Expert's Opinion


By Neil D. Gissler, Accenture | June 23, 2014

A digital judgment day for CPG companies?

For consumer packaged goods (CPG) companies, the road to digital transformation will be anything but simple. Between now and 2020, if they wish to retain their growth trajectories, they need to rethink everything from IT operating model and applications, to their personnel, skills and how they engage with consumers. These changes may not yet be fully understood, but one thing is clear—they will be dramatic.
Advances in technology have already profoundly changed consumer expectations. People now hunt down deals at the touch of a screen, compare prices, choose their optimal delivery method, and order—all while commuting home, or waiting for a coffee.
A digital society means that this kind of service is no longer the preserve of the 1%. Accenture predicts that up to one billion new consumers will emerge from the growing middle class market in developing economies by 2015, and clearly digital has a huge role to play in reaching this market—and capturing their loyalty.
But this opportunity is also a threat for companies that fail to adapt. CPG companies that fail to embrace digital technology quickly enough will find themselves increasingly outmaneuvered by nimbler rivals. As it stands, though, few consumer goods firms appear to be doing enough. Accenture’s recent High Performance IT study found that hardly any CPG companies are on the path toward genuine digital transformation compared to leaders in other sectors, for example, only 6% have embedded real-time analytics-based decision-making tools into business processes, while 46% of high performers have done so.
And while the high IT performers’ primary business objective is to improve the consumer’s experience, the top priorities of the CPG organizations we surveyed are cost reduction and boosting productivity. Also, while more than half of high performers are experimenting with and learning from early deployment of digital-related technologies, only 29% of CPG companies are in the experimentation stage.
So how can those CPG firms currently lagging behind get themselves on the road to digital transformation before it’s too late?

Re-engineering for Digital
First of all, to compete in a digital world, CPG companies must reach consumers in new ways, and engage them through more tailored interactions. In the future, more and more consumer goods companies will be able to take advantage of technology advances to make mass customization of products a reality—paving the way for product co-creation and other product development innovations.
But for many companies, such breakthroughs will not be possible without an overhaul of existing operating models and business processes. Today, the majority of CPG companies’ IT organizations are transaction and automation driven, with a focus on back-end solutions to support operations. By contrast, in a digital world, the IT function will need to shift from being the provider of efficient and effective processes, to the enabler of seamless and content-rich interactions with consumers.
Meanwhile, greater collaboration between functions will also be required to fully harness digital technologies. For example, as big data and analytics becomes an increasing source of competitive advantage, IT and marketing will need to work far more closely to figure out how the most valuable consumer data can be captured and put to work.

The Digital Roadmap
During the next six years to 2020, CPG companies must set out and follow a clear IT roadmap to digital transformation. The key waypoints of this roadmap will vary from one firm to another, but will include:
Going mobile. As mobile increasingly becomes the first point of contact between a business and its stakeholders, CPG companies must embrace cloud solutions to ensure that internal and external systems can be accessed from a tablet or smartphone, and that access is available from an enterprise app store.
Embedding process integration and management. Transaction-driven technology investments must make way for IT systems geared toward relationship and experience-driven interactions.
Making the most of social media. Leading businesses will be ramping up their social media presence with the aim of increasing their active customer community. CPG firms need to build these channels to gather greater feedback from consumers, customers or business partners, using the input to improve consumer satisfaction and accelerate product development. Meanwhile, internal collaboration tools are also growing in usage, as they become valuable channels for sharing ideas and information between employees.
Harnessing big data and analytics. While many CPG companies are collecting and storing data, few have the capability to tap its potential to deliver meaningful insights that can assist decision-making. Businesses are frantically racing towards this destination, and those that arrive first will gain a huge advantage over their rivals.
Even today, it is apparent that the companies taking the lead on digital are stealing a march on their competitors by increasing organizational agility, reaching customers on new platforms and gathering information that helps them set strategy. By 2020, for those that delay this journey, it may well be too late.

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About the Author
Neil D. Gissler is North American technology leader for Consumer Goods & Services, Accenture