“Reinventing CPG Summit” Looks to the Future“Reinventing CPG Summit” Looks to the Future

VentanaMonitor™

Summary

The first annual Reinventing CPG Summit in San Diego delivered a message that was a clear call for change in the consumer goods vertical industry. Speakers from packaged goods manufacturers, industry service providers, and retailers alike spoke to the need for re-thinking the collective approach to technology and integrating software more tightly within their businesses. A common thread throughout speaker topics was reinvention, resurrection, redirection, and rebirth of products and categories, of store operations, of brand and customer equity. In reinventing itself, the challenge facing the CPG (Consumer Packaged Goods) industry is to redirect its focus from squeezing costs from the supply chain, suppliers, and retailers battling over margin pennies and saturation marketing toward a more enlightened spotlight on the consumer.

Assessment

In late February, the new Information Resources, Inc. (IRI), (see Symphony & Tennenbaum Make Tender Offer for IRI), hosted its first annual “Reinventing CPG Summit” at San Diego’s Manchester Grand Hyatt. This event brought together executives of many leading CPG manufacturers, retailers, and service providers. Included in the speaker lineup were keynoter Dr. Romesh Wadhwani, General Partner of Symphony Technology Group and IRI, Doug Elix, SVP & Group Executive of IBM Global Services, Dwight Riskey, SVP of Consumer & Customer Insights at PepsiCo, Jim Keyes, President & CEO at 7-Eleven, Dave Lukiewski, Welch’s SVP of Sales & Marketing, Ralph Scozzafava, VP & Managing Director at Wrigley, and Mike Bloom, SVP Merchandise at CVS.

In keeping with the conference title, the common themes weaved throughout the speaker comments were those of reinvention, resurrection, redirection, rebirth, and reinvestment of product and category composition, of store operations and procedures, of brand and customer equity. The litany of speakers all highlighted the extreme challenge of reinvention that presents itself to any sustaining business. In fact, recognizing and acting on the need for reinvention are marks of organizational maturity that, once faced and dealt with creatively, can elevate the organization to the next level of performance and effectiveness.

As the executives took the stage in turn, the conference took on a decidedly non-partisan flavor, with similar messaging from virtually everyone, whether manufacturer or retailer or service provider. In order for the industry to thrive again, it can no longer focus efforts on squeezing more costs out of the supply chain. The industry can no longer function with suppliers and retailers battling over margin pennies. It must recognize that saturation marketing to get the attention of the consumer is not an acceptable means of creating lasting customer relationships. In order for the reinvention to occur, the industry must redirect its focus back toward the consumer.

The answer is clearly not, however, in more operational CRM systems that have at best served to bring process discipline to organizational behavior in customer-facing interactions. The new mission IRI’s Wadhwani challenged the audience with is to build lifelong relationships with customers and consumers throughout the demand chain and supply chain interaction continuum. This will thus elevate interactions above mere transactions to the level of relationships delivering solutions, not products. As Ventana Research characterized it last fall, The Customer Drives the Demand Chain.

Parallel to these general session talks, IRI featured its re-worked Business Performance Management (BPM) suite of software solutions for both manufacturers and retailers (see A New Symphony for Performance Management). Touting an ability to deliver a “Total Retail View” of product movement from factory to pantry, it features an underlying real-time data integration engine for dealing with the many dimensional variations in source systems. If this feature is as functional in practice as in show-floor demos, it will be a very nice step forward. Ventana Research remains skeptical not of the technical capability, but of the practical expectation in the short term of CPG adoption.

The challenge for IRI is to deliver on the promises made here of strengthened consumer-focused core analytics and enterprise solutions for both manufacturers and retailers without succumbing to old product-centric, transaction-centric reporting and analysis tool habits. It will also be challenged to make good on the non-trivial data integration task inherent to the total view solution touted, crossing consumer level detail, store and category consumption, supply chain logistics and shipments detail, and financial data.

Market Impact

Software and support vendors targeting CPG marketing and retailing organizations have been operating in a sleepy niche for the past several years. Out of necessity, point solutions have been the rule, bringing vertical domain expertise to bear where horizontal business intelligence solutions have failed. As Dr. Wadhwani commented in his keynote, both IRI and A.C.Nielsen, its primary competitor in the data syndicate arena, have failed to create strategic relationships with retailers or consumers, have not brought robust data integration or data visualization solutions to market, and have not sufficiently promoted demand chain and supply chain collaboration.

Ventana Research has predicted that demand chain performance within consumer goods manufacturer organizations will come under sufficient pressure in the next year to foment an industry reinvention (see Demand Chain Performance Management In Consumer Goods). With this event, IRI has taken up the gauntlet of change, promising to deliver new functionality throughout the balance of 2004. We expect A.C.Nielsen to respond to this challenge of reinvention. So should those business intelligence vendors with traction in the vertical, such as MicroStrategy, ProClarity, Business Objects, and Cognos, and vendors of operational CRM suites and ERP systems, such as Siebel, SAP, PeopleSoft and Oracle. Specialty application vendors, such as DemandTec and KhiMetrics for retail merchandising, Aprimo and Demantra for marketing planning, plus E.piphany, Unica and the like, may be less impacted, but should still prepare themselves to respond to shifting demand. Depending of course on each vendor’s placement of strategic importance on the consumer goods vertical, a well-crafted response to the coming changes can quickly leverage a threat into market opportunity.

Recommendation

As Ventana Research has suggested in reference to IRI’s new ownership, participants of all variety in the Consumer Goods vertical can anticipate benefits from the re-emergence of IRI under the guidance of Symphony Technology Group. If your organization is a current IRI customer, you will be among the first to learn the realities of IRI’s new initiatives aimed at manufacturers. In addition to evaluating the new functionality introduced, we urge you to pull hard for business-case justification and articulation of the value proposition of upgrade paths going forward, and to understand data integration, system implementation and network connectivity issues.

If you are a CPG manufacturer not working with IRI today, we presume you are engaged with A.C.Nielsen. As contract renewal dates approach, there is every reason to evaluate IRI’s offerings as a point of comparison to A.C.Nielsen’s, as they have not yet responded to the new portfolio from IRI and SymphonyRPM. As release of new functionality occurs over the next year or so, Ventana Research advises you to accumulate knowledge over the course of time and balance the two offerings in light of your priority functional and user requirements.

Retailers have great upside potential. IRI has pledged to build more strategic relationships with retailers, delivering new content, analytic services, and BPM solutions. As a vendor of software solutions, IRI is breaking new ground here. As a retailer, you should assess the value of solutions in context of your own performance improvement initiatives.