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Increasing Resilience, Profitability, and Sustainability in the Consumer Products Industry – Futurum Tech Podcast The Intelligent Enterprise Industry Series
by Daniel Newman | November 12, 2020

This episode of the Futurum Tech Podcast – Interview Series is the ninth installment of our Intelligent Enterprise Industry Series — done in partnership with SAP. I welcomed Paul Larson and John Buckley, executive advisors for the consumer products industry at SAP to discuss how they are helping organizations focus on furthering their intelligent enterprise story.

The Interconnected Consumer Products Company

SAP recently partnered with Oxford Economics to conduct a research study to identify how an interconnected mindset impacts organizations. It also covers the industry’s progress to date. Consumer products companies have made a lot of progress in digital transformation but still have several areas to work on including collaboration, data-sharing, and talent management. The report includes findings from 3,000 senior executives, including 300 from the consumer goods sector.

My conversation with Paul and John revolved around the following:

  • How the consumer products industry is doing in 2020 and the effects COVID-19 has had on companies.
  • The different ways executives are using systems thinking to break down silos.
  • How organizations within the consumer products industry are using an integrated approach to reduce costs and improve speed.
  • The impact talent has had on companies looking to improve digital transformation initiatives.
  • How companies are able to get the most out of their data.
  • The technology investments consumer products companies are making to spur digital transformation.

Paul, John and I explored some of the findings of the Oxford Economics report: The Interconnected Consumer Products Company that will have a big impact on the future. We only explored a few topics in the report and there’s so much more to it. If you’re interested in a comprehensive view of the subject download The Oxford Economics report here.

Listen to my interview with Paul and John here:

Disclaimer: The Futurum Tech Podcast is for information and entertainment purposes only. Over the course of this podcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.

Read more analysis from Futurum Research:

Increasing Resilience, Profitability, And Sustainability In The Insurance Industry

Increasing Resilience, Profitability, And Sustainability In The Utilities Industry

Increasing Resilience And Sustainability In The Public Sector

Transcript:

Daniel Newman: Welcome to the Futurum Tech Podcast, I’m your host today, Daniel Newman, Principal Analyst, and Founding Partner at Futurum Research. And I am very excited about this episode of the Futurum Tech Podcast, Interview Series, as part of our intelligent enterprise partnership with SAP, where we’re talking about not only intelligent enterprises across 10 different industries on 10 different podcasts, but we’re also highlighting a very interesting study that SAP did with Oxford Economics and we’ll talk about that on this show today. In this particular episode, we’re going to be talking to the team from consumer products and I’m really excited. This is a topic near and dear to my heart and my pantry, and of course, many other parts of my home, but we have Paul Larson joining us today, along with John Buckley from SAP. And I’m going to bring them on in just a moment. But before I do, first of all, like I said, thank you for sitting in with us.

Thank you SAP for being a partner of this podcast and for everyone out there that listens to this show and enjoys it, I just want to say in advance that there are nine more of these across a whole bunch of different industries, everything from retail to oil and gas and automotive.

So no matter what industry you’re in, check these other podcasts out and just note, no matter what industry you’re in, you will find nuggets of valuable information from all these experts that we’ve brought on because there’s so much to learn from paying attention to the technology, digital transformation, and investments being made to create the most intelligent enterprises across all the industries. So without further ado, John Buckley, Paul Larson, welcome to the Futurum Tech Podcast, Interview Series, how are you guys doing today?

Paul Larson: Hey, doing great, Daniel. Thank you. Thanks for having us today.

John Buckley: Hey, Daniel, I appreciate you inviting us on to talk with you today, it’s going to be a great time.

Daniel Newman: Yeah, I’m really excited for it. By the way, you guys did great there about not jumping on each other. A lot of times when there’s two guests, I have to tell someone to go first, I love the patience. Paul, I’m just going to have you go ahead first foremost, introduce yourself and tell everybody out there a little bit about what you do at SAP.

Paul Larson: All right. Thanks Daniel. Hello everyone. My name is Paul Larson, and I’m an industry executive advisor for our consumer products industry. And at SAP, consumer product is the largest industry, so it’s great to be a part of that team. We get to work with all the great brands that we’re all consuming and using on a daily basis. And what I do is I talk with our customers about their most compelling and business needs that they need solved.

Daniel Newman: And John, welcome to the show.

John Buckley: Great. And as you know, I’ll usually follow Paul here. So Paul is my colleague from the South. I’m in the Midwest portion of the United States for SAP. So as with Paul, I’m the industry advisor and I’ve spent over 30 years in supply chain in consumer products, goods business. So I certainly have a passion for CPG. So looking forward to talking with you about this Daniel.

Daniel Newman: Yeah, it’s a great topic. In a former life, I did some work with one of the largest in this space. I remember heading out to Cincinnati to visit some innovation center, saw some really cool things early on where tech was being implemented into the future settings for say retail and grocery. It was kind of cool. Can’t say much about it, but just it was a cool experience, former life. By the way, you gentlemen live where I live and where I want to live. John, you and I are neighbors. And Paul, you live where I want to be hopefully very soon down there in Austin, Texas. I just can’t wait to pick up and get out of this cold weather. But anyways, I’ll digress. I won’t complain. I mean, what do we have to complain about? We’re living a good life, we’re talking about technology, we’re working with some of the coolest companies on the planet. So Paul let’s create a little framework here, I’d love to just hear a little bit about kind of what you’re seeing, few things that you’re seeing right now in the CPG or in the consumer goods industry.

Paul Larson: Obviously, the last six, seven months have been a big change, but fundamentally when you look at what our customers are focused on, it’ll always be three things, but there’s really a fourth I want to throw in there, Daniel, if you don’t mind. So the focus on top line revenue growth has never been higher than it is today because if you look back on the industry over the years, specifically in North America, but then globally as well, there’s always been some steady organic growth with population increase, with urban sprawl, things like that.

There’s been growth out there and it’s come to the leaders pretty easily in years past, but now with all the digital incumbents that have come into the industry, we’re seeing a huge refocus on top line revenue growth, because without the growth, your enterprise will not function without having top line revenue growth and being able to do something with it.

Secondly, it kind of goes with that is margin improvement, right? So margin improvement is probably more top of mind than it ever has been. It’s always been part of the industry. If I had top line revenue growth, I could always focus on driving costs out of the system with my supply chain or my manufacturing lines, which were quite frankly siloed, and still quite a bit of the companies are, but there was always silos and that really drove a negative vibe through the enterprise because they weren’t able to speak to each other, they weren’t intelligent, right?

And I think that’s one thing we’re going to talk about more today. So margin improvement is a big one specifically now when companies have been turned upside down with their supply chains and trying to connect with us, the consumers on more of a digital and an online consumption model, which in the past, wasn’t as big, maybe 5% of the revenue, but now it’s exploding.

I don’t know about you, but it seems like there’s a package that shows up on my doorstep every day or more than one package, right? So that changes your ability and the way you do business with the consumer. So being connected as you’ll hear more today about the industry Oxford economic study, is more important than ever. And then talking about connecting with the consumer, that may even be number one, but obviously we’ve got to have top line revenue growth to do anything, but connecting with the consumer is more important than ever before.

Every company is ranking that as their top one or two things that they need to focus on because in the past, they’ve been on the shelf, they’ve been able to drive their business with trade promotions and own shelf space. And now it’s a digital world. So they’ve got to get up front and personal with the consumer, understand what their needs are, and be able to be present and help them with feeding them or whatever other type of consumable item they need to purchase for themselves or their family specifically in this new time, right?

And then last I just wanted to say, I know there were three things, but for you people there’s more need now to have empathy and to be able to focus on the talent within your organization, understand that everyone is under a different amount of pressure depending on their situation, and that leads to either greater or lesser productivity when it comes to the enterprise. But if it’s connected, you’re able to tie that talent together so we can all perform at a greater scale, and it’s coming at us faster than ever specifically because we’re all at reach easily, we’re not like you spoke earlier that we’re on an airplane quite a bit and John and I were as well. So we weren’t as successful on an airplane, but now it is very accessible. So it puts a different amount of pressure on the talent, without their feeling comfortable, you won’t be able to achieve the three different items I talked about earlier.

Daniel Newman: Absolutely. That’s a lot of insights there to start off. We’ll unpack that a little bit more here with a handful of questions that I’ve got ready for you all. But I will say, it does not surprise me to hear the top line growth and margin growth are a big focus, we’ve seen explosion of commerce online, a lot of the companies you’re working with have probably seen that shift from a lot more in-person retail type of consumption to more orders. Like you said, the doorstep packages. I get my goods in the mail almost every day, boxes and boxes full of goods. I’ve never been so unexcited to have packages on my doorstep as I have become during the COVID crisis. The other thing I think you mentioned that is worth noting is, the human impact of what’s gone on.

So COVID drove a lot of revenue for CPG, drove definitely revenue to tech, but people’s lives are very different now. So I think building a robust enterprise is going to be different and it’s going to be forever changed here. So I’ve got a handful of questions and John you’ve been sitting there patiently, and thank you for that. Let’s talk about this Oxford economics study a little bit here. In the survey, one of the top of mind focuses for executives was systems thinking, in the CPG consumer product space I’m interested in, what you’re seeing in terms of executives using this systems thinking to break down silos.

John Buckley: That’s great question, Daniel. And it’s interesting as I read through the Oxford economics survey in there, there’s a section in there that talks about the consumer products executives and their top priorities. And as you go down through the list of that, even though this item wasn’t listed as the number one, it did have the most number one votes because it would rank it from one, two and three and each one got a percentage of the votes, but this particular one was number one, received the most number one votes, and that was integrating external partners to create a competitive ecosystem. So your question speaks to the heart of this. And so when we think about that, that is so true for supply chains as we talk about this, and you talked about those packages showing up on your doorstep and such. The supply chains have been disrupted quite a bit.

We talk about consumer products goods, there’s been some portions of our business that have seen extraordinary demand on the positive side. But then likewise, we’ve had some of our businesses that have been struggling from the downside of it, depending on what particular of the segment of this. And getting to this at the heart of it, it’s connecting and integrating those suppliers to the production facilities, making sure that they talk about that co-manufacturing or the material or product shortages, but on the other side of it too, it’s connecting and integrating those customers to our sales and marketing and our demand planners, that’s always been critical so this is something that’s not earth shattering to a lot of people.

But I think with today’s scenario on the demand volatility that we have, it’s an all time high for us to stay connected and to remove those silos so that we can minimize the risk that we have and maximize those profits as Paul mentioned, as the number one objective for CPG companies is to maximize the profits we have. So I think going into this, having that strategy of collaboration and sharing, is going to be the best method for organizations to ensure that they can make those timely and effective business decisions.

Daniel Newman: Absolutely. And by the way, some of these objectives are just really sound business objectives, growing margin, growing … I mean, that’s why I said earlier in the show, a lot of what these companies are going through, there’s a universal isms, no matter what business you’re in, what industry, but I think absolutely in CPG, especially because there’s so much cost involved, supply chains are intensive from start to finish, and you’ve got to get those margins up. Anyone that’s ever watched Kevin O’Leary on Shark Tank for even just one minute, realizes it’s all about getting those costs out of the system.

I’m kidding because I like that show, but Paul, let me bounce this back to you because, as I just was alluding to study highlights, cost savings and speed as the top two benefits of this integrated approach, the one that John just talked about, the one that we’ve been talking about using terms like digital transformation and intelligent enterprise for the better part of God, what feels like a decade. I’m seven books into it now, I’m not kidding. I’ve written seven books about this now. So I’m always interested in hearing what you’re dealing with. How are leaders taking advantage of this integrated approach to create this value, to reduce this cost and to create and drive speed?

Paul Larson: Well, we have a saying, and it’s really been a trend that speed the new big. And if you think about the winners in CPG, the big companies that had tremendous market share, they were shipping truck loads, their manufacturing facilities were running 24/7. I mean, the big guys had all the synergy and benefits, right? And if you’re big, you could drive more space at retail and therefore you could drive cost savings because you had that scale to really be more competitive than the smaller incumbents and competitors. So what’s happened here is the big companies cannot work fast and they haven’t been able to, unless they have this interconnected approach, driving agility. I was looking at some statistics about the word agility and in the last 10 years, CEOs that are on analysts calls or talking to Wall Street, the trend of the word agility has quadrupled in the last few years.

So in other words, agility in my mind is speed, right? And the way that companies are doing business today, they’re getting picked apart by digital natives that are coming in. You’ve seen a lot of that in the shave care business, right? And these big companies that have owned that razor industry are now being stepped around because of companies that are agile. They have a lot of speed because they have a small footprint, they’re all digital, they can go directly to the consumer, and they probably outsource most of their manufacturing, most of their shipment, that’s really what we’re looking at. And if you have an integrated approach, I don’t care how big or small you are, you’re able to really take advantage of the accelerated lens that provides to your talent. Getting back to the talent, I kind of mentioned it earlier, if your talent has the ability to do other types of analytical functions within the company, you’re going to be better, and you’re going to be able to notice opportunities, you’re going to be able to improve business processes.

When I look at speed and cost, Daniel, that’s what I’m seeing out there. And that’s what I’m seeing the folks that are capitalizing on that on a graded approach are really rising to the top. And I’ve seen it quickly in the last six months where companies had to switch from maybe more of an industrial type approach with some of their products to all retail. So they take half of their business and convert it to retail because everyone’s shopping down, they’re not buying products the way they did, and they’re not out visiting this facilities that they were delivering products to.

Daniel Newman: Absolutely. You make a lot of great points. And the technology itself is a huge enabler. Having systems that are coordinated across silos is more important than ever. Of course, that requires the right data flow, the right inputs, the right management, layering on new technologies, whether that be ML and AI, whether that be open source tools, whether that’s business intelligence and visualization tools, all things that you guys work with your customers on each and every day. But that brings me to sort of another point, something that John I’d love for you to talk to a little bit, and that’s the people, because Paul, everything he just said is really great. And in an ideal world, you buy technology and it works. But I still remember an old cio.com study that says something like 50% of it projects fail. And so in all my transformation research, it points back to, yes, the tech is critical and agility is based on tech, but it’s also based on people. So what is the impact of talent, John, in the workforce in terms of actually achieving these successful measures that Paul just spoke to?

John Buckley: Hey you know, that’s a great point. And I think if you would go out and you would talk to any CEO that’s out there in the CPG space, or for that matter, probably in any other industry and you talk about what makes them a success in that, I think, they may talk about the products, but they’re quickly going to switch to the talent, they’re going to quickly switch to the people, because I think we all know that in behind any of the great companies, are the great products is the people, it’s the talent aspect of things. And so when you look at this from an integrated approach aspect, it’s got a very positive impact, not only to the people, but also to the enterprise that you’re working in.

Employees, if they have the opportunity to have all of this information at their hands, or they have what they consider to be more near time relevant information, they’re going to be able to spend their time making decisions rather than having to go out and gather all this data and spend time doing it.

Those tasks that we know 10, 15 years ago needed to be done, but nobody really liked to do those. So the result that you get from this is that if you can get all that information, your talent’s going to feel engaged. And if they’re engaged, they’re going to feel like they are adding value to the organization, they’re honestly going to be happy. They’re going to be happy in their role, and they’re going to be happy in their enterprise. Inclusion from a human trade is something that we all desire. We like to be included in this. So if you can provide your employees with that ability to be integrated into the business process, integrated into the decision making process, by giving them all of that required data and information, and as we know, that certainly has grown over the years and we have more data and information at our fingertips now than what we’ve ever had before.

No, they are going to be happier and honestly, you’re going to retain those employees. And so what that does then on a side note is it allows your HR departments to focus on things, to help with the employees other than going out and recruiting talent. One of the big challenges we face in CPG organizations is retaining good talent because we do know that it is the people behind the products that actually make them a success.

Daniel Newman: No, that makes a ton of sense. We’ve done research year over year, John, and what we’ve found is that generally when it came to digital transformation, culture ranked in the top three on almost every organization and in many cases, number one, when you found correlation between fast moving acceleration in transformation projects and in technology projects, there was usually a connection to a company that felt it had a very strong culture and had strong leadership in place. So the correlation is really big and definitely think that you’re onto something there.

John Buckley: And I think Daniel, just to add on top of that too, if you look at the new workforce is coming out, you’ve got the millennials that are coming out, I mean, they are more adept at handling all of this data than what we’ve ever had been in the past. And so if I’m an, I don’t know, old guy and I’ve been around for a long time and I see these new people come into the workforce and their ability to manage all of this data and then to make heads and tails out of it quicker than what was ever done before, just tells us as an organization is to give them the data, let them make those decisions, and we’ll end up making more money in the long run.

Daniel Newman: No, I think you’re absolutely right, very good stuff there, but you know what, we’ve pivoted between tech and people and I want to pivot back to tech really quickly here, because you heard me mention about data, voluminous data, expansive data, well, CBG data is huge, these companies tend to be very big on investing and everything from SEO to digital platforms, they’re using data inside their organization, they’re using data to get to customers and consumers. So in terms of a connected enterprise, CPG is a great example. Consumer products is a great example. What are you seeing Paul, in terms of, how companies are being able to get the most out of all the data that’s at their disposal?

Paul Larson: Well, John kind of mentioned it, I think early on the last question he mentioned the word real time, right? That’s maybe an overused term, but I’m just seeing our customers specifically the ones that are really starting to perform from a more real-time nature of reporting, and what that does is that drives a behavioral change in the way you think, and the way you conduct your day-to-day business, no matter what line of business you’re in, if you have that type of access, that lens into your business, and it’s real time, you basically make decisions on the fly based on how your enterprise is changing from minute to minute, from hour to hour. And we talked about cost earlier, it drives a lot of costs out of the system. You don’t have the wait time for those reports.

You don’t have the handoff time that these companies would have between one shift or the other specifically in supply chain or procurement or any of those fulfillment areas, right? There’s not a lag time because you have real-time information, and you have real-time reporting. And I see the more advanced companies focused on the data sharing between functions, between silos, and the more data sharing we can have specifically in the eco system, which hasn’t always been super open if you look between manufacturers and retailers, I think you’re going to see the progressive companies on both sides win when they start sharing. Because if they both don’t have visibility to inventory, to consumer demands, there’s no way they keep the shelves filled. We experienced that firsthand didn’t we? So I would say that’s from a connected experience, from a data experience, that’s what I’m seeing, that’s what the trend is, more real-time, put the control in your talent so they can make the decisions they need and improve business processes to be a better partner with their consumer and their ecosystem.

Daniel Newman: There’s some really good stuff there and I want to pour some gasoline on that fire, and we’ve got a few minutes left here and you guys have been great by the way, really appreciate you digging into this Oxford Economics study, talking a little bit about the intelligent enterprise in the CPG and consumer products space, a lot of expertise here. No question, you guys have been in this business for a minute. I won’t ask you how long or how old, it’s just not a polite thing to do, but I think it’s been a while. But nonetheless, pouring gasoline on that fire is, AI, IOT unpredictive? So in this study, John, those were the three investments we just talked about data, we just talked about the connected enterprise. I’m just a little bit curious, is that what you’re seeing, are those the investment areas that your customers are most focused on? And how do you think these investments are going to help propel these businesses more than perhaps we’ve already alluded to?

John Buckley: That’s, again, another great question that you’re asking, because certainly the AI, the internet of things, machine learning or predictive capabilities are certainly on the minds of a lot of CPG executives. And they certainly come up in all the conversations that Paul and I have with our customers when we get out there. But honestly, I think the jury is still kind of out on these technologies is that they are still relatively new, we know that they’re out there and the capabilities of them, we’re still learning about what we can do with them. For instance, I was talking with a customer the other day and they were talking about using, was there anything that we could do with the AI or with machine learning that we could go back into the financial crisis of 2008 and learn from that experience and how could we apply that back into today’s environment?

Is there anything that we can learn from that? So I think that type of thinking is what we’re seeing in the CPG industry, and the companies that are excelling at that are certainly making a leap ahead of some of those ones that are not. So again, we’ve seen a lot of customers experience huge cost savings, even if we look at closing the books at the end of the month, customers are using machine learning to increase the accuracy and the speed of how they’re reconciling their accounts receivable and their payables is, as you mentioned, getting into that intelligent enterprise. So doing those things and using those technologies, it’s still growing right now, it’s still kind of at its infancy stage, but it’s certainly going to be on the radar and should be on the radar of our CPG executives, because it is something that is certainly going to help make them more profitable as we go down the road.

Daniel Newman: Yeah. I love that example, by the way of going back, how much technology has changed in a decade plus, and what could we do by applying some algorithms, applying some models to data in the past to provide us better perspective on the future. I’m sure it’s being done, but probably not fully democratized as we see, this tech become more democratized, we’re seeing AI made more available, the cloud has helped make it available at scale to more people. Oh, we can talk about this forever. So I made a comment earlier when we were talking about people and I have one last question I’d love to give you both a chance to weigh in, just a few minutes left, big question too, by the way, I’m going to ask you to make a quick answer to a big question, but I want to talk about corporate culture and shaping success.

So we talked about people. I alluded to the fact that culture has overwhelmingly been the difference maker. John, I know you rose your hand and weighed in, but let’s finish there because I think it drew everybody’s attention. Everybody out there can relate to this. What do you think here? And I’ll let you go first.

Paul Larson: Okay. Daniel, thanks. Corporate culture, drives behavior and every company, I don’t care if they’re in the same exact industry, in our head to head competitors, they both have a different culture. And that really drives the way companies do business, how they interact socially, how they interact with the community, their views on sustainability. I mean, culture really is the lifeblood of a company. And years ago, we started really focusing on the specific culture of each of our customers when we are addressing their business needs, because we knew how important it was. I mean, yeah we know the industry, we know their industry, but the culture is what drives the deep rooted decision-making and success of a company. So once again, along with culture, it drives business goals for the company and each company is a little different because of their culture. And I’m glad this was a question because sometimes it’s overlooked, right? But I think it’s probably one of the most key initiatives that you need to focus on and understand your culture internally and communicate that within the enterprise and to your consumers and customers.

Daniel Newman: And John, any last thoughts on that one?

John Buckley: Yeah. So I think Paul hit a lot of it there with the corporate culture and you even Daniel mentioned it prior, how corporate culture is so huge in CPG companies and that is so true. But I think when you get the leaders for the culture that look at the things that we just talked about, or if you go back and you read that Oxford economics paper, it brings up a lot of good points. And if you go down through the priorities of what’s on the mind with that, it’s going to be that type of a leader that is thinking that way, that’s going to not only help drive a particular culture, but embed it into the day-to-day operations and actions of the employees. Because as we talked about before, employees are the ones that are actually going to make things happen. So the job of a leader within the CPG environment is to drive those things, to start thinking ways that we haven’t thought about before. We talked about the new data, the new information that we have available to us, creating that intelligent enterprise where we’re talking right to the consumer.

We never had that before, 10 years ago, that was just something in our imagination and today it’s there. So I think the CPG companies that are winning the game right now, or are developing a culture using that mindset to help drive improvement for their business.

Daniel Newman: Absolutely. I think you guys both made lot of great points and throughout the whole show. So I want to just stop here. I want to say thank you, Paul. Thank you, John. Really appreciate having both of you on the Futurum Tech Podcast, Interview Series, great guests, and good luck in the rest of your years of focusing on and driving the business, the technology, and the adoption inside of the consumer packaged goods and consumer product space.

John Buckley: Great.

Paul Larson: Thank you Daniel, it’s been a pleasure.

John Buckley: I appreciate the invitation, Daniel. Thank you for the time.

Daniel Newman: Yeah. So for everyone out there that enjoyed this, click that subscribe button, stay with us here on the Futurum Tech Podcast. Like I said, there are nine more of these. So no matter what industry you’re in, I’m sure there’s one that you can relate to. And also you heard me talk about that industry Oxford economics study, well, hit the show notes, or if you’re reading our blog, look for that link and click on it, fill it out. The survey is free and it’s got a ton of valuable information that you can learn all about what executive leaders are doing in your industry when they’re trying to transform their business through technology and human capital investments. But for now, I got to say goodbye. Thank you everybody again. Thanks for tuning in. We look forward to having you back very soon, but for Futurum Tech Podcast, I got to go, see you all later.

Daniel Newman