The consumer goods industry is home to some of the largest and most successful brands of the past century. Known for their complex business models and ability to navigate multiple regions, categories, and channels, consumer goods giants have dominated the competitive landscape for some time.
Yet over the past decade, there has been a changing tide. In recent years, increasing numbers of digitally-native competitors have launched new innovative business models that are shaking up the traditional consumer goods landscape.
So much so, McKinsey highlighted that while 60% of industry sales are still driven by the top 50 consumer goods companies, those same companies only capture 2% of annual industry growth. What’s more, 80% of consumer goods CEO’s believe that their business models are at risk, citing an over-reliance on bottom-line focus and innovation under-performance.
The fact is, challenger brands are capturing industry growth because their businesses are designed around agile business practices. To compete, traditional consumer goods giants must adapt by developing their own ’agile growth engines’ at the heart of their organisations, in the form of people, processes, and technology.
But, what does this mean in practice? How can consumer goods organisations actually achieve agility?
Create entrepreneurial work cultures
Naturally, global organisations in the consumer goods sector spend a great deal of focus on their most significant and successful brands. But, with more competition than ever arising from agile startups, many have started to consider additional working practices that are beginning to pay off.
P+G, for example, has introduced "lean innovation" throughout its marketing department. Here they examined how startup teams operated, before bringing "lean innovation" into the business and forming small teams within P+G that work as their own small startups. Not only do these teams always experiment, but they move quickly, fail, pivot, and learn.
So far, P+G has trained thousands of employees in everything from direct to consumer performance marketing to working more like entrepreneurs. P+G’s Chief Brand Officer says all of this is "inspiring more of a startup culture".
And, they’re not alone. Johnson & Johnson is another consumer goods giant that has taken inspiration from startups, creating cross-functional squads focused on consumer needs.
Step one in creating agile growth engines needs to start with equipping employees with the skills and organisational culture that breeds speed and innovation. By creating smaller scale teams with skills akin to newer digitally-native competitors, consumer goods giants can adapt to consumer needs faster to test new products.
Yet it’s not only the organisational culture that needs to change. Employees need access to information at their fingertips so that learning happens across the organisation. Consumer goods giants that do not break down silos within the organisation risk being slowed down by inefficient global teams that are making common mistakes.
Collaborate on a global level
To prevent duplicate work from being carried out, global organisations need to collaborate. This requires technology that allows internal information to be stored, shared and accessed by all.
Surprisingly though, many large consumer goods organisations still rely on legacy folder-based storage systems, littered with outdated insights and duplicate information. This not only provides employees with misinformation, but its archaic infrastructure also encourages business silos to form.
The consumer goods brands winning at becoming agile are those that are unblocking data bottlenecks. This means removing clunky legacy infrastructure, replacing it with user-friendly technology that allows every employee, regardless of location or position, to find up to date internal information in minutes.
The results? Teams make fewer ’data-requests’ and instead find insights and market intelligence that they can act on. Thus, making informed business decisions on their customers wants and needs, just like their digitally-native competitors.
Ultimately, consumer goods organisations must mobilise around technologies that empower the organisation and break down knowledge silos. Only then will they be able to level up their organisational infrastructure and move faster.
Accelerate with technology
Smart partnerships are one way to replace archaic infrastructure and increase the efficiency of workforces. Another is acquisitions.
Globally, there is mounting pressure on teams to ensure they’re able to analyse the customer, understand their consumption habits, deliver their needs and predict their wants. And, with deeper pockets than many new digitally-native competitors, a quicker route to providing unique experiences or services could be through acquiring technologies.
Last year McDonald’s announced the acquisition of Dynamic Yield. Using Dynamic Yield’s AI-Powered Personalisation Anywhere Engine, the company can now provide customers with a tailored experience at drive-thrus, self-ordering kiosks and in their app. Without this acquisition, McDonald’s would have been less likely to be able to accelerate its personalisation capabilities at the same speed.
Investing in advanced technology that already exists could prove the quickest, and most competitive way, to innovate and go to market.
Develop an agile future
The consumer goods companies that achieve agility will be those that can adapt to the changing competitive landscape. Digitally-native competitors are forcing consumer goods giants to mobilise their organisations to think differently, both in terms of how they are organised, and how they use technology.
Those who succeed will be the organisations that can embed a culture of agility, innovation and entrepreneurship. In utilising their scale to make smart acquisitions and partnerships, consumer goods companies can fight back to a place where they continue to capture industry growth.
Thor Olof Philogène is chief executive and co-founder of Stravito
Main image: Adobe Stock
Author image courtesy of Thor Olof Philogène/Stravito