The Perks of Peril ... Analytically Speaking!
Three current "Perils" of the CPG world and role analytics has to play to address them. There have been many advancements in the field of analytics. A brief synopsis of how these advancements can help solve for current business issues faced by the CPG industry. Read less "Mandar - Hope all is well, I need to speak with you to get your thoughts on ABC vendor. When can we speak?". Started my day with an early morning Whatsapp message from one of my ex-colleagues who now leads regional analytics for emerging markets for a leading CPG company. Alexa, What's my commute? - The fastest route takes 59 minutes; replied my personal assistant. She also informed me that my next meeting does not start till 10:30 AM. So stars were unusually aligned for a quick catch up (thanks to Atlanta traffic)! I had a great time catching up and having an intellectually stimulating discussion with this talented and smart professional about Analytics and the state of the CPG industry; including the latest Amazon bid to take over Whole Foods. We naturally talked about the challenges we were facing as analytics professionals working for leading global CPG manufacturers. Surprisingly enough we face very similar challenges, despite working for beverages versus non-food categories and managing corporate versus regional responsibilities respectively. Analytics industry has been rocked recently by emerging techniques and buzzwords. The race to deploy solutions involving Big Data, Machine Learning, Artificial Intelligence is no different than the race to the moon! These hot button buzzwords have added more chaos than truly helping solve "real business questions". Many times we are finding ourselves talking to suppliers with expert capabilities in Machine Learning and AI; who want us to find business questions that can fit their capabilities so that we can partner on "Cutting Edge" projects!!! About time we separate the "shiny" means from the end - the business issues. I am summarizing some of the real challenges - "The Perils" that we continue to face as a part of the CPG industry and analytics community. The list may not be exhaustive, but I am hoping these three will resonate with many of my peers in the industry. "The 3G Effect": It's not a surprise that almost every publicly traded CPG manufacturer operates under the threat of 3G Capital and/or activist investors, anxious about their next target acquisition. Identifying and eliminating inefficiencies in the P&L is of paramount importance. These inefficiencies may lie within trade spends, price-pack structure, marketing, supply chain, or head counts. The analytics function has to go well beyond its traditional capabilities into "End-to-End" analytics solutions to cater to these needs. The situation demands a shift from siloed solutions like Marketing Analytics, Sales, RGM Analytics to an Integrated Business Analytics approach that delivers on desired P&L expectations while making the necessary trade-offs concurrently. "Scale versus Speed": The scaled approach to analytics has either slowed us down or produced mediocre results due to the "lowest common denominator" constrains we put on ourselves for standardized ( and invariably cheap/low cost) solutions. Prioritizing speed has become more important than ever along with the need for "Mass Customization" to cater to the nuanced needs of categories and markets within our portfolio. Scale which was our biggest asset is turning into a liability quickly. In the world of "Zero Based Budgeting" - the research and analytics budgets continue to shrink. Balancing the speed and scale at a reasonable value continues to be a challenging task. Off-Shoring is rapidly becoming an ineffective solution due to rising inflation resulting in lower savings, higher churn leading to constant breaks in knowledge continuity and the need for speed I mentioned above. "Dynamically Evolving Consumer Journey": The consumer journey continues to evolve at a rapid pace and keeping up with it requires a more dynamic approach to understand the changes in consumer behavior. The emerging field of "Social Physics" promises to build ecosystems that can be utilized for predicting human behavior. This can be accomplished by interconnecting various aspects of human life data that is becoming available via various digital sources. The traditional funnel metrics and "vanity KPIs" need to be replaced with relevant and true KPIs that can be tied to business performance. I find these three "Perils" to be always top of mind lately. I am sure there are few more that are either subsets (e.g. advertising analytics, media buying/targeting, digital analytics, e-commerce, etc.) or related to the three above. Big Data, AI and Machine Learning will have to search through these business challenges and deliver business solutions that can help with these perils (and not the other way round!). The "Perks" of solving for these are exponentially rewarding. I truly believe that advanced analytics is poised to deliver on these challenges leveraging emerging technologies and affluence of rich data. However, acknowledging the real perils (as they apply to your industry) and "redefining" the scope of analytics is the first and critical step in the right direction. Are you ready?
Author: Mandar Paradkar
Published on June 22, 2017 on LinkedIn; https://www.linkedin.com/pulse/perks-peril-analytically-speaking-mandar-paradkar/
Chasing +3%, Are your wheels balanced?
An overview of current business planning process and the critical need for cross functional wheel balancing to realize business goals. A pragmatic view on business forecasting process and a cascading effect it has on planning and execution. Recommendations on how an integrated business planning process can help address the planning gaps and executional challenges. Read less "Sales are down again, let's have the analysis ready for leadership presentation before noon on Monday." If you are part of the Business Intelligence/Insights team or a market measurement supplier managing a market or BU; this is the much dreaded email you hope and pray you will not receive on a Sunday night or (even worse) Friday evening. Luckily, I am not at the receiving end of this much dreaded one line email anymore for past few years. However, I am always intrigued with how we fall short of our annual plans - that seemed difficult but realistic and we all agreed/aligned upon. After all we were chasing 3, yes a meager 3% growth! I was recently listening to the 3% economy growth expectation debate on NPR and how realistic it is (or not). While I am no expert on economy, it got me thinking about the several CPG category/brand growth debates that I have been part of over the last 10-12 years. Thought this would be a timely synopsis for that time of the year when many of my industry peers are getting ready (or deep into it already) for yet another annual planning process. The efforts we put behind strategy and planning for the next year are enormous. It really takes a village and you know what I mean if you have been part of this journey. Several planning, pre-planning, review, recap meetings with the key stakeholders and leadership and a final down-to-the-wire back and forth with the corporate headquarters before you finally settle for the number you lock and commit! Usually this number for large markets/brands is +2-3%. Somehow, after of all the headwinds presentations you have made; you are assured some increased marketing, trade, and/or innovation budgets, challenged and expected to perform slightly better (remember 2-3%) than prior year. That's very reasonable, the stage is set, and we all hope that our plan will work! Acknowledging the oversimplification of the process above and apologizing in advance to the teams who are part of this process in the CPG industry worldwide; I will cut to the chase. We focus on key business drivers to estimate the planned growth, discuss, debate and decide on the outcomes; build risks and pad them up with opps (opportunities), review sensitivities and ranges of error. Usually 4-5 main business drivers sum up your expected growth. These should by and large cover the industry standard on business drivers for forecasting. The overly simplified output looks as below (which is super glamorized in the planning presentation with stellar images of programs, events, incentives, innovations, campaigns etc.). You now have the facts to support how you can get to the magic number! When the year rolls out, we start falling short of our planned numbers, month after month for the first half until panic sets in! There are several urgent and important meetings to discuss growth opportunities. As the year progresses you have lived through several of the ("Sales are down again, let's have the analysis ready for leadership presentation before noon on Monday.") one line emails. By the end of the year the actual performance looks very different than what you planned for. The actual result is in fact -3%! Apologizing again to those who put in several hours of efforts; below is the non-glamorized version of the analysis and explanation. The (in)famous forecast versus actual analysis. Disclaimer: These actual numbers are fictional and any resemblance to actual business/brands dead or alive is purely coincidental. Over the years, I have realized that we diagnose, analyse and treat symptoms versus the real root causes of these business issues. These treatments can quickly become a vicious cycle causing serious and irreversible damage to once thriving business or brands. The real reason may be a serious misalignment between the cross functional teams, in terms of expectations, objectives, measurement metrics, tools, incentives, rewarding and/or capabilities. This may or may not be the case for many businesses but what the analysis explanation really means may be quiet different than reality. Data, facts and "Deep Dive" analysis can certainly help you explain superficial issues and save the day. However your real solution may be the "Occam's Razor", simply in front of you! Here's what I mean - the cascading and inter-related effects of business failures... Macro-Economics and Consumer Trends: Are we spending more time/resources explaining and justifying the past than truly understanding and quantifying the impact of the emerging trends? I have covered this in my prior article "The Perks of Peril", how critically important it is to understand evolving consumer journey. Marketing: In the wake of missing targets, is the general management quick to pull the plug on back-half Marketing spends and move to almost guaranteed sales from trade promotions? Innovation: Is the base marketing truly committed to the agreed media support on innovation (usually claiming more than fair share of marketing budget)? When marketing budgets get cut, usually base marketing will pull the plug on innovation marketing budget to support the stronger, tried and tested base brands. There goes your last hope to fix category headwinds and growth driver for next 2-3 years. The innovation velocities are further impacted due to lack of awareness and the incremental distribution you fought hard for is at serious risk. Price & Trade Promotion: This is the double edged sword with serious side effects. The more you do it, the more it loses it's effectiveness. We may end up training our consumers to buy on deal, hurting brand equity and the same promotions suddenly aren't giving you the bang for your buck! Besides, large part of the guaranteed sales shipped in anticipation of promotional sales are now inventory load for your retail partners. Either we need to spend more on promotion to move this inventory or write-off returns. Base Distribution: Shelf is always at risk within brick and mortar retailers. Even within e-commerce, if you do not rank within the first page; chances are that you are at risk of being pushed down even further for future searches. If the category is struggling, the turns are low and margins are dwindling. While you expect to get incremental distribution points for the stellar innovation you are launching, more often than not innovation cannibalizes base distribution. Competition: As ironic as it sounds, but the competition is very predictable when it comes to trade promotions. Your competition is working aggressively to counter your promotions from last year (similar to how you are designing your defense and offense). Competition is perhaps facing similar challenges as you and has injected incremental trade dollars to drive growth. Great! Your retailer is now sitting with boatloads of category inventory and losing faith in your JBP presentation promises from last year warranting the +3% growth. Shelf reset is almost inevitable with reduced shelf space for the category. Not to mention, this inventory is immediate negative headwind on the category for next year. These are series of naturally occurring events and responses and can be easily classified as "Agile Business Management Process", minus the desired business performance. To fix it, you need a reset! Unfortunately we do not have "reset" buttons on our P&Ls. Unless your organization has deep pockets and healthy cash flows to allow you a recovery period, it is almost impossible to break this vicious cycle. If you are fortunate enough to be part of such organization and leadership with courage to take bold steps - you have hope! "Cross functional Wheel Balancing" the business planning, execution and measurement process during this recovery period is inevitable and is a serious endeavor. This includes functional mapping, aligning, cascading business processes, assigning responsibilities and account-abilities and most importantly a significant change in organizational culture. This change is extremely painful but the results are rewarding if done right. I will save the details of this transformation process and change management for another day. I have been part of and spoken to many of my peers in organizations who went through similar changes. The organizations that were able to successfully hit reset and implement these changes and come out ahead had two things in common - leadership commitment to change in organizational culture (not just structure) and completely revamping the rewards and incentives for the high potential talent that survives. Needless to say, some organizations only focus on changes in strategy and structure; and continue deep diving into category decline analyses. I wish them well. Good luck with 2018 planning to all my friends in the industry! Are your wheels balanced?
Author: Mandar Paradkar
Published on June 25, 2017 on LinkedIn; https://www.linkedin.com/pulse/chasing-3-your-wheels-balanced-mandar-paradkar/