Transforming consumers, channels and competitors: A note on turning agile and winning in the next decade for CPG companies

Think Tank: McKinsey & Company – Report summarized by : Bummary

Introduction

CPG companies in the US are recording a declining growth trend since 2011. Executives in the space who’ve historically relied on rising consumer demand for growth are no longer able to generate the same level of incremental performances in the business as they did a few decades ago. The big reason for this change is a transformation in consumer’s tastes, channels of communication and the onslaught of smaller brands who’ve taken the world of digital by storm and found innovative new ways to attract consumers.

What will you learn?

In this Bummary we focus on what CPG firms can do to avoid getting disrupted and understand the difference between pursuing incremental change viz a viz a robust transformative exercise to build an agile next-gen organization.

Key Insights

  • Adopt an innovative agility at scale model against the current growth model for sustainability and future profitability.
  • Consistent capital re-allocation is a big game changer for CPG firms. McKinsey research shows that firms who’ve re-allocated more than 49 percent of their capital over a period of ten years have delivered much higher total shareholder returns than counterparts who failed to move swiftly on this front.
  • Customer experience, digitization and personalization at scale should be the key CEO agenda. 
  • An agile system with small core cross-functional teams and a central nervous system building dependencies, rules & accountability is going to be the key differentiator between success and failure.

Agility in resource allocation can help you avoid stagnation and drive growth

McKinsey’s research of CPG firms in the US reveal there is no significant trade-off between operating expense efficiency and growth. The idea is to frame cost efficiencies around future investments driving the company towards its fundamental strengths through a fact-driven, company level strategic planning process each year. Becoming a dynamic resource allocator needs firms to become better at shifting resources away from non-performing activities towards those areas where they can unlock significant and sustainable economic value.

Customer experience and omni-channel is critical for sales success

McKinsey’s analysis shows that a number of CPG players have fallen behind the retail sector when it comes to adopting data analytics for transitioning towards creating customer experiences based on actual behavioral analysis rather than stated preferences. The best CPG companies are using big data sets on a real time basis to identify segments of customers with similar behaviors, attitudes and needs. Using data analytics and creating personalized journeys can allow you to move over mass-market marketing processes towards a marketing model aligned to the needs, behaviors and requirements of your consumers.

Combining spend advantages in traditional channels with data driven capabilities and new channels can play a big role at a firm’s ability to generate incremental value.

 

Agility at scale should be the mantra for CPG firms

The greatest advantage of being agile is the power to compete across a broader range of market spaces. The basis for competition becomes a flat organization structure and cross-functional talent working towards achieving pre-defined goals within the larger canvas painted by the company.

Using granular data to start with creating strategies based on analytics, intelligence and machine learning can help firms unlock incremental growth advantages through a data-driven approach. 

Final summary

Many companies in the CPG segment have been recording a declining rate of growth in the US market for last few years. We believe there’s incremental synergy to adopting an agile model led by unstructured data analytics, research, AI and machine learning to find new sources of value across the business chain and find credible sources of value creation through specific customer journey creation.

Here’s the key takeaway:

  • Build small cross-functional teams to identify the key tasks, activities and short term goals for growth.
  • Have an agile system where the organization sets the necessary rules, systems and accountabilities, and shorter lead times to market for idea testing and value identification.
  • Build customer experience journey by going beyond traditional modes of marketing and learn about your customers through the use of big data channels and sources.

 

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