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Pandemic Pivots: Community Driven Innovation

Jag Bath
Chief Digital Officer/CEO at H-E-B / Favor
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SXSW 2021
March 16, 2021, Online, Austin, USA
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About speakers

Jag Bath
Chief Digital Officer/CEO at H-E-B / Favor
Tom Foster
Editor at Large

Jag Bath is the CEO & President of Favor. Under his leadership, Favor became the first U.S. on-demand delivery company to achieve profitability, and in 2018, Favor was acquired by one of the country's largest privately held companies, H-E-B. Today, he is also H-E-B’s Chief Digital Officer. Jag has a 20-year track record scaling early stage startups to successful mature companies, including RetailMeNot, Inc., Gilt Groupe and WeightWatchers.com.

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Tom Foster is an Editor-at-Large for Inc. and an award-winning author whose work has also appeared in Fast Company, Popular Science, and Men's Health, among other publications. A resident of Austin, Tom also works as Editor-at-Large for Texas Monthly.

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About the talk

As the Coronavirus pandemic swept the nation, the consumer industry had to shift quickly with hyperfocus on adapting and innovating to meet the needs of the community. From developing innovative tech solutions to support our most vulnerable communities to sacrificing the bottom line to do what’s right, businesses everywhere found a higher purpose. Join Jag Bath and Tom Foster for a conversation about learning on the go and pivoting amid a pandemic, innovating community-focused solutions at warp speed, and the rapid acceleration of consumer digital adoption throughout and beyond COVID.

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I am Tom Foster. I'm editor-at-large of ink magazine as well as Texas monthly and really glad to be here today with somebody I've known and whose work I've admired for so many years and that's Jack back. Jack is the chief digital officer of the grocery giant, HEB, as well as CEO of the on-demand delivery company favor now, and HEB, subsidiary of Gilt, groupe, RetailMeNot, and other companies who became CEO favor in 2015, in 2018, that company was acquired by H-E-B first acquisition ever, I believe in a Chibis, long hundred 15-year history. And Jog

at that point took on the Dual role he has today. We're going to get into this a little bit as we talk, but I want a super quick primer on these two. These two organizations H-E-B in favor for folks who are here who might not be familiar with them. HEB is one of the largest privately-owned companies in America is a family-run grocery chain. Food stores are almost exclusively in Texas, Things are are almost religious about how much they love H-E-B in and see it as something more than just a place to buy groceries. That's that's

that's not over till what I'm saying there if you're in Texas, you know what I'm talking about. Favor is in an on-demand delivery service as I said, not unlike say doordash with the critical distinction. This happened before the H-E-B Acquisitions. That favors efforts are focused on taxes as well. In case you think that sounds like small ball, consider that in less than five years under jagz leadership, favor has launched in over 200, Texas cities with more than 100,000 Runners on its platform who has completed over 40 million deliveries today, not insignificantly Jack is also leftover to

become the first us on demand delivery company to achieve profitability. All of which made favor a very interesting fit for HEB and leads to today's topic what Jen calls community. Innovation, before I go on any longer. I want to introduce dragon and then let him do the talking. Jag! Welcome! Thanks Tom. Thanks for having me. You bet you bet you for the great info already. Pretty sure I want to let me prompt that with with with a quote from from HEB president Craig Bland who said this was

sometime in the past year. This pandemic year HEB has has has done a lot and did a lot early on to be sort of prepared for this this this major disruption in in how we live. And how we sort of do, everything's we are in. We are constantly in a year-round, state of preparedness for different emergencies. We keep emergency supplies at almost every warehouse and have water and other supplies stage, and ready to go and kept in storage, to make sure that we are ready to react quickly. When a crisis emerges, whether that be a

hurricane or a pandemic, we take being strong, emergency responder in Texas to take care of Texas. Community is very seriously. The sounds not necessarily like like somebody who works for a grocery chain and more like I like a quasi-governmental agency or something and then it gets to the heart of this sort of Community Connection that were talking about end. And, and I'm curious from your perspective is coming into a company like that, post-acquisition house Central was that to sort of the, the organization that you joined and how you speak. And to think about

your organization. Yeah, I mean looked there's no doubt that Community is at the heart of what we do at HEB and fax exactly what bullet the two companies together. H-E-B as being around does as you mention Tom for over a hundred and fifteen years, now has only been around for 7 years but yet the Common Ground if you like in terms of the conversations that we were having during that process of Bring the two companies together was older man Community. It has definitely Dean

a pretty amazing time. I would say, I hate you be for me in the past 3 years. Learning more about what this means. And this people fast approach that has always being at the heart of H-E-B but you know, we say slightly differently a favor. But it means the same thing which is the Community First approached you. They both of these values if you like are at Coram, hate you either like or a favor as well. Even though the two companies have been around for a very

different amount of time, you know, over a century for H-E-B in less than a decade. And so, you know Craig's quote that you mentioned is is very true You know, said differently when Community is at the heart of everything that you do, ya round. You are always thinking and operating around how you better support your community, that's great. I want to mention, I want to talk about how the hell that, how the hell that then translates into reality into actual action? I promise, I won't do a lot of one-word, quote,

it was an interesting New York Times story very recently. After after these, these winter storms, the Texas suffered when he was talking about, HEB, as well. And, and there was a quote, from a marketing professor, at the University of Texas, at Austin McAllister, who in trying to sort of, parse what it is, that that, that that makes a chi, be able to respond in these kinds of scenarios. Does, it comes from the heart and they're good at Logistics. Like this is too very simple things. Being really good at Logistics and and, and the end of having her An end. So as we go through this and

then talk about some specific examples of what you guys did post is HEB in favor and together. I want I want to try to like parse out how those two things kind of played out, you know. This is like the berry nothing, both piece of it. And the sort of thinking about people piece of it, you know, love you guys very interesting because your favor at its core, when you think about favorite operationally, favor is a local logistics company. Now, how you experience that as a customer or, as one of our delivery drivers can be cold run, is, or is one of our

restaurant Partners will mention pain. This is very different how you experience it, but the Crux of the operations it is local. That just then you bring a TV into the mix which I can tell you, you know, that quote is, is a great quote because Logistics is at the heart of H-E-B in operation. Is at the heart of HEB and runs pretty much, you're everything that we do. It is operational. It is logistical. It is backed by technology but seeing it at this Grand, a scale and Utah. Together. We does you said this people fast Community First approached. You

ready do have something magical that comes together when you have those two things. So it's interesting that you bring that up as well because you don't advertise as a, as a stated one of the things that really bored. The two companies together was this Community. First People, First approach, which is very different. When you think about other companies that go through an acquisition like, this was your right. It was the first ever acquisition in a Chibis, 115 year history. But that also led to how it was Executed very differently from classic

Acquisitions that happened. You know everywhere else. And then you're the second piece that book that you companies together is this, you know, Common Core operational piece around Logistics, is that in both cases the fact that that H-E-B in favor of focused on Texas? Which let's be honest is a very large place, but is it what is it? What is a define space? In a way that is tighter than say a doordash order? Or if you know, I don't pick your pic, your National Grocery chain pair.

That's what that that those Geographic boundaries with, with this, this focus on community as an idea. How does that change the way one thinks about logistics for a company like Sabre or 4? I can feel like it should be white. Come into play. As you think about problems when they arise there's no doubt. First of all I would like, it's so maybe, maybe not everybody listening in on this knows this but H-E-B is stitched into the fabric of Texas. You you've

already described that anybody here in the states obviously is very familiar with the H-E-B in you know for for us a favor. This is something that we always since the early days of the founding of the company H-E-B was always an example for us. But it does change. I would say both, you do me a favor which is a smaller scale than HEB but I'm both H-E-B in a favor does change how you think about how you operate both logistically and how you think philosophically about the communities. You first of all, you know, the geography better than anyone. One

thing, the second thing is that you learned very quickly, the things that are very important to our communities. And by the way, there's the Texas community at large, but then there's the community that are different from City to City, from rural town to rural town, and from region, to region within the state of Texas. And your, this is something that has continued to make H-E-B not just unique in our approach. But also it's the pot that you talked about earlier and the pot, that I described as H-E-B being

stitched into the fabric of Texas because every store of All of Us stores here in the state of Texas is different because the stores optimized for the communities around them. And again, this is all about Community. First People fast when you, when, you know, What we know about our communities around us stores, you're able to serve the needs of those communities when they walk into the store. So you will, I will come to mind a TV, which is a few blocks from, from where I live. It's very different from just driving down the road, a few minutes, to the next to

H-E-B. And I think a lot of this is a differentiated when you are focused in on a single state, versus you, do the challenge of focusing on, you know, the country as a whole. So there is definitely a difference. And the same is true at that, baby. We found it's a favor as well. You don't understand in our communities. And like I said, it's just the needs of different from from City, to City from rural town to RiverTown and the combination of favor and HEB has allowed us a favor to learn a lot more about that. So you're absolutely right that geographically

that Focus definitely was. On, on more of a focus and more knowledge about who our community actually is, I should know the answer to this but is favored because of favors focus on Texas, does favor sort of get more granular in its ability to serve small town then say, I don't know if doordash order or whatever larger. Yes. For sure. And I think the most telling thing is something that we did recently, actually, you know, there's been a lot of focus as, you know, on H-E-B on Facebook particularly as a

condemned pandemic started. And as the pandemic started and I'll focus on Texas, really allowed us to understand what was needed. We were able to very quickly at favor expand into that, you know, those towns and cities that actually had no presents at all when it came to a delivery company. I met by the presence and when it came to H-E-B because of our presence across the state and the decades that that we have been here in Texas, but it, but for favor, you know, we expanded very quickly. In fact, we expanded into

75 new towns and cities in the space of a week because of the pandemic. Now that may sound, you know, I make it sound very easy, but that is a very, very difficult task. And you can only pull that off when one is supported by HED. But you, when you understand the needs of the state, and that's in stark contrast to you. I always use example, 2018 at favor, we expanded across the entire year in 240, 340 new cities, and towns across the state to do 75 in a single week. Just, I think exemplifies what you're

saying about the knowledge and the resources that we have and when they applied in a focus way to the state, Able to move a lot faster. That's kind of an unbelievable expanded into 75 new markets in a week. When this was when in 2020, was it was this early in the pandemic. This was, this is the end of March, early, April, and the reason behind it was largely to get our service to more seniors. At the time, there was something that we launched a call to senior support program is still available today and it still used

by a lot of seniors today. But the, the goal at the time was how do you get that program. I just recently been launched to as many seniors as possible across the entire state. So what do it? Let's talk about the senior support program. Can you define what that is? Exactly. Yeah, I mean, this is a program that we launched at the start of the pandemic. It was soon off to, you know, the first thing we did was going to contact list deliveries and that's also sounds very easy now but was a very difficult thing, but it's very commonplace everybody's, you know, all this

Amelia with that. The senior support program and however, was something that we decided to do because of what we was early on. When the pandemic started, when the pandemic started, we started to see many retailers, not just here in the state of Texas, but across the country shift toward something that they were referring to you as senior hours and Senior. Our was early in the morning before stores open allowing seniors access to essential oils that they needed overall you know on paper that sounds like a great idea. Except when the CDC is

telling all of us that seniors are most at risk and that those were The underlying conditions are most at risk which is still true today and still you know, something of the CDC has continued to advise and so you know when it came to us that hate you be what we didn't want to do was just replicate what was happening and what we were seeing and just opened doors to seniors early on. But by not doing that, we had to come up with a better solution. And to us, we wanted to optimize keeping seniors at home where they will most safe and figure out. How do we get groceries

in Essentials to seniors at home? This is a great example of favor and HEB coming together, first and foremost, you know, I was thinking was around. Well, let's open up, you know, how to see. We have a nap at HEB and a website. I hate to be where you can place an order for capside in home delivery. So that's something you can leverage, not really not when you're in the midst of a pandemic and you have Huge increase in foot traffic, coming into your store and in parallel to that you've got a huge increase of people trying to find slots for a Cub side pickup, or a home delivery and they're on

top of that. With seniors, not necessarily having access to the internet, not necessarily having all of the knowledge and know-how of using an app or even a website like you have to really think differently. So everything, Allen Norms, if you like when it came to digital approaches had to be thrown out the window and we have to rethink everything. In the first thing we did was we launched a, a decentralized Kohl Center. Now, we went to leverage our call center and create something that seniors can pick up the phone and

call and place an order. But I called since it was also inundated, so we had to create a brand-new Kohl Center and by the way, At the start of the pandemic, this is something that was not centralizer. We have to create a technology that would allow our teams to essentially, take Cold anyway, and that decentralised cool center was staffed by volunteers across favorite H-E-B. So now, you're taking coals from seeing is built on technology that had to be built in quite frankly, hours and days, not weeks, or months. So, all of our Pro since he's got out the window as well. And,

you know, now you've got something where you can get to seeing you. But now they're on top of the other you talk about logistics and operations that will have to change. So now while the slots are in high demand and there's a lot of foot traffic in stores now is sending favor running into stores with directions from a decentralized Kohl Center on what items to shot for seniors and then deliver them contact list to the doorstep of seniors. I'm so if you think about what I just described that that is not your classic technology Approach at all, but it gets to the

heart of the problem that we have to solve. So that was, that was the program itself in a nutshell. And then the question was, how do you get that to you as many CD's as possible? Which drove that launch of 75, new markets in less than a week to get it to as many seniors and what is a fascinating example? Letting you know what it, what I think it is, is, is equally fascinating about all of this, is that, you know, we're not talking about, hey, we need to think about our community in a way that that sounds like, you know, corporate in a CSR or something, you know, like it, like it like a,

hey, let's, let's let's do some philanthropy. Let's do some do good stuff, but this is core to The service that these companies provide and I'm guessing that in the process, I mean, I spoke to this when you said that you guys launched 75 Newmarket, I'm guessing that this has been just a bunkers business here for for both companies as well. Write a mint, nnnnn audit. And I don't mean that in an opportunistic way. I mean it's fascinating how these things go together, right? You serve an audience with great need and then provide

innovative solutions for them at a time of great need and that is good for your business as well or I can you speak to that? yeah, it look we we became an essential business overnight at the HEB and a favor overnights. And in every sense of the term, this is not my terminology. This is the terminology of the state and the country classified as an essential business. And, you know, for us, that's a term used by others before us, we've always viewed the service that we provide as essential to the state and

Iowa communities with with the, with the pandemic and Mal, go back to the quote that you read Elliott from from Craig. Our preparedness. I would say, especially from a Logistics in an operational and a community Sandpoint was great. But you know, we both only talked about how there were a lot of things that we we just couldn't have prepared for we were watching what was happening early on in the year. The other side of the planet, quite frankly and thinking about, how is

that going to impact the US? And how is it going to impact Texas? And we started to have a lot of discussions and even run tabletop exercises of what we would do. That's why we identify things life, contactless delivery, we saw that happening internationally and we we we started to work on an ellia. You know what, we wouldn't be able to prepare for was eating some of the things like the run-on sentence products that we were not prepared for cleaning. Essentials is one thing but like toilet paper, which obviously, you don't have you been sitting talking about I'm so there's definitely

things like that, that some was surprising to us, but I would say that this year round of preparation and thought that is equipped us very well for responding to hurricanes or other emergencies and disasters that happened in the state of kryptos equipped us a lot better for it. Speaking of that damn sure. There are other examples we could talk about programs that did that came up during the pandemic. But let's talk about the word. In the, in the larger sense, we just went through a big emergency right with this winter storm that that led

to widespread blackouts loss of water for 4, large portions of the states. Really existential crisis for a lot of people in the state of Texas. What's what, what were some of those learnings either? You know, new programs that you were able to leverage work or new ways of thinking and problem-solving that you were able to leverage when they when facing that recent crisis. This most recent one was one of the toughest for us because it's quite frankly, almost closed down all of our operation at HEB on a

favor and throughout all this. Conversation, that Logistics and operations are are at the heart of what we do, Ted, without focus on our communities and our people fast. And at a time when people are without power without water, and infrastructures are basically ready for it to their feet. It was very, very difficult to respond for us. I would say, the biggest Landing was out all hands on deck approach where your lot of times as businesses. You know, we talked about Alan departments or a

functions or, you know, you and I have talked about this before the conversations around digital. Here and brick-and-mortar over here, all of that in a crisis, doesn't matter. It's all irrelevant. What matters is all hands on deck and everybody working together and that's what we did in the latest crisis. Latest crisis was how do we get the state back on its feet out people back on their feet, the operations, all up and running again because all of this has to work. And then, of course, Very quickly putting on disaster relief at the to us, you know, we did

a lot of things immediately, you know, the favor side we focused on Austin right away which is where we had courted. And, you know, he worked with some of our restaurant partners and some Community Partners in Austin, Austin. Mutual Aid. Good luck. Austin to provide almost 3,000 meals to people and, and get those delivered. But then we started to see what was happening in food. Banks, in food banks. You know, I think of me Familiar to do with this. You know, primarily depend on

supermarkets and other retailers like H-E-B to provide provides food. Now when an entire network shuts, down a food banks already struggling. So we moved, you know, pretty quickly to get 20. I think it was around 23, might be even more than that 23 truck, loads of food, and meals to Texas food bank. As soon as we could get back on the road, we worked with other suppliers and partners to get water to people over 20 trailer, loads of water. And that included working with Publix out of states. That just a great example of, teaming up

with another retailer, to bring you no more during a time of Crisis. We also do, you know, we put why we focus on overseas Community Anna operations at a time like that, with your operations are some will hold it. You have to put donations to work. You just have to end so, you know, we donated $1000000. Eating Texas. And that's going to be distributed to 18, food banks across the state. And so, you know, I think, I think programs like this that we're familiar with together with operations, really helped in this most recent crisis. And so, it was all because I would

say, over a decade on how do we get back on our feet. When all of us were affected across the entire State? This is not like one part of the state of fected where you can rely on operation somewhere else. Like let's say, what happened with hurricane Harvey? We relied on operations everywhere else in the state to put those two what the temp in a scenario like this. I think, you know, we've never seen an impact like this was just a white jacket. I was really fun to connect and all the good work this year and best of luck. Thanks. Thank you, Tom. Appreciate the time today. Thanks.

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