There's a lot that can be said for the current situation. It's easy for anyone to point a finger at how companies are handling or not handling the crisis. There are companies acting defensively and there are companies going on offense. We don't know what the right or wrong answer will be on how to react. But, what we do know is that many of the trends pre-COVID19 are now seeing massive acceleration – which we can learn from and plan accordingly.
Because we're in the Cannabis space, I'll focus on how these affect our industry, but "The Great Acceleration" is universal.
The Remote Experiment
In Silicon Valley, there has been a long push for remote work. One of the biggest trends in SaaS is productivity and remote work. Tim Ferris came out with his 4 Hour Work Week book. But, working remotely really only stayed within the confines of tech.
With COVID-19, however, we're seeing the ultimate work-from-home experiment. It seems as if overnight everything that can be remote, went remote. A Gallop survey found 62% of American's have worked from home during the crisis. What looked like another decade out before companies went remote has been accelerated in a matter of weeks.
What does this means for cannabis companies? This is the time to build out the workflows and systems for a remote team. When you go remote you open up access to more talent. In an early industry, talent is everything. I recently spoke with a cannabis brand who's CEO lives in L.A., their chief scientist is in Israel, their CTO is in N.Y., and have two marketers in S.F.
Going remote is no easy task. It takes the entire team to buy in. Systems must be in place and communication skills will have to be retaught in a way. Jason Fried over at Basecamp is a longtime promoter of remote work. I recommend his book Remote for a deeper dive on this topic.
The Unbundling of Cannabis
In Cannabis, it's the cool thing to be vertically integrated right out the gates. For most experienced operators this didn't make sense. We saw this in every market as it transitioned from traditional to legal. Where we saw this the most was in Canada as the Canadians tried to take over the world via cannabis. In the US we saw MSO's gobble up every license in the supply-chain.
Then, in 2019 the cracks started to show. Companies started to divest assets. Now, COVID just accelerated that process. Company after company, we're seeing them divest or stop all M&A. From Medmen to Canopy, companies are choosing focus (and survival) over world dominance.
This is a blessing in disguise for the industry. Companies are getting back to first principles. Starting with the question, what kind of company are we? If you are a retailer, why are you growing? If you are a brand, why are you adding the additional complexities of cultivation? Companies need to understand what their core competencies are and double down on them. Strategy isn't about figuring out what to do. It's about figuring out what NOT to do.
We live in an era where everything happens at the flick of our finger. It seems operators have forgotten that most vertically integrated companies became vertical after 10+ years in operation. Build, test, prove, expand.
In this new paradigm, I predict four big winners as companies choose focus – third party logistics (3PL), co-packers, delivery, and outsourced services – these sectors will play vital rolls for many cannabis companies.
For small companies, maybe a full on c-suite doesn't make sense. That fleet of trucks for the cultivator is an undue operational expense. Brands really don't need to run their own manufacturing facility. Use a co-packer, a 3PL, and an outsourced sales team + c-suite and you can cut costs drastically. Prove the concept and then expand capabilities. Don't create undue pressure on the business.
A Digital Transformation
The digital transformation has accelerated tenfold since the crisis. Industries that have long held out are coming into the fold – education, medical, retail, cannabis – its all getting fast tracked by 10 years.
Cannabis has long been an analog business. Driven by in person experiences and connections. It was built on community. Now that community is going digital. Dispensaries are forced to think about a world with less brick and mortar. Cultivators are forced to think about the internet of things (IoT) as they move to preserve margins. Distributors are building platforms in the cloud. Brands are getting creative on how they connect with consumers when they aren't at an event or dispensary.
We all have been experiencing the digital transformation in one way or another, it's been happening for the last two decades. But, we're seeing this gradual transformation turn into a rapid one as social distancing continues. I fear it won't be business as usual once things open up and the companies that embrace the change will be the ones that enjoy the success down the line.
Headquarters is a brand accelerator that specializes in California cannabis. We help brands launch, grow, and scale in the Golden State and beyond.