Cloud Lifts Rodan + Fields Towards $1B Revenue

The consumer package goods company relies on the cloud to support its direct sales business model.

Mitch Wagner, Executive Editor, Light Reading

August 15, 2016

5 Min Read
Cloud Lifts Rodan + Fields Towards $1B Revenue

SAN FRANCISCO -- A cloud-centric management strategy has helped skincare company Rodan + Fields stay lean and grow its global revenues to $627 million in just a decade with only 500 employees, according to CTO Ralph Loura.

Rodan + Fields was founded by two dermatologists -- doctors Katie Rodan and Kathy Fields -- in 2002, who sold the company to Estee Lauder a year later. The product was initially sold in department stores, but the company realized that all its marketing was coming from word-of-mouth. So Rodan + Fields switched to a "community commerce" or "social selling" model -- in other words, multi-level marketing as deployed by Avon and Mary Kay, but with a significant difference, mainly that the company handles the actual sales and fulfillment. The representative is a "brand ambassador" and "coach," Loura said during a presentation at the Rackspace::Solve conference last week.

Figure 1: Skincare Man Rodan + Fields CTO Ralph Loura Rodan + Fields CTO Ralph Loura

Rodan + Fields uses "data of all sizes" to drive growth and understand business, and is investing in deep learning, cognitive computing and big data, Loura says. It connects with its consultants and customers over mobile, social media and other channels.

Rodan + Fields uses its private, multi-tenant and multi-cloud infrastructure -- in conjunction with Rackspace -- to transform into a digital business. But business process is more important than technology, Loura said. "It's the toiling in the background that lets us manage it as a system."

For example, DevOps is key to IT. Using DevOps properly is more important than the tools. "Everyone has heard the term DevOps ad nauseum," Loura said. "I'm not sure everyone knows what it is or has experienced true DevOps." "Process playbooks" are more important than tools. Organizations need to change their engineering process and maintenance.

"You can't just put out a set of tools and say you've won," Loura said. "Just owning a bunch of assets doesn't make you digital. What makes DevOps is applying processes against business outcomes that allows you to achieve outcomes in a different way."

The cloud also helps Rodan + Fields sell in multiple markets, in Canada and the US, with plans to move into Australia and Asia. The company needs to deal with regulatory and data sovereignty requirements everywhere it does business. It needs to track data on 100,000 consultants and 1.6 million customers hitting its sites and transacting, with a "month-end hockeystick" in workload that the cloud's elasticity helps satisfy. Nearly 80% of compute volume occurs in the last hour of the month. "If you don't have tools to measure, monitor and react, you're sunk before you start," Loura said. Most management tools react in 20 to 30 minutes; Rodan + Fields' tools need to react in seconds.

Rodan + Fields asks itself three questions when determining whether to take on a project internally versus hiring it out: Does the project create consumer or consultant value? Will the company be the best in the world? Are they required to do it for legal reasons? "If the answer is no for any of these questions, we don't do it. It's that simple," Loura said. Simple, but not easy. Companies will find all sorts of ways to talk themselves into doing projects that they shouldn't take on -- that they were advised by an outsider, or it's "best practice" in the industry or "the market demands it."

"It's a lot easier to say they won't do it than not to do it," he said.

Rodan + Fields' goals go beyond financial success. The company is looking to change how people think about skin care. Skin care is at the state today that dentistry was 150 years ago, when people only went to dentists to have bad teeth removed. Now we brush and floss regularly, knowing that preventing problems is better than fixing them. Similarly, with skin care, we should take steps ourselves to prevent acute issues such as acne, sun damage, blemishes, wrinkles and fine lines, rather than going to the dermatologist to have the problem fixed with harsh treatments such as burning and chemicals, the equivalent of pulling a tooth, Loura said.

"We think everyone should treat their skin the same way they treat their teeth," Loura said. With only one dermatologist for every 10,000 people in the US, dermatologists can't do it all, so Rodan + Fields sees its consultants as helping to fill that gap.

With that approach, Rodan + Fields is looking to disrupt the consumer package goods industry. It wouldn't be the first. Unilever recently bought Dollar Shave Club for $1 billion, a few years after the shaving products company started with a $50,000 credit card loan and homemade video, Loura noted. Unilever didn't buy Dollar Shave Club just for the shaving business; the big company made the purchase to tap into Dollar Shave Club's direct sales expertise. Direct sales is disrupting consumer package goods, as retail sales becomes more problematic.

Soon afterward, P&G responded with its own direct sales initiative: a laundry washing service that would pick up dirty laundry at home, take it away and wash it -- with P&G's own Tide detergent -- and deliver it to customers' homes, Loura said.

Want to know more about the cloud? Visit Light Reading Enterprise Cloud.

All of this business revolution requires technology transformation to support it.

"We are not alone. It's happening to every industry," Loura said. "This could be happening to you."

Last month, Cisco Systems Inc. (Nasdaq: CSCO) CEO Chuck Robbins talked about a similar theme, saying the Internet of Things will transform the way companies do business, from selling products to offering recurring services that build long-term customer relationships. (See Cisco's Robbins: With IoT & Cloud, Services Beat Products.)

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— Mitch Wagner, Follow me on TwitterVisit my LinkedIn profile, Editor, Light Reading Enterprise Cloud

About the Author(s)

Mitch Wagner

Executive Editor, Light Reading

San Diego-based Mitch Wagner is many things. As well as being "our guy" on the West Coast (of the US, not Scotland, or anywhere else with indifferent meteorological conditions), he's a husband (to his wife), dissatisfied Democrat, American (so he could be President some day), nonobservant Jew, and science fiction fan. Not necessarily in that order.

He's also one half of a special duo, along with Minnie, who is the co-habitor of the West Coast Bureau and Light Reading's primary chewer of sticks, though she is not the only one on the team who regularly munches on bark.

Wagner, whose previous positions include Editor-in-Chief at Internet Evolution and Executive Editor at InformationWeek, will be responsible for tracking and reporting on developments in Silicon Valley and other US West Coast hotspots of communications technology innovation.

Beats: Software-defined networking (SDN), network functions virtualization (NFV), IP networking, and colored foods (such as 'green rice').

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