Leadership Matters

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January 17, 2020

Safe Is Now Risky: What Consumer Products Companies Can Learn from Startups

By Spencer Stuart’s Consumer Practice

Big consumer products companies are experts at avoiding risk, making calculated decisions based on market experience and data. Historically, that has often led to a tendency to launch safe solutions. But today, in the age of digital disruption, safe has suddenly become too risky. Fail to innovate, and your brand runs the risk of becoming antiquated. 

Consumer products leaders are feeling the pressure to introduce bold new categories and speed up time to market. They’re leaning into new technologies and hiring data scientists. They’re adopting predictive analytics, and they’re obsessed with agility. In other words, they’re starting to act more like startups — but with the advantage of size and experience.

In a series of conversations between Spencer Stuart experts and leaders of some of the world’s largest consumer products companies, they share how startups have influenced the space. Following are rich insights from forward thinkers for both adapting to and leading a market in transition.

Set a quick pace for innovation
Startups have the agility to move quickly, iterating through prototypes and getting products to market faster than consumer products companies traditionally have. Javier Ferran, chairman of the board of Diageo, says: “The key is to have the agility, speed and entrepreneurship to assemble things yourself. You want to be able to move quickly when you see your competitor move.”

This means companies will have to create a flexible supply chain to speed the to-market process and keep up with the pace of startups. Ram Krishnan, president & CEO of Pepsico, greater China Region, explains, “You need really rapid innovation enabled by a very flexible supply chain. That is completely getting disrupted with data-driven innovation.”

Acquire and act on data 
Born in the era of big data, startups tend to do analytics well in general. Consumer products companies are playing catch-up in this regard, often because they don’t have the technology built into their existing legacy systems, but also because leadership must make it a priority to use the data they do have.

Many of the consumer products leaders we spoke with agreed that there’s a tremendous urgency for companies to acquire data science assets and collect first-party data, but that’s only the first step. They also need to articulate and own the challenge they’re trying to solve with data and translate that into a cohesive data ecosystem — what one leader calls “the structural backbone of the new playbook and business model.” (Read more about what to look for in a data and analytics leader.)

Deliver the more personal, local and meaningful products that consumers crave
One of the biggest ways in which the consumer industry is being affected by startups lies in the way startups are directly affecting consumer behavior. With more and more bespoke choices on the market, consumers today are increasingly invested in the purpose and meaning behind the brands they choose, turning away from generic, mass-produced products in favor of conscious consumption. Over and over again, research suggests that consumers — particularly millennials — are speaking with their dollars, choosing their purchases based specifically on their value systems. They prefer consumer products that are more personal to them, which is putting the pressure on companies to be more purposeful in how they engage with customers.

Startups often have the advantage of being localized. Jorge Mesquita, former executive vice president and worldwide chairman of Johnson & Johnson says, “Startups tend to be single-country companies, so they feel intensely local, very on-trend and immersed in the culture and folklore of the country.”

Global consumer product companies can be at a disadvantage in this regard, but there are workarounds. For instance, Johnson & Johnson sends “black ops groups” into specific regions to localize and innovate on the ground. They look at regional cultural trends and find out precisely what those local consumers are asking for. Additionally, the sheer size and budget of large companies sometimes enables them to leverage technology and data more quickly. As David Taylor, president and CEO of Procter & Gamble, explains, “P&G scientists work in labs in multiple places. Then we show up locally with an organization that’s empowered to develop local ad copy and local programs to connect the brand with consumers. Connecting to consumers locally, we’re seeing 20 percent growth on some brands that were not growing before.”

Seize the moment
It’s definitely an interesting time to be a consumer product leader. In many ways, big companies are playing catch-up with smaller challengers, and this is certainly true compared to other industries that have already undergone seismic changes. Yet, compared to purely technology-driven industries, the consumer industry is still a relatively quiet and stable environment, one where technology has not yet truly upended the sector. Competition from smaller companies remains limited to the margins.

The consumer products winners of the future will be companies that are agile, willing to experiment and can learn rapidly — then, when something works, jump on their capability to scale and implement well, especially in a way that’s relevant to regional pockets of consumers.   

For more insight into how today’s leaders are adapting to the pressure to be more agile and startup-like, read The CPG CEO of the Future: Insight into the Transformation of CPG Leadership.