The CPG sector needs to embrace end-to-end digital transformation

6th November 2017

By Stuart Richards

Leading CPG players have responded to digital disruption with huge investment in eCommerce. But if they are to truly realise the massive potential growth through the channel they need to embrace an end-to-end digital transformation programme encompassing their entire business process.

New entrants using plug and play e-commerce technology and other distribution solutions to sell directly to consumers have been increasingly disrupting the traditional CPG model with the retailer acting as middleman.

With no legacy systems designed for bulk distribution to retail partners, the new CPG players serving today’s ‘little and often’ consumer have been able to steal a march on the established sector leaders for D2C online sales.

A good example would be Dollar Shave Club. Founded in 2011, it was able to solve an industry problem: razor blades are too expensive. Established products have to do a lot of heavy lifting (marketing, R&D, supply chain costs, sustainable procurement, industry competition) that doesn’t have a positive impact on the consumer’s wallet. Dollar Shave Club spotted an opportunity to differentiate but also wasn’t restricted by wider costs. It was a true disruptor…until it was sold to Unilever in 2016 for $1bn. Warby Parker is another example.

Saddled with the disadvantages of huge cost and complexity in changing traditional business practices, global CPG giants were initially slow to react to the digital transformation agenda. But the sector has latterly been investing huge resources into eCommerce.

So far this has largely been restricted to front end activity including digital marketing, although there have been some notable examples of true digital interaction with consumers. They include UK multinational alcoholic beverages firm Diageo, which launched a smart bottle in 2015 for its iconic Johnnie Walker Blue Label whisky enabling personalised communication to consumers reading the tags with their smartphones and tracking of stock.

But for CPG leaders to capitalise on the huge potential growth in direct online sales to consumers, they need to go a lot further and invest in digital transformation throughout the whole ecosystem of their business.

This means fully digitising back office business processes like finance, hr, supply chain and logistics.

In 2013 eCommerce accounted for under 1 per cent of sales in packaged food and 3 per cent  in non-food but by 2020 it is predicted this could rise to 5 per cent  of food sales and 10 per cent of non-food sales – accounting for up to 30 per cent  of total CPG industry sales growth between 2015 and 2020.*

However, a KPMG survey of 175 global retail and consumer goods CEOs published in September revealed a third were concerned they were “not leveraging digital means to connect with their customers as effectively as possible”. **

Customer-centric strategies being pursued to tackle this include digitisation through technology transformation, greater speed to market, and stronger marketing, branding and communications, the survey found.

D2C sales enable CPG firms to collect significant volumes of customer data, providing invaluable intelligence on consumer purchasing preferences which can help shape product development and targeted sales.

Recognising the benefits, the sector is now starting to examine the digital technologies which can help throughout all areas of the business.

In its report How digital reinventors are pulling away from the pack published last month, global management consultants McKinsey&Company conclude: “The reinventors are investing at scale in technology, analytics, and digital talent – not just playing on the margins – and investing much more aggressively in business-model innovations or entirely new business models.”

The report, based on a global survey of more than 1,600 executives, continued: “To find success and sustain growth, incumbents must do two things at once: digitize their core businesses while also innovating with new digital ones. Making small changes to the edges of your business model is insufficient in an increasingly digital world.” ***

HW Global Talent Partner has been helping clients transform their global digital capabilities for the past five years.

We recently completed an executive search assignment for a Sales Director for a tier one courier and logistics firm. One of his key targets is nailing last mile delivery, which has been a significant customer service issue. The company will achieve this by investing in digital technology, making it a more attractive proposition for partners and clients alike.

Other recent assignments include a global CIO search for a tier one food business. With an $18bn P&L they will ensure the organisation has the systems and MI that make it fit for purpose for the next ten years across the entire value chain. In addition, a recently placed VP for Data & Analytics for the same client will translate consumer behaviour and trends into actionable business strategy across marketing, sales, supply chain and logistics.

As an international executive search and professional interim business, HW Global Talent Partner advises many of the world’s most recognised and respected brands, among them the leaders in consumer products and services, and retail operations of all shapes and sizes.

For a confidential discussion about how we can assist you with digital transformation contact Stuart Richards, Consultant in the Global Consumer Practice, at stuartr@hwglobalpartner.com or on +44 (0) 7787 254 600.

* The digital future of CPG companies: McKinsey&Company article – Oct 2015
** U.S. Consumer Goods & Retail CEOs More Optimistic Than Global Peers About Growth: KPMG Survey – Sept 2017
*** How digital reinventors are pulling away from the pack: McKinsey&Company survey report – Oct 2017

Demand for transformation and change programmes driving interim management growth

12th September 2017

By Rachel Frankland 

The professional interim management market is enjoying rapid growth, driven by a burgeoning cycle of business transformation programmes across all industry sectors.

For a multitude of reasons, companies both large and small are increasingly turning to professional interim managers to help steer them through organisational change – with a particular drive for digital transformation and customer experience programmes.

These are experienced business leaders who can also provide stability following the sudden departure of a senior director, or offer a highly specialised skill set which a business may not have in-house.

Their appointment is an effective way for companies to achieve business objectives and obtain highly specialised leadership skills at crucial times.

The extensive benefits of interim management include flexibility and speed of placement, compared to an executive search for a permanent position which can take many months from commission to arrival in post due to the complexity of global searches and the need to fulfil notice periods.

HW can turn round a shortlist of professional interim managers for a client within three working days who can typically be placed within two weeks. They can often come in to bridge the gap during an executive search process being conducted by our Search business.

There are cost benefits too; many SMEs may not be in a position to fund a permanent executive position for a particular specialism such as a digital transformation director.

And without the on-costs of a permanent executive such as bonuses, holiday pay, NI contributions, pension, private health insurance and company car benefits, the day rate suddenly does not seem so prohibitive.

Free from the shackles of office politics, a professional interim can offer a fresh perspective, objectivity and challenge. As a freelance operator whose work is heavily reliant on referrals and reputation, the interim is highly motivated and results driven, and will be fully committed to their client.

Professional interim managers are often over-qualified for the interim position they are commissioned for, meaning they can work independently and hit the ground running, with instant results. Their wealth of experience, skills, contacts and knowledge will also be transferred to the in-house team, giving benefits which outlive their interim contract.

The return on investment of a professional interim manager for a business can therefore be substantial, particularly at a critical time.

HW has access to an elite network of senior executives, with a particular strength in finance, commercial, operations, and transformation and change, enabling us to provide interim solutions within tight deadlines.

Rachel Frankland is an Executive Interim Consultant in HW’s Interim practice. For an informal discussion contact her at rachelf@hwglobalpartner.com or +44 (0) 7595 203 229, or contact Interim Executive Recruiter Anna Splain at annas@hwglobalpartner.com.

FS providers seek NEDs with retail experience

18th August 2017

By Pascale Gara

Talented retail executives are being targeted by the boards of financial services institutions looking to adopt new technologies to get closer to their customers.

Many banks, building societies and other FS providers remain some way behind the retail sector in rolling out customer engagement and digital transformation strategies, and boards are under pressure to deliver as they respond to a radically transformed market place.

Non-executive directors with significant retail and digital experience are therefore in demand given the huge value they can bring to an FS institution’s board.

Martin Newman, CEO and founder of global retail consultancy Practicology and a non-executive director of leading drinks distributor Conviviality Plc and the multichannel fashion retailer White Stuff, has more than 25 years of multichannel retailing experience with well-known brands including Ted Baker, Burberry, Harrods and Intersport.

He said: “I believe that experienced NEDs, as well as first time NEDs whose core experience is outside of financial services, can bring a lot to the sector in NED roles – particularly those from the retail space.

“After all, retail touches the consumer more frequently and is much faster paced than financial services. I also believe that retailers have been quicker to adopt digital and begin their transformation towards more customer centric organisations. They’ve also started to address other key questions such as ‘what’s the role of my store?’, or ‘how many stores do I need as more of my business moves online?’

“Financial services players face the same questions, particularly retail banks. Therefore, senior retail executives who have this experience will have a lot of value to add to FS organisations.

“The customers of financial service providers spend far more time in retail, and therefore those with deep knowledge of the retail space, what matters to customers, and how to truly put the customer first, would be able to leverage this experience and insight extremely well within FS.”

Retail executives without NED experience who would relish the challenge of a first non-executive directorship within FS have numerous considerations to make first, however.

A highly experienced FS executive with an impressive NED portfolio, speaking at a recent industry dinner, said among them was an acceptance that as an NED you have no executive power and can only influence, contribute and challenge constructively.

You should not underestimate the time and pressure demands on an NED when the business is in trouble, and should expect to exert double the time indicated in the role spec, he said.

And just being a successful senior executive carries no strong entry point in such a highly competitive market; there are only a couple of thousand NEDs in the FTSE 350. The hardest NED role to get is the first one, he advised, and it sets the standards on which you will be benchmarked, so don’t necessarily take the first one which may come your way.

Brian Brodie, CEO of Freedom Finance Group, had further advice for would-be non-executive directors. He told HW: “The best NEDs are constructively challenging and bring new thinking rather than old questions.

“It is too easy for lazy NEDs to roll out standard set of challenges to the executive which don’t really add any value.  This leads to frustration. The best NEDs help to build the confidence of the Executive (if they merit that) and guide them to avoid mistakes and pitfalls.

“The worst NEDs try to be friends with the Executive and this just doesn’t work as there is a need for independence. NEDs are often there to prevent the destruction of value by the Executive. As such they are more governance and control-focused and tend to be more about oversight than working with the executive.”

HW Global Partner has a track record of working with a range of companies from FTSE 100 to PE backed organisations to provide Chair/NED candidates who can offer perspective and challenge, and specialises in FS and Consumer.

Pascale Gara is a Consultant in the Chair & NED Practice at HW. If you wish to discuss NED opportunities as either a client or candidate contact her at pascaleg@hwglobalpartner.com or +44 (0) 781 258 2486 for a confidential chat.