In recent years, however, disruptive technologies, market forces and changing consumer behaviors have begun to strain that model, and there are many clear signs that CPGs will need to respond and adapt.

A number of companies — especially “digital natives” — have begun innovating around the edges of the space occupied by CPGs, chipping away pieces of the value chain. For example, everyone knows (and likely has personally experienced) the “Amazon Effect” — an expectation of endless product selection, competitive pricing, personalized service and near-instant fulfillment.

The proliferation of multiple sales channels and ubiquity of product information along with mobility, social media and other influencers have resulted in a rapid shift in consumer behaviors, eliminating the wall that once separated producers from consumers. It’s a pattern that’s familiar to other industries. Travel companies felt the effects early on as consumers began bypassing agents in favor of direct purchases from airlines and hotels. Insurance carriers have created direct sales and service channels to customers as an adjunct to agents. Tesla is roiling the auto sales network by selling directly to customers rather than through dealerships.

Individually, the new entrants may not pose a significant competitive threat, but collectively they are reshaping what consumers want and expect from everyone — CPGs included.

Who’s the customer?

As the share of direct-to-consumer sales increases, CPG companies need to broaden their definition of “customer,” including not only retail outlets, but consumers, as well. And that shift has profound implications for the depth of knowledge that companies must develop. CPGs have world-class customer relationship management (CRM) systems that tell them everything they need to know about retailers. But as CPGs look for a more direct connection with end users or consumers, this kind of detailed data about individual consumers will become a critical component.

Amazon and other digital-native companies have demonstrated the value of developing a deeper and more granular understanding of customer needs in the CPG space. These companies know, to the individual, what products a person has evaluated, what they’ve bought, how often, how they feel about it, in what combination and dozens of other detailed aspects. This detailed picture of individual consumers enables the digital native to make highly effective recommendations for complementary products, upsells, next-best purchases and more.

To compete effectively, CPG companies need to develop a similar depth of understanding of individual consumers

Developing insights at speed

CPGs need not only to increase their depth of knowledge, but they also need to increase the speed at which they obtain it. The ease and quality of online searches in search engines and commerce sites has acclimated consumers to highly relevant, instant results. In response to a search phrase, Google evaluates over 200 factors in milliseconds to offer users a list of the most relevant and useful resources. Similarly, online commerce sites respond in real time to consumers with products that match their description — plus, feedback about what other people have purchased, complementary products and more.

CPGs conduct a great deal of research to develop similar insights, but at a much less granular level. Market analysis, customer loyalty or pricing studies often require many people devoted to projects that span weeks or months.

Developing direct customer-facing applications means that CPG companies will need the same level of real-time analytics to deliver the same type of customer experience. Analytics applications in other parts of the supply chain will benefit from faster analysis, if not real-time results. For example, using analytics to better manage inventory and reduce days in inventory can result in saving tens of millions of dollars for a large enterprise.

Results matter most

Detailed profiles are valuable. Fast insights are useful. But what matters most is the degree to which that information can be used to improve existing business processes or achieve new outcomes. For example, let’s take tools and machines: The ability to measure microscopic deviations in the performance of a high-speed lathe matters only if that data is used to improve the quality of finished outputs. Similarly, knowing what products are most relevant for an individual customer will help a company drive more sales only if those insights are presented to consumers as they browse. Insights must be turned to actions in order to deliver real value.

Raising your analytics IQ

Advanced analytics are the key element that will help CPGs adapt and thrive in a rapidly changing environment. Maturing technologies such as machine learning, deep learning, artificial intelligence and advanced neural networks are being combined with a growing supply of data and new ways of interacting with systems, resulting in new capabilities and opportunities.

Advanced analytics are enabling CPG companies to look deep into the rich data resources they hold, to find hidden insights and promptly act on them. The collection and analysis of huge amounts of diverse data generated by customers, machines and enterprise applications are enabling a better understanding of rapidly changing markets that can be achieved by human intelligence and perception alone.

Over the next few years, CPGs will employ data and advanced analytics as competitive assets everywhere. They will adapt quickly and predict trends by continuously discovering value from data and turning it into insight to drive value. These organizations will be recognized as disruptors in the digital revolution, capable of driving exponential organizational value and continuous improvement. They will be branded as Analytics IQ organizations.

How to get there

When it comes to the development of advanced analytical capabilities, the scale of modern CPG companies can be a blessing and a curse.

Large enterprises have the resources to aggressively pursue new technologies such as analytics, but they also have large IT estates, siloed data and large application portfolios that can make it difficult to translate the success of pilot projects into production systems. Established corporate cultures create barriers that can make it difficult to operationalize insights. CPGs can achieve rapid innovation and productivity breakthroughs with accelerated digital transformation strategies that meld people, business processes, advanced analytics, artificial intelligence and new human/machine interaction technologies.

Stakeholders across the enterprise must commit to enhancing analytics insight- driven decision-making capabilities, leading cultural change(s) and applying systematic approaches for optimizing their information models — focusing on the value that information and analytics can deliver in business differentiation, productivity and growth.

CPGs should define their long-term objectives, clearly understand where and how new value will be created, and build digital journey maps from this new vision.