Cloud Lifts Rodan + Fields Towards $1B Revenue

Mitch Wagner
8/15/2016
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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.

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

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Independ33957
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Independ33957,
User Rank: Light Beer
8/17/2016 | 4:51:24 PM
R+F holds the key to the future in direct sales
It is incredible - all the planning, infrastructure, technology, Brand recognition, product development and testing, etc. that is provided by the company, all of that just so that an Independent Constultant is provided with everything to be successful.  I am amazed that these doctors have pulled out of high-end department stores and have decided to give that selling power to the masses (and currently still ground level, only 75K actively working consultants vs several million Mary Kay or Avon reps).  I am truly thankful to be part of those that have chosen this path. If ever there is a good time to join R+F and benefit from all this company has to offer - it is now.  Especially that we are just weeks away from a brand new product launch!!  There is nothing like it on the market at this time.  And, all you need to be successful in this biz is the right mindset and cell phone or computer with wifi.
Kelsey Ziser
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Kelsey Ziser,
User Rank: Blogger
8/16/2016 | 4:56:24 PM
Re: Direct
@Mitch I didn't realize they were different from Mary Kay in the way they fulfill orders... probably helps lower the barrier to entry for new sales people. They seem to be doing well as a company if the number of people that have approached me about buying their products is any indication ;)
Operatio74226
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Operatio74226,
User Rank: Light Beer
8/16/2016 | 2:46:24 PM
This company is the real deal
What the writer speaks is just the tip of the iceburg. The business side of Rodan+Fields has completley changed my familys fortunes in just one year. I would encourage anyone who is looking to add a stream of residual income to get on board this train. I know we are thanful we did!
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
8/15/2016 | 3:00:28 PM
Re: Direct
Huge numbers of consumers buy the same products, from the same brands, over and over again. For those people, subscription does indeed make sense. Companies need the IT infrastructure to fill those needs. 
danielcawrey
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danielcawrey,
User Rank: Light Sabre
8/15/2016 | 2:10:03 PM
Direct
The direct sales model works. And with technology, it has become more powerful. Many people prefer to avoid stores if they can. It's hard to plan around, but when you can have a subcription service deliver what you need, it makes sense. 
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