CPG / FMCG

Becoming Future Fit: Challenges and Opportunities for Consumer Product Companies

| Charlie Ranalli

Faced with changing consumer preferences, accelerating technology change, and competition from nimble startups, today’s consumer products (CP) companies know they need to make major changes to their operations within the next half-decade to remain successful. But while many have started down the path of transformation, progress is uneven, with some companies stalled by a combination of conflicting leadership priorities and a shortage of the talent and capabilities needed to make change happen. Unless companies find ways to overcome these hurdles in the near future, they will fail to achieve their transformation goals and grow increasingly out of step with the demands of tomorrow’s consumers rather than becoming the models of efficiency and responsiveness they wish to be.

These are among the findings in a new MIT SMR Connections/EY LLP Global Consumer Industries research study based on a survey of 370 CP business leaders in 10 countries. Conducted in June and July 2021, the survey asked these leaders about the challenges they face as they endeavor to make major changes in operations ranging from manufacturing and supply chain to finance, marketing, and talent acquisition to meet changing consumer needs.

A multi-disciplinary team of advisors and academics then sliced and diced the results of the survey, identified patterns, and provided provocative recommendations.

“The way business models are architected in the large consumer goods companies, the way they account for profitability and marketing expenses, needs to change. They need to rethink the entire measurement system so they can get a more holistic view of the relationship between them and the customer.”
Len Schlesinger
Baker Foundation Professor, Harvard Business School

Published in a series of Sloan Management Review Articles, a (downloadable) paper and a summary infographic:

Is Your Company’s Operating Model Trailblazing — or Trail-Gazing?
September 2021

3 Priorities for Accelerating Your Operating Model Transformation
October 2021

Becoming Future Fit: Challenges and Opportunities for Today’s Consumer Products Companies
December 2021

Optimizing Operations for Now — and the Future
December 13, 2021

The Digital Future: A Game Plan for Consumer Packaged Goods

| Charlie Ranalli

Written six years ago, the robust analytical groundwork makes this paper a good read today. Furthermore, many of the recommendations are mainstream strategic plays in present-day toolboxes.

After outlining realities and challenges and how that game has changed, the authors argue that CPG companies should quicky move beyond establishing a digital presence—a website, some digital advertising, a presence in social media—and fully integrate digital into their operating model, build a big-data analytical capability, pursue a multichannel (or omnichannel) strategy, or tailor their product offerings to the digital or e-commerce marketplace

Their recipe to Playing the New Game to Win:

  • Develop an integrated strategy
  • Build brand equity online
  • Revisit category management across channels
  • Partner with retailers
  • Rethink supply chain configuration
  • Test, learn, scale
  • Build an adaptive organization
  • Manage internal tensions

Retrospectively, a missing item in this top-level list is advanced Data Analytics.

The Digital Future: A Game Plan for Consumer Packaged Goods
Patrick Hadlock, Shankar Raja, Bob Black, Jeff Gell, Paul Gormley, Ben Sprecher, Krishnakumar (KK) S. Davey, and Jamil Satchu
Boston Consulting Group, 2014

Agility@Scale: Solving the growth challenge in consumer packaged goods

| Charlie Ranalli

Conducting research for a customer project I came across this paper.

The premise is that the reconfiguration of the US market has undermined traditional growth models for consumer-packaged-goods companies, particularly large ones.

The authors argue that there is no single solution to the growth challenge; rather, changes along multiple dimensions are necessary.

While not directly focused on digital innovation, the correlation between what growing consumer packaged goods companies are doing and the traits of digital leaders is astonishing:

  • Build an agile, streamlined organization
  • Develop triple-A capabilities: Advanced analytics and automation
  • Fuel growth through agile resource reallocation
  • Ditch the stage gate for ‘test and learn’ innovation
  • Reset customer collaboration: E-commerce and small format
  • Deliver next-generation consumer engagement: ‘Consumer 3.0’
  • Use Agility@Scale to go broader and smaller

Highly recommended reading for executives in consumer packaged goods companies revising their strategies to revitalize growth strategies.

Agility@Scale: Solving the growth challenge in consumer packaged goods
Jan Henrich, Ed Little, Anne Martinez, Kandarp Shah and Bernardo Sichel
McKinsey & Company, July 2018

Solving the digital and analytics scale-up challenge in consumer goods

| Charlie Ranalli

McKinsey argues that consumer-goods companies have invested in digital and analytics, but that more than half of the time those investments have failed to yied the desired results.

Their research shows that only 40 percent of consumer-goods companies that have made digital and analytics investments are achieving returns above the cost of capital. The rest are stuck in what the authors call “pilot purgatory,” eking out small wins but failing to make an enterprise-wide impact.

But digital leaders are showing they way – with four core elements leading to digital and analytics success:

  • Set a bold long-term aspiration
  • Pursue ‘domain transformations,’ not unrelated use cases
  • Ensure the coherence of enablers across domains
  • Reconfigure your operating model for speed and flexibility

Solving the digital and analytics scale-up challenge in consumer goods
Ford Halbardier, Brian Henstorf; Robert Levin and Aldo Rosales
McKinsey & Company, 2020