Preparing for a Decade of Disruption

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Preparing for a Decade of Disruption

By Gregor Davidson, Accenture - 08/29/2017
Gregor Davidson

For consumer product companies, science fiction is now no longer science fiction. Imagine receiving a delivery of laundry detergent because your washing machine told Amazon you need it. Or your health insurer offering dental discounts because your toothbrush told it you’re brushing your teeth regularly.

As we in the industry know, this is already happening.

A new era of profound technological transformation has begun. Eighty-eight percent of industry executives agree they must innovate at an increasingly rapid pace to keep up with competitors. Despite this understanding, consumer goods companies are in the bottom quartile for anticipating digital disruption. As technology reshapes the market, how can consumer goods companies catch up — and even lead the way?

1. Individualized consumer engagement
Artificial intelligence is one of the technologies making the shift from science fiction to reality. It's enabling consumer goods companies to reimagine the relationship between company and consumer. For years, we've spoken of the segment of one — finally, there's a chance to make this reality.

For high-engagement brands, AI can make the consumer connection more personalized, more responsive, more trusted. Consumer goods leaders are investing in predictive analytics to get to know their consumers and tailor products to individuals. For consumers, such personalization is becoming a given.

For low-engagement products, AI threatens to eliminate the user interface altogether. Amazon’s automatic detergent replenishment is just one example, and its Dash buttons let consumers replenish a range of other products automatically.

So how do companies disrupt this automation process and get their brands in front of consumers? Their best bet is to get out in front by trialing predictive replenishment services; clearly, subscription-based models are the simplest way to evaluate this. What's important here isn't the value of the subscription, but rather what can be learned from the endeavor.

Similarly, high engagement products must continue to develop methods of data acquisition; it is only through building close understanding of consumers over a period of time that the segment of one stands a chance of being addressed.

2. Productive partnerships
Three-quarters of executives believe competitive advantage will be determined by the strength of partnerships, and nine in 10 say adopting platform-based business models and engaging in ecosystems with digital partners is critical.

So companies are integrating their core business functions with third parties and digital platforms to carve out positions at the heart of valuable new ecosystems. The smart toothbrush is one example: Beam Technologies created a new oral health ecosystem alongside dental and insurance providers; the data collected by its connected toothbrush goes to these partners, which can provide the end consumer with exclusive discounts on services or insurance premiums.

Data sharing and openness are essential for such partnerships, and it’s unsurprising that cyber security is the biggest concern for CPG companies when it comes to participating in ecosystems. Before opening up data to partners, they must establish robust cyber security policies and procedures. There’s more to gain than lose.

3. Talent marketplace
On-demand labor platforms and online work management solutions are changing the way companies source talent. They provide access to skills on demand, providing access to specialized talent and reducing the scale of more costly permanent teams. This is especially useful for project-based, non-core work that has specific outcomes.

Accessing open talent marketplaces may, however, give rise to concerns about intellectual property risks. Consumer goods leaders will have to evaluate the risks, establish processes to address them, and use incentives to engender loyalty among their short-term workforce. Yet the resulting on-demand enterprise will be key to enhanced agility and rapid innovation.

4. Personalized design
Creating a tailored customer journey is vital for success in today’s market, where experience is beginning to trump product. Bespoke, interactive and shareable, these experiences offer personalized products and a more engaging experience. In the UK, Magnum has created a pop-up “Pleasure Store” where consumers can make their own ice cream blends.

Additionally, the experience from creating a one-of-a-kind product increases the consumer's attachment to a brand and makes her more willing to share information. The enabler for this is digital manufacturing techniques, especially digital printing. Consumer businesses would be wise to keep ahead of this fast developing area.

5. Doing the right thing
Consumer data has huge potential for consumer goods companies, but it's crucial that brands ensure security and privacy.

Next year’s General Data Protection Regulation affects how companies handle the data of European Union citizens. Rather than seeing GDPR as an obstacle, companies should recognize it as an opportunity to reinforce customer trust.

Additionally, vigilance must extend to the supply chain. Consumers care about ethical sourcing, and technology now lets them check the origin of everything they buy; show them that your procurement practices are ethical and they will reward you with their trust. Technology is also helping companies conduct their own due diligence: Some are already using blockchain’s distributed ledger technology to authenticate high-value products and protect against counterfeiting.

Survival in the new era depends not simply on continuing to make a success of core business areas, but also on looking beyond that business to innovative technologies, partnerships, staffing models and consumer relationships.

It's not yet clear what particular combination of innovations will lead to ultimate success, so responsiveness and speed will be critically important as science fiction continues to become reality.

About the Author
Gregor Davidson is a technology strategy specialist in Accenture Strategy, based in London. He leads Accenture’s technology strategy work in consumer goods and services across a wide range of industry- leading clients.