Mid-Year Trends for Consumer Goods
Relating to, using, or storing data or information in the form of digital signals; involving or relating to the use of computer technology; "the digital revolution"
A thorough or dramatic change in form or appearance; change, alteration, mutation, conversion, metamorphosis, transfiguration, transmutation, sea change; revolution, overhaul; remodeling, reshaping, redoing, reconstruction, rebuilding, reorganization, rearrangement, reworking, renewal, revamp, remaking, remake
The buzz at this year’s Consumer Goods Sales & Marketing Summit centered on these two words: digital and transformation. Sometimes used together; sometimes used apart. Used in a myriad of discussions as the consumer goods industry faces immense pressure to evolve. Digital programs. Digital initiatives. Digital shopper experiences. Digital engagement with retailers. Shift to digital applications. Transforming the innovation process. Transforming the sales teams and approach. Transforming the trade promotion process. Transforming from legacy, slow, dis-aggregated, on-premise data platforms to integrated, enabled cloud capabilities.
The old, monolithic big brands are struggling — and quite frankly, just feel old. The new up-start boutique brands are booming. They are innovating. Listening to consumers. Built on cloud technology. Engaged with their audience. Nimble. And oh, by the way, exciting and interesting!
Growth is shifting to smaller players: More than 90% of industry growth is driven by smaller (perhaps more innovative) ones. Brands are becoming connected ecosystems — the move from products to “connected” brands has driven consumers to expect higher levels of value and purposeful engagement (e.g., Nike Plus). Consumers expect 360-degree engagement. Powered by data, consumers now expect brands to serve them with more contextually relevant, personalized experiences.
Business models are evolving from subscription models (Dollar Shave Club) to “as a service” models (Michelin tires). CGs must increasingly focus on serving consumers directly. And finally, transformation is being driven by digitally disruptive technology. New market entrants are “digitally native” from inception and don't have to overcome the limitations of legacy technologies. Incumbents must rapidly pivot and adopt new, disruptive technologies.
At the mid-way point of 2018, here are 5 top-of-mind trends affecting the consumer goods industry.
1. Intelligence Automation
Across the industry, and in fact across most industries, RPA (robotic process automation), artificial intelligence and machine learning are top priorities. The reason that these capabilities are growing quickly is that the time it takes to establish process, governance, and capability is relatively fast, allowing for rapid deployment, quick wins and benefits realization.
Intelligent automation leveraged across the enterprise refers to the use of software to mimic or accelerate the actions a human user would perform — both in processing and analysis — at scale. Intelligence automation can, for example, perform things like form entry, validation, submission, web scraping, uploading, exporting, downloading, importing, “help” services via virtual agents, data mining for insights via apps.
The potential benefits to CG businesses is significant, given that most big brands grew through acquisition and continue to employ spreadsheet-based reporting, management, and operating routines due to back-office system complexity. Potential benefits in this space include reducing labor costs by deploying virtual resources and re-deploying human FTEs (full-time employees) to higher-value work; increasing scalability through a 24-hour "virtual workforce" — de-coupling resource costs from process volume, guaranteeing consistent quality as human error is eliminated.
2. A New Breed of Competition
In the “old days,” Coke competed against Pepsi. Target against Walmart. Kroger against Publix. CBS against NBC. AMC against Regal. The list goes on.
Today, consumer goods companies have a broader competitive set:
They have direct competitors, services that directly compete (now including Amazon) and increasingly seek not just to distribute big brands today, but to supplant them with their own brands tomorrow!
They have experiential competitors that are winning the hearts and minds of kids and parents, services that (partially) replace the need for their own that include Apple, FreshDirect, Lego, etc.
And finally, they have perceptual competitors: Services that change and elevate consumer expectations such as Netflix, Uber, Spotify, and Facebook. When people use Uber or Spotify, they think, “Why can’t YOU do this for me, too?” Pressure is being put on consumer goods companies to think entirely differently and transform their brand experiences.
3. Sales Transformation Investment
Sales force transformation and enablement is hot. Just about every major CG brand is investing in an integrated platform centered on delivering the right product, at the right time, to the right location, and empowering the sales rep with data and insights on the retail customer. These platforms are typically cloud-based, and therefore are able to move forward despite traditional monolithic CG IT environs with a focus on customer data, personalization insights, upsell/cross-sell capabilities, and service integration enabling a true, single view of retailer (or retailer location).
4. Multi-Speed IT
One new buzzword across industries and moving fast in CG is the idea of “multi-speed IT.” Digital is changing the nature of business, and new strategies and delivery models are required for consumer goods CIOs to improve performance while controlling costs. A traditional approach to IT delivery is no longer viable. The multi-speed IT model is designed to dynamically match the different features of the digital, evolving, and legacy business — in other words, keeping the lights on with legacy systems while evolving new capabilities via new platforms where possible.
This model helps in optimizing IT costs by focusing the spending where it's most needed while reducing expenses in non-strategic areas; focusing the IT cost-optimization on legacy systems to gather resources for the digitalization of the business.
5. CISO Is the New CXO
The old days — when the vice president of information security was just a block on the org chart under CIO — are over. Today, the chief information security officer (CISO) has become one of the most thankless yet elevated jobs in the industry: You have the C-level title, but nobody appreciates you until something goes wrong (hence the position's high turnover rate).
Data and information security have reached C-level importance, priority and focus, and the industry is investing in upgrading capabilities to avoid being the next brand name headlining the nightly news for a data breach. Having the right security strategy and cyber defense approach are at the core of business resilience and brand trust. There are several CG firms that sell direct-to-consumer and/or market to consumers via loyalty programs and therefore do have access to and utilize PII (personally identifiable information) data — as do the agencies executing their campaigns. And, of course, the new GDPR regulations affect all global CG firms. From a CG security priorities perspective, security strategy and managed risk, cyber defense, digital identity, and application security are top of the list.