Competing in the Digital Now: Competing in the Digital Now: Winning in the New Digital Era Bob Black, Senior Advisor to BCG and former Group President Kimberly Clark & Annie's Board of Directors Dan Cooke, General Manager, Global eCommerce, Kellogg Company CONFIDENTIAL MATERIAL August 15, 2015 Gabrielle Novacek, Partner, Boston Consulting Group
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Competing in the Digital Now:Competing in the Digital Now: Winning in the New Digital Era
Bob Black, Senior Advisor to BCG and former Group President Kimberly Clark & Annie's Board of DirectorsDan Cooke, General Manager, Global eCommerce, Kellogg Company
CONFIDENTIAL MATERIAL
August 15, 2015Gabrielle Novacek, Partner, Boston Consulting Group
GMA Steering Committee members
Rick Brindle Dan Cooke Evan Fernando Keith Aldredge David Wurmg
Sarah Wagoner Eric Ong Tim Madigan James Splinter Jeff Malat
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Steve Savell Sara Mirelez Nigel Burton Gian-Carlo Peressutti Scott Cameron
CPG companies face a '1-5-10' market over next few yearsy
with multiple PENETRATIONWe are living in a HYBRID WORLD...
5%
10%
... with multiple PENETRATION LEVELS by market/category/ segment ...
1+% ... that will ACCELERATE at1 %an unknown pace
2Note: From BCG-GMA "The Digital Future: A Game Plan for Consumer Packaged Goods" (2014)
Potential market evolution
750
US grocery sales ($B)Online Offline
Contribution to Growth
36
725
700
+2%
718
28
Contribution to Growth
~50%
8
36700
675
52
666 24
+
8
0
3
2018E2013
Note: From BCG-GMA "The Digital Future: A Game Plan for Consumer Packaged Goods" (2014)Source: IRI Database L52 ending May 2014, Wells Fargo analyst report on online grocery, BCG analysis
Brick & mortar shelf Website shelf Mobile shelf
4Source: Store visit (Target), Amazon website and mobile app (accessed August 4, 2015)
1. Position yourself as a critical source of C&C knowledge and expertise for retailers
– Dedicate a cross-functional team
– "Go to school" on iterations in Europe – beyond your own categories
– Actively engage and lead in pilots across multiple retailers – your categories
2. Set standards for product content, shopping list optimization, and fundamentals
3 Aggressively experiment and innovate for unique consumer and logistical aspects of your3. Aggressively experiment and innovate for unique consumer and logistical aspects of your
categories, e.g.,
– Lane and locker sampling programs, e.g., small pack, impulse
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– Unique point of pick-up promotional strategies, e.g, bulky, fresh, and impulse
– Shopping list population, basket auto repeats
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Maximize total Support Amazon's goal to get greater share of household contribution dollars spending through optimal prices, selection and convenience
Master operational basics and become
top partner
Supply chain PackagingA+ product content
Strategic Vendor Services
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Strategic Vendor Services SEO Vine program
SVS enables a more strategic, beneficial relationship with Amazon
Amazon not conducive for personalized account management
SVS provides opportunities to sell more strategically
Amazon culture - biased to minimize human contact
Dependence on algorithm limits need for
CPG companies can fund a single point of contact through SVS• Ensures success of promotional efforts,
helps address challengesDependence on algorithm limits need for suppliers relationships
No single point of contact for most vendors – scale not correlated with bargaining
helps address challenges• Provides an interpretive lens to
performance
But... SVS comes at cost and does notscale not correlated with bargaining power
But... SVS comes at cost and does not solve all Amazon challenges
15Source: Expert interviews, 3rd party data vendors, and GMA members, online research, BCG analysis
Developing A+ product content Optimizing for search
• Don't capitalize on trend for fear of cannibalizing existing product sales
stance, playing catch-up
• Face flat or stagnating sales• Aggressive digital bets,
experiment heavily, move fast
expectations
• Disrupting the value chain
• Move from manufacturer to consumer company
ree
of
ange
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Deg
rch
a
Source: BCG analysis
BE BOLDnot stupidnot stupid
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Key Actions to Win
– Commit to action - today– Set bold objectives – winners not laggardsAlign as a
leadership team j gg– Invest ahead of volume - risk of inaction is too high
– Immerse as consumers – go on a digital diet
leadership team
Immerse as consumers go on a digital diet– Follow consumers 24/7- understand evolving behaviors– Make digital a core focus – discuss Walmart AND Walmart.com
Engage as a leadership team
– Identify key places to win – where and with who– Reallocate resources – prioritize across key levers– Integrate across functions - eliminate silos that are barriers
Focus as an organization
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– Accelerate talent and capabilities – new needs for a new market