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Business Intelligence for
Consumer Packaged Goods:
Actionable Insights for Business Decision Makers

by Don Tapscott




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Business Intelligence for Consumer Products: Actionable Insights for Business Decision Makers

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While historically consumer packaged goods (CPG) organizations have made significant investments in data collection and integration, much of the data stored in their IT infrastructures has not been analyzed or deployed to further the firms business performance.

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Business Intelligence for Consumer Products: Actionable Insights for Business Decision Makers

  1. 1. Business Intelligence for Consumer Packaged Goods: Actionable Insights for Business Decision Makers by Don Tapscott Brought to you by Business Objects (an SAP company), SAP and Intel.
  2. 2. Business Intelligence for Consumer Packaged Goods: 1 Actionable Insights for Business Decision Makers Executive Summary when it comes time to bring a product offering to market. Nevertheless, good business intelligence enables a better WHILE HISTORICALLY consumer packaged goods (CPG) understanding of consumers and their preferences; thereby organizations have made significant investments in data helping marketers deliver meaningful, authentic, and collection and integration, much of the data stored in their targeted customer messages that rise above the noise of an IT infrastructures has not been analyzed or deployed to increasingly cluttered marketplace. further the firms’ business performance. What is needed is a new generation of business intelligence (BI) tools and Finally, although the logistics of a distributed global applications that are capable of integrating cross- and supply chain have created new opportunities for creating inter-enterprise processes and information. The resulting greater alignment between supply and demand, without intelligence would enable CPG companies to make better proper business intelligence, account teams often fail to operating decisions, increase company transparency, obtain adequate data to derive a true picture of consumer change business processes, and drive overall performance. demand for the companies’ products within the retail Those enterprises that learn to effectively harness the vast channel. For example, certain items could be out of stock, quantities of information generated by their IT systems— while others may not be selling at all⎯both situations lead both within and outside the corporation—will enjoy a to lost sales opportunities and create downstream substantial competitive advantage. challenges when attempting to justify future shelf space with the retailer. 1.0 Value Proposition Incredibly, the average out of stock rate for items on promotion can sometimes be as high as 30 per cent! Only After decades of leading product innovation, the consumer by understanding consumer demand can marketers ensure packaged goods industry is facing a number of escalating that goods will be available for consumers when and challenges that are inhibiting its ability to reach consumers where they are ready to buy. and convert them to customers. Companies without a proper plan to address issues of First, the growing quantity of data maintained by CPG data management, marketing, and logistics, will companies has yet to significantly improve the industry’s experience negative results: declining consumer understanding of consumer needs. Managers continue to mindshare, profits, and shareholder value. Indeed, New rely on guesswork: risking bringing the wrong products to Paradigm’s research shows that existing business market, poorly executing on marketing campaigns and intelligence solutions are insufficient to address these promotions, or distributing them to the wrong locations. It problems. Perhaps this explains why recent surveys of is not enough for marketers to understand what customers CIO spending show that BI and data warehousing (DW) want today; they must also be able to anticipate have become a significant spending priority. (In January customers’ needs, and in so doing, develop timely, 2007, independent research revealed that 44 per cent of innovative, market leading products ahead of the CIOs identified BI/DW as a top spending priority going competition. Mike Szafranski, director of business forward.) intelligence and enterprise content management for Kraft In this paper, we discuss how technological advances Foods, lives this challenge: are enabling improved decision making across three broad “On the marketing side, the goals are much less about axes: simplicity and relevance, agility and integration. cost cutting and more about building the relationship New interfaces and approaches to business intelligence with the consumer, meeting the consumer’s demands are empowering more decision makers by providing through innovation, [driving] new product relevant data within a user-friendly interface. Meanwhile, development and using this approach as a platform for new technology advancements, such as in-memory BI, are growth.” providing additional levels of performance and helping Next, today’s consumers are so bombarded by users gain real-time insight into their data. Further, by advertising—a variety of research consistently shows that integrating BI within business processes and distributing it more than 80% of consumers don’t like traditional more widely, decisions can be made at the point of impact. advertising and seek to avoid it, a significant consideration But to ensure that the data can be trusted, a solid data © 2008 New Paradigm Learning Corporation
  3. 3. Business Intelligence for Consumer Packaged Goods: 2 Actionable Insights for Business Decision Makers foundation must first be established and aligned with the a significant challenge but also a significant master data. opportunity.” To solve this challenge, all partners need to collaborate 2.0 Simplicity and Relevance and construct a platform to enable an exchange of information. Although this may require some participants Effective business intelligence is both simple and relevant: to share what was previously their closely guarded simple to allow a large number of users to access the proprietary information, when the data is finally allowed information through an interactive, user-friendly to flow freely in all directions, all of the partners are likely interface⎯regardless of the type or source of to benefit significantly. information⎯and relevant so that users can employ it to A new approach to the interface is also needed. To that address immediate issues and support business decisions. end, new technology and tools in the areas of user interface and visual mapping are coming to the market 2.1 Simplicity every year. Szafranski describes his own idealized vision The quantity of structured and unstructured data (emails, of a “simple” business intelligence user interface: blogs, wikis, etc.) is increasing to such a degree that “I view consumer information evolving from a content management and search have become hot topics syndicated data space to a much more unstructured, among the multitude of business and technology accessible environment in the future. I think the future executives trying to gain insight beyond the structure of of all this should be as simple as a Google search box. just “raw” numbers. Another important dimension is the Something where you can write questions in English source of information; internal sources have always been which are translated into queries against structured mined but external data is now increasingly pulled in from and unstructured data, which then comes back to you business intelligence portals. This can come in the form of with an answer in English.” syndicated research, industry reports, trends and analysis for better estimating demand, or as industry benchmarks 2.2 Relevance that enable decision makers to measure themselves against corporate targets. Consumer goods executives are inundated with data⎯sometimes to the point where the sheer volume of it Kraft Foods is investing significant resources in order to makes taking action difficult. This plethora of data is increase the simplicity and relevance of its business derived from various sources and presented in many intelligence. Kraft is a $34.4 billion company, different forms. Data from initial research (panels, focus manufacturing and distributing snacks, beverages, cheese groups, consumer groups, etc.), internal transactions and dairy, and other convenience or grocery food items. (manufacturing, shipments, costs, etc.) and/or feedback Among its successful products, the company counts seven from the channel (sales, promotions, etc.) all answer brands worth over $1 billion and 50 brands worth over different questions and must be reconciled. Still, the key $100 million. And with 90,000 employees and 159 to gaining insight and competitive advantage is not the manufacturing plants worldwide, it is truly a global player. quantity of data, it’s the relevance of it. Szafranski explains Kraft’s complex situation: “The amount of data is staggering, and there doesn’t “The challenge in the consumer goods industry for us seem to be an end to it—it continues to grow by heaps and a number of our peer companies, is the complexity and bounds,” remarks Tom O’Toole, director of go-to- and magnitude of data that is needed to get a complete market systems at Brown-Forman, one of the largest picture of the marketplace. We have to get many American-owned companies in the spirits and wine sources of data transformed, cleansed, and harmonized business, and a diversified producer and marketer of just to marry consumption data from a retailer for a various consumer products. “We’re certainly one of certain category, in a certain demographic segment the heavy users amongst our industry. Our main with our shipment and our planning and forecasting concern is what to do with this data, and making sure data. Repeating this for different use cases with that what we’re storing is useful for the business. The retailers, syndicated sources, and distributors, creates © 2008 New Paradigm Learning Corporation
  4. 4. Business Intelligence for Consumer Packaged Goods: 3 Actionable Insights for Business Decision Makers interesting insights and actionable pieces of reasonable cost), today’s BI solutions can process reports information are increasingly challenging to unearth.” “on the fly,” instead of having to process and “massage” the data into pre-formatted tables and databases. Real-time A number of factors are driving this growth in raw data, information means real-time decision making; enabling including technology advances such as Radio Frequency companies to monitor and adjust the promotion of Identification (RFID).1 Although this particular products and flow of goods fast enough to impact results. technology has generated significant fanfare, its value continues to be debated. While information is now Kimberly-Clark is a leading global health and hygiene available at the micro-level throughout the supply chain, it company employing more than 55,000 people worldwide is of questionable benefit if business processes cannot be and posting sales of $16.7 billion in 2006. Headquartered dynamically altered to reflect what has been learned from in Dallas, Texas, and with operations in 37 countries, the it⎯for example, if products cannot be rerouted based on corporation’s global brands are sold in more than 150 new distribution information, or orders cannot be canceled countries. The management team attributes the firm’s based on lagging consumer interest figures, etc. success to its practice of leveraging insights from customers, shoppers and users of the innovations The solution is to clearly define what information is Kimberly-Clark brings to market. This enables the firm to relevant to each business decision and to meticulously develop entirely new products and categories, and map it across all of the various business functions and improves its performance in existing brands.2 roles. At Brown-Forman, this detailed process is paying huge dividends. “To achieve our objectives, we are For Phil Nikolai, the company’s senior manager of delivering BI on a roles basis, based on a hierarchy of global data warehousing, the implementation of hardware business metrics,” O’Toole explains. acceleration through in-memory technology was one of the most significant advances his group had ever delivered “We looked at every role from the front-office (sales, to its business unit. marketing) to the back-office (finance, HR) and refined our business processes into 23 sub processes. Then we “The move to in-memory business intelligence has used the common ‘RACI’ approach to establish who been a huge win for us. We first did a five-day proof of was ‘responsible,’ ‘accountable,’ and had to be concept to show the business unit what this was about ‘consulted’ or ‘informed’ about these processes. but they were still skeptical. After the implementation, Finally, we implemented these processes and attached the query times were two to 120 times faster. They [the reports through our portal.” business unit] could not believe the results we delivered⎯we even had to warn them about the upgrade so they wouldn’t think there was an error, as 3.0 Agility queries that used to take 10 to 15 minutes were now delivered [in] under a minute. For the first time in my Instantaneous or real-time response rates can have a career, we actually had a honeymoon phase with the meaningful impact on the rapid sales cycles throughout business unit.” the channel. This is a particularly acute challenge in the consumer goods industry, where data volumes are high yet Any improvement in the frequency of updates can result rapid decision making can directly impact the day-to-day in significant benefits. For example, at another consumer business. Rapid response rates (i.e. less than a few goods company, information used to be aggregated on a seconds) on queries of millions of entries can provide a monthly basis. Recent upgrades have now made it significant competitive advantage. Recent developments possible to deliver the same supply chain information in hardware and software technology are now capable of daily. This has significant business implications. The sales delivering real-time response rates through in-memory BI force now has a much better assessment of the impact of technology. promotional activities. When sales are aggregated monthly, it’s challenging to determine whether point-of- For example, a monthly or even, weekly report would sale promotions in some locations really drove sales. not provide any meaningful input that would reduce the Complicated by potential variations that can affect sales number of out of stock occurrences. Yet, with the (weather, competitive activity, etc.), the results can be increased technological capacity now available (and at a difficult to understand. Frequent updates also enable sales © 2008 New Paradigm Learning Corporation
  5. 5. Business Intelligence for Consumer Packaged Goods: 4 Actionable Insights for Business Decision Makers representatives to address supply chain discrepancies in a should be delivered to the right individual at the right more timely and effective manner. If a store or region’s time. As previously mentioned, Brown-Forman has gone inventory is particularly low on an item, the situation can to great lengths to implement this approach. “We are be addressed immediately before the inventory is moving from a situation where about two per cent of the exhausted. Finally, for senior management, frequent company are [sic] power users and high volume users, to a updates enable a whole new look at the overall operations scenario where business intelligence will affect 20 per and profitability of the company, from the warehouse to cent of our employees,” notes O’Toole. the retail shelf. “The end-users are asking for it⎯more and more we hear ‘this is great’ after we’ve introduced people to 4.0 Integration these new tools. For example, sales managers can now monitor activity, get insights into competitors and Business intelligence is moving beyond the end-of-line market trends, take this info and prepare their action analysis and reporting function to an integrated system plan, and then go out to deliver on this plan, all embedded within business processes. In the past, the through the business intelligence portal.” reporting mechanisms that reached the end user came at As BI is integrated with business processes, there is also the final stage of a tedious “in series” approach to business an opportunity to revisit existing processes to ensure they intelligence. Data was processed, stored in the production represent best practices. After all, accurately documenting system, and then extracted into a data warehouse in a and measuring an ineffective process does nothing to linear sequence. Only then was the information the end improve the business. Most effective BI solutions will users required ready for analysis and reporting. The new provide industry-specific resources in the form of approach injects BI “in parallel” with the business expertise (e.g. consultants) or specific technical resources processes; thereby providing clients with more timely (e.g. templates, queries). access to better information about critical business processes. In addition, the simple definition of a “transaction” can 5.0 Alignment reveal significant discrepancies across departments and users. By the time a particular transaction is completed, so The previous sections address the quality of the insight many deductions, rebates, discounts and other trade needed and the importance of linking it to business spending has occurred that it is almost impossible to processes. The manner in which data is collected, specifically identify profit centers at a granular level (i.e. processed and stored has an immense impact on the by customer, by product, by channel). And without this quality and value of business intelligence tools, (i.e., level of detail, planning for profitable volume growth “garbage in, garbage out”). For this reason, master data becomes no more than an educated guess. The challenge management (MDM), which defines how data is managed lies in the insight, not the availability of the raw data. from its initial collection to final use, is a critical underpinning of successful BI implementations. This is The ultimate benefit is derived from complete especially true for the consumer goods industry, where the integration of the information across systems and quantity of data and the variety of sources adds to the departments. In this event, planning for day-to-day complexity. activities and significant occasions, such as new product introductions, can be integrated across marketing, sales The concept of MDM is fairly straightforward: without and other departments. From the onset, the benefits of clean and properly aligned data across the organization, such integration include consistent and accurate it’s difficult to answer key business questions. And information and customer messaging, and ultimately, although it might appear just as straightforward to solve it, substantial revenue and profitability improvements. the level of complexity of today’s IT organizations poses a real challenge. “Master data management is a real Customer interviews revealed that BI is not just for challenge for us. We have been able to move forward on senior managers; smart companies are distributing it more the business intelligence front in the past with setting broadly across their organizations. Every business process MDM aside, but we can’t wait anymore,” says Phil requires a certain amount of insight and analytics which © 2008 New Paradigm Learning Corporation
  6. 6. Business Intelligence for Consumer Packaged Goods: 5 Actionable Insights for Business Decision Makers Nikolai. Globalization of supply and demand networks is enable business intelligence solutions built on the tenets of a large contributor to this pressure to implement MDM. simplicity and relevance, agility and integration have the potential to sustain competitive advantage in a world “Until recently, when a large global retail chain where change is the only constant. Simple and relevant BI wanted to see a report of all the products we had sold tools can empower employees to make effective decisions to them worldwide, we struggled to piece together all with increasing speed and agility. By integrating real-time the various customer numbers and products numbers decision making with mission critical business processes, used by all our regional offices. So we are focusing our smart businesses can keep up with and even excel in the MDM efforts on customer and product information, innovation-driven world of the 21st century. and making great strides.” Yet BI in and of itself is not enough to enable consumer goods companies to launch the right products, run the 6.0 The Payoff right promotions, or properly stock the shelves. But BI is a key part of the solution to deliver a harmonized report of The challenges faced by the consumer goods industry will retailer consumption data, combined with historical only grow with time. Trends, such as the growing number shipment data for analysis of promotion activity. As a of disengaged consumers, increased data volume, business simple example, this would empower consumer goods globalization, and complexity, are here to stay. To companies by giving them the opportunity to evaluate maintain their competitive advantage, organizations must which promotions were the most successful and most leverage internal and external information into an profitable in the past, and giving them the opportunity to accessible, usable medium and provide BI to a larger make better decisions on upcoming ones. number of employees. Business intelligence solutions will continue to evolve, as exciting new capabilities such as in- Moving from legacy BI solutions to these next memory technology evolve and are adopted broadly generation solutions represents a giant step forward and within the marketplace. corporations will continue to face a choice: execute these best practices or fall by the wayside. Early adopters will We are making a case for a broader definition of BI; one see empowered employees, rapid execution and where CIOs need to use and promote BI not just as a adjustments to plan, resulting in bottom-line growth. means to report on corporate performance, but also to enable broader analysis and understanding by incorporating and managing content in addition to data, an enabler of enterprise knowledge management and enterprise intelligence in the future. Organizations that © 2008 New Paradigm Learning Corporation
  7. 7. Business Intelligence for Consumer Packaged Goods: 6 Actionable Insights for Business Decision Makers I am grateful to Pierre-Luc Bisaillon and Paul Barter of the New Paradigm team for their help in researching this paper and I also thank SAP and Intel for their financial support of this White Paper series. However, the views expressed are my own and my company New Paradigm takes responsibility for the opinions expressed herein. Don Tapscott, chairman and founder, New Paradigm DON TAPSCOTT, one of the world’s leading authorities on business strategy, is the founder and chairman of international think tank New Paradigm. Established in 1993, New Paradigm produces ground-breaking research on the role of technology in innovation, competitiveness and society. The company was acquired by BSG Alliance in November of 2007, and is expanding its syndicated research programs globally. Currently four multi million dollar efforts—The Enterprise 2.0, Talent 2.0, Marketing 2.0 and Government 2.0—investigate strategies for winning through next generation enterprises. Tapscott is the author of 11 widely read books about information technology in business and society, including Paradigm Shift, The Digital Economy, Growing Up Digital and The Naked Corporation. His most recent book, Wikinomics: How Mass Collaboration Changes Everything is an international best seller in 20 languages. It was a finalist for the prestigious Financial Times/Goldman Sachs Best Business Book award and has been chosen by many publications including The Economist as one of the best books of the year. He is also adjunct professor of management at the Joseph L. Rotman School of Management, University of Toronto. His clients include top executives of many of the world’s largest corporations, and government leaders from many countries. He holds a master’s degree in Research Methodology and two Doctor of Laws (Hon). www.newparadigm.com Endnotes 1 Wikipedia defines RFID as an automatic identification method, relying on storing and remotely retrieving data using devices called RFID tags or transponders. 2 www.kimberly-clark.com, July 2007. © 2008 New Paradigm Learning Corporation
  8. 8. A message from the sponsors… Enabling Better Business Intelligence More strategic IT through the intelligent use of information Today’s competitive environment is fast and fierce, marked by complex supply networks and increased consumer power. In order to succeed, companies in the consumer goods industry need to fully leverage the power of information to their advantage. No longer is it enough to leave information access to a select few; every business person needs to be empowered to access, analyze and act on trusted information, wherever and whenever needed, and in the context of the relevant business activities. That is why leading companies worldwide rely on solutions from Business Objects and SAP to provide end-to-end solutions for better business intelligence (BI). The business user is in the focal point, with an intuitive and system-agnostic solution set that delivers on even the most demanding needs. Embedded into the context of business activities and work environments, information is immediately relevant and actionable. At the same time, IT can focus on being an enabler of innovation, rather than just working overtime to just “keep the lights” on. With solutions from Business Objects and SAP, companies in the consumer goods industry get: • More effective business decison making. Simple and intuitive user interfaces foster broad adoption, while reducing IT backlog. Business users quickly access any type of information, regardless of its source. And with BI accelerator technology, response times are consistently fast, independent of data volumes analyzed or question asked, allowing IT to meet the increasing demand for real-time BI embedded into business operations. • More efficient IT, freeing up resources for innovation. The broadest solution set in the industry, combined with best-in-class capabilities, dramatically reduces the need to deal with multiple vendors. Due to inter-operability with any systems, applications or databases, investments are protected and don’t require expensive custom-integration. And by providing the right level of controls with an agile infrastructure, IT can focus on managing service levels, and does not need to manage individual users. • Faster realization of value from IT investments. Out-of-the box content and templates, across both SAP and non-SAP data sources fosters accelerated deployments of BI solutions while significantly increasing the chance to “get it right” from the beginning, as compared to pure custom-built approaches. And alternative delivery models (e.g. on-demand, appliances) provide drastically reduced setup time and lower maintenance. The result is that IT is better able to meet the information needs of business users thus becoming a strategic partner to the business. To learn more about how solutions from SAP and Business Objects can help you empower your employees to make the best-informed business decisions, visit www.sap.com/businessobjects. SAP and Intel not only understand the challenges businesses face in today’s volatile global marketplace, but since 1994 they have worked together to offer a powerful set of optimized solutions on innovative platforms that help companies quickly adapt their strategies and execution. Today, more than 74 per cent of all new SAP installations are deployed on proven Intel platforms, enabling IT to become more efficient and responsive with breakthrough performance, energy efficiency, and reliability needed for virtualization and business-critical applications. With Intel solutions, companies can be more responsive, efficient and dependable using innovative, highly reliable and compatible Intel Xeon and Itanium®2 platforms that help them optimize their IT infrastructure and scale with confidence. They can benefit from: • Performance and flexibility: Build their business on scalable, flexible infrastructure that can grow with shifting enterprise demands using Intel’s market-leading multi-core processing technology. This is achieved with second generation quad-core technology based on Intel® Core™ microarchitecture and 64-bit virtualization capabilities. • Reduced operating costs: Intel’s market leading server technologies are key to building a stable and efficient IT infrastructure that will help reduce operating expenses. This is achieved with energy efficient performance, quad-core architecture, server consolidation, virtualization and reliability features. • Reliability: Intel-based servers are the foundation of a dependable IT infrastructure with built-in reliability features, uptime, virtualization and software optimization and enabling investment. © 2008 New Paradigm Learning Corporation

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