Are you protecting yesterday's competitive advantage or shaping tomorrow's?

Authors

Kristina Rogers

EY Global Consumer Leader

Marketer. Harvard MBA. Photographer. Scuba diver. Canadian fiction reader. Mother of two.

Andrew Cosgrove

EY Global Consumer Knowledge Leader & Lead Analyst

Consumer futurist. Strategist with global FMCG experience. Storyteller. Photographer. Father.

15 minute read 16 Nov 2018

Show resources

Address five imperatives now to win the future consumer

The leaders of every consumer-facing business recognize the need for transformation. Otherwise, their organizations risk becoming irrelevant to the changing consumer. Most are taking action, but they need to be bolder. They need to accelerate and redirect their efforts so they can move beyond protecting the business they have and put more focus on creating the business they need to become.

The five key imperatives set out below will help leaders reshape their organizations so they can generate value for the data- and technology-enabled “smart consumer” of tomorrow. They are drawn from our on-going collaboration with over 200 business leaders, futurists and industry experts to model a 360-degree view of the future consumer and how their needs could change in a variety of “future world” scenarios.

Five key imperatives to win the future consumer

  1. Challenge every assumption: Shift your business model from incremental improvement to exponential change
  2. Choose your tribe: Focus your purpose on the stakeholders who matter to your business
  3. Win every micro-moment: Compete for superfluid consumers every time, all the time
  4. Deliver measurable outcomes: Replace brand promise with transparent impact
  5. Master the ecosystem: Focus exclusively on where and how you can add value

Create what you need to become

We are entering an era of exponential change, when things happen gradually and then suddenly. Companies will need to be agile enough to shift course quickly and effectively. To navigate, leaders need to anticipate a range of probable, possible and plausible consumer futures and stress test all their assumptions against them . To create competitive advantage tomorrow, these five imperatives must be addressed now.

  • With FutureConsumer.Now, EY is helping business leaders make their organizations fit for a what’s to come by thinking differently about the future.

    Research and interviews with global innovators, futurists, business leaders and EY professionals identified more than 150 drivers that could shape the future consumer.

    We used those drivers to create eight powerful hypotheses. Each one relates to a key aspect of the future consumer: how people will shop, eat, stay healthy, live, use technology, play, work and move.

    We then held a series of innovative hackweeks around the world to explore these hypotheses further and to model the kind of future worlds they might create. These took place in Berlin, London, Los Angeles, Shanghai and Mumbai.

    Over the course of a week, an eclectic mix of futurists, entrepreneurs, business leaders and EY professionals used the 150 change drivers and eight hypotheses to model three alternative versions of the future.

    The experience of creating these future consumer worlds helped participants anticipate the direction of travel and the implications – and opportunities – for business today. It challenged their assumptions about what it takes for a consumer-facing business to succeed – today and in the years ahead.

    By the end of the hack, they were better prepared to stay relevant as consumers evolve, and to shape that evolution.

Little girl pushing boulder
(Chapter breaker)
1

Chapter 1

Challenge every assumption

Shift your business model from incremental improvement to exponential change

Today, most companies are trying to protect a legacy of competitive advantage by leveraging their scale and finding incrementally better ways to do what they do already. But the degree and accelerating pace of consumer changes are turning heritage into baggage as trusted capabilities lose relevance.

A bolder shift requires vision and speed. Agile market entrants are using technology and new routes to market to shred incumbent business models. It took Halo Top just six years to become a best-selling ice cream brand. Amazon CEO Jeff Bezos reminds his shareholders every year that, as far as he’s concerned, the company is at day one, every day. And as Peter Drucker said, “There is nothing so useless as doing efficiently that which should not be done at all."

The successful products and services of the future likely don’t exist today. Consumers will expect more transparency, personalization and connectivity than is currently possible. In our Experience Everything world , brands do not define consumers, they are defined by consumers; product cycles flex in real time to meet hyper-fluid changes in taste; and consumers use baseline designs to become co-creators.

Leaders need to reinvent their business, but very few have the opportunity to abandon everything that’s diminishing in value and move forward with only what they need. The strategic challenge is to address three requirements: maximize the declining benefits of existing business models to fund transformation; build on current capabilities in ways that drives new business models for the medium term; and create new capabilities that enable a pivot into new opportunities.

  • Learn fast and don’t be afraid to fail
    The future is becoming harder to predict, but companies can prepare for it. A faster, bolder business will rapidly experiment and scale those ideas that succeed.

    Change the way you think about talent
    Most employees have the skills needed to run the business as it is today. As needs change and new ways of working including bots and gig workers emerge, companies must identify and empower the talent required for future success.

    Re-evaluate your KPIs
    Most metrics look backwards; companies can’t build the future if they track progress in the past. Leaders must identify forward-looking measures that unite all stakeholders behind a set of common goals and enable consistent decision-making.

Friends enjoying weekend surfing getaway rugged beach
(Chapter breaker)
2

Chapter 2

Choose your tribe

Focus your purpose on the stakeholders who matter to your business

Consumer-facing companies love to put purpose at the heart of strategic presentations. That wouldn’t have been the case a few years ago; leaders today know that defining and articulating a sense of purpose is an essential part of engaging consumers and talent. But most organizations articulate a purpose today that is well-intentioned yet too broad to give them any advantage in the future worlds we are modeling.

Currently, companies anchor their purpose in a set of values that most people would agree with, like caring more for the environment or bringing families together. Future consumers will be much more tribal.

In our Waste Nothing world, consumers’ values are far more important to them than they are to consumers today. They want to express those values in all of their purchase and consumption choices; and they won’t consider brands that don’t meet their demands. The same applies to talent and ecosystem partners: people in the Waste Nothing world only work for and with organizations that reflect their shared purpose.

Try to please everyone, and you’ll delight no one. But take the risk of standing out from the crowd, and there’s scope to form deep, lasting and profitable connections. Companies must take leadership on the values and concerns of the consumers and talent they target – their tribes – for purpose to generate competitive advantage. Nike’s alignment with Colin Kaepernick indicates the direction of travel.

Leaders need to embed their purpose right across the business. Future success will require more than making purpose apparent at every touchpoint. Everything the business does will have to articulate – not just reflect – its purpose, from the way it uses artificial intelligence to the ecosystems it joins or creates.

  • Be willing to let consumers go
    When you shift the focus of your business to a purpose that is distinctive enough to engage future consumers, you can’t expect them all to come with you.

    Embed your purpose
    With tens of thousands of employees making millions of decisions every day, the key elements of your purpose must be simple to understand and translate into action. Otherwise, you cannot put purpose at the heart of your transformation.

    Create a purpose-driven portfolio
    Confirm that all of the individual brands in your portfolio are aligned with your core corporate purpose. Brands that fail to reflect your purpose should be divested, even if profitable.

ey woman blusher brush checking smartphone
(Chapter breaker)
3

Chapter 3

Win every micro-moment

Compete for superfluid consumers every time, all the time

Today companies are trying to win and retain consumers by optimizing the experience they deliver at every point along the path to purchase. New technologies are turning that pathway into a longer and more winding road, crossing channels and blending physical, online and mobile. But the future worlds we are modeling fundamentally challenge any idea of purchasing based on a linear journey.

Tomorrow's “superfluid” consumers do not follow a predictable pathway. They purchase goods, services and experiences in micro-moments. They decide to buy, complete the transaction and get what they paid for in the blink of an eye. They often don’t know or care who actually supplies what they’ve bought; their AI curates choices for them. In our Ascendant Consumer world , brands that are a millisecond behind the competition are instantly irrelevant.

Instead of being loyal to a brand, consumers want to feel part of something they have helped to define and create. To gain a competitive advantage in our future worlds, companies must be able to shape demand by continually adapting what they offer, when they offer it and at what price – for each consumer, in each micro-moment. Anything that slows the process is unwanted friction, which the consumer does not tolerate. Business models designed for more prosaic engagement will fail.

  • Look outside your traditional industry
    Consumer-facing companies need to deliver against rising consumer expectations of convenience, transparency and value. Understand who or what is shaping consumer experience.

    Define the power of data in the new value chain
    Data is critical. Companies can create competitive advantage by investing in their own capabilities. But it can be more efficient to access insights via a partner. And perhaps the only way to give consumers the personal experience they crave is to pool data across the ecosystem. It’s about finding the right balance.

    Break down your silos
    Demand-shaping must be aligned with demand-sensing across functional areas, as well as between retailer and manufacturer. Incentivize the consumer to buy, but connect sales, supply chain and marketing – and wider value chain partners – so that every sale is profitable.

ey excited school girls during chemistry experiment
(Chapter breaker)
4

Chapter 4

Deliver measurable outcomes

Replace brand promise with transparent impact

Today, companies try to engage consumers by promising that their product or service will give them a unique benefit. The extent to which it actually delivers can be hard, or impossible, to tell. Do expensive skincare brands really work better than generic alternatives? How sustainable is the salmon in your sushi? The consumer often has to take it on trust. To thrive in the future worlds we are modeling, companies need to deliver measurable outcomes.

The problem isn’t that companies don’t want to be more transparent. Rather, it’s a problem with data. Nutritional information, for example, is based on aggregated average data from large population sets, not the individual consumer. Companies are experimenting now with ways to build competitive advantage by bridging that data gap. Nestlé, for example, has 100,000 consumers signed up to a pilot project in Japan: consumers who send the company a DNA sample receive personalized nutrition.

The smart consumers of the future will have total transparency about the quantifiable consequence of every purchase and consumption choice they make. In our Better Self world , personal AI gives consumers live insights at the point of decision – ranging from the impact on their personal and mental health, to their social and financial wellbeing, to the impact on their community, the wider environment and the global population. Consumers exchange these insights with companies, which compete to provide goods, services and lifestyles that deliver the outcomes they want.

Consumer-facing companies can create new ways of generating value today by anticipating this shift from generalized brand promises to measurable, personalized outcomes. A bifurcation is inevitable between low-value generic goods and those that deliver quantified, differentiated and relevant value.

  • Reframe the concept of brand
    Benefits that are intangible today will become more valuable than physical goods. Brands need to reflect this. Competitive advantage will center on the enhanced services, advice and curation that make brand experiences both fun and informative

    Protect consumer data
    To give consumers the transparent, measurable outcomes they will demand, companies will need to hold or access a much wider and deeper set of customer data than they do today. Our modeling suggests that future consumers can be incentivized to share. But for companies, any breach of data security would be potentially fatal.

    Be realistic about the value you create
    Emotional biases and attachments to legacy brands that once were distinctive often skew decision-making. Stripping out undifferentiated brands from the portfolio allows companies to divert resources toward assets with a higher growth potential.

ey students working electrical equipment table classroom
(Chapter breaker)
5

Chapter 5

Master the ecosystem

Focus exclusively on where and how you can add value

New technologies and business models are disrupting the kind of value chains that companies have relied on for decades. Consumers expect much higher levels of control, customization and service, and it’s increasingly difficult to meet these expectations in a way that is profitable. In the future worlds we’re modeling, these linear business models are stretched past the breaking point.

Today, many companies are responding to disruption by implementing more agile and demand-responsive networks. This kind of transformation can be a powerful generator of competitive advantage. Our future worlds suggest how these new networks could evolve into far more complex ecosystems.

A defining feature of our Balanced Life world , for example, is that consumers strive to achieve the perfect equilibrium between what they need to consume and how much they consume. A hypothetical product in this world is a personalized drink that uses your real-time health and wellbeing data, and an understanding of what the rest of your day looks like, to serve the optimal balance of calories, nutrients and bespoke medication, manufactured on the spot. The experience is simple and convenient for the consumer, but delivering it requires a vast and complex ecosystem of players from consumer goods, technology, pharma and other industries .

In our future worlds, these complex ecosystems are always led by one dominant player – the ecosystem orchestrator. They coordinate a fragmented network of partners and suppliers and capture the most value, but other roles are profitable.

The challenge for leaders today is to anticipate what ecosystems might emerge, identify those they want to create and decide where in the ecosystem they want to play. The focus should be on where you can generate the most value and who can bring the third-party solutions — like micro-manufacturing — that build your competitive advantage in ways that you couldn’t do on your own. Your decisions will have implications for the operations and capabilities you have now.

  • Understand what truly creates value
    Legacy activities may no longer provide competitive advantage. Ruthlessly analyze your operating model to identify which assets create differentiated value, what you should outsource and which capabilities you could offer as a service to ecosystem partners.

    Treat technology as a platform
    The pace and scope of technological change make it almost impossible for any company to master everything internally. Open your platform to allow ecosystem partners to plug and play technologies dynamically.

    Balance control with accountability
    Identify potential partners with common purpose. While you must be prepared to relinquish control of value chain components, you must also hold yourself and ecosystem partners accountable for delivering shared targets.

Summary

To win the data- and technology-enabled “smart consumer” of tomorrow, there are five key imperatives that companies must start to address now.

About this article

Authors

Kristina Rogers

EY Global Consumer Leader

Marketer. Harvard MBA. Photographer. Scuba diver. Canadian fiction reader. Mother of two.

Andrew Cosgrove

EY Global Consumer Knowledge Leader & Lead Analyst

Consumer futurist. Strategist with global FMCG experience. Storyteller. Photographer. Father.