CGSM 2018 Overview: The Age of Innovation
How do you succeed in a marketplace where the rules of engagement — with consumers, with retailers, with more-nimble new competitors — have changed dramatically? Based on the presentations and discussions held in June at the 2018 Consumer Goods Sales & Marketing Summit, "Innovation" might be the one-word answer.
That conclusion doesn't come simply from the fact that a leading innovation catalyst galvanized attendees with a pair of sessions on the event's first day. “We iterate instead of innovate,” said Duncan Wardle, former vice president of innovation and creativity at The Walt Disney Co. and now creativity catalyst at id8&innov8, as he inspired attendees to flip that phrase through an opening keynote and later led a dynamic conference-wide workshop. (The latter had attendees brainstorming fanciful new products such as Dom Perignon-flavored edible underwear.)
Nor is it because the conference's final morning was unofficially labeled "Innovation Day" due to the lineup of new consumer goods companies that took the stage to explain their unique go-to-market strategies (see below). Or that attendees were able to test drive 10 emerging technologies designed to improve consumer engagement on the event's first day.
Beyond all those factors, the obvious need for business innovation was the underlying message delivered by everyone who took the stage — even the three straight representatives from consumer goods companies that have been in business for more than 100 years (Kellogg, Church & Dwight and Colgate-Palmolive).
Whether these speakers used the word overtly or not (although most did), it became obvious over the course of three days that innovation is the key to future success in the consumer goods industry. The driving force behind all of the "digital transformation" that's taking place isn't the need to rethink strategies, reimagine tactics or rebuild existing systems and processes. Efforts to drive incremental improvement, or even initiatives to add new skills that have already become required practice, will be insufficient. Companies will only achieve success if they take the necessary steps to develop the cultures and the capabilities needed to unlock true business innovation.
The following is an overview of highlights from the conference agenda.
To overcome the typical barriers to creativity, Wardle encouraged venturing outside standard "rivers of thinking" to begin breaking rules by asking "What if … Where else? … How else?" The more provocative the questions or ideas, he suggested, the more innovative your thinking will become. In his workshop, Wardle advocated team building by transforming the idea from “mine” to “ours.” Using auditory, visual, and kinesthetic queues as well as “Yes, and …” thinking, leaders can begin to suspend judgment and nurture ideas.
Artificial intelligence is "particularly good at predicting things that don't happen very often," said Anil Kaul, co-founder and chief executive officer of Absolutdata, during a first-day share group examining the potential impact of AI on business analytics. In Absolutdata's point of view, CGs need to build core capabilities (tools, techniques, personnel), establish a guiding analytics framework, clearly articulate the corresponding business contexts, and find the right supporting technology in order to create scalable impact with AI.
The omnichannel marketplace has made the need to align sales and marketing activity pretty obvious, according to Gail Horwood, senior vice president of integrated marketing & brand experience at Kellogg Co. Retailer media, for instance, has become critical to the promotional plan and is a tactic that straddles the traditional activity of both functions. "Demand creation and fulfillment can't be separate anymore," said Horwood, who has been helping Kellogg build a cross-functional, "Integrated Commercial Planning" team that builds, executes and measures programs collaboratively.
Direct-to-consumer is becoming a critical aspect of the consumer goods business, not just for the potential sales it can deliver but because it provides a "constant flow of data" about consumers and their behavior. "And that is the marketeer's dream," said Britta Bomhard, executive vice president and chief marketing officer at Church & Dwight. However, the costs and resources required to build the necessary capabilities make some brands more suitable for DTC than others, she suggested. CGs should consider the size of the category and the target audience, the nature of the product (Is it embarrassing to buy in a store?), the frequency of purchase, and the impact of the value chain that must be developed to support the business.
AI and machine learning has already infiltrated daily life more than some people realize, said Rahul Tyagi, worldwide director of analytics at Colgate-Palmolive, while noting that Marriott is starting to add Alex into hotel rooms as a customer service tool. But while the technology can deliver numerous benefits (such as solving very complex problems), it isn't necessarily suitable for all tasks (as a "Black Box" solution, it's ill-suited for root-cause analysis), he explained. Tyagi presented attendees with a pre-implementation evaluation checklist ("Are the business needs fully identified?") and a series of questions to ask potential vendors ("What is your post-rollout framework for managing the solution?").
The retail store has become a "real-time battlefield," and companies now have the ability to arm their field force with actionable information on-site, according to Matt Talbot, chief executive officer and co-founder of GoSpotCheck. PepsiCo has been working since 2013 to do just that though a combination of in-house solutions and key solutions partners (such as GoSpotCheck). The end goal is achieving a "perfect store" in which each retail location is optimized for product assortment, placement, pricing, promotions and service frequency, explained Jim Holland, PepsiCo's director of sales capability, sales transformation.
Brands must be as smart as their consumers demand, but they must also think ahead to what retailers expect as well. It’s not necessarily an easy environment for growth, but it is an exciting and challenging one. Those were among the takeaways from a panel discussion on becoming an industry disruptor led by Richard Essigs, principal of consumer products and retail at EY and featuring Sally Stuart, senior manager e-commerce strategy of Newell Brands, Kevin Gokey, vice president of IT and global chief information officer of Church & Dwight and Jonathan Teller, chief executive officer of eos Products.
“No matter who you are, data is key,” said Laura Rangel, vice president of strategy and business development for ItemMaster said regarding the need for optimized, complete product content on the digital shelf in order to drive sales and brand equity. “Everyone needs to come together. There’s an impact across functions, so it must be a project across functions.” JoyceAnn Rosenfield and Lee Bogner of Mars, Inc. joined Wrangel to discuss the challenges of digital merchandising today and how to bring the voice of the consumer back into product development so their needs are fully understood.
The days of isolated, chain-wide campaigns planned 18 months are gone. Consumer packaged goods companies now must be fast (two to three weeks out) and granular (even to the store level) with their execution and connected in their planning across the entire path to purchase, according to Ed Johnson, principal in the consumer products practice at Deloitte. To put the theory of commercial convergence in into practice, companies must define a single strategy for spending, build a seamless playbook of promotion guidelines and budget structures, develop an integrated plan that allows for continuous adjustments, and activate tactics at a granular level with improved data capture, according to Deloitte principal Brian Bodendein.
The age of conversational commerce has arrived, according to Ethan Goodman, senior vice president of innovation at The Mars Agency, who discussed the rise of voice shopping and the engagement opportunities it offers brands and retailers. Among the most common tactics thus far have been voice skills/apps, the ranks of which increased from 15,000 in 2017 to more than 40,000 in early 2018. Brands currently are using skills in four basic ways: inspiration, education, personalized product selection and ordering.
In other activity at the conference, Calvin Klein's Marie Gulin-Merle received CGT's 5th annual CMO of the Year award, while the magazine joined with HCL Technologies to present the inaugural Women in Tech awards.
"God may have created the world in six days, but He didn't have to deal with legacy systems," said Jon Harding, global chief information officer of Conair Corp., during a panel discussion based on CGT's 2018 Sales & Marketing Study. Harding also noted the increasingly critical role that IT now plays in developing new strategies for consumer engagement (rather than focusing solely on internal systems and processes.) Meanwhile, Michael Forhez, global managing director of consumer Markets for Oracle, explored the changing nature of brand marketing in a marketplace where retail stores must deliver engaging experiences and consumer products have to provide engaging stories. Finally, Simon Ellis, vice president of supply chain at IDC Manufacturing Insights, described the need for CGs to build analytics capabilities that can drive enterprise-wide alignment and collaboration.
"The glory days of big CPG may be over. We're in a period of continuous economic growth, and we're struggling " acknowledged Michael Senackerib, now co-founder and chief executive officer of 2017 startup Farm & Oven Snacks but formerly a "big CPG" executive himself. However, that doesn't mean traditional brands don't still have distinct advantages over smaller competitors — if they're able to learn a few critical new capabilities from them: authenticity in product, messaging and mission is critical for sustained relevance with consumers; complete transparency about the entire business (about ingredients, suppliers, people, social issues); an obsession with customer service; and a long-term focus on success. "The real question is, who's going to deliver what the consumer wants," he concluded.
Patrick Tannous, president and Dan Klein, chief executive officer of Tiesta Tea shared the impact of authenticity on consumer engagement by describing how their company does that both figuratively and literally. In the latter respect, Tannous explained how a decision to add a clear window to packaging has improved sales and attracted new retail partners. In the latter area, he explained how a $9,000 investment in building a water well in Nigeria (in the village from which the company sources its hibiscus) has likewise led to deeper connections with consumers and retailers.
Dirty Lemon Beverages only accept orders via text messages in order to "connect more deeply with consumers and bypass the traditional business process" in a soft drink category still operating with "a very antiquated process for communicating," explained co-founder and chief executive officer Zak Normandin. "Instead of having to rely on the buyer at Target or the buyer at Walmart, we have unlimited shelf space." The company is growing through acquisition of beverage brands that will boost the portfolio and technology companies that will improve operations. "Proprietary technology really set us apart in the beginning and it will continue to set us apart in the future," he said. Dirty Lemon is also selling on Amazon.com in recognition of the site's power as a marketing vehicle (and the fact that other entities were bidding on keywords related to the company).
In less than two years, baby-snack maker Nosh has gained distribution through such leading grocers as Target, Ahold USA, Meijer and Walgreens because retailers liked the margins the company can provide and its ability to use local influencers and social media (along with GPS-based ad tools) to market at the store level, explained co-founder Jason Becker. Nosh started out by selling on Amazon through the Seller Central program so it could maintain control of pricing as it rolled out to brick-and-mortar chains, then signed up for the added benefits of the Vendor Central service once price differentiation became less of a concern.
Zahir Dossa, founder and chief executive officer of health & beauty manufacturer Function of Beauty, illustrated one key difference between startups and traditional organizations when he suggested that companies should “accept some aspects of inefficiency to stay true to your brand.” Dossa was explaining his unwillingness to mass produce some of his shampoos and conditioners (which are uniquely formulated for each consumer) in the name of scale. "That leads you down a dangerous path."
"Systems hate change," noted Patrick Fitzmaurice, principal at consultancy Caterpillar Farm, during his closing keynote. "Personalization is now truly possible, and that's really hard for the systems that we've built." That's why traditional CGs must re-evaluate their traditional go-to-market strategies. But success won't be determined as much by the adoption of any specific new capabilities as it will be the readiness and ability to address whatever changes will be required. "The future is ongoing, continual disruption," so the question for traditional companies is "how do you make a big organization nimble," he said.