EY Global Operating Model Transformation Leader

Consumer preferences are changing more rapidly than ever before, which means that manufacturers need to fine-tune their products as swiftly as the market shifts in order to meet demand and remain competitive.

It’s a far cry from the traditional consumer goods manufacturing model, where products were developed once, rolled out globally and only changed every few years. Today, anyone taking such an approach will quickly be left lagging by fast-changing consumer tastes and overtaken by more fleet-footed rivals.

Test and scale like software-as-a-service

What to do? Adopt a more nimble and responsive operating model – one that enables innovation and scaling of products at pace and then ensures constant refinement to keep pace with consumer demands. Fortunately, there’s an industry consumer goods companies can learn from that’s been doing this for years: software-as-a-service (SaaS).

SaaS companies use an integrated ecosystem to build bespoke, interoperable solutions that work across a network and unlock value collectively. To drive this value ever higher, they capture a constant flow of data from customers and partners, and use it to improve their offerings, creating a feedback loop that powers innovation. What’s more, they leverage the “economics of abundance”: developing and launching digital products at high speed and scaling them into mass usage in seconds.

In my view, consumer products companies that can emulate SaaS providers capabilities will be tomorrow’s winners. Many companies are focusing on development of technological capabilities, including artificial intelligence (AI) and advanced data analytics to inform product changes, in conjunction with agile manufacturing systems and digital twinning to enable swift and responsive adjustments to the products being made. More fundamentally, however, it also requires operating model changes as companies shift their processes to be more demand responsive and adapt their talent profile, digital capabilities, organizational structure and working culture accordingly.

At the heart of these changes will be a significant shift in mindset from being product-centric to being not just customer-centric, but also ecosystem-centric. Rather than looking to manufacture products for consumers to buy transactionally, operations will be recalibrated across a network of partners to define and deliver products and their components –at the pace which consumers move.

Central to this model is a recalibration of how companies work with their partner ecosystem, to enable constant improvement of the products without fundamentally having to consistently reinvent manufacturing infrastructure. The other critical dimension is becoming a listening organization – with deep intimacy of not just the consumer, but all partners in the ecosystem in order to anticipate and effectively meet demand shifts in a timely manner.  Whether through internet of things (IoT) connected products or through direct consumer engagement, these changes enable – and require – new levels of operational agility.

The benefits in action

Some forward-thinking companies are doing this already: the food manufacturers reformulating for lower meat content in processed meals to adapt to shifting preferences.  Or the household appliance smaker that’s capturing and analyzing usage data to pinpoint regional differences in customer demand and using contract manufacturing to tailor its products to meet them. Or the supermarket that recently reformulated hundreds of products to achieve higher health ratings.

The biggest challenge in creating this kind of agility lies not just in implementing the technology and apparatus to succeed, but also in the challenge of reconfiguring operations to capture and apply the data sourced from across the ecosystem. The scope of this reconfiguration requires a holistic change management effort.

Five design characteristics for a future-ready operating model

So, how can consumer products manufacturers create the agile, responsive, resilient operating model we’ve described? A recent EY MIT SMR Connections report examines this question. And the findings underscore the need for change: 98% of the 370 consumer products leaders interviewed in 10 countries said they need to transform how they operate, with 86% believing change is essential to becoming future-ready.

The results were then synthesized to identify five key design characteristics for creating an operating model fit for future success:

1. Harness dynamic ecosystems

Your consumer products business must become part of a connected, dynamic and flexible ecosystem integrating your customers, business partners, suppliers –and maybe even your competitors.

2. Embed digital and data into your DNA

To make the right decisions at the right time, you’ll need to become a listening organization founded on data and analytics, and powered by digital networks and their data flows.

3. Embrace talent flexibility

You’ll need an adaptive workforce combining deep digital skills, with brilliant generalists able to work together in new ways.

4. Innovate at scale

Innovation is everyone’s job – and when people anywhere in the business generate new ideas, it’s vital to capture these, apply them and scale those that work.

5. Let your purpose shape everything

Organizational purpose and sustainability are powerful value drivers for consumer products companies, but aren’t always made an integral part of operations. They should be.

The views reflected in this article are my own, written in collaboration with Jon Copestake, EY Global Consumer Senior Analyst and do not necessarily reflect the views of the global EY organization or its member firms.