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The Evolution of Technology in Consumer Products

Sabrina McPherson Scott Petry Reva Bhatia
Sabrina McPherson Scott Petry Reva Bhatia
This article is part 1 of a 3 part series. Read rest of the articles here.

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Transcript

Reva: Over the course of the past 25 years, we have seen a dramatic shift in the way consumers leverage technologies, in all forms, in their paths to purchase. Many of these digital advancements increasingly put consumers at the center of the buying experience, but change hasn't come easily to many of the long-established consumer products firms.

Today, we're going to unpack the evolution of technology and how CP firms can leverage technology to support their bottom lines. I'm joined today by Sabrina MacPherson, Managing Director at Publicis Sapient and Scott Petry, Senior Vice President of Engineering. Now let's dive in.

Sabrina, I'm going to kick things off with a question for you. Technology and the CP industry is a super meaty topic and can mean a lot of different things for different firms, from marketing technology to experience and ecommerce. Can you provide some context on the various functional areas where technology is playing an increasingly important role for consumer products firms?

Sabrina: Sure. So, you know, that's it, that's a big loaded question and to sort of kick it off. I think I would bucket two extremely topical areas right now, especially in light of the pandemic. Um, the first area is what, what I call always on engagement and that covers a lot of different components. But what that really is, is around CPG companies—changing fundamentally how they engage with their consumers. So moving from being more campaign focused and intermittent, being more offline and not very personalized, having individual, not really knowing their audience and their consumer to be recurring primarily digital personalized, or from by one P-data and content—that's always evolving and touching their consumers in an “always” way. And to drive that capability or change in engagement it really comes down to having a really strong data capability and a strong technology capability. So that's one bucket. And then I'd say the other bucket is no surprise around commerce. And so, what we're seeing right now is, is really the time is now for DTC and CPG.

You know, the industry has been flirting with the idea of going direct, a big, big CPG companies have been flirting with the idea of going direct given the success of some of the challenger brands going direct. But now there's no choice. Especially again, in light of the pandemic, which has behaviors, changing behaviors that were really seen as being relatively sticky and not going to be going away just because we solved, “solved” the pandemic.

So, in commerce, it's ironic you know, technology really helping these companies to engage and sell products directly to their consumers that are now going to become their customers.

Scott: If I could just add, I think, especially highlighted due to the pandemic, but also relevant any time as our, as our CBG clients start to go more direct to consumer, is getting better at demand planning and forecasting and figuring out where they need to have products, which shelves they need to be on in order to actually deliver them to end consumers.

And what are the supply chain implications of that? So again, another place where data and technology is a huge enabler and it's an area where not enough, not enough focus has been put over the last few years, and that was highlighted as soon as demand got really spiky for certain products and disappeared for other products.

And people started having trouble finding them and supply chains got disrupted as the pandemic kind of moved globally.

Reva: Thanks, Scott. That's great context and a good segue into my next question for you both. So, we work with many of the largest consumer products firms around, and you guys have been exposed to the full array of issues, bottlenecks, experiences that CP firms have had in their quest to improve their overall technology infrastructure.

I'm curious what you both see as the biggest bottlenecks that CP firms seem to be experiencing and tackling some of their technology initiatives. Sabrina, I'm going to start with you again.

Sabrina: Sure. Yeah. So I really, it falls into, I think, two buckets as well. I realize I said that on the last question, but I think the first one—one of the main, major roadblocks or challenges that we see with large consumer products firms is around being able to really build a very grounded business case or the large investments that are often required to really be able to move them forward, as far as having the right digital and technology capabilities in place.

And so part of that is tied to everyone around the executive tables. Like, yes, we need to do it. Yes, digital transformation at the time is now. But, when it comes down to saying, okay, well, you're going to have to commit X and Y amount of dollars to really drive that, we really have to get senior team executive team alignment around the case for why you would do that and how much uplift it can unlock or how much volume and revenue is at risk if you don't. And so, what's happening is often, so finding a way to quantify the ”value of digital“ that you could sort of unlock through investing behind technology and data capability isn't  always so easy.

And so companies that put the time behind doing that are able to really accelerate moving forward. So that's, that's one. I think the second is around Op model. So, with a lot of CPGs, especially the large, large multinational CPG players are very matrixed organizations, right? So they have a strong local in-market team that drives the day to day distribution of products.

And then they have a lot of capabilities globally that often are sort of brand owners, et cetera, and marketing teams, and so what happens is it's a lot of it technology initiatives to drive some of the pieces that we talked about around commerce and always-on engagement. It's hard to get traction in that matrix structure.

And so really companies are getting delayed or finding they're having bottlenecks with, with pursuing and driving a lot of this new transformation through technology because of this matrix. And so it's really critical to really get the right digital operating model in place that manages. And in that, I think one of the things that I'm seeing is, in our experience is that actually bringing some of that capability centrally is really critical.

So for especially for decentralized companies where a lot of the capability and marketing capabilities, for example, sits in each region, or IT sits in each region, that doesn't always work when we're talking about really driving change in technology and in MarTech and data. You really have to have a core capability that sits centrally, and that tension is a lot of what causes roadblocks.

Reva: Yeah, and that's a good… oh yeah. That's I was just going to say, Scott, that's a good dovetail into potentially some hiccups that people run into from an execution standpoint. So, Scott, I'd love for you to paint some color on, on that front.

Scott: Yeah, exactly the centralization or not to centralize and particularly as it relates to IT and infrastructure and the relatively large costs that go with putting in technology to support the scale of data and a sort of new relationship with a consumer that comes with a direct to consumer model, is a hard decision, and it's a big barrier to success.

If you distribute those investments widely, then you get lots of little units making small investments in that technology, which might not be a big enough investment to actually be successful. If you centralize it, you tend to get organizations that are used to glacier-sized projects that lasts months and months in order to deliver the, the first working, say direct to consumer commerce site.

And if, if you, if you have that scenario, the business never gets what they need in order to make that business case that Sabrina was talking about. So, we need to find ways to go fast, but in the large context, so that we can have a size- a sizeable enough investment to put in meaty, powerful platforms that deliver on data and commerce.

But also, be able to do that in a way that's much more modern, cloud native types of architectures that go really fast using agile techniques to deliver. And that is not the norm for companies that have historically been behind the scenes in a B2B business model with an enterprise technology that's geared around manufacturing and supply chain execution.

And so when we start talking B2C, we're talking about go fast like a consumer, and these companies are generally not used to that. And therefore, there's a lot of change just in how they operate and deliver a technology that has to come into play, as well as the organizational pieces that Sabrina was talking about.

Reva: Hmm, insightful. Thank you, Scott. So you guys both touched on centralization versus decentralization. And, it's interesting cause you look at the heritage of a lot of  these large, long established consumer products firms, and a common theme that you often see is M&A, right? A lot of them acquire brands bring new brands into their portfolio over the course of their many years of history and naturally, with the acquisition of new brands and often totally new fulfillment strategies and brand strategies comes an impact naturally on your overall tech strategy. And so we chatted again about bottlenecks and centralization versus decentralization, but I would love if you both could double click specifically onto the role that you've seen M&A playing into the overall  digital strategy and technology strategy that a lot of CP firms have been establishing.

Scott: Yeah, I can jump in on that just from the technology lens. Anytime there's a merger or assembly of two companies together you always end up with, almost always end up with, two completely different technology stacks that were designed to work differently and integrated differently, different products, different vendors, and the complexity of integrating that.

And, honestly, it's not even always worth it. Sometimes it's really a question of what is the right strategic step to take to optimize the right pieces of that technology stack to get the synergies or whatever the  benefits were supposed to be of the merger that was, that was happening.

But if all companies had sort of modern architectures in their technology stacks, it would be easier to do integration. So the more that companies invest and micro-services architectures or APIs or strategies that unlock the data and allow it to flow freely throughout organizations, those strategies all make it easier to do integrations when mergers and acquisitions happen.

And if the merger and acquisition has already happened, then those investments still have to be made to move in that direction, even if it's too big of a lift to do the integration right now. So, I guess the advice I have here is you always have to be investing in your technology stack. It always has to be moving forward.

We always have to be improving the way in which we engineer solutions and the speed with which we can get ideas out into the market. And that doesn't matter whether you have two different technology stacks from two different sides of the business, or whether you've found one that you can integrate together, you still gotta be investing in both of them.

You can't, you can't leave one brand behind, otherwise your merger won't be successful.

Reva: Sabrina, anything you want to add on that?

Sabrina: Yeah, I was just saying, I mean, in taking a different lens on it, on your question. You know, what's interesting is we're seeing more and more the shift on, on what's driving that M&A activity, right? So traditionally for CPG, it was around inquiring often a brand, and brand equity or a portfolio of product capability.

And now it's, it's really shifting towards often the M&A activity, especially in the end spaces around acquiring data and tech capabilities. Right? It's almost like who cares what the brand is, you're requiring something because they're really good at engaging with consumers and extracting 1P data from them.

And that capability that you're buying is actually the value and less so the brand of whatever it is they're selling. And so, as that shift is happening in the industry, I think it's, it's just from a strategy perspective, I think, good to note that it definitely has implications on when you think about the integration or a rationalization of that technology, et cetera, it's less around efficiency gains, for example, as it used to be and more around how do you actually take that value and scale whatever it is that you purchased as a company and scale that to drive growth, usually outside of that new part of the business.

So it's a little shift in focus and that shift in focus is, is relatively substantial for a lot of the CPGs.

Reva: Yeah, that's a really astute point. I think about Unilever and their acquisition of dollar shave club. Right? And on the surface, it's like, gosh, they're so vastly different. And dollar shave clubs, like full business model is so vastly different from anything Unilever does, but to your point, Sabrina, like double clicking into the strategy that underpins it, right? 

It's the unlock of that completely new model and way of doing things that was large, probably largely a driver for Unilever in that acquisition. So, yeah, that's a fantastic point. Cool. So, the next question I have for you both, so obviously human tendencies, we all know is for folks and firms to look for a silver bullet to help them out of their woes, right? And so if it were that easy, obviously consumer products firms would have already unlocked the golden panacea of technology strategy, and we wouldn't be having this chat. But any advice that you both can offer and you have been throughout the course of the conversation, but any additional advice that you both can offer for CP firms to consider in order to get closer to their best tech selves, so to speak - that golden panacea?

Scott: I think, I think from a, an engineering and technology perspective, I wish there was, I really do wish there was the sort of golden silver bullet solution, whatever it is that we're trying to find here, but really it's a mindset shift type of situation. So when we're, when we're talking about moving from classic ways of implementing technology solutions to agile engineering, when we're talking about moving from lots and lots of packaged platforms to a lot more custom integrated solutions, and when we're talking about moving from solutions that are very prescriptive and defined to systems that are very data driven and very fluid based on what the data is telling them is happening, those are, those are very different tools to use and very different mindsets to operate them—that mindset pervades both the IT organization and the business as they use the tools.

And that switch is absolutely mandatory to be successful in this environment. So, the data platforms get bigger and more complicated, and we need people in teams and methodologies for constantly being, learning from the data and gaining insights from the data and using data to create personalization and, and other uses throughout the enterprise, not just the consumer, the consumer facing side of the business.

So how do you become more agile in your supply chain? How do you become more agile in your demand planning, using the data that you're gathering all the time? And how do you gather more data that you have never had to gather before, that with consumer data direct or whatever it is that you don't generally didn't use to have?

And then software engineering becomes a, it becomes a muscle that you have to build. It's not the same as IT project implementation that we all used to do. It's very much a fluid environment of delivering new technology solutions every two weeks into a production environment across, if you look at how Google does it, thousands of deployments, potentially in a day. That's something that  CP firms aren't used to and getting to that level of flexibility and nimbleness is key.

So those are all mindset shifts, not just, you don't just pick up a new tool and start doing that. You don't just install JIRA to manage your agile programs, and therefore you're suddenly agile, right? Your mindset has to shift to go along with thinking just completely differently about how to create value and production.

Reva: Cool. Thanks, Scott. Sabrina, any adds?

Sabrina: Yeah. I mean, and I think building on that, I mean, there's a mindset piece for sure. And then there's this, the reality is I think technology used to be something that was, had, was kind of in these buckets of if it was tech platforms, it's the CIO's mandate. And if it's digital marketing and tech to enable marketing, it's the CMO’s mandate and all of that has to get thrown out, right? 

Because right now, digital is the value driver and underpinning that you have things like data and technology. And that is truly cross functional. It touches all aspects of the business. It's not just that in the background piece of the enabler to help you build brands and sell them, which is what the legacy CPG industry has really been focused on.

Right? And so as we move into a much more digital future, It's really around there's no, there's definitely no silver bullet, but it's having the acknowledgement that this is an understanding that this is truly a cross functional opportunity and thing that needs to be cracked and addressed. And you need all of those parties around the table, and often see CPG companies trying to address that by putting in, creating a digital role, a chief digital role, a transformation role, a growth role, et cetera, to try to pull that all together under one umbrella, cause it is tricky and have that cross functional team.

So I think that's one piece though, is mindset shift supported by a new way to think about whose domain and how this fits across a traditional leadership team. And I think the other thing would be slightly different, but it comes back to what we talked about earlier around the need for having a very good, strong view around understanding where the value is and resource allocation tied to that and a business case. Because what we're seeing is a lot of, a lot of like sort of technology initiatives are happening bottom up in different brands, in different markets. And it's very incremental. And there's no real view about where the value is and which ones are higher priority.

And, therefore, how should I distribute my funds as if I'm an IT lead, et cetera, because it's happening one off and without a systematic effort behind that and something that is both got that bottom up piece, but also a top down piece—all of those sort of bottom up change initiatives linked to sort of incremental technology here and there will never get a company where it wants to go with the pace, the pace of change that we're seeing—that's accelerated reading so fast by the time they do bottom up initiative (A over here and B over here), they're already behind.

Reva: Yeah. Interesting. It's interesting you say that too because do you guys think like bottoms up is synonymous with like consensus driven? Because I often see a lot of companies, especially those that have a quilt of brands within their portfolio for the centralized decisions rely on consensus to drive forward their strategy.

And so I'm curious, like in your exposure to clients, if you see that playing a role like that culture shift too, you mentioned mindset Scott, which I think is very similar to this, but like having more centralized decision making also is being critical, or is that not really a thing?

Scott: And for me, it's a, it goes both directions, right? So, some of the greatest brilliance and, and coolest ideas come from the bottom and some person that's actually in a place or a team that's in a place to be innovative with what they're trying to accomplish. And, those things have to be enabled to foster, which is  one of the things that, that working in the sort of modern engineering mindset does help with, right?

It gives teams the opportunity to collaborate better and be more innovative on the ground. At the same time I think you do need to have that culture of innovation and the culture of, of making these things work for the business in an efficient and effective way, all has to come also from the top.

So I think it feels like it has to be going in both directions, right? You have to be measuring success on it, but you also have to foster and enable people to be more than just  the crank turners at the bottom of the pyramid, right?

Reva: So, cool. Alright. I have a fun closer for you both. What's the coolest or most innovative application of technology you've seen a consumer products firm leverage recently? Any ideas, any thoughts?

Scott: I'll tell you, I'll tell you I have two answers. Cause I'm going to tell you one that I think will be the coolest and I'm just waiting for somebody to actually, to actually find a way to execute on it. But I'm still sort of waiting for manufacturing, particularly for products that have some level of customization to them to move to that edge so that you get, whether it's 3D printing or some other technology that sort of delivers that where products are on demand produced, as opposed to produced in some faraway place and then routed around through some massive supply chain to get to where you're going. People have talked about that in the sort of 3D printing next generation manufacturing realm. It's not well executed anywhere, but there's a few pockets of  products that are in the apparel space in particular that are highly customizable, that, that are getting pushed to last minute customizations when you order and things like that.

Automobile companies also are somewhat capable of this, so it was just interesting to see how that plays out in, in the CPG space, and obviously it depends on which part CPG you're talking about, whether that's really feasible, but I'm interested in that one. The other, which is one that I, that I have seen not long ago, and  I won't name the client, but probably everybody can figure it out. But an instrumented diaper… So, so somebody is actually innovating on the product in a way that's digital. And so bringing an IOT device to a diaper to help new parents feel more comfortable with what's going on with their baby, whether the diaper needs to be changed, whether the baby's sleeping, breathing, doing all the things that you want a baby to be doing when you're not in the room, all of those kinds of those features.

And, I just think it's a really innovative way to think about how technology is, is bigger than just commerce and marketing, but it's actually engaging in a consumer and a  very valuable way to that individual consumer. And therefore I would think very attractive and builds the brand, helps build the business.

Reva: When you were mentioning instrumented diaper, Scott, I thought you were going to say like a robotic arm to change a baby's diaper. Which honestly, if that existed, I may choose to have kids because that sounds sensational. So that's maybe the next frontier.

Scott: It takes away all the fun though.

Reva: That's true. That's true.

Scott: If you have the robot nanny, you don't get to experience the joy of, of diaper changing.

Reva: Sabrina, what do you think?

Sabrina: So what’s funny is I was with Scott, when, when we had saw that product. And so I was actually going to bring that one up, but I have a backup, which you’ll know of Scott's, I think, I mean, overall I've seen like pretty amazing stuff on the edges. Innovative stuff around beauty, wellness, personalized wellness, like knowing your genetic code and tailoring products for your genetic code.

There's a lot of great stuff happening in that space. One of the things that I thought was unbelievable was, is a product where you do, you basically have a,  it's a machine that reads your face and tells you what your skin problems are pretty much. And it basically shoots out makeup in a tailored fashion.

So, if you're putting on concealer, let's say in the morning, it puts just enough on the right spots where you might have like a car or you might have like  black under your eye, your under-eye circles because you didn't sleep well. It really just tailors and sprays on concealer depending on your makeup and what your needs are. So that’s one.

And then there's another which it's an actual mirror, which is scary because it tells you, it like is basically you look into the mirror and it tells you what your real age is on your skin from sun damage and tells you what products you should be using. And then you can ideally link and purchase those products.

But basically, and if you put on your it's like training, you’ll have a video where you can put on your, let's say eyeliner while looking into the mirror where they're coaching you on it through the mirror. So there's, I mean, it's amazing in general, especially in wellness and anything tailored to your body, et cetera, on some of the innovation that's out there and, and consumer products.

Reva: Yeah, it's incredible. And it's definitely tapping into that like, I mean, obviously we've all seen, especially in the COVID-19 era, consumers leaning more into like YouTube and social channels to get tutorials on how to engage with products and certain recipes and makeup tutorials. We've all seen that a thousand times.

So yeah, Sabrina, that's awesome. Like it's a really unique way to tap into what we know is an existing like consumer want and consumer trend. Awesome. Well, thank you both for joining. We're at time. Thanks for a great and lively conversation.

Scott: Thank you so much, Reva.

Sabrina: Thank you.

Reva: Cheers.

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