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- Why is Change Management Important to FMCG Right Now? - July 20, 2020
Due to coronavirus, the marketplace has stretched and pushed FMCG brands like never before. Whether it’s in terms of demand, fluctuating sales or maintaining their supply chain, it has made companies realize the need for better systems to deal with turbulent times. So, they should go ahead and get better systems, right? That’s easier said than done.
Organizational change comes in many forms – from isolated yet vital operational tweaks to total business transformation. But whatever form change may take, the steps to implementation can take time and are often strewn with obstructions. Resistance appears in all shapes and sizes: disparate legacy systems and data, diverging leadership agendas, disgruntled users; the list goes on. But once you address these barriers, change can be hugely successful.
Change is often thought of as something that takes place outside of the day-to-day. Something that takes a dedicated team and is prioritized alongside their other workloads. COVID-19 has caused a shift. Change is not only everywhere, but the need for organizational change – particularly in FMCG – has become more urgent and necessary. Dramatic shifts in consumer behaviour mean retailers have to work even harder to meet ever-evolving demands and remain relevant. But working flat out already, existing teams will be finding it hard to make it happen without sufficient support in change management.
For many brands in the grocery sector, change has suddenly become imperative for survival and longevity. However urgent the requirement may be, for change to succeed in the long run, it needs to be considered carefully and executed in the right way to ensure that any passive resistance does not stand in the way.
One of the most important ways that the industry should look at adapting is by focusing on change in Net Revenue Management (NRM), or Revenue Growth Management to use its other name. NRM gives organizations the ability to have a ‘single version of the truth’ when it comes to promotional spend and return. But, experience and progress in this space are mixed. Some companies have taken steps to improve their commercial awareness, others are just getting started, and more still are stuck with traditional ways of doing things. Scattered spreadsheets and data inputs that obscure the truth about performance are commonplace.
FMCG brands need to tackle change head-on. To do this successfully, they must use specific industry insights to help identify their problems regardless of whether it’s the fact that COVID-19 has taken a bite out of food supply chains, or the increased online demand for products. We all suffered at the hands of the lack of flour and toilet rolls when we first hit lockdown.
It’s about getting the balance between timings and activity. Through implementing the right strategy, change for better NRM is achievable for businesses of any size. But take note, if you change too fast, you can break people and the company, yet if you change too slowly, you’ll miss the boat.
The need to change
NRM enhances visibility on budget allocation and displays what’s recouped. This insight might encourage business leaders to restructure their strategy in a refreshed business plan, assessing the current situation as the perfect opportunity to push forward with considered digital transformation plans. Departmental heads could push for the ability to measure and promote success more accurately. Or aim for change which will come from those at the sharp end, requiring the latest technology to do their jobs properly. Right now, it’s likely that all three have a role to play.
For our upcoming report, Effective change execution in NRM, we interviewed some FMCG industry experts. A leading Italian manufacturer of branded chocolate and confectionery explained how they are rebuilding their processes to be more modern, as they want a system that offers suitable solutions for retailers, but inherent flexibility that also reflects their current demand. They also highlighted that communication and briefing from the top must be continual, as the visibility of NRM can be like opening Pandora’s Box. An executive from a top tier alcohol brand explained how the sales team would hit their revenue and volume numbers. Still, they didn’t understand if they were doing it the right way, as they would only know if better returns would be available by trying something different.
A smart combination of technology, data, user capability and process redefinition drives results and category growth. But though this might sound easy, it’s far from it.
Barriers to changing
Whenever a business tries to change, it will face hurdles along the way, and the hunt for better NRM in the grocery sector is no exception. The right approach needs to be created upfront, and they need to work out how to deal with all stakeholders and practical aspects of the commercial operation ahead of action being taken. This approach isn’t a panacea – we all know that that the best-laid plans don’t always run smoothly.
The change will be a balancing act, as having numerous moving parts can lead to a case of too many cooks, and a lack of authentic leadership can mean people miss traditions and old habits.
The FMCG brands we spoke to flagged that even though companies say they do ‘promotional optimisation’, they don’t know the actual impact on their P&L. Without that understanding, the activity is just promotion management. Experts we spoke to shared collective insights around detours and derailment. Although most were successful in the long run, some of the obstacles flagged included:
- Falling back on a ‘tech-first’ approach –There’s often a ‘full steam ahead’ approach to track down the tech without having any sort of change process in place.
- Misunderstanding NRM’s purpose– While the term NRM may not mean much outside of the commercial team, it’s helpful to educate the wider business about the discipline and its benefits before they can support a change programme.
- The risk of losing knowledge in the process– New processes can wipe out existing knowledge from team members whose spreadsheets may include useful historical information that businesses shouldn’t lose.
- Protective user community resistant to change– It’s common for people to have their guard up when told change should apply to their department. It’s not an overnight miracle – prepare for gradual acceptance.
- Implementing a newly centralised strategy –Changing your approach to a centralised one can be unexpected and unwelcome for local teams. Still, with close management, you can ensure they join the journey.
- Uncertainty over which data is valuable– Data can be overwhelming, especially when you have a lot of it.
- Too much change too soon– Don’t run before you can walk. Managing expectations for the timelines and educating people on the real, but eventual benefits is a time-consuming activity.
So, considering the desired benefits of successful NRM change and the barriers that will likely stand in a business’ way, it’s essential to explore more efficient ways to implement lasting – and successful – change.
Navigating change is often not easy. It can be hugely complex to deconstruct existing operations and face the future with an agile mindset. However, as the FMCG and grocery industry is being forced to adapt rapidly, it is a perfect time for people to be open to and accept change. Change offers a vast opportunity to reorient processes for the better; it just takes a skillful combination of planning, technical expertise, patience, and diplomacy to execute successfully.
With the support of external partners that are an extension of your commercial organisation, sales teams can become more commercially savvy and use the third-party involvement to implement change management.
The benefits are widespread, from sales accountability and success, boosted company revenue and profit, to building retailer relationships via joint planning opportunities and the improved returns from promotions.