Success as a consumer products company has long been built on developing great brands, efficiently manufacturing the high-quality products those brands represent, and motivating consumers such that those products fly off the shelves.
None of that has changed. But it’s not enough anymore.
There are a few reasons. Consumers demand personalization in ways that place unprecedented burdens on supply chains and product innovation. That calls for not only product variation to satisfy ever-finer segmentation across and within geographies, but also extending a brand’s value to consumers into complementary services.
Consumers care much more about health and wellness, and they link what they buy to how it makes them feel, mentally and physically. There’s a serious focus on sustainability, and, despite inflationary pressures on discretionary income (another challenge for the industry), people are increasingly willing to pay a premium for products that can demonstrate sustainability.
Related is a desire for transparency into not only sustainable sourcing, but also ethical sourcing. Given the reality (and perceived reality) of greenwashing, you must be able to demonstrate, rather than just talk about, sustainable and ethical sourcing.
Rare is the consumer products company that can do all this alone. Hence the need for an ecosystem of partners, each doing what it does best, to serve an increasingly discriminating and finely differentiated consumer base. The complexity of doing so is placing unprecedented demands on IT infrastructure, ones extreme enough that old architectures and patchworks of systems can’t keep up.
Solid Core, Flexible Extensions
While the details of the solutions capable of supporting consumer products companies into the future differ, they share common characteristics: a robust, cloud-based digital core enabling real-time visibility across a company’s operations; an ability to plug specialized solutions into that core using standardized APIs; and interconnectivity with the systems running at ecosystem partners.
It starts with the digital core. We’ve come across clients with dozens of ERP instances. In such cases, it’s at the very least extremely time-consuming — and, more likely, all but impossible — to reliably track sustainability metrics across the supply chain.
Perhaps more pressing, disparate systems become stumbling blocks to developing new products – much less partner-ecosystem-derived bundles of products and services. And without a trove of centralized, reliable data at the core, the value of advanced analytics so critical in understanding everything from evolving consumer tastes to operational efficiency plummets.
Examples of data as competitive advantage abound. Companies that focus on their core competencies and leverage data as a competitive advantage are digitizing that knowledge to boost sales. Nestle’s experience in nutrition and infant health, among many other areas, provides detailed insights into a vast array of nutrition and health information as well as consumer tastes. Under Armour's MyFitnessPal subsidiary presides over the world’s largest food-related database, with detailed nutritional information of more than six million products and insights into purchasing behavior every time one of its 200 million global users scans a barcode with a smartphone camera.
To maximize the value of such information, it must be stored centrally and, taking security and privacy into account, made available to creative minds throughout the company.
The advantages of a core-plus-extensions approach more directly apply to internal and supply-chain-wide operations. A global food-and-beverage company leaves packaging and graphics to partners, but because those partners can plug into the digital core, labels and packaging materials are there when needed. It’s a symbiosis common to natural ecosystems, and it’s no accident that the consumer products industry is evolving in a direction that nature settled upon eons ago.
Partners Gain Too
What’s in it for the partners? In addition to steady sales, they can reap the benefits of the bigger fish’s data-derived insights. Using blockchain technology, Bumble Bee Seafoods implemented a system capable of tracking and tracing the provenance of yellowfin “ahi” tuna from the shores off Indonesia to packed products. While feeding that system with on-the-sea data, fishermen — some who may catch just a couple of fish a day — got something in return. Bumble Bee was able to discern the movement and location of concentrations of fish and relay that back to the boats, benefitting the fishermen and, ultimately, their villages.
Back on land, Barry Callebaut, the world’s leading chocolate and cocoa producer, developed an app for West African farmers that’s light enough to run on a flip phone. The app provides insight into market prices, which prevents local distribution-center buyers from taking advantage of them. It also enables digital payments, which lessens the risk of being robbed after receiving cash. In addition, sustainability-related data allow the company to assess individual-farmer and community needs, resulting in higher-quality and yields.
The roughly 65,000 farmers using the app now have improved access to seedlings, fertilizer, and training that cater to their specific needs. In return, Barry Callebaut gains traceability of cocoa beans from farm to Barry Callebaut’s warehouses and an improved cocoa-bean supply.
Today’s consumer products companies must satisfy increasingly selective consumers with highly targeted products and product-service combinations often delivered by partner ecosystems. That’s driving an IT transition to cloud-based cores with flexible extensions. The industry’s leaders rightly recognize that the capabilities these systems afford will soon be essential in staying competitive — if they’re not already.
—E.J. Kenney leads SAP’s consumer products and life sciences business units.