Insights

A Composable Approach to Technology Modernization

Like many industries, the consumer products (CP) landscape is facing a tipping point. While retailers and digitally native players can roll out digital solutions based on real-time demand, CP companies are often left playing catch-up due to highly complex legacy technology and related ways of working across their various brands and geographies.

However, many CP firms are hesitant to modernize their technology architecture because of high costs and a lack of perceived value, resulting in growing technical debt as engineering, information and technology functions become a bottleneck to digital business transformation.

Modular technology architecture breaks down technology into solution-specific modules that can be replicated across business-to-business (B2B) and direct-to-consumer (D2C) use cases. While this flexible approach has a high initial cost, it drastically decreases effort and spend over time because each technology module is independent of one another.

For example, an apparel brand that wants to track customer loyalty points through purchases would traditionally employ its technology team to build a retailer- or site-specific solution. Taking a modular approach, this brand could create a solution that works not just for one retailer but for any third-party or owned channel, like Instagram, WhatsApp or Pinterest.

Composable technology architecture goes even further to break down solutions into smaller components, such as microservices or packaged capabilities within solutions that can be replicated across an enterprise and its various business use cases, even by non-technical team members.

As a company’s architecture becomes more composable, the business gains higher flexibility and scalability to use what is available and add new features and functionality as needs evolve.

Using the same apparel brand loyalty program example, a composable solution would allow a business development representative to set up an API-based loyalty program with a new retail partner in under an hour without the help of a technology team.

Technology modernization through modular and composable architecture

One way to conceptualize the efficiency of technology modernization through modular and composable architecture is by using the metaphor of building a home.

With a traditional or “monolithic” approach to home building, the general contractor creates a custom design from scratch. This highly unique construction is difficult to update and change as needs evolve over time.

With a modular approach to home building, the general contractor assembles a home using pre-built modules based on existing blueprints. The contractor can use guaranteed high-quality, independent modules built in a controlled factory environment. The upfront investment in the pre-built modules and blueprints allows for tremendous speed and the flexibility to swap out parts of the home with new ones as needs evolve.

A composable approach goes a step further, allowing homeowners themselves to independently design and update the architecture, room by room, through an easy-to-use application.

When it comes to technology architecture, a non-technical team member’s ability to independently configure new technology opens the door for new business opportunities that may have been unrealistic due to limited resources within a monolithic architecture and ways of working.

“As you can see, it isn’t just about the technology itself. It’s about the operation and the organization behind it,” says Steiner.

Five use cases for technology modernization in the consumer products industry

As part of a larger digital business transformation, technology modernization helps consumer products companies address changing customer expectations, economic fluctuations and unique industry challenges.

Consumer products decision-makers can prove revenue growth quickly with modern technology investments in use cases like:

Technology architecture must be agile enough to keep up with accelerating consumer products trend cycles, perpetuated by the viral nature of social media.

TikTok is a social media platform that has accelerated trend cycles across sectors, creating new revenue opportunities for CP firms overnight. Creator Emily Mariko went viral in 2021 for her salmon rice bowl recipe, which used a Japanese mayo brand—Kewpie. For the first time, specialty grocery stores were selling out of the product all over the United States, yet many mainstream grocers didn’t even carry it.

One year later, Q&B foods launched a new e-commerce website for the U.S. market. An agile technology architecture allows a CPG company like Q&B foods to rapidly create storefronts at new retailers in new markets within days or weeks and take advantage of unexpected, viral demand at its peak.

Fractured, on-premises technology architecture forces companies to invest in brand-and region-specific technology solutions that aren’t easily replicated. With scalable technology architecture, specific business units can test solutions locally and then automatically deploy and maintain them at an increasingly lower cost.

Kimberly-Clarke, a global leader in baby and child care, feminine care, and professional and family care brands, overhauled its legacy IT system by consolidating its enterprise resource planning (ERP) and deploying a hybrid-cloud technology. This allowed the company to create a digital interface to automate their sales routine across brands and regions, saving sales representatives 30% of their time.

CP firms can differentiate themselves through cutting-edge software applications that utilize machine learning, predictive analytics and artificial intelligence software. However, it’s time consuming and costly to integrate these applications with inflexible legacy technology.

Mars, a global pet care, food and confection company, partnered with a third-party AI image analytics software company to automatically test hundreds of product images. For one set of SKUs on Amazon, the AI technology contributed to a 30% increase in conversions. As AI like ChatGPT advances, CP companies with flexible technology architecture will be able to rapidly connect to the most modern software applications without massive disruption and risk.

The vast majority (66%) of customers expect brands to be able to understand their needs, whether these brands are selling directly to them or through retailers. Technology architecture needs to be customer-centric so that customer data across regions and brands can inform new channels, products and experiences that delight customers in moments that matter.

Accelerated by the COVID-19 pandemic, clothing brand Levi’s moved to D2C, requiring a customer-centric technology architecture. The brand quickly launched contactless shopping options such as buy online, pickup in-store (BOPIS), curbside pickup and appointment scheduling for in-store shopping.

This allowed the company to build a stronger connection with customers directly on the Levi’s app, with loyalty programs across the Americas and Europe, and with initiatives such as ‘Shop Now’ on TikTok or the ‘Virtual Closet’ experience in partnership with Snapchat and Kohls. Enabling experiences like this increases brand connection and loyalty in times of volatile market conditions.

According to 2022 IDC research, CEOs report that their #1 risk is cybersecurity threats/regulations. As CP firms prioritize supply chain visibility using IoT sensors, third-party vendors and data integration points, these systems become vulnerable to cybersecurity threats unless their risk posture evolves with digitization.

Secure technology architecture allows technology teams to work on different solutions simultaneously and replicate that work across the business, even using AI to run manual and repetitive reporting or technology tasks. These efficiencies free up time to manage new security risks across SaaS solutions, suppliers and all aspects of digitized supply chains.

As CP firms transform their operating models and ways of working to meet the demands of the digital age, the underlying technology architecture can serve to either enhance or detract from digital growth. A composable approach to technology modernization will provide the agility necessary for long-term and sustainable digital transformation.

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