Frenetic market activity and new pressures and possibilities are dramatically changing the consumer goods landscape—and the terrain is shifting fast. Three trends have proven to be the most transformative and influential as companies move toward digital.
Globalization. The modern storefront is global. As political and trade barriers collapse around the world, new workers, consumers and shoppers are able to participate in the global economy. Accenture anticipates up to one billion new emerging market consumers eager to buy products by 2015. At the same time, transport and communications costs are plummeting, providing ample opportunities for businesses to compete in a globalized world.
Emerging markets middle-class. A newly affluent emerging market middle-class consumer is opening up a vast new market. By capturing the hearts and wallets of these new consumers by offering desirable snacks and drinks, cosmetics, toiletries and household goods, consumer packaged goods (CPG) companies have grown revenues by almost 7 percent in the last two years, despite depressed global economic growth. However, to effectively reach these new consumers, CPG companies would need to establish up to 15 million new retail outlets.
Digital adoption. The rise of digital technology is empowering consumers, shifting power from corporate to the individual. Today’s consumer demands anytime/anywhere interactions and continuous integration across channels. They have access to a wider range of products and services, and they expect good value. Across developed and emerging markets, consumers are going digital and social at the same time, and they may not be willing to purchase goods any other way. In fact, online sales are growing rapidly—by 18 percent CAGR.
Digital technology can bring products and services to consumers in communities where it’s impossible to get to a physical store. And, consumers simply expect interactions to be digitally enabled. Going digital is the only economically viable way to compete and win in this environment.
The Accenture Technology Vision 2014
The Accenture Technology Vision 2014 points toward an exciting time of new opportunities driven by the power of technology. To move beyond ERP to the digital enterprise, CPG companies must embrace these trends and connect their ERP to digital technologies to power their digital interactions with a single version of real-time data. The four trends below highlight the digital technologies that will influence CPG companies on the journey to becoming digital enterprises.
Data supply chain. There are vast amounts of data that can be harnessed to help CPG companies make better decisions. Right now, data and analytics are being used in pockets of the organization, thus limiting the ROI and potential value. By making data accessible across the enterprise, CPG companies could apply predictive analytics to improve decisions around products and consumer engagement. In the future, they might also use analytics to inform product development and may hire more analytic talent. Putting this data into circulation calls for an enterprise analytics strategy that prioritizes analytics investments aligned to business goals.
Digital-physical blur. Technology is enabling CPG companies to interact with consumers in context and at the point of sale. Businesses can harness the constant flow of data to personalize interactions and customize offers. The way consumers experience and interact with technology is also changing. Wearable devices are now more prevalent than ever among consumers and within businesses—and this can unlock new opportunities. For example, Gartner predicts that the field service industry alone stands to save $1B annually by 2017 just by using smartglasses.
From workforce to crowdsource. Technology is reaching a point where it’s easy to connect with millions of people in millions of places. In this borderless enterprise, organizations can reach beyond their four walls to use the crowd for new scale and unique capabilities. They can also leverage target consumers to co-create new products, helping guide their choices around flavor, size or assortment. The crowd can also fund these products—crowdfunding creates guaranteed demand – and capital – prior to any investment in a new product. To open the door to crowds, CPG companies will need technology to enable greater collaboration and social reach.
Business of applications. As CPG companies push for greater IT agility in the digital world, there is a sharp shift toward simpler, more modular and more custom apps. In addition to consumers wanting apps to feed their digital desires, customers and employees are looking for consumer-grade experiences everywhere. They are pressing IT to give them the kinds of low-cost, accessible and intelligent apps they use every day on their own mobile devices. The more quickly businesses can create and launch new applications that add value to their products in today’s turbulent markets, the better they can innovate, collaborate, improve consumer experiences and enrich personal interactions.
Accenture High Performance IT Research
High performers take charge of their digital journey. They view IT as a strategic asset that can help renew vital aspects of operations—optimizing at least and innovating at best. CPG enterprises that embrace digital and evolve their IT strategy, architecture, operating model, applications, infrastructure and security to support digital functions and processes are most likely to emerge as winners as the digital revolution unfolds.
According to Accenture’s fourth High Performance IT research, the digital dimension is clearly visible. High performers use digital tools and systems to push for excellence across three areas:
IT innovation. High performers are seizing digital opportunities to transform how goods are designed and produced, how commercial transactions are created and managed, how information is accessed, how relationships are formed, and how collaboration happens internally and with customers and partners. They readily experiment with social media, mobile, analytics and cloud, as well as virtualization, security and data management.
IT agility. High performers are replacing their legacy architecture with a more flexible architecture that can help the business to evolve from a transaction/automation-driven IT environment to a relationship- and experience-driven environment. IT high performers (40 percent) are seeing measurable improvements in IT agility and 33 percent say their architecture transformations successfully lead to cost reductions.
IT execution. Most CPG companies initially invested in transaction-driven technology to increase productivity and automate manual or paper-based processes. Today the high performers prioritize their IT investments by measuring their overall business impact. Yet only 40 percent of CPG organizations allocate their IT budget to deliver strategic business capabilities.
While many are dabbling in digital, the true disruptors are investing in enterprise digital tools, capabilities and skills to shift from using technology as an enabler of efficient and effective processes to an enabler of seamless and content-rich interactions with consumers, customers, third-party suppliers, employees and other stakeholders.
How can you realize your vision?
The journey from an analog to a digital enterprise may seem overwhelming at times, but there are core principles that can guide each step toward achieving your digital vision.
Become deliberately digital. Dabbling in digital is no longer enough. CPG companies today must see digital as a strategic imperative. The high performers are investing in enterprise digital tools, capabilities and skills. They are moving beyond ERP to leverage new technology platforms that support enterprise mobility, collaboration and enhanced usability. Above all, CPG companies need to move their digital responses from a tactical to a strategic level. This is not about digital marketing, it is about becoming a digital enterprise; and to do this you need to transform to a digital operating model.
Connect IT and the business. “The technology” and “the business” are tightly intertwined and should never be thought of separately. Businesses can drive more value from ERP investments and enable global operations efficiencies by viewing IT through a business lens. Accenture research indicates that high performers allocate 55 percent of their IT budgets to deliver strategic business capabilities. Business-led IT investments such as flexible architecture, enterprise analytics and pay-per-use IT services deliver business value and will also reduce costs over the long term.
Focus on consumers. Traditional marketing models have been based around the industry pushing products to consumers and shoppers. Marketing and advertising have been a monologue – from brand to consumer and shopper. In the digital world, monologue becomes dialogue; it demands interaction and engagement through numerous interconnections between the consumer or shopper, product, retailer, digital and social networks. To enable an enterprise-wide focus on the consumer, IT must become increasingly interactive, data-driven, real-time and integrated.
The high performers are focusing on seamless and personal consumer experiences, and digital interactions, not transactions. To achieve the kind of seamless experience consumers want, your business will have to have a presence at every stage of the shopper’s journey. This entails making a major investment in automation, technology and analytics. A core ERP backbone enables this move to a digital enterprise by providing a foundation to build a digital infrastructure, and complimenting ERP data with enterprise analytics to provide more predictive insights.
Continue to Drive Value from Consumer Goods’ ERP Investment