Global CPG companies are being challenged by the same market forces that we read about everywhere: increased volatility, uncertainty, complexity and ambiguity. The ability to sense and respond quickly to new trends and information will determine which organizations survive. Naturally, leaders in these organizations are drawn to the widely publicized promises of Agile – a way of working that will create focus, unlock productivity and innovation, and of course, result in growth. But as my CPG clients are quick to remind me: they are not software companies, they are not in financial services, they are not becoming a tech company any time soon, and they often have cultures and reputations that are hundreds of years old. So, they need a different approach; one that leverages the same principles, but flexes to meet the realities of the CPG business context.
In my experience leading the design and deployment of new ways of working, there are three factors that meaningfully differentiate these fast-moving consumer packaged goods organizations from others undergoing similar change efforts:
- Their competitive advantage comes from the efficiency of scaled operations, particularly in manufacturing and supply chain. For disruptive insurgent CPG brands, starting costs can be very low, but scaling costs are impossibly high. For global companies already operating at scale, the high cost of “turning the machine on” increases the pressure to have certainty that whatever the machine produces will work. The impact of this reality is that is challenging to execute on small bets.
- Digital capabilities and tools have a less obvious connection to the end product and the value chain. Advanced data collection and analytics are enabling CPG firms to turn insight into action via targeted marketing and communications strategies. To make this happen, talent must be comfortable operating within a digital space and a physical one - understanding e.g. physical store architecture, as well as sales reports and customer data.
- In the organization’s structure, there are three dynamics at play that often come into conflict with each other:
- regions demanding locally-relevant products
- channels controlled by an increasing mix of human customers and algorithms
- categories requiring innovation to meet rapidly-evolving consumer needs and trends.
These matrixed demands can produce a workforce stymied by coordination, project management and ambiguous decision-rights. Symptoms of this will include unproductive meetings where information is presented to internal stakeholders, each with conflicting objectives and priorities. The outcome of those meetings could be artificial/temporary alignment, unproductive debate, escalation to the next level in the hierarchy, or all of the above.
From experience, it is these three factors that obstruct or slow down the adoption of traditional, capital-A Agile. Based on my experience leading agile transformations at multiple F100 CPG firms, I’ve learned to focus on several strategies that go a long way to overcoming these factors, flexing to the individual needs and culture of each organization.
- Reduce the cost of entry by finding places to experiment where the innovation teams are not in tension with day-to-day operations, for instance by taking resources. Don’t expect agility and new ways of working to be needed or accepted everywhere: sometimes the keeping-the-lights-on predictable work doesn’t need transforming.
- Coach leadership to cultivate new behaviors, competencies, and agreements that encourage conversation and constructive disagreement when collaboration and compromise are involved to make decisions.
- Organize around strategic bets, not decision-makers. Forget positional authority, and instead build teams around opportunities in the market. Be surgical in the identification of the opportunities, but freeform in how you meet them.
- To that end, innovation is about rapidly testing in the market, not generating decks to get senior leadership excited about your ideas. Leverage your insights team as much as possible, right from the start of the conversation.
- Encourage global teams to define the process / approach even over the direction/solution. For example, rather than define the new SKUs for a global product from a centralized, global team, have that team create the toolkit that lets local teams predict which SKUs will be most successful. There is more power in the how than the what.
- Build multidisciplinary teams tied together with a reliable cadence in order to reduce coordination and project management.
- Implement systems and tools that unify the doing of the work with the knowledge management of the work. This will replace excess manager time with more maker encouraging focus on creating, generating and innovating.
- In CPG companies with marketing in the DNA, marketers often hold onto their ideas tightly, creating an imbalance between internal stakeholder opinions and real consumer needs. Coach overzealous marketeers to be okay with killing their darlings, through user testing early and often.
Every industry, and every organization has idiosyncrasies and specific needs to be met. Blanket application of agile methodologies will only take you so far, before these natural organizational resistors begin to kick in. By retaining an agile mindset during an agile transformation, flexing to the specific needs of the organization in the way that I’ve described it is possible to build global movements that change the way a huge corporation innovates, adapts and creates.