By Milko van Schaik, Regional Industry Sales Executive, Retail & CPG, Paulo Fitas Da Silva – Western Europe Retail & CPG Sales Specialist and Michele Camuri – Western Europe Retail & CPG Industry Executive, Microsoft Western Europe HQ.
We live in an era where information is instantly available to everybody, thus consumers are self-informed and influence each other with an ever-rapid pace. Also, the distance between brands and consumers is getting reduced daily. Brands need to move as fast as possible. When change happens, it happens fast. Consider that the time between the Wright brothers’ inaugural flight at Kitty Hawk and the Apollo 11 moon landing was a mere 66 years.
In such a timeframe, whole industries have been disrupted. As Bain points out in their article, an eye has to be kept on the so-called insurgent brands that are threatening well-established brands and entire industries because they have the skills, capabilities and agility to constantly innovate and intercept what consumers want.
The latest trends in the consumer packaged goods industry
We see the following key trends impacting the consumer packaged goods (CPG) industry where growth in revenues is fairly slow in this historical period:
- Industry consolidation with strong mergers and acquisitions, which is also accelerated by new technologies such as cloud;
- Direct-to-consumer is disrupting the relationships between brands, wholesalers and consumers;
- A switch from the old 5 Ps model to the new 5 Es model—from product to experience, from price to exchange of values, from promotion to evangelism (as consumers themselves become brand ambassadors) and from place to everyplace (as consumers can choose among a number of channels to interact with brands);
- Battle between private labels and brands;
- Start-up mindset required to cope with “insurgent brands”;
- Digital exasperation;
- Wellness and health;
Responding to these trends
Companies can respond to these trends with two main objectives—either increasing their top line or improving their bottom line. In order to do so, brands need a strategy in order to get insights out of data and infuse intelligence across lines of business and business processes. This is pivotal to create a consistent revenue growth strategy and be able to engage with consumers and customers in a hyper-personalized way. Effective examples of such approaches can be seen in the partnership between Accenture and Microsoft in developing “intelligent industry offerings” for either retail or CPG industries.
In order to cope with these trends and the complexity of the industry, brands need to turn themselves into “intelligent enterprises” by combining reimagined business processes with the innovative technologies available today to everybody thanks to the cloud. Microsoft and its partner ecosystem are offering a unique proposition to brands that want to turn into “intelligent enterprises.” Transformation starts by implementing a “digital feedback loop.”
The lower left-hand side of the graphic represents customers. If you think about—and this is traditionally the domain of customer relationship management (CRM)—it’s customer engagement. If you think about CRM historically, it was a system largely about the “known knowns.” You were in my CRM system if I knew your name and maybe had some contact information. But, increasingly, our customers—or even our prospects before they are customers—are making themselves known to us in anonymous form first. They’re a profile on the other side of a web session or some random Twitter handle tweeting about my brand, and they’re coming at me from all these various channels that are digitally delivered. And that allows—and in many ways mandates—that our customers think differently about how they engage their customers. They need to collect all this information from these various sources, even prior to knowing who this individual is or being able to identify them. And they need to be able to take them on a journey intelligently based on these learnings. That’s a fundamental change in the way that we’re engaging our customers.
On the right-hand side, you find products. We would argue this is the traditional enterprise resource planning (ERP) environment where historically ERP was about collecting supply chain, manufacturing some products, warehousing them, shipping them out, and hopefully getting paid. But once the product left the loading docks and hit the truck, it was gone. Today, that is increasingly not the case. When brands ship a product to a customer, that product is often connected back. It’s sending lots of telemetry, and it’s allowing me to fundamentally rethink the nature of the products and services. And it has huge implications for what’s possible. Watching the use of consumables. Doing a better job of planning inventory. Predicting when a piece of capital equipment is going to fail, and then proactively managing it versus allowing the customer to get into a situation of dissatisfaction. Again, it’s a fundamental reimagination of what’s possible on the product side. So, this sort of interconnected set of business processes is brand-new, powered by data, artificial intelligence (AI) and, as you’ll see, delivered through Dynamics 365.
The last loop of the graphic is people. This involves: 1) the kinds of people that we need in our organization who can operate in this digitally transformed environment combined with 2) the kind of tools that you need to allow them to create, collaborate and communicate and the 3) connection with the business processes that transform the experience—and to do it again with data. Again, fundamental change is how we find these people, convince them to join our organization and provide them with tools that they need in order to connect with customers and connect with products.
This opportunity is real, and it is what’s driving all the growth, enabled by a combination of Azure platform, Dynamics 365, and by the innovations brought by our partner ecosystem.
The role of data and AI for the “intelligent enterprise”
It goes without saying that data is the new oil of our current era and success will be achieved only by those companies that understand how to extract actionable intelligence out of data. The right use of data is impacting both top-line growth and bottom-line improvements by bringing the end-to-end customer experience to the next level and by re-enforcing the market positioning.
In order to really win, though, companies have to go beyond the simple process automation—focused on efficiency and cost reduction only—by infusing intelligence in the ways brands are interacting with consumers/customers, creating adaptive conversational interfaces that will cover the whole experience from a total personalized offering to informing and influencing the consumers through the purchasing experience and eventually the after-sales caring. All this must be supported by a next-gen supply chain to fulfill the instant requests deriving from the market.
Benefits of data and AI
Artificial intelligence and advanced analytics have the potential to unlock a value that we cannot even imagine. Given that artificial intelligence is covering a lot of different topics and can have many different angles (from deep learning to neural networks to machine learning and cognitive interfaces), the main impacts we are seeing are mostly in the following areas:
- Customer Service Management: improved speech recognition in call centers allows a more frictionless experience for customers—and a more efficient processing with a positive impact on the back-office processes;
- Price and Promotion Optimization: new paradigms help discover which promotions offer the greatest ROI and track changes to promotion campaigns and the impact of each change, uplifts coming from promotions and dynamic forecast models based on predictive analytics;
- Personalized Offer and Experience: the power of data can help understand the consumers’ needs and “feelings,” tailoring dynamic experiences in the physical and digital world and empowering humans with insights and conversational interfaces;
- Sales Execution: intelligence can guide in a more efficient way the sales force through the sales process, reducing overheads and freeing up more valuable time for the “human” agents and, lastly;
- Supply Chain and Manufacturing: the impacts on the supply chain are huge and primarily involve inventory optimization, procurement and spend analysis, demand forecasting, and logistic and route optimization.
As Erik Brynjolfsson, Director of the MIT Initiative on the Digital Economy, points out in his paper, “Artificial Intelligence and the Modern Productivity Paradox: A Clash of Expectations and Statistics,” “systems using artificial intelligence match or surpass human level performance in more and more domains, leveraging rapid advances in other technologies and driving soaring stock prices. Yet, measured productivity growth has declined by half over the past decade, and real income has stagnated since the late-1990s for a majority of Americans. More importantly, like other general-purpose technologies, their full effects won’t be realized until waves of complementary innovations are developed and implemented.”
We live in an extremely interesting age, and we are yet to appreciate the full potential that we can reap off the current level of innovation.
Microsoft Dynamics 365 for Customer Service enables you to combine customer-centricity with a data-driven approach for the consumer packaged goods industry.