The past decade has seen dozens of Consumer-Packaged Goods (CPG) companies utilize Zero-Based Organization (“ZBO”) principles to redesign their operating models to fuel sustainable, profitable growth. Accenture Strategy’s latest research supports these findings, and demonstrates that 91 percent of companies have achieved their zero-basing targets, realizing an average $260M in profit improvement annually.i
This success suggests that zero-basing programs are easy—but that could not be further from the truth. Instead, companies that succeed do so because of deliberate decisions they make in both deciding what to do, and then adhering to key principles as they begin to execute. From our experience, these CPGs—which we will call “Winners”—do eight things:
- Start with the strategy and emphasize growth drivers: Winners explicitly link their operating model programs to their corporate vision and strategy. They emphasize the products, markets and customer segments that are needed to drive growth and keep these capabilities in-house. These firms also customize their models where needed to drive growth. A current CPG client determined that one channel was growing nearly 5x its core business, then designed an op model that over-invested resources in this area.
- Agree on one page of design principles: Successful programs often begin with the C-Suite agreeing on 10-12 principles—including program intent, the role of corporate, and the vision for shared services. Winners explicitly debate relevant tradeoffs and only proceed to detailed design once leaders are aligned. This list of principles is then cascaded throughout the organization—used to drive decisions related to structures, investments, and phasing, and then becomes the “true north” around which further operating model adjustments are validated.
- Design around capabilities: Winners start with an industry-driven set of capabilities that summarize all the work across the company. Clear capability priorities guide future state design, with a focus beyond just org charts, and these firms double-down on understanding what is required to win in the “New.” One CPG agreed upon the 95 capabilities that made up all “the work” that happened at the company, and then worked with the C-Suite to identify the five capabilities needed to drive long-term growth.
- Pivot to the consumer: Winners put their consumers—the end users of their products or services—at the center of their designs. This principle often requires cross-functional teams, data experts, and clearly-defined metrics across key consumer segments. One client went as far as completely re-organizing their functional structure to drive more intimate consumer knowledge, and they appointed a “Chief Experience Officer” to own all touchpoints across their digital, retail, and service channels.
- More than just cost takeout: Too often, programs devolve into Finance-driven budget reduction exercises. Winners focus on elements beyond cost takeout, and emphasize building new capabilities, improving the employee experience, and organizational agility. They also actively look to re-skill their current workforces—recent research Accenture conducted for the World Economic Forum identified that if CPGs adopted and optimized all technology available to them, they could run their organizations with half as many people. ii
- Broad set of levers: Winners think more broadly than just reducing spans / layers, and consider a wide range of potential “Levers” needed to deliver a more agile organization, including:
- Demand Management: Resources aligned to most important strategic priorities
- Intelligent Automation: Use of AI, RPA, and Bots to increase per-employee productivity
- Shared Services: Consolidate supporting activities to drive leverage and efficiency
- Liquid Workforce: Leverage new workforce models such as on-demand labor to improve productivity per dollar in labor cost
- Simplified and Productive Organization: Optimize productivity, including clearer decision rights and simpler hierarchy
- Focus on metrics that matter: Winners attach real, meaningful metrics to their operating model programs. They prioritize leading indicators and consumer-focused metrics. They build these metrics into annual performance plans, and reward leaders who are successful in driving their part of the transformation. Many have automated management-focused dashboards that display a consistent set of growth, operational, and financial metrics globally.
- Communicate targets and progress: At the onset, Winners communicate the focus and value potential to their stakeholders, including investors, as transparently as possible. Then, as changes are rolled out, they explicitly highlight progress against their program-wide value target in distinct “windows” of communication. This not only comforts external parties, but also acts as an incentive to push the C-Suite to live up to its commitments. One company conducted “progress updates” every 90 days where, café style, each design team showed their progress and approach to the top 120 leaders in the company.
By employing a similar, deliberate approach, firms can greatly increase their chances of success and set a course towards long-term, profitable growth.
i Accenture Strategy research, Beyond the ZBB Buzz, 2018
ii Accenture Strategy and the World Economic Forum, Operating Models for the Future of Consumption,2018