Manufacturing companies are only capturing a mere 20-30% of the revenue and efficiency gains that they were predicted to in the past five years, notes the Harvard Business Review article by Nicolaus Henke, Jacques Bughin and Michael Chui from McKinsey, “Most Industries Are Nowhere Close to Realizing the Potential of Analytics.” Why are CPG companies falling short, particularly in the area of trade promotion? The answer lies in a lack of organizational change and talent development.
While many companies invest in analytics initiatives to improve data management and results; they do not manage the process with organizational support to maximize internal efficiencies and productivity. Therefore, without a defined role or action plan, results are limited to the application of data insight to current practices. For example, if a CPG company is currently analyzing their top 5 retail customers and after adopting an analytics solutions such as Trade Promotion Optimization, they still only analyze their top 5 retail customers, they will see limited gains in efficiencies and ROI. What is the potential if the practice changes to evaluate all their retail customers?
"Manufacturing companies are only capturing a mere 20-30% of the revenue and efficiency gains
that they were predicted to in the past five years."
It’s important to recognize that turning data into value comes with some day-to-day reshaping. The article states that “embracing data and analytics is not a tactic; it’s a transformation.” Without addressing a lack of visibility between departmental siloes, trade promotion suffers from practical inefficiency and misaligned targets, not to mention the costliness of lost time and redundant efforts. Thus, mature companies must do more than layering digital initiatives on top of existing business practices if they want to avoid lost opportunity, the authors warn.
Two critical steps that CPG companies can take to address potential shortfalls when incorporating analytics are:
Update core operations
As stated previously, companies must do more than simply layering new initiatives on top of existing operations. While this won’t happen in the blink of any eye, it’s well worth the time it takes because it will significantly improve cross-departmental visibility and performance in the end.
It begins with a holistic, uniform company vision endorsed by company leaders and applied throughout company practices. The article states, “An effective transformation strategy starts with clearly articulating how data and analytics will be used to generate value and how the results will be measured.” For Trade Marketing, Sales and Finance leaders this will include answering some insightful questions:
- What KPIs will be used to define success?
- What are the priorities in managing process changes to maximize efficiency and results?
- How can new analytical capabilities help achieve current organizational objectives?
Currently, there is a large pocket of time wasted trying to fill data gaps. Data analysts spend most of their time compiling their data, but not analyzing it. The leaders of these groups are responsible for reporting performance metrics to organizational executives, but do so with only a partial picture of activity. Meanwhile, field sales are presenting and executing plans with retailers without historical predictive information. This results in being unable to analyze the impact of a customer plan on the category and brands, accurately articulating that to company leadership. In short, there is a great deal of scrambling going on.
However, with the aforementioned breakdown of siloes and helpful tools, time can be spent analyzing and using key insights from data to drive action. In addition to not only supplying the software, a good solution provider will also deliver important best in class training. This makes employees more effective because with the necessary knowledge, employees will find value in their work through seeing the connection between action and company results. Developing this talent internally allows for both data savviness and functional expertise at the corporate level.
"Without addressing a lack of visibility between departmental siloes, trade promotion suffers
from practical inefficiency and misaligned targets, not to mention the costliness of lost time and redundant efforts."
While many companies may be taking the right steps towards digital solutions, they are not fully unpacking the potential that lies within. As stated in the article, “Early adopters are posting faster growth in operating profits, which enables them to continue innovating and solidifying their advantages. In industries where analytics adoption has been slow, there is still an opportunity for first movers to gain a significant edge over competitors.” Simply adding an analytics initiative on top of existing systems will not give you results. But by executing important organizational shifts and developing key skills, companies can reap the full benefits of an analytics initiative and thus place themselves at the forefront of the competition.
What to read next: Becoming an Industry Leader: How to Transform Trade Marketing with Analytics