At an event for the Marketing Agencies Association in January, the CPG giant Unilever revealed that it was having a hard time adopting the startup mentality within its innovation program called The Foundry.
“A little bit of start-up mentality is about reiterations. You launch something, and then you improve it,” Unilever global media director Alper Eroglu said at the event. “But at Unilever this is difficult, because we aren’t used to this mentality. For us everything needs to be proved to the last point.”
Unilever is just one of the many CPG companies that have recently attempted startup methodologies and processes. As smaller, tech-savvy companies have sprouted up, established CPGs are losing market share and fending off more competitors than ever before. By exploiting mobile, cloud and social technologies, startups are reshaping consumer expectations, forcing established CPGs to re-evaluate their own products and processes.
To avoid further declines in revenue and household penetration, CPG companies need to act like a startup. Here are four ways multinational CPG can more effectively do so:
- Know the consumer.
One misconception about embracing the startup mentality is that it’s all about technology. Companies like Target have opened tech facilities and hired software developers to help them get ahead of technology. But having the right technological infrastructure in place doesn’t guarantee success.
Competitive advantage in the startup world begins with a deep understanding of the target market. Airbnb, one of the biggest startup success stories in the last five years, spent its early days getting to know early adopters. Airbnb founders flew to New York City and visited Airbnb hosts, learning about the day-to-day lives and the homes of their users. The founders gave their feedback to their tech team, who then made improvements to the site as quickly as possible.
As Airbnb demonstrates, embracing a lean startup mentality begins not with technology innovation but with better consumer intelligence. Instead of blindly investing in big projects, CPG will enjoy more ROI if they begin with the consumer in mind and determine which technologies will help them provide better products, services and experiences.
Embracing a lean startup mentality begins with a deep understanding of the consumer. (CLICK TO TWEET)
- Design for agility.
Startups care mostly about two things: scaling up and remaining agile. Established CPG companies already have the scale, but they often lack agility.
Embracing the “fail fast, fail often” mantra that has permeated Silicon Valley can give CPG companies the agility they need to compete in today’s marketplace. CPG manufacturers today need to make careful choices about where they invest—and they need to so as quickly as a startup can. Management consulting firm McKinsey & Company says CPG companies need to “foster a test-and-learn mindset within their organization, building an experimentation ‘engine’ that can quickly scale up successful pilots.”
Coca-Cola already employs a similar framework by “planning backwards.” Borrowed from the startup community, the idea is to release the most inexpensive version of a product possible before developing a full business plan. Planning only begins once the company has established that there is a market for the product, using consumer feedback throughout the process to drive improvements.
Of course, not all failures are created equal: “fail fast” isn’t an excuse to put out subpar products or to deliver mediocre customer experiences. Knowing your consumers and addressing their problems can help CPG companies increase the likelihood that they’re learning from failures and not simply failing.
- Foster a culture of consumer-centric innovation.
When evaluating the potential of startups, many venture capital firms consider company culture. As Rosemary L. Ripley, managing director of venture investment firm NGEN, wrote in The Guardian, the most successful startups embrace “controlled risk-taking and failure.” These startups also believe that “valuable insights may be sourced outside the company.”
Innovative companies, both big and small, develop a culture where consumers are involved as collaborators throughout product development. For CPGs to successfully infuse a startup mentality into their enterprises, they need a culture that’s open to the possibility that the best idea is outside its own four walls—that consumers are a valuable source of insight.
- Be more human.
In the age of social media, consumers can easily amplify their message. The wrath of the empowered consumer can rapidly go viral, as Vani Hari, who runs the blog Food Babe, recently demonstrated when she got General Mills to reconsider its use of preservatives in cereal products. Consumers today can readily tap into a community of like-minded people and mobilize to get their voice heard.
The good news: today’s technologies also allow companies to show their human side. CPG companies can do this by embracing the power of community, engaging with consumers directly and continuously. By cultivating relationships and talking to their community of consumers, large CPG companies can seem just as human and scrappy as startups.
To act like a startup, CPG companies need to show their human side and embrace the power of community. (CLICK TO TWEET)
The CPG industry is in the midst of significant transformations as consumers have more information and more choices available to them. With the consumer voice louder than ever, CPG companies need to act more like a startup and be more nimble and flexible. Putting the focus on their community of consumers can help CPG companies do that.