Editor’s Intro: In order to prosper in a digitally transformed world, CPG has been forced to embrace new ways of finding the levels of growth demanded by investors. Jay Rampuria argues that “fast-fail” approaches pioneered by software developers need to be more fully embraced by CPG companies. Given the high new product failure rates traditional approaches have yielded, it will be interesting to see if such agile approaches will be more effective in the end. Or, will consumers balk at products always seeming to be in “beta” (I know of Tesla owners who complain of that)?
Digital disruption comes in many flavors. We’re used to hearing about blue-chip household names upended by upstarts. We are also accustomed to stories of startups who “get” digital and mobile commandeering new touch points with consumers.
But there’s another, more subtle form of digital disruption that’s plaguing the consumer packaged goods industry: the metaphor of technology.
While CPGs, of course, need to embrace the latest technology, they also need to internalize the startup ethos of “fast fail.” Rushing out a minimum viable product runs counter to how CPG firms have done things over the past 100 years or so, but the change is warranted since consumer insights and data have never been as accessible as they are now.
Why today demands a new approach
About 20 years ago, when Napster was blazing a trail for future disruptors by rattling the music industry, the need for digital transformation in this segment wasn’t as acute. Since then though, quick-ship online retailers mounted a potent challenge to traditional distribution. Amazon, for example, doesn’t market paper towels under its AmazonBasics house brand, but it’s easy to imagine it adding a line. (The Walmart-owned Jet sells paper towels under its house brand, UniquelyJ.)
If that wasn’t enough, a wave of digitally native vertical brands (DNVBs) is also encouraging consumers to put repeat purchases like razors, feminine products, and coffee, among other items, on subscription.
The upshot is that while CPGs have had the luxury of a high barrier to entry, that’s no longer the case. If one of the e-commerce giants comes up with a great idea for a household product, then that’s an existential threat. The same could be said for a VC-funded DNVB.
The agile versus waterfall approaches
None of this is to imply that the CPG giants have been resting on their laurels all of these years. Everyone knows that even when they enjoyed structural advances both were known as hothouses of innovation. Bright Ivy League grads were happy to spend much of their careers finding ways to bring incremental improvements to toothpaste or laundry detergent and the standards for such innovation were formidable.
But since these companies are not just competing with like-sized brands anymore, they need a new approach to market research and obtaining consumer insights. The traditional lifecycle for consumer products lasts years. Since it is rooted in an age when real-time data wasn’t available, by necessity a lot of the company’s resources are invested in it before it launched a product. It’s hard enough to reiterate products once they’re launch, but the psychological investment also makes it hard for teams to admit they were wrong or that they overlooked something during the research phase.
This has been an issue in software development as well. The traditional or waterfall approach employs rigidly set phases for each development phase. Once you’re done with one, you move on to the next. By contrast, in agile development, consumers weigh in at each stage about what’s working and what’s not and cross-functional teams constantly address those concerns to improve the product.
With an agile framework, CPG brands can get feedback on everything from product design and packaging to shelf product placement in a retail environment. Such data-driven insights delivered in real time can give such brands the freedom to test ideas while limiting their chances of a major new product disaster.
While each has its pros and cons, one advantage of the agile approach is that when the product gets an “official” release there should be no surprises about how it will perform. Agile is also a better model to stay on top of consumers’ ever-changing expectations.
Why real-time data is a game changer
The agile approach hasn’t been an option until recently. But analysis of real-time data and machine learning can identify usage patterns and criticisms that allow for more constant iteration.
Along with a “fast-fail” mindset, such agile development will help CPG companies keep pace with nimble startups and spot opportunities. In the long run, embracing this type of digital disruption may have the most long-lasting effects.