Early December 2015, in Amsterdam, the Board of The Consumer Goods Forum, comprising the 50 CEO’s of the largest retail and consumer goods companies in the world, discussed the disruptive forces at work in the industry. They concluded that these disruptive forces are now so great that they will cause a significant and rapid value chain transformation and the adoption of new forms of collaboration.
These 50 CEO’s based their discussions on a brand new industry vision report called ‘Rethinking the Value Chain’, initiated by the CEO’s of Coca-Cola and AEON, and supported by Capgemini. The report argues that our traditional business models, traditional definitions of the value chain and traditional forms of collaboration are not up to the challenges that these forces present.
Consumer behaviour has changed forever. The path to purchase is no longer linear and could involve social media, an app, web-based research, an in-store visit and an online purchase, in any order. Can we offer consumers a consistent experience through this journey? Can we give consumers accurate information about a product’s ingredients, provenance and social and environmental impact wherever they see it?
At the same time, the internet has accelerated innovative competition. Established technology firms and an army of internet start-ups move rapidly into the consumer market and do not follow established patterns in commerce. Emerging markets are incubating new retail and manufacturing business models, many of which are also digitally native. Can companies re-engineer their business models rapidly enough to rise to these growing challenges?
China and India are creating expanding urban economies at the fastest pace in history. By 2025, an additional 1.8 billion people worldwide will join the consuming classes, representing annual growth of 3.7 percent. In contrast, rural populations will continue to develop along different lines. In the West, Japan and China ageing populations are creating a massive demographic shift. Can businesses serve all these new markets, with diverging needs, at the same time and ahead of digital interlopers and start-ups?
In the face of these dramatic changes in consumer behaviour, business innovation, economic trends and global demographics, our value chains struggle to keep pace. Consumer industries have made them more efficient but they remain mostly linear: important information is lost in silos and change can be agonisingly slow. They may not help the consumer products and retail industry respond rapidly to the simultaneous, multiple demands they now face.
What should businesses do next? It will mean rethinking the value chain and creating collaborative networks built with consumers at the centre: millennials, ageing consumers, consumers in developed countries and regions and those in urban and rural areas will all play a part in the evolution to a future value network.
To help ensure future value networks strengthen the industry and benefit consumers through the challenges that lie ahead, please read “Rethinking the Value Chain: New Realities in Collaborative Business” – developed in collaboration with the Consumer Goods Forum and with findings and recommendations for what businesses can do now to sustain long-term growth.
For a personalized conversation on what these findings mean for your company, please get in touch: firstname.lastname@example.org