Five (not so) easy steps to CPG digital transformation


Digital transformation is helping companies in the consumer packaged goods (CPG) industry streamline operations, increase business agility and gain deeper insights into their data. But the digital transformation journey is not an easy one. Success can only be achieved if enterprises are willing to go through change by embracing the mindset, culture, operating model, work execution, and technology necessary to enable digital transformation.

I’ve been lucky enough to be in the middle of many digital transformation in my role at DXC and have picked up a few lessons along the way.

What is driving digital transformation?

Let’s begin by taking a close look at what is prompting companies in the consumer goods industry and beyond to undertake digital transformations. A number of factors have thrust digital transformation to the top of the agenda in corporate boardrooms: cost pressure, need for innovation to simplify work and achieve breakthrough results and reduce cost, disruptive business models, the emergence of digital natives, the pervasive reach of technology through cloud, and the staggering increase in applications on smartphones and the opportunity that creates.

Startups and digital natives are achieving success by challenging the traditional boundaries and operating models of enterprise firms through their relentless focus on one or more of these drivers:

  • Using direct insights into customer behavior and preferences to design new products and channels
  • Becoming more agile, by better sensing and quickly responding to opportunities and threats
  • Deconstructing traditional supply chains to create right-sized, flexible supply networks
  • Using modern, open-source digital technology to automate a significant portion of their operations
  • Trusting machines with much of the decision making

More established companies need to embrace this same type of thinking to keep pace, and surround their digital transformation approach with measurements all long the journey to track progress.

Finding Your Enterprise’s Startup Happy Place

Digital transformation is something that happens over time. You cannot come in on a Friday and say “I’m going to digitize the business” and expected to be digitized on Monday. For enterprises trying to meet the challenges and disruptions caused by startups and digital natives, digital transformation needs to be undertaken as an iterative journey to embrace their new competitors’ mindset, culture, lean operating model, and technology stack, while ensuring a seamless transition and integration with legacy investments. It is critical to decide on the priorities and the starting point for the digital transformation journey.

With careful planning, leadership, and an attitude that your enterprise can thrive on change, gaining significant business benefits from digitization can be realized. Still, even the largest and most technically sophisticated companies struggle with digital transformation. To help guide you on your journey, here are five (not so) easy steps to successful digital transformation:

  1. Change Your Mindset

 Digitization is as much about the mindset as it is about the technology or the way the business operates. A good example: if we have a broken process and we digitize it, we still have a broken process.

For successful digitization to take place, we need a change in mindset. This means measuring what needs to be changed, changing the process, and then measuring again.

  1. Change Your Processes and People

 What digitizing the business means taking processes previously accomplished with people and recreating them to be done without them. Previously in the CPG industry, humans were leveraging Optical Character Recognition (OCR) technology to do scanning, but now we are going further by applying Smart Process Automation (SPA) and Robotics Process Automation (RPA) to do that work.

In addition to changing processes and technology, we need to change the people underneath. We need a different talent pool, with a different set of people that understand what needs to be done and how, while being able to measure all along the journey. Then we need to inject those people into existing teams and gradually expand those skills and take over the business.

  1. Embrace Automation

 Enterprises in the CPG industry that are successfully embracing automation are seeing reduced costs and greater efficiency in the supply chain. Enterprises should view robotics as a way to automate work previously done by humans. These are not the physical robots we have in factories, but software-based robots.

SPA takes robotics one step further. If a process fails because the machine learning engine doesn’t know what to do, it gets thrown out and a human comes in. The human teaches the machine learning engine what should have been done, and the machine learns from the exceptions that it doesn’t handle on its own.

  1. Embrace Open Technologies

 Open technologies and open source capabilities are not synonymous terms, but they are complementary. That’s because a lot of technology innovation that is happening in the world is coming through the open source community. To take advantage of this, CPG firms need different architecture, standards, and integration.

Enterprises need to migrate to next-generation technology stacks with fundamental layers that are open, scalable, and interoperable with other stacks, while supporting agile development practices, including bi-modal operations that combine Mode 1 and Mode 2 into a single model. Companies must also embrace an open ecosystem of providers, tools, algorithms, and software to enhance the capability of new platforms and keep them future-proof.

  1. Become an Agile Enterprise

 Agile is a crucially important component in digital transformation. That’s where components like DevOps come in, where the team that develops solutions is the same team that operates the business. For DevOps or an agile enterprise to be successful, we need to have a digital process where things go from one place to another in a digital format. As soon as it is in a digital format, we can automate and we can do things much faster.

So where does this all lead?

As we become more digital, we can automate more processes and do so to a greater extent. However, the automation we need to put in place in the digital world needs to be done with a lot more data. Data is now being captured and stored in a digital format.

In the CPG industry, once we have that data, we can automate more and become more proactive or even more prescriptive. Proactive means you apply automation and act in advance of a future situation, and prescriptive means you provide recommendations on the best path forward. If we know what might happen, we may have two or three options that we can work on. And as long as we have data, we can make predictions regarding which of those options has the highest probability of being successful.

How is digital transformation being applied in the real world?

As with many industries, in the CPG industry digitization is being applied successfully and delivering positive business results. Digitizing the workflow is giving enterprises improved visibility and the digitization process is saving money by, for example, increasing automation in the supply chain.

When a digitized business increases workloads by 50%, that should only account for maybe 10% more people. That’s because most of the work that’s being done is digitized with robots taking care of the additional workload. That is one of the key benefits of digitization, of course. It saves money.

What is my path forward?

In the current state that we have in packaged goods, operations are very linear. That is, things are interconnected, but only by point-to-point connections. We have optimization within individual silos, but we need to extend and interconnect that optimization across the entire enterprise.

In packaged goods, this begins by deploying a platform that allows us to exchange information in a much more effective way. There are still the point connections, but they go beyond the one-to-one linear format. Enterprises need to run operations where everything is interconnected, where silos no longer exist and everybody has access to all the information. And because everybody has access to all that information, everything is integrated with everything else and nothing is hidden. The information should exist in a single large repository because we want to do things fast.

It certainly isn’t an easy path and you are sure to see many others broken down on the side of the road as you find your way, but by embracing change, measuring along every step of the journey, and keeping an open mind to new processes and technologies, the potential rewards are limitless for those who keep at it.

Find out what Gartner says is needed to build and expand your business in a digital world.

Rene-Aerdts-headshotRené Aerdts is DXC’s chief technologist for a global consumer goods corporation client, for which he leads the technology strategy and provides the technical vision to advance the objectives of the business. Integral to that process, René drives innovation and inspires selective disruption to enable the client to thrive through accelerating change in the industry.


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