Could your biggest challenge today be how you think about tomorrow?

By

Kristina Rogers

EY Global Consumer Industries Leader

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

10 minute read 17 Apr 2018

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How to navigate exponential change, anticipate a range of consumer futures and stress test all your assumptions.

Whenever you plan for the future, you have to make some assumptions. We believe some key assumptions that have shaped the consumer products and retail industries for decades – from the best way to organize a business to the products and services to sell – are becoming increasingly irrelevant.

Over the past decade, people around the world have changed where they shop, how they discover products, and what they ultimately buy, thanks to new technologies, innovative business models, and disruptive brands.

But the next wave of disruption will be exponential. Change will unfold in compound leaps and bounds, not linear steps.

CPR leaders are struggling to keep their organizations relevant: 75% of executives from CP and 66% from retail tell us their traditional value-creation tactics are increasingly disrupted.

Complexity, uncertainty and change have been on the agenda for some time. But few companies have taken the bold action that success requires. We can all name once-strong businesses that have already disappeared. And there’s only more of that to come.

An industry disrupted

75%

... of consumer product executives surveyed are telling us their traditional value creation tactics are being disrupted.

The industry is at an inflection point. Although CPR companies recognize the need for urgent change, adapting to what’s happening now is not enough. New forms of disruption have the potential to truly revolutionize the world of the consumer.

A failure to think differently about the future will be fatal.

Two men looking at designs for the future.
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Chapter 1

Preparing for the next revolution

The implications are critical. In a world shaped by exponential change, because everything happens so much faster, events that seem far-fetched can suddenly become reality.

Today it’s astonishing that a start-up brand can dominate a US grocery category five years after its launch. Tomorrow, it could happen in five months. In the early stages of change, trends can look linear. It’s only when the compound multiplier takes affect that the curve accelerates away.

If you don’t adapt your thinking, and rely on a linear mindset, you’ll miss trends that suddenly take off, creating threats or opportunities that you either hadn’t imagined, or that seemed too implausible.

We’re all aware of some big, global trends that will reshape the consumer, from the changing global climate, to the rise of the emerging-market middle classes, to the rapidly aging populations of the developed world.

But what about the future ubiquity of artificial intelligence and machine learning, the coming advances in neural processing and synthetic foods? What impact could they have? When will they achieve critical mass? What will happen when multiple different exponential trends collide with each other, leveraging their impact in extraordinary ways?

Focus on too narrow a set of assumptions and your perspective on the future will be too limited.
 

Stress test every assumption

The leaders who create profitable growth will be those who think about the future in a different way.

They will explore the radically different ways people might live and consume, and imagine how different trends could affect each other. They will use the insights from the future worlds they model to “stress test” all their assumptions.

Three key questions for leaders endure: What will consumers value? What will you change in your organization to meet those needs? How will you lead that transformation? But it’s time to approach these questions differently:

  1. How can you create a better understanding of future consumer needs by modelling the worlds they will live in?

  2. How can you use that modelling process to stress-test your business against what it will take to succeed in those future worlds?

  3. How can you use the learnings from that stress-testing to actively shape the future in your favour?

Address those questions and you can design better ways of doing business that will make your business more relevant to changing consumers. You can take bolder actions that will drive the right transformation faster.

The ability to adapt to whatever is happening now will always be important. But success in business – as in so many other walks of life, from politics to sport – is about anticipating what might happen next; about ‘reading the game’.

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Chapter 2

Hacking the future consumer

We’re helping our clients to change the way they think about the future and, by implication, the actions they need to take now, in the present.

At a series of collaborative hackathon events, we’re exploring a wider and deeper perspective on what the future might be like in key global cities.

  • How might people shop, play and work?
  • How will they live, eat, stay healthy, move around, and connect?
  • What are the deep implications of over 100 change drivers – from the applications of AI and robotics to wider shifts in social structures and consumer aspirations?

As examples of the future states we’ll be exploring, we’ve listed below some probable, possible and plausible scenanios and some questions that may arise from them.

Probable

As more products and services become commoditized, consumers are putting increasing value on experiences. Luxury consumer brands and many mass market retailers understand this already, and are constructing new customer environments driven by brand experience. But what if players from less obvious categories – like cleaning products or personal hygiene – started to turn shopping into ‘retailtainment’? Could these less desirable or emotionally engaging categories create profitable opportunities to re-engage consumers and build loyalty?

If retail was more fun, when would you pay to shop?

Possible

A deeper shift to a culture where consumers pay to access products and services that today they would own. It happens already with transport, workspaces and media; a shift to categories like clothing and technology is possible.

How will you serve consumers who buy almost nothing?

Plausible

People will share data about every aspect of their lives with an ecosystem of companies from convergent sectors – such as tech, entertainment and health. The result: they lead healthier lives and also help to reduce the social cost of poor health. Attitudes that are roadblocks to innovation today – such as consumer concerns about data privacy – could transform. Keeping your data private might become an act of gross selfishness. Companies could shape value propositions that don't exist today.

When everyone shares everything, how do you create value from data?

Discover the questions we're asking to explore these probable, possible and plausible future scenarios, and the implications for consumer products and retail businesses:

  • Marcie Merriman is an Executive Director in the Advisory practice at EY. Marcie has spent 25 years working with boards, CEOs and their teams to improve customer and employee experiences, innovate brands and drive growth through human-centric strategies and design. Her industry experience includes retail, consumer products, health care, automotive and hospitality.

    If you wanted to sell soap powder in the 1950s, focusing on your target customer was easy. One fixed characteristic filtered out half the population: gender. Women bought the product, and women used it.

    Today, US women still do twice as much housework as men. But traditionally assigned gender roles have changed. And the idea of gender itself has evolved.

    Facebook now allows its members to self-identify in one of over 70 gender categories. A binary distinction between male and female is not rich enough to reflect our lived experience.

    Future consumers will likely live longer and spend more of their time online, or in virtual realities. They’ll have move opportunities to shape and inhabit different identities.

    Markers like their nationality, social class or even their age could become more fluid, and have less influence on what they think, how they behave and what they value.

    Perhaps there won’t be a ‘mass market’ for consumer goods anymore; just a mass of individuals who are increasingly difficult to categorize, and who reinvent themselves from moment to moment, from platform to platform.

    The challenge for companies would be, how will you relate to consumers who keep remaking themselves?

  • Rob Holston is the Global Advisory Leader for Consumer Products and Retail at EY. Rob’s experience and background spans multiple industries and global markets all while centered on unlocking innovative growth opportunities through the unique combination of strategy, data, analytics, and technology solutions.

    Most consumers don’t see much value in their data. They’ll willingly accept terms & conditions that allow a company to monetize it, if that gives them “free” access to a fun app or a useful platform. But when will that change?

    Consumers are becoming more reluctant to share anything other than basic personal data, largely due to privacy worries. What if that reluctance developed into a deeper shift in attitudes, and consumers started demanding better terms or more value from companies that monetize their data?

    It could be an opportunity. Companies could respond to this shift in consumer sentiment by offering better services and bespoke data use terms, all supported by greater transparency between themselves and their customers.

    As people recognize and understand the financial value of their data, they could make different choices about what they share and with whom. T&Cs could become more fluid, and negotiated by artificial intelligence.

    Then again, if people who choose not to share their data had to pay for a service that others get for free, perhaps opting out will become a choice only the relatively well-off can afford. Will privacy become the greatest form of luxury?

  • Ryan Burke is the Global Transactions Leader for Consumer Products and Retail at EY. Ryan has more than 20 years of transaction and client advisory experience across startups, middle market and multibillion dollar conglomerates. In this current role, he helps clients grow and transform their businesses to address today’s unprecedented disruption in the industry.

    Consumer products companies have used scale as an advantage for decades. Their financial muscle and distribution networks have enabled them to create global brands for mass markets – and at lower costs. A win-win for the business AND consumer.

    But, growing consumer demand for products that feel local and authentic means there’s value in the long tail of small yet lucrative consumer niche segments. I have seen this all over the world – especially here in the US.

    In a digital world it’s easier for small or start-up companies to overcome traditional barriers to entry. My general impression from working with a number of fast growing CEO’s is they don’t get caught up in traditional thinking that could slow them down – which is always refreshing!

    New platform technologies will only further democratize access to funding, design, manufacturing, distribution and marketing – pretty much everything...making it easier to manufacture and distribute products.

    In this new world, being big may not be so helpful. The competitive advantage of economies of scale enjoyed by large companies are eroded and we could see much greater variation in products that target the specific needs of individual consumers.

    I think many of today’s assumptions about the value of scale will no longer apply. The question I often ask my clients - Is it time to rethink scale in your search for growth?

CPR leaders will need to ask themselves "what if?" questions such as these, and consider whether such scenarios are probable, possible or plausible, in order to prepare their businesses for the consumers of the future.

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Chapter 3

Finding a different way to navigate

The future will be defined by changes that are beyond any one organization’s control. But if you can challenge all your assumptions about what the world might be like, you can design a profitable space for your future-business, and then use that insight to change your organization now.

There isn’t a fixed roadmap you can follow, because nobody knows the terrain. And there isn’t a compass to guide you, because there is no fixed destination that can act as a ‘true north’. You’ll have to create a different set of navigational tools.

These are the most important challenges:

  • Put the needs of the consumer first (really). To sustain profitable growth, look beyond the constant pressure on margins. Avoid compromising your purpose. Put the consumer at the center of every decision.

  • Forget the ‘global consumer’. Change will be messy. Understand the similarities and differences across regions and cities.

  • Do whatever it takes to make your organization super-agile. You’ll need to change course as the world changes – which it will, all the time. Be clear about your agreed strategic priorities across the organization. Empower managers to make fast decisions. Invest in the analytics technologies and the people needed to identify where investment can unlock growth.

  • Think big. Start small. Scale fast. Exponential trends play out with bewildering speed; internal organizational change can be frustratingly slow. So build an ecosystem that can help you seize opportunities faster.

  • Understand where value will be created. Speed, platform and trust will always matter. But scale needs to be defined differently. Analyze your P&L to identify where scale is a benefit. Consider the balance between the value created by scale, agility and localization.

  • Balance what it takes to be relevant to the consumer and relevant to your shareholders. If it’s not profitable, it’s not sustainable. Develop an “and…” mindset. Balance short-term and long-term actions, growth and cost-cutting, innovation and efficiency, centralization and decentralization. a

  • Again, stress test every assumption. Challenge complacency. The implausible can suddenly become reality. Don’t rely on surveying consumers or executives to understand how the world might change and what the impact could be. Cast your net wider – talk to disruptive thinkers, futurists and pioneers, people who think differently.

Design your future now

The tools that guided leaders through a linear world are not fit for an exponential one. They imply that the future is knowable, that business transformation can unfold in a largely predictable way, with clear milestones that lead to a destination just over the horizon.

They also tend to over-value what an organization achieved in the past: baggage can feel too much like useful heritage. Organizations need to find a better balance between protecting what they have today and investing in what they need to become.

To underline the point, we’re not talking about predicting a distant future; we’re talking about how to change your organization now, so it’s relevant today and into the future.

It’s about developing a new mindset, opening your imagination to the unexpected and seemingly implausible, and stress-testing every single assumption you have about the scope and pace of change. The future is uncertain and constantly evolving. But it’s exciting and profitable for those who start to adapt now. How will you equip yourself to lead?

Summary

Consumer products and retail companies can thrive in a period of accelerating change by modelling alternative consumer ‘future-worlds’ and using them to stress-test every part of their business, now.

About this article

By

Kristina Rogers

EY Global Consumer Industries Leader

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