Strategy isn’t just about being better than the competition. It’s about being different; something that eludes most consumer products businesses. I’ll come right out and say it so you can decide if you want to read on: It’s high time for IT and CIOs to play a major strategic role in differentiating consumer products companies from their peers and driving sustainable industry-leading results. In an age where the big three trends – Macroeconomics, Globalization, and Technology – are forever changing the landscape of business, consumer products companies still largely treat IT as a necessary evil. But when IT becomes a core strategy, consumer product businesses can separate themselves from the status quo and position themselves as leaders. See Burberry & The Digitization of Shopper Marketing as one example.
Not many are doing it yet. And I can understand why. For one thing, most still have a limited view based on the role IT played in the past. It has been a necessary evil… a center to be cost reduced and invested in just enough to maintain the infrastructure needed for the “business” to do its business (don’t you just hate it when there’s “the business” and then there’s IT?).
And another reason for a jaundiced view of IT: most have been burned by a difficult ERP install that’s burned cash, people, and under-delivered on promises. See Businesses & Consultants Get an F. 88% of IT projects fail to deliver on time and budget. And let’s admit it. Everybody ends up disillusioned after an ERP project.
But now it’s not only time for CIOs to come out of the back rooms of CPG with better strategy, it’s time for IT strategy to take center stage among the other CPG strategies. Indeed, IT strategy will likely become the next great differentiator at smart consumer products companies. In summary, here are some of the ways.
IT as a Driver of Innovation – Innovation depends on insights, which in turn rely on information. And there’s so much information available now; everything from consumer research and market data to millions and millions of buying transactions to crowdsourcing and social media posts. There’s no longer any excuse for not hearing the voice of the consumer and building that voice into superior products, unexpected quality and consumer experience, and new markets. If you’re not capturing and leveraging information from a vast number of information channels and turning it into insights to drive the innovation engine, you’re not really leveraging a core power of IT. You need an IT-driven innovation strategy.
IT to Transform the Cost Structure – Currently, there isn’t much that differentiates the value chain of one CPG from its competitive peers. Like zero. Zip. Nada. But if consumer products companies can get past the disillusionment of their (very painful) ERP adventures, there is tremendous opportunity to differentiate by fundamentally shifting to a lower cost structure driven by IT. New technology has put everything in play from research to new product development; merchandising to advertising; labor scheduling to machine operations; logistics to demand planning, purchasing to path-to-purchase, and everything in between. And it needn’t be an architectural nightmare. If you’re depending on incremental continuous improvement, you’re never going to have a step function improvement in your cost structure. You need an IT-driven cost breakthrough strategy.
IT for Speed, Simplicity & Flexibility – Most businesses in the consumer products industry are what can be called “mature” businesses competing in “mature” markets. What I really mean to say is they’re slow, plodding, rigid, hierarchical, bureaucratic, and process-laden. In fact, the vast majority of process in a mature business is non-value adding. Non-value added work isn’t particularly compelling to do and recruiting employees to get excited about do work that doesn’t really matter is a problem too. So, what is sorely needed is an IT strategy that focuses on providing the solutions to that; automating administrative process that can’t be eliminated, eliminating non-value added where it can be, and providing the tools for simplicity, innovation and flexibility in not only white collar processes but in the physical assets too. Check it for yourself: in most companies it takes months or years to get a new idea to market even though the value added work in the process can be done in weeks. If you’re in that boat, you need an IT strategy that helps the business focus on work that matters; that drives speed, simplicity and flexibility.
Those are just three examples. There are others. Most businesses will turn away from the notion of leveraging IT for competitive advantage. CEOs may be hesitant, CFOs may spurn the investment, and CMOs may be skeptical. That’s okay. Leveraging IT strategically doesn’t have to be done all at once. There needs to be an architecture to the strategy so the business moves deliberately toward the future state. But it needs to be done. The future of successful consumer products companies (and in other industries as well) will be in moving IT strategy center-stage to drive innovation, transform the cost structure, and drive speed, simplicity, and flexibility.