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. 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. 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 firmsâ 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 companiesâ 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 systemsâ while others may not be selling at allâŻboth situations lead
both within and outside the corporationâwill 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 industryâs 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 Paradigmâs 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
customersâ 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
âOn 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 consumerâs 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.â providing additional levels of performance and helping
Next, todayâs consumers are so bombarded by users gain real-time insight into their data. Further, by
advertisingâa variety of research consistently shows that integrating BI within business processes and distributing it
more than 80% of consumers donât 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
Š 2008 New Paradigm Learning Corporation
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.â
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
interfaceâŻregardless of the type or source of to benefit significantly.
informationâŻand 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 âsimpleâ business intelligence user interface:
blogs, wikis, etc.) is increasing to such a degree that âI 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 ârawâ 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.â
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
dataâŻsometimes 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, itâs the relevance of it.
Szafranski explains Kraftâs complex situation: âThe amount of data is staggering, and there doesnât
âThe challenge in the consumer goods industry for us seem to be an end to itâit continues to grow by heaps
and a number of our peer companies, is the complexity and bounds,â remarks Tom OâToole, 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. âWeâre 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 weâre storing is useful for the business. The
retailers, syndicated sources, and distributors, creates
Š 2008 New Paradigm Learning Corporation
4. Business Intelligence for Consumer Packaged Goods: 3
Actionable Insights for Business Decision Makers
interesting insights and actionable pieces of reasonable cost), todayâs BI solutions can process reports
information are increasingly challenging to unearth.â âon the fly,â instead of having to process and âmassageâ
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
itâŻfor example, if products cannot be rerouted based on corporationâs global brands are sold in more than 150
new distribution information, or orders cannot be canceled countries. The management team attributes the firmâs
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. âTo achieve our objectives, we are For Phil Nikolai, the companyâs senior manager of
delivering BI on a roles basis, based on a hierarchy of global data warehousing, the implementation of hardware
business metrics,â OâToole explains. acceleration through in-memory technology was one of
the most significant advances his group had ever delivered
âWe 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 âThe move to in-memory business intelligence has
used the common âRACIâ approach to establish who been a huge win for us. We first did a five-day proof of
was âresponsible,â âaccountable,â and had to be concept to show the business unit what this was about
âconsultedâ or âinformedâ 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.â business unit] could not believe the results we
deliveredâŻwe even had to warn them about the
upgrade so they wouldnât 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.â
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, itâs 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
Š 2008 New Paradigm Learning Corporation
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 regionâs 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. âWe 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,â notes OâToole.
the retail shelf.
âThe end-users are asking for itâŻmore and more we
hear âthis is greatâ after weâve 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.â
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 âin seriesâ 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 âin parallelâ 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 âtransactionâ 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 âgarbage in, garbage outâ). 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 itâs 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 todayâs IT organizations poses a
real challenge. âMaster 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 canât wait anymore,â says Phil
requires a certain amount of insight and analytics which
Š 2008 New Paradigm Learning Corporation
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
âUntil 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.â
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
Š 2008 New Paradigm Learning Corporation
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 worldâs 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 effortsâThe Enterprise 2.0, Talent 2.0, Marketing 2.0
and Government 2.0âinvestigate 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 worldâs largest corporations, and government leaders from many
countries. He holds a masterâs 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.
Š 2008 New Paradigm Learning Corporation
8. A message from the sponsorsâŚ
Enabling Better Business Intelligence
More strategic IT through the intelligent use of information
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Š 2008 New Paradigm Learning Corporation