Debashish Chatterjee of SAP on What's Ahead in 2008
Once again, SAP comes out on top in many categories of our annual Readers' Choice survey, thanks to positive feedback from its consumer goods clients. Because of this leadership status, CGT turned to SAP for perspective on our industry in 2008. I sat down with Debashish Chatterjee, vice president and head of the Global Consumer Products Business Unit of SAP, to get his thoughts on what the new year might hold for consumer goods companies.
What new opportunities/challenges will consumer goods companies face in 2008?
CHATTERJEE: Demanding consumers continue to characterize the consumer products (CP) industry. Thus, gaining consumer insights, and translating the insights effectively to create safe and healthy products for a sustainable business, remains the most important priority for leading companies.
There is great opportunity for global consumer goods companies, as emerging markets continue to grow at a rapid pace. There is also a greater need for innovation at a local level to appeal to new consumers, and the industry is being forced to innovate faster. Global market expansion, new product development, enhanced collaboration with retailers and gaining consumer confidence by reducing the impact on the environment are keeping the industry at the leading edge.
Why is global expansion important?
CHATTERJEE: The mature markets can still grow in value, but the growth in tonnage now comes from the emerging economies that are growing quickly. Millions of new consumers are being added with more disposable incomes. There is significant growth opportunity in the big cities of countries such as India and China. However, there is more untapped potential in the rural areas. CP companies need to serve these markets cost effectively. The leading companies are adapting to local tastes, building local networks of partners and trying to fit into local budgets to grow in these rural markets.
What is the most important initiative for companies to maintain competitive advantage?
CHATTERJEE: Innovation is key to sustainable growth. In the past, innovation has originated within the four walls of a company. Most companies are now facing diminishing returns from internal research and development. Industry leaders have put open innovation strategies in place that leverage global networks to find solutions to problems.
For success in growing markets, like Brazil, Russia, India and China, innovation needs to be localized for faster growth. For example, rural Chinese believe that salt whitens teeth. This insight led to the new product development and successful introduction of salt-based toothpastes into the Chinese market. This new growth did not come from copying the mature market approach but by developing a new approach based on gathering consumer insights at a local level and acting quickly on that insight.
Who really manages the consumer relationship, consumer products manufacturers or retailers? How can the two entities work together?
CHATTERJEE: Customer channel collaboration is critical for growing consumer confidence and for increasing purchases across categories. While manufacturers are focused on improving marketing spend effectiveness and selling profitable volume, they are collaborating with retailers to customize their offerings to differentiated lifestyles and local markets. With technological advances for manufacturers and retailers can collaboratively customize the offering for the end consumer.
CP companies aim to have one face to the retail customer. Companies have been streamlining processes to get more products to more channels more quickly and at a lower cost. Initiatives to standardize and consolidate business processes shall continue, yet leading companies shall look to the next frontier to differentiate themselves. Efforts to become demand driven have created an urgency to collaborate with multiple players in the value network.
Leading retailers have recognized that when manufacturers can obtain the right level of information in near real-time, they can run their operations better and, in turn, provide higher service levels. The increasing complexity of business, the lack of standards and the scale of data sharing needed for effective collaboration has been a deterrent in the past. Having a two-way meaningful exchange between manufacturer and retailer to run efficient planning and execution is now becoming easier.
Is there a "silver bullet" for today's companies to succeed?
CHATTERJEE: There is no single silver bullet for success; however, there are critical factors every CP company should consider. Gaining consumer insights and the ability to act fast on them is the new mantra for success, and new technologies can help companies gain these insights across multiple channels and formats. Leading players are building sophisticated information systems to draw consumer data from many sources such as POS, loyalty cards, consumer surveys, Internet sales, as well as syndicated data. The objective of these investments is not just shelf replenishment, but discovery of new demand trends that trigger innovation.
As consumer behavior becomes harder to predict and margins come under increasing pressure, smart consumer products companies shall also invest more in strengthening the interface with the store and the consumer. Using handheld devices they shall manage sales and deliveries, also capture market information about pricing and promotions. They shall use more sophisticated ways to come up with replenishments.
Information from sales, marketing, supply chain and finance is converging to empower the mobile front-line worker. More decisions now need to be made locally as time to react continues to shrink. This requires empowerment at a local level while keeping global visibility and control, implying an emphasis on efficient human capital management and creating an environment for change and continuous learning.
The industry needs a robust platform for collaboration and innovation to support a responsive and sustainable business, as well as to foster innovation driven by the consumer. It needs to be flexible and easy to adopt by suppliers, manufacturers, retailers and service providers alike. The platform would help with enterprise-level information exchange in a meaningful way. A combination of applications and best practices orchestrated on a unified platform for consumer business could usher in the next wave of growth for the industry.
What is the next big thing?
CHATTERJEE: I am very excited to see the potential for technology to help preserve our environment. With the growing importance of sustainability in business, it is imperative that we reduce our environmental footprint by reducing waste, conserving energy and reducing emissions. IT can certainly come in handy, turning expensive and one-off sustainability projects into organization-wide, repeatable and measurable processes. Embedding sustainability in our thinking and daily work would be a great way to start the new year. CG