Disruption in the business landscape is accelerating, and companies that aren’t nimble enough are at risk of becoming obsolete. The velocity of change today is so great that companies that were considered innovators just a few years ago are now at risk of being disrupted themselves. This phenomenon is called the “big-bang disruption,” a term coined by Larry Downes, project director at the Georgetown Center for Business and Public Policy, and Paul F. Nunes, global managing director of the Accenture Institute for High Performance, in a March 2013 Harvard Business Review article.
Companies that were considered innovators a few years ago are now at risk of being disrupted themselves. (CLICK TO TWEET)
“We’re accustomed to seeing mature products wiped out by new technologies and to ever-shorter product life cycles,” writes Downes and Nunes. “But now entire product lines—whole markets—are being created or destroyed overnight. Disrupters can come out of nowhere and instantly be everywhere. Once launched, such disruption is hard to fight.”
The authors warn, “The impact of big-bang disrupters is certainly amplified for technology- and information-intensive businesses, but most industries are at risk.” In fact, in the consumer packaged goods industry, you don’t have to look very far to see signs of big-bang disruption. Ecommerce and app upstarts are upending business models and stealing market share from established brands. These startups “trigger disasters,” according to Downes and Nunes, putting established companies at risk of quickly becoming irrelevant.
Thriving in the era of big-bang disruption requires a new approach to doing business—one that puts the focus on the consumer (CLICK TO TWEET). Here are three things CPG companies should do in order to avoid disruption:
- Adopt a startup mentality.
Driving innovation and improving marketing tactics require a test-and-learn approach. But that’s easier said than done in the CPG industry, a mature market where established brands are rarely nimble.
Speaking on the topic of momentous shifts in consumer tastes and digital media, former Kraft Foods CMO Deanie Elsner admitted to The Drum that many of the tools and processes that CPG companies utilize “don’t work like they used to” due to “tremendous transformation” happening in the retail landscape.
“It’s all driven by the consumer,” adds Elsner. “It’s this new millennial consumer who is really behaving and operating very differently than any consumer prior to them.”
Ecommerce and other disruptive business models favor nimble players. And as mobile, social and cloud technologies continue to change consumer expectations, companies will be under more pressure to respond quickly.
CPG companies need to be in the habit of trying new technologies and new approaches with their consumers. Engagement is critical because it will allow companies to get feedback quickly as they hone new strategies and new offerings.
- Understand changes in consumer tastes.
Disruption is not just about mastering the latest technology. It’s also about keeping up with consumer tastes and preferences. In the CPG space, the Greek yogurt phenomenon in the U.S. and the success of Proctor & Gamble’s Swiffer demonstrate how customers today quickly embrace new trends. Having a firm grasp of consumer wants and needs helps companies stay ahead of the curve rather than struggle to keep up with change.
Getting closer to consumers also enables companies to play offense instead of defense by surfacing ideas that spark the next big thing. After all, the products that are truly innovative are those that fulfill a consumer need. A deep understanding of consumer motivations could empower big CPGs to fend off new competitors by transforming their industry and becoming the disruptors themselves.
- Build a relationship with your consumers.
A key aspect of big-bang disruption is that new products are “embraced quickly by the vast majority of the market,” according to Downes and Nunes. The brand equity that CPG companies have accumulated over decades is no longer a viable source of competitive advantage.
In my point of view, big bang disruptions are going to come from within the CPG market (through new products and consumer experiences) or from outside the industry (through the emergence of new channels like ecommerce). Factors outside of CPG will increasingly pressure large CPGs to try things that are outside their traditional production and distribution methods. As CPG companies navigate new ways of doing business, they need to be in lock step with consumers.
To compete in the age of big-bang disruption, companies need to engage with their consumers in meaningful, ongoing conversations. A customer-centric mentality will help CPG companies provide the type of experiences and products that their consumers are looking for. Engagement can also help companies keep tabs on what’s happening in the marketplace and what consumers are doing with other products.
To compete in the age of big-bang disruption, companies need to engage with consumers in meaningful conversations. (CLICK TO TWEET)
Customer-centricity is particularly important because new disruptions in the market have dramatically made the path to purchase more complex. Ecommerce, peer-to-peer shopping, social media and review sites all influence consumer decision-making. Success in the world of constant disruption comes from a commitment to constantly learn from consumers. CPGs need to treat consumers as partners, love them and build a meaningful relationship with them in a way that facilitates learning.
While the big-bang model is more pronounced in industries like tech, the CPG industry is not immune. To prepare for this new reality, CPGs need to adopt tools to develop customer intelligence that will help shape the transition to online channels. To compete with startups, CPG companies need to become more nimble, more informed and more customer-centric. The ability to develop customer intelligence, innovate and co-create product and marketing solutions with customers is a huge competitive advantage.
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