Vantage Point: Are You Well Positioned to Drive Growth in the Post-Recession Era?
By Anthony Bigornia, Global Vice President of Product Marketing, CAS
As 2009 comes to close, we see the majority of Consumer Products (CP) companies continuing the margin improvement efforts they began during the economic downturn. At the same time, it's clear that leading companies are also re-focusing their attention on how to drive growth in preparation for the post-recession era. Based on our conversations with leading CP companies, the growth initiatives being considered or deployed almost universally revolve around two fundamental business issues:
1. How can my company drive incremental share in increasingly competitive, mature developed markets?
2. How can my company realize the growth potential presented by less mature emerging markets that are still in their high growth phase?
The Challenge of Driving Growth in Developed and Emerging Markets
At first blush, the situation appears challenging but relatively straightforward: CP companies should adopt a traditional decentralized approach and deploy front-office, go-to-market capabilities driven mainly by the requirements of individual markets with minimal oversight from corporate headquarters. Many if not most global CP companies have taken this approach in recent years, as this strategy places a premium on fast, local decision making. However, this approach often leads to the proliferation of many disparate regional/local account planning, trade promotion management, field sales and field service mobility solutions that eventually drive IT and process complexity -- and thereby cost. At the same time, this approach typically has failed to deliver a standardized, consistent business process and solution.
Because much of the focus in developed markets is to provide differentiated value-added services to strategic customers in order to fight for shelf placement, promotion budgets, etc., CP manufacturers are focused on continuously improving the speed, accuracy and intelligence of account-level decision making and store-level execution. Leading CP companies in developed markets need to position themselves as a partner that has the insight and innovation to drive category growth and overall market basket volume for their retail partners. In order to achieve this, manufacturers need advanced planning and optimization capabilities that enable them to leverage the ever-increasing volume of demand data that is becoming available -- e.g., retail POS, syndicated data, unstructured web-based data, causal data. CP companies that are leveraging direct POS data to power the advanced analytics of Trade Promotion Optimization applications are prime examples of the type of capabilities that leading companies are beginning to adopt in developed markets.
Likewise, CP field sales and service personnel in developed markets are increasingly drawing from sophisticated analytical capabilities to enable a transition from being an army of basic order- and survey-takers to an insight-based, consultative partner to their retail customers. This transformation of field execution capabilities largely depends on the availability of mobility solutions designed to leverage powerful mobile devices such as tablet PCs or handheld PDAs/Smartphones and operate in an environment with high availability of wireless broadband connectivity. For example, the increasing use of route optimization and POS-based predictive ordering algorithms are two good examples of ways in which leading companies in developed markets are improving the planning and execution of their field teams.
However, global CP companies trying to expand their presence in emerging markets have generally been less focused on advanced analytics and more focused on basic execution. Most emerging markets are defined by complex, multi-tier distribution models that make the availability of timely, granular and accurate demand data more difficult to obtain. This means that some of the advanced planning and optimization capabilities being deployed today in developed markets simply cannot be deployed in many emerging markets. In addition, the technical infrastructure of many emerging markets simply is not yet ready to support near-ubiquitous availability of wireless broadband connectivity. Moreover, perhaps more importantly, labor economics in emerging markets generally cannot justify the cost of sophisticated, powerful mobility devices. This point was put in sharp relief at a recent client session in which we were discussing trade planning and mobility requirements of one of the client's high priority, high growth emerging markets. The client flatly stated that "we just need basic order taking functionality in this market. The typical PDA we deploy in the Americas costs more than the annual salary of the rep we are enabling in this market." Clearly, a simpler, lower cost solution would be required for this market.
Given the variability in availability of data, technical infrastructures, cost structures, etc. of developed vs. emerging markets, the challenge many CP companies are now facing is how to achieve the right balance between catering to local market requirements while still realizing the economies of scale of a global organization.
The Modernization of Emerging Markets: It's a Matter of "When", not "If"
Further complicating matters is the fact that modern trade retailers are now rapidly expanding to penetrate the same emerging markets as global CP companies. Be it China, Brazil or India, multinational retailers like Wal-Mart, Tesco, Carrefour and Metro are expanding into the same high growth emerging markets as Procter & Gamble, Unilever, Coca-Cola and Nestle. For example, according to PricewaterhouseCoopers, as of August 2009, Carrefour and Wal-Mart plan to open ~20 stores per year in China on top of the 137 and 146 stores they already own, respectively. In fact, Nielsen estimates that "modern trade [in China] grew over four fold over the past six years."
Not surprisingly, multinational retailers are slowly but surely driving change in the local markets that they are penetrating and these emerging markets are becoming increasingly "modern" in the manner in which they operate. CP company executives leading expansion efforts in emerging markets often comment on the implications of the inevitable transition toward modern trade-like practices caused by the penetration of multinational retailers adopting their modern market practices and capabilities in local emerging markets. For example, during my last visit to Shanghai, I had the pleasure of meeting an executive from a global CP company looking to aggressively expand in China. One of the insights he provided was that multinational retailers like Tesco and Carrefour who have expanded into China have so far been more focused on internal growth-related issues and less focused on imposing traditional modern market processes and practices on their Chinese supply base. However, he also mentioned that "I know [the modernization of the Chinese market] is coming. So my question is: how do I quickly and cheaply deploy capabilities that I need today while still preparing for the future?"
"Glocalization" Requires An Integrated, Component-Based Customer Management and Mobility Platform to Deliver Business Value and Reduce IT Complexity and Cost
So what must a global CP company to do to push the boundaries of innovation in developed markets while cost-effectively supporting rapid growth in emerging markets?
To reference a term introduced by the IBM Institute of Business Value, we believe the key to profitable growth for global CP companies is "glocalization" -- i.e., the ability of a CP company to "put in place standard global systems and processes to deliver operating efficiencies, while simultaneously delivering localized offerings in individual markets." Moreover, we believe that glocalization will only become more important as global CP organizations try to adopt global "best practices" where possible to leverage economies of scale as emerging markets become more competitive and sophisticated.
Regarding customer facing capabilities, glocalization is most effectively achieved via the deployment of a single, integrated trade promotion management and optimization, mobile field sales and field service solution that can be modularly deployed and configured to serve the needs of both developed and emerging markets. In practical terms, our experience suggests that the trend among global CP companies is to deploy customer management and mobility capabilities that are:
As 2009 comes to close, we see the majority of Consumer Products (CP) companies continuing the margin improvement efforts they began during the economic downturn. At the same time, it's clear that leading companies are also re-focusing their attention on how to drive growth in preparation for the post-recession era. Based on our conversations with leading CP companies, the growth initiatives being considered or deployed almost universally revolve around two fundamental business issues:
1. How can my company drive incremental share in increasingly competitive, mature developed markets?
2. How can my company realize the growth potential presented by less mature emerging markets that are still in their high growth phase?
The Challenge of Driving Growth in Developed and Emerging Markets
At first blush, the situation appears challenging but relatively straightforward: CP companies should adopt a traditional decentralized approach and deploy front-office, go-to-market capabilities driven mainly by the requirements of individual markets with minimal oversight from corporate headquarters. Many if not most global CP companies have taken this approach in recent years, as this strategy places a premium on fast, local decision making. However, this approach often leads to the proliferation of many disparate regional/local account planning, trade promotion management, field sales and field service mobility solutions that eventually drive IT and process complexity -- and thereby cost. At the same time, this approach typically has failed to deliver a standardized, consistent business process and solution.
Because much of the focus in developed markets is to provide differentiated value-added services to strategic customers in order to fight for shelf placement, promotion budgets, etc., CP manufacturers are focused on continuously improving the speed, accuracy and intelligence of account-level decision making and store-level execution. Leading CP companies in developed markets need to position themselves as a partner that has the insight and innovation to drive category growth and overall market basket volume for their retail partners. In order to achieve this, manufacturers need advanced planning and optimization capabilities that enable them to leverage the ever-increasing volume of demand data that is becoming available -- e.g., retail POS, syndicated data, unstructured web-based data, causal data. CP companies that are leveraging direct POS data to power the advanced analytics of Trade Promotion Optimization applications are prime examples of the type of capabilities that leading companies are beginning to adopt in developed markets.
Likewise, CP field sales and service personnel in developed markets are increasingly drawing from sophisticated analytical capabilities to enable a transition from being an army of basic order- and survey-takers to an insight-based, consultative partner to their retail customers. This transformation of field execution capabilities largely depends on the availability of mobility solutions designed to leverage powerful mobile devices such as tablet PCs or handheld PDAs/Smartphones and operate in an environment with high availability of wireless broadband connectivity. For example, the increasing use of route optimization and POS-based predictive ordering algorithms are two good examples of ways in which leading companies in developed markets are improving the planning and execution of their field teams.
However, global CP companies trying to expand their presence in emerging markets have generally been less focused on advanced analytics and more focused on basic execution. Most emerging markets are defined by complex, multi-tier distribution models that make the availability of timely, granular and accurate demand data more difficult to obtain. This means that some of the advanced planning and optimization capabilities being deployed today in developed markets simply cannot be deployed in many emerging markets. In addition, the technical infrastructure of many emerging markets simply is not yet ready to support near-ubiquitous availability of wireless broadband connectivity. Moreover, perhaps more importantly, labor economics in emerging markets generally cannot justify the cost of sophisticated, powerful mobility devices. This point was put in sharp relief at a recent client session in which we were discussing trade planning and mobility requirements of one of the client's high priority, high growth emerging markets. The client flatly stated that "we just need basic order taking functionality in this market. The typical PDA we deploy in the Americas costs more than the annual salary of the rep we are enabling in this market." Clearly, a simpler, lower cost solution would be required for this market.
Given the variability in availability of data, technical infrastructures, cost structures, etc. of developed vs. emerging markets, the challenge many CP companies are now facing is how to achieve the right balance between catering to local market requirements while still realizing the economies of scale of a global organization.
The Modernization of Emerging Markets: It's a Matter of "When", not "If"
Further complicating matters is the fact that modern trade retailers are now rapidly expanding to penetrate the same emerging markets as global CP companies. Be it China, Brazil or India, multinational retailers like Wal-Mart, Tesco, Carrefour and Metro are expanding into the same high growth emerging markets as Procter & Gamble, Unilever, Coca-Cola and Nestle. For example, according to PricewaterhouseCoopers, as of August 2009, Carrefour and Wal-Mart plan to open ~20 stores per year in China on top of the 137 and 146 stores they already own, respectively. In fact, Nielsen estimates that "modern trade [in China] grew over four fold over the past six years."
Not surprisingly, multinational retailers are slowly but surely driving change in the local markets that they are penetrating and these emerging markets are becoming increasingly "modern" in the manner in which they operate. CP company executives leading expansion efforts in emerging markets often comment on the implications of the inevitable transition toward modern trade-like practices caused by the penetration of multinational retailers adopting their modern market practices and capabilities in local emerging markets. For example, during my last visit to Shanghai, I had the pleasure of meeting an executive from a global CP company looking to aggressively expand in China. One of the insights he provided was that multinational retailers like Tesco and Carrefour who have expanded into China have so far been more focused on internal growth-related issues and less focused on imposing traditional modern market processes and practices on their Chinese supply base. However, he also mentioned that "I know [the modernization of the Chinese market] is coming. So my question is: how do I quickly and cheaply deploy capabilities that I need today while still preparing for the future?"
"Glocalization" Requires An Integrated, Component-Based Customer Management and Mobility Platform to Deliver Business Value and Reduce IT Complexity and Cost
So what must a global CP company to do to push the boundaries of innovation in developed markets while cost-effectively supporting rapid growth in emerging markets?
To reference a term introduced by the IBM Institute of Business Value, we believe the key to profitable growth for global CP companies is "glocalization" -- i.e., the ability of a CP company to "put in place standard global systems and processes to deliver operating efficiencies, while simultaneously delivering localized offerings in individual markets." Moreover, we believe that glocalization will only become more important as global CP organizations try to adopt global "best practices" where possible to leverage economies of scale as emerging markets become more competitive and sophisticated.
Regarding customer facing capabilities, glocalization is most effectively achieved via the deployment of a single, integrated trade promotion management and optimization, mobile field sales and field service solution that can be modularly deployed and configured to serve the needs of both developed and emerging markets. In practical terms, our experience suggests that the trend among global CP companies is to deploy customer management and mobility capabilities that are:
- Based on an "end state" vision of a closed-loop customer management and mobility solution that integrates headquarter planning with field execution in a single application with common data, workflow, analytics and user experience
- Modular in nature so that individual markets or regions can focus on mobility or trade planning at the outset based on local requirements yet have the option to migrate to an integrated trade planning and mobility platform as markets mature
- Configurable via a flexible, component or template-driven approach to enable process standardization of core processes while providing the flexibility to accommodate local market needs within each module
- Deployable on multiple device platforms so that the global template can be leveraged in the most markets possible -- whether individual markets choose to enable their personnel with PCs, tablet PCs, PDAs or Smartphones, etc.
Are you well positioned to sell more products, more profitably in the post-recession era? Now more than ever, the ability to execute flawlessly at a local market level while delivering an integrated global customer and consumer strategy will be a major factor in determining which CP companies will generate above average growth and profitability in the future. Paul Polman, now CEO of Unilever, aptly articulates the delicate balancing act required in stating: "I always look at it as globally efficient and locally relevant; you can't be too global because there is no global customer. You can't be too local either anymore, because if you're not efficient the competition will do it for you."
ABOUT THE AUTHOR
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Anthony Bigornia is the global vice president of Product Marketing for CAS, a provider of customer management and mobility solutions for the Consumer Products industry. CAS offers an integrated suite of Retail Execution and Trade Promotion Management software, including Direct Store Delivery, Field Service and Trade Promotion Optimization. Prior to CAS, Bigornia served as director, Consumer Goods Industry Strategy at Oracle and Worldwide Solution Manager for the Consumer Driven Supply Chain for Consumer Products business solution at IBM. For more information, contact Anthony Bigornia at [email protected].