Report: Digital Innovation is the CIO's Domain
Digital disruption in the marketplace and an onslaught of smaller, more nimble competitors is leading traditional consumer packaged goods companies to seek greater innovation from their IT organizations, according to a report from Boston Consulting Group and the GMA (Grocery Manufacturers Association).
"Just about any kind of innovation a CPG company may undertake today — such as integrating more tightly with third-party e-commerce channels or setting up interactive store displays — has implications for, and an impact on, the company’s core IT systems," states the just-released report, titled "Accelerating Digital Innovation in CPG." Therefore, "chief information officers are being asked to lay a foundation for future innovation."
The report identifies four criteria that define an innovative organization:
- "The breadth and level of digital investments" in such areas as marketing, e-commerce systems integration and supply chain transparency.
- "The extent of direct-to-consumer activities," beginning with the creation of stronger consumer databases and extending to new-product testing and personalized offers.
- "The application of advanced analytics" to optimize pricing, increase sales force effectiveness, improve inventory management or strengthen demand forecasting, among other initiatives.
- "The use of innovation accelerators" like investing in technology startups, hosting "hackathons" for programmers, or freelancing prototype development. The Unilever Foundry, which crowdsources technology and software solutions to problems faced by the CPG's business units, was cited as a best-in-class example.
"Many CPG companies have made investments in these areas, but few have done so in a comprehensive way that has allowed them to break out of the pack," the report concludes.
Not surprisingly, these new innovation responsibilities for CIOs haven’t led to any corresponding increase in IT resources. Executives at most CPGs are facing increased budgetary constraints, according to the report.
And, increased spending doesn't necessarily pay off: Companies earning the highest innovation scores have IT expenditures that exceed the median, which the report pegs at roughly 1.4% of total corporate revenue. But these organizations are "no more innovative than frugal spenders," several of which "have been able to achieve above-average innovation scores," according the report.
Last fielded in 2015, the GMA/BCG report is based on a 2017 survey of 37 major consumer packaged goods companies. BCG additionally interviewed roughly one-third of the participating companies.
The full report is available on GMA's website.
