What can DoD Contractors Learn from the Craft Brewing Industry About Customer Intimacy and Innovation?
Growing up in the 80’s and 90’s, I distinctly recall my dad having “His beer”- the one with a dedicated shelf in the fridge that he would crack open after a day’s work. He was obsessively loyal to a particular brand and if he waivered from it, you knew that there must be something amiss. If this rings familiar, there’s a high probably that your dad’s (or mom’s) beer of choice came from 1 of the big 4 breweries: Pabst, Anheuser-Busch, Miller or Coors. My father was a Michelob guy.
Fast forward to today, and thanks to the proliferation of microbreweries and craft beers, the choice of unique and interesting beers is limitless. In 1983, there were 93 breweries TOTAL in the U.S. In 2020, there were 8,884 of which, 8,764 were categorized as a “Craft Brewery” Why have we seen such growth in the craft brewing industry and more importantly, what does this have to do with DoD contracting? Simply put: customer intimacy.
Consumers have been flocking to craft breweries in droves over the past 10 years and the popularity of these beers continues to rise. People are looking for a unique experience that has been carefully curated and aligns with their tastes. Microbreweries are uniquely positioned to deliver this experience. They are part of the local community who cultivate relationships with their customers by listening and responding to their likes and dislikes. They are agile enough to adapt and care enough to make changes when needed. This cycle of feedback and response creates a mutual investment on the part of the consumer and the brewery which manifests itself in higher degrees of loyalty. In contrast to consumers like my father in the 80’s, today’s craft beer consumers can have a relationship with the brewery, the brew master and the entire staff of the brewery and feel a genuine connection to the product and the people. And that will keep them coming back.
I recently read an article in Breaking Defense, “Anduril CRO: ‘There is no fair competition’ for non-traditional companies in defense” and the parallels with the sentiments expressed in that article and growth of the craft brewing market seemed striking. Matthew Steckman, Chief Revenue Officer at Anduril Industries vented his frustration that “non-traditional defense firms, including startups, have so little chance against the towering traditional primes that there is ‘no fair competition.’” As recently as 2010 a craft brewer could have the same gripe about breaking into the beer industry against the large, monolithic breweries with vast resources and huge advertising budgets. What changed? Customer intimacy. Customers in the DoD want a relationship with their contractors so that their voice can be heard, their requirements met and in the end, have solutions that address the complex challenges unique to their mission. They want innovation and innovation typically only comes from the small and medium companies whose success requires it.
It is my view that we must recognize that monolithic large system integrators have the ability to innovate to a degree, but that is not where they excel. Their strength is scaling technologies developed through customer intimacy and a culture of innovation prevalent in the small and medium enterprises. These are different business models. I have lost proposals working at a mid-sized integrator because there was a concern my business could not execute at scale. If there is a perceived risk of not being able to scale by those companies that excel in innovation, then there must be a perceived risk of not being able to innovate by those companies that excel in scaling. It’s time to start quantifying the risk that the company who focuses on scale can’t innovate. For us to maintain our competitive advantage in the world we must leverage comparative advantage and award the right work to the right business models.
I have worked for the “towering traditional primes” that Mr. Steckman rails against. I understand his frustration. But when I consider the 16-year history of Sigma Defense and I look what we have accomplished, our success as a company is largely attributed to customer intimacy. Almost 70% of Sigma Defense comes from a military background. We are lean, we are agile and we listen to our customers. We are also not alone, there are countless mid-size companies with the same identity. We all recognize it’s not enough just to have a great product. It’s understanding the customer needs through listening and then having the agility to innovate, adapt and deliver.
There’s a simple pleasure in enjoying a cold beer, whether your taste is Michelob, your local craft brew or anywhere in-between. Great relationships can be forged over beers. And if we’ve learned anything, strong relationships are the foundation of good business. Cheers!
And to all of you beer lovers out there, I’d love to hear your favorites – leave a note in the comments!