Most CPG companies understand that successfully moving to the cloud is key to staying competitive, but they must overcome three barriers, identified by our research, to get ahead:
1. Failure to appreciate cloud’s full potential
“A widening gap”
The truth is that most CPGs still don’t fully understand or embrace the profound impact that cloud is having on all businesses.
Too many CPGs are approaching cloud readiness as a pure “technology cost reduction” play, seeing only an opportunity to lower spending. This is short-sighted because it ignores the larger gains in operational efficiency and increases in revenue that cloud unlocks throughout the organization.
We divided the 100 companies we surveyed into “Frontrunners” and “Followers” with regard to their adoption of cloud.
Crucially, Frontrunners showed better top-line growth and resilience compared to Followers over the first year of the pandemic.
of the Frontrunners have their IT-Business strategies aligned.
of the Followers have their IT-Business strategies aligned.
If the larger cloud readiness story is a tale of two CPGs, the unfortunate narrative for Followers (and for underperforming Frontrunners) is one of misalignment between IT and business strategies. But these two must be aligned and work together to allocate resources appropriately, design IT transformation road maps and build relevant skills in the workforce, all based on clear business priorities.
But the unspoken truth is that—for the industry as a whole—IT and business strategies are still poorly aligned. It is “the elephant in the room” for the sector. According to our research, 33% of CPGs have misaligned IT and business strategies. Moreover, build these strategies out as a single endeavor.
Broadly speaking, misaligned strategies prevent companies from realizing the full value of cloud. The difference in cloud maturity of CPGs with aligned vs. misaligned IT and business strategies is too stark to be ignored: 40% of those with aligned strategies, for example, significantly reinvented business operations in the cloud (in contrast to only 6% with misaligned strategies).
The third challenge facing CPGs is the need to close the gap between their D&A aspirations and actual capabilities. Managing data effectively and generating meaningful, actionable insights is critical—the single most important transformational play enabled by the cloud for the industry. While a larger percentage of CPGs have invested to some degree in the cloud technology layer, only 14% have made the corresponding and necessary investments in transforming their business, culture, and processes to be truly data driven.
More than a hundred Chief Digital Officers (CDOs) state that 80% of CDOs/CEOs are struggling to deliver scalable value through data and analytics, due to their current operating model.
What's holding them back?
According to 58% of CPG respondents to our survey, it’s their failure to secure the analytical capabilities needed to make all the data ingested useful and actionable. This belies a larger challenge: a lack of completeness in D&A strategy that includes updated operating models, use cases and talent.
Crucially, with the establishment of highly flexible analytical products on the cloud, there is a need to re-think the end-to-end operating model to ensure the data and analytics capability can deliver business results at speed.
In fact, research of more than a hundred Chief Digital Officers (CDOs) states that 80% of CDOs/CEOs are struggling to deliver scalable value through data and analytics, due to their current operating model.2
On talent, critical gaps can be found in data science, visualization and a range of other D&A skills. Gaps like these are setting up a two-tier world—one that is benefitting from significant D&A talent build, and another that is coming up short.
Put simply, CPGs won’t succeed without deploying and harnessing the benefits of cloud: Without it, they risk being left behind with outdated technology and a sluggish business that will struggle to remain competitive. Focused investment in technology, however, is necessary but not sufficient for success. Instead, CPG leaders will only achieve real benefits by embedding end-to-end process, governance and culture change with an appropriately aligned business and IT strategy. The good news is that both Followers and Frontrunners can take steps now—using the above recommendations—to optimize and accelerate their cloud journeys.