Strategy&: Digital leap for consumer packaged goods (CPG)
Harness the energy and engagement your business has navigated during the pandemic and use it to start closing the gap between digital aspirations and achievements - is the message to players in the consumer packaged goods industry (CPG) from Strategy&.
Digital transformation to drive growth tops the agenda of most large CPG but too many are failing to make the digital transformation so smaller companies and new entrants have been growing faster than larger ones according to a new report from Strategy& (part of PricewaterhouseCoopers).
“For large companies, moving from the old model to the new is the core challenge of digital transformation. This means unlearning tried and tested principles that drove success in the past, comment Strategy& in the report, The digital leap: How to drive growth through digital transformation in consumer packaged goods.
“By anchoring their business around a set of flexible, digital capabilities and technologies, emergent CPG players have been better placed to win.”
The pandemic has changed the landscape with 93% of consumers polled by PwC’s Global Consumers Insight Survey 2020 saying they are likely to maintain their increased use of mobile shopping. Two-thirds of all companies say their revenue and profit will suffer if their digital transformation doesn’t move fast enough to keep up with the changes.
“The challengers’ success also owes much to the fact their capabilities undermine the historical advantages of scale and reach enjoyed by larger rivals. When consumers can be engaged with targeted products and digital marketing, big budgets for mass-market product innovation and large-scale agency advertising are no longer required.”
Journey to digital transformation
Start your digital transformation today, say Strategy&. “This should start with an understanding of strategy, operating model and supporting technology for each function within the business. Next, identify the current level of digital maturity and align on the target state your organisation needs to realise.”
“Brand owners are encouraged to focus on developing a unique set of differentiating and mutually reinforcing capabilities to drive competitive advantage. Investments in non-differentiating, “table-stakes” capabilities should be carefully managed, with a focus on maximising efficiency and possibly buying these in as a service.”
Strategy& has identified five steps CPGs can take to make the digital leap successfully:
- What does digital transformation mean for your business?
Leading companies take a holistic view of digital with 45% recognise it is a mindset of constant innovation and tech integration in all phases of the business.
Digital leaders know it is not synonymous with IT or isolated reactions such as moving to the cloud but instead means adopting digital capabilities and supporting technologies holistically across their business.
“Their strategy is also articulated at the right level – not lost in the weeds of specific technology solutions, nor loftily detached from action. They accept the fact that digital transformation is a continuous journey,” comment Strategy&.
PwC's Digital IQ research shows 62% of leading companies agree that digital transformation does not have start and end points.
- Make the leap to digital a strategic and investment priority
Leading companies invest 33% more in digital initiatives and 96% of them take a long-term view but companies must realise this is not a small or siloed side-project.
“It should be a pivotal element of the top executive agenda – championed by leadership and backed to the hilt with investment… They also invest in people, allowing time and space for transformation teams to engage and collaborate across the enterprise,” says the report.
3. Ensure you have digitally savvy leaders
“It is knowhow that makes the difference. More than half (54%) of top performing businesses say their leadership is digitally savvy and helps the workforce think in new ways, against just 41% of less successful peers.
“Also, 77% of top performers say the executives in charge of digital efforts, such as a Chief Digital Officer, or Chief Transformation Officer, are deeply involved in setting high-level strategy,” comment Strategy&.
4. Invest in a workforce for the future
Leading companies focus on their growth by upskilling employees and recruiting the right talent. This means changing how candidates are recruited and becoming a magnet for people with digital capabilities or experience in delivering digital transformation.
“Digital leaders also realise success is not just about technology skills. Culture and ways of working, including mental agility and flexible, cross-functional collaboration, are crucial,” says the report.
5. Progress with speed and control
Digital transformation should be executed at speed using an agile, continuous improvement approach of test, learn and scale.
“Leading companies achieve this with governance models that enable the right people to make the right decisions at the right time - setting the guardrails for teams to innovate and take managed risks.
“They also galvanise collaboration: 84% of leaders mandate collaboration and cross-functional working. And they put sufficient resources into the change management effort – communicating and measuring progress frequently and changing course if needed,” comment Strategy&.