Navigating Your Way to Tech-Enabled Revenue Growth Management
By Alex Swales
Commercial dynamics, such as the pressure for profit and technology savviness of millennials, are presenting new challenges for CPG companies as they manage revenue growth. It has led to the need for a much more integrated view on growth that is based on genuine insights from data within the business as well as external sources. Traditional revenue growth disciplines predict consumer behavior and optimize for product availability and price in such a way as to manage revenue growth – but they can be painfully slow and based on pre-conceived models of what works.
Technology has increasingly had a role in identifying insights by analyzing core Revenue Growth Management (RGM) levers. This is due to its ability to enable much more data to be analyzed for behavioral impact and find patterns and solutions to address revenue needs faster. Tech-enabled RGM, as it is known, is entering a new era that can help companies ensure a scalable and long-term sustainable approach to growth, through the interplay of data engineering, data science, advanced analytics and agile tooling.
The need for tech-enabled RGM has never been greater. A recent McKinsey survey of CEOs at CPG organizations found systemic dissatisfaction with the current state of CPG companies. Less than 30 percent had any kind of systemic growth management, and only 6 percent of CEOs were satisfied with the way their company innovates. Perhaps unsurprisingly in that context, eight out of 10 CEOs said they feel their business model is at risk.
For many companies, RGM in itself is nothing new. However, trying to move from slow and manual spreadsheet processes towards fully integrated platforms that call on data sources as diverse as POS data, Profit & Loss, ERP systems, shopper panels and brand equity studies on Usage and Attitude, for example, can seem like a daunting task. This is especially true given that the gold standard for such solutions are those that are real-time and are feeding data to cloud-based storage that can be used to regularly and effortlessly refresh the insights on which a company bases its decision.
It is actually easier to get started on the journey to tech-enabled RGM than many realize if organizations stay true to some basic rules. Open source tools and the availability of cloud services mean companies can experiment with tech-enabled RGM using off-the-shelf technologies without great expense and begin to see the value it can deliver.
Outlined below are the rules that we believe set the best foundation for success, based on our own experiences and those of tech-enabled RGM pioneers with whom we have worked from a wide range of industries.
See it as a business opportunity
The default position of many approaching tech-enabled RGM projects is to view them as a technology problem rather than a business opportunity. Integration and adoption happen through engaged (and up-skilled) business leaders and front-line personnel. It is important that people from across the business participate in the project, and senior personnel must feature heavily in the composition of your digital and analytics teams.
Choose three priorities
Pick the three use cases where you feel RGM can really make a concrete impact in the business. Make those use cases the priority of the project. Eighty percent of the effort in the project should be centered around the delivery of those cases initially. This will quickly demonstrate the value of tech-enabled RGM to the wider business, building excitement and interest in scaling it out to other areas.
An innovation focus is key
Tech-enabled RGM could be viewed as a centralized function to be owned and controlled by one team. However, experience has taught us that while a center of excellence approach might be needed to pool the talents in the business that can deliver on tech-enabled RGM, that team should not own RGM. They should work to build the platform and governance standards that mean users on the front line can own their own RGM destiny, and be inspired to use it in innovative ways, without the constraints of a pre-defined set of tools and reports.
Don’t boil the ocean
Many think about the data sources outlined above and realize that organizing and cleaning that data to “feed” a tech-enabled RGM would be a huge task in its own right. The reality is that, depending upon where the pilot of the solution will run, initially only 5-10 percent of your data needs to be organized to get started. Leverage the data you have before you start investing in new sources.
Adopt agile working practices
Agile working is a methodology that gets you to a working solution quickly. Agree a regular cycle of meetings and milestones, embrace the failures that will come along the way as opportunities to learn, and adapt to your learnings throughout these milestones. Adopting a tech-enabled RGM project should only be a top priority if it is going to create material value in the near term – not in 10 years. Take a bias to scaling priority use cases fast, kill experiments that aren't working, and establish quarterly milestones for impact and value delivered.
Tech-enabled RGM provides a new, sophisticated way for companies to understand the path to growth in their business and identify growth opportunities that may have been under their noses for years. With margins tighter than ever and competition intense, can any CPG company afford to not seize every opportunity in their path?
Alex Swales is an associate partner and RGM solution leader at Periscope by McKinsey.