Business Intelligence (BI) systems – processes that take raw data, such as sales information, and crunch it to help forge future strategies — have been around since at least the late 1950s. Automated ones have been on the scene for many years, as well. Though it’s been known to take upwards of hundreds of hours of processing to get results that companies can act upon.
Now, with the advent of better tech and faster systems from major players like SAP and Oracle, what took days to find out can take as little as a few seconds. This places valuable forecasting and trend data in the hands of salespeople in real time, possibly just before walking through the door to pitch a re-stock of items that BI has predicted are running low in your warehouse. Consulting companies such as Accenture, for instance, use SAP systems to help Consumer Packaged Goods (CPG) companies “respond with ever-increasing speed and accuracy to dynamic market changes—from new regulation to customer preferences for style, variety, location, price and other variables.”
But do consumers really want IT telling everyone what to stock and, presumably, what to buy? Is the Geek Patrol becoming too dominant in an industry sector that has traditionally wooed customers instead of over-analyzing them? Will the companies with the fastest and leanest BI systems carry the day, or will well marketed products still find their way onto store shelves?
“We have information that can make you talk”
McKinsey & Company, a consulting firm, released a report that addressed the growing influence of technology on CPGs. Entitled “Winning with IT in Consumer Packaged Goods,” the study looks at seven trends that are supposedly transforming the role of the CIO. You remember the CIO – aka, Chief Information Officer, a role necessitated by the exploding Information Age. Which most people in the business world wouldn’t have known existed until they began their adult working lives.
According to McKinsey, IT leaders in CPGs are “stepping up to the challenge” of using tech to gain a competitive advantage, in these seven areas:
Direct Consumer Relationships
CPGs are using technology to improve customer loyalty and to target their individual needs and preferences. Social media is one obvious tool. Monitoring customer conversations on blogs and directly engaging certain consumers through targeted marketing are others that IT has found ways to manipulate.
Mobile & Location-Based Services
CPGs are capitalizing on the widespread use of smartphones and tablets. The goal? To engage with the customer wherever they might be and whenever they’d like, and to encourage the sharing of those engagements via social circles. One example: Levi Strauss put out a location-specific deal over social media to just 400 consumers — 1,600 people responded by showing up at the company’s stores. Just wait until CPGs take greater advantage by tapping your mobile device’s camera and scanning functions.
Simply put – companies are using algorithms and other formulas to determine prices, assortment, promotions and replenishment. All tasks that used to be determined more by studying historical performance, demands of various channels and, that reliable barometer of business, the gut feeling. And some CPGs apparently aren’t just whistling Winn-Dixie. Procter & Gamble (P&G), McKinsey reports, recently announced that it would increase its analytics workforce by 400%. One requirement: Your crystal ball must now be connected to the Internet, preferably via a smartphone or tablet.
Demand-Driven Supply Chain Management
CPGs are using IT to predict when a customer’s stocks will run low, as well as when to re-stock your own inventories so that the supply chain keeps humming, uninterrupted. McKinsey says that one major grocery retailer worked with a CPG manufacturer on a predictive basis – and drove 15% growth in same-store sales for a flat category, just by improving assortment and preventing stock-outs.
One CPG has apparently gone to the trouble of operating a virtual design studio, with virtual prototypes that simulates products on store shelves so that certain effects can be tested in-house and with consumers. P&G, cited yet again, is apparently doing this with more than 8 out of every 10 new products. Don’t like the new look of Crest? Zap it and Photoshop another version, while your test audience patiently waits…and weighs in instantly again…and asks if you can do that in orange and blue, but with just a little less orange. Plus, why is the toothpaste in a box?
Safety & Traceability
With authorities and consumers ever-aware of product safety issues, it makes sense for CPGs to leverage IT to quickly manage any crisis. One consumer health care company, McKinsey notes, is using radio-frequency tags and even holograms to track its products through the supply chain. Hopefully nobody in IT gets any James Bond-ish ideas when it comes to similarly equipping personal care products in the family planning aisle.
Consumers apparently aren’t losing much interest in their demands for corporate transparency and social responsibility. One CPG company has supposedly gone so far as to print carbon footprint information on product labels. To do that, of course, means having that data available and ready to use in the first place. Another big-data task that clearly calls for IT (and for an engaging footprint logo design to offset any adverse impressions made by products that push the carbon needle off the meter).
The report goes on to provide further helpful information on how to win the IT angle, including which trends to focus on, how to nose out the competition, how to leverage in-house capabilities and using proof-of-concept efforts to show other business folks that the company’s IT mission is on the right track.
There’s also plenty of information on the kinds of initiatives CIOs will need to push through if they hope to reap the rewards of tech-assisted BI —known as “making it all work”, so the whole information thing doesn’t look like a colossal waste of time, necessitating a possible career change.
McKinsey’s concluding statement: The opportunity is here and the time is now for big changes to IT. However, “staying ahead of the game will require nothing less than a transformation of the IT organization’s mind-set and operating model.”
In other words, when the guys in IT start paying repeated visits to the folks in marketing, be forewarned: This stuff isn’t going away until the competition is either out-sold, or until efforts to do so end up short-circuiting every server in the known universe.