Data flows, upstream and down
The data that smart packaging provides upstream to businesses is even more valuable. It enables them to understand a great deal more about how their products are used by consumers. Think about it as a focus group providing views and insights for a product but expanded to the entire customer base. Those insights can have a material effect on product development, manufacturing and production. It’s this integration into a business’s digital thread where the greatest potential for smart, connected packaging lies.
The promise is clear. But we wanted to find out more, explore these benefits in more depth and understand the practices that separate the leaders from the followers in this space.
Finding the smart packaging pioneers
To do that, we teamed up with the Active and Intelligent Packaging Industry Association (AIPIA) to survey 1,000 c-level executives and conducted more than 30 in-depth interviews. Overall, we found that they see enormous potential in smart, connected packaging. But deeper analysis of our research, using machine learning, revealed only 16% of companies have adopted a comprehensive, data-driven approach to smart packaging. We call these pioneers ‘value threaders.’ They outperform their peers—'value seekers’ (52% of businesses) and ‘value evaders’ (32% of businesses)—by a significant margin across a number of key value indicators.
More specifically, value threaders, in comparison to value evaders enjoy lower material intensity by 1.2 percentage points (pp), reduce trade in counterfeit goods by 2.3pp, lower product recall rates by 3.3pp and lower customer acquisition costs by 5.5pp.
Value left on the table
Put another way, if value evaders could become value threaders, our analysis suggests they could achieve a 3.6% increase in revenues. That’s equivalent to US$300 million on average over the last three years. The group of businesses that falls between evaders and threaders, which we call ‘value seekers’, have almost as much to gain from emulating threaders. Our analysis suggests their increase in revenue would be 2.3%, translating to US$230 million over the last three years.
Three steps to value threading
The compelling business case for smart, connected packaging is clear. The question is: what are the value threaders doing to realize it? We found three vital steps.
- They are building data driven feedback loops across the entire product lifecycle.
That’s what manufacturers of smart products, from Tesla to Peloton, do. Their data scientists, business analysts and research engineers’ pore over the data generated from customer experiences and product performance. They harness the insights from that data to make value-adding improvements across areas ranging from product development and production efficiency to more effective marketing.
Data feedback like this has not been often seen in many packaged goods businesses. But smart packaging means every product is–or could be–also now a smart product. Those that grasp this transformation are harnessing the opportunity by weaving digital threads throughout their product lifecycles to create value, upstream and downstream.
- Value threaders excel at how they capture, analyze and govern data.
Nearly every executive we surveyed (97%) agreed that data from smart, connected packaging could improve the evidence-based culture in their organization. But only 29% of them say their businesses are extensively applying analytics to that data. In contrast, 63% of value threaders apply analytics intensively to packaging data, with 83% of them having a clear governance structure in place for the packaging data they use for analytics and decision making.