Guest Post: A Case Study On Disruption
Since 1955, the Consumer Goods Forum has continued its mission of bringing together leaders in retail and manufacturing under the common goal of sharing best business practices and igniting positive change across the industry. In October, we had the opportunity to send couple of our awesome marketers, Kiren & Justin to participate in the 61st Congress of the Future Leaders Programme- one of CGF’s annual signature events for the “next generation” of leaders. Kiren & Justin had a great learning experience. I invited them to post on their most important learning.
This year’s event was held in London, one of the world’s most dynamic and innovative digital capitals, which provided a unique setting that allowed us to explore new perspectives on growth and industry disruption. Over the course of the conference, we had the opportunity to take a deeper look into the UK grocery market which is a fascinating example of both growth and industry disruption.
Historically, the UK market has been known for its Best In Class grocers that many across the globe look to replicate. Throughout the 2000s, The “Big 4” major retailers – Tesco, Sainsbury’s, Asda and Morrisons – dominated the UK market. Yet, sometime following The Great Recession, shoppers started to leave these trusted players for low-cost retailers, such as Aldi and Lidl. Even as the economy rebounded and incomes started to rise, however, shoppers didn’t return to the traditional players. As a result, the market was rocked by a sudden change of fortune as the top retailers started to realize year over year share declines as a new wave of low cost retailers stole channel share. This proved to be a surprise for researchers as the UK had traditionally been slow to respond to the discount model that other European markets, such as Germany and Switzerland, embraced.
While initially perplexing, a deeper look reveals that a confluence of factors when taken in totality resulted in this seismic shift of the UK grocery category. Throughout the 2000s, consumers started looking for alternative retailers that offered a better value and simpler promotions. As their shopping behaviors changed, many were looking for smaller “fill-in” trips to the grocery store. At the same time, consumer’s lives became more fluid and less routine – making the “weekly shop” less essential and encouraging consumers to try value based retailers for fill-in trips. Deep Discounters quickly captured shoppers with their advantaged pricing, high quality private label offerings that eventually became a part of their shopping repertoires. While it is safe to say both traditional and deep discount retailers will continue to compete in the UK for the foreseeable future, the days of a clearly defined “Big 4” are definitively over.
This small glimpse into the UK grocery landscape provides marketers around the world with a case study for industry disruption. Just as the deep discounters flipped the UK market on its head, we’ve seen signs of disruption across many industries with the advent of technology and the continued endeavor to make things more convenient, less expensive and overall more satisfying for shoppers.
How can we as marketers prevent ourselves from being “disrupted” by new players or new technologies, or even better, how can we cause disruption ourselves? Peter Freedman, the Managing Director of The Consumer Goods Forum, outlined a process that helps organizations prepare for the inevitable – industry disruption.
Habit 1: Learning From Disruptors. Although specific circumstances may vary, history is full of examples of disruptors that provide learnings for current and future business leaders. Netflix is a classic example. Throughout the 1990s, the home movie market was dominated by powerhouse Blockbuster Video. Both Blockbuster and Netflix started as video rental services – Netflix even sought to be acquired by Blockbuster only 16 years ago – yet, only one company remains successful today. As Blockbuster grew complacent with its market share position, Netflix continued to adapt and evolve to provide consumers with new video-rental solutions. Even as Netflix became the new market leader, the company has continued to find new ways to innovate by creating its own original television series and movie content. Now, originally seen as a DVD rental service, Netflix has over 126 original programs under its portfolio – more than any traditional cable network. Disruptors, including Netflix, know better than to grow complacent. Disruptors continuously focus on how to improve their business model and stay ahead of competition. As Netflix Chief Content Officer Ted Sarandos famously said, "The goal is to become HBO faster than HBO can become us."
Habit 2: Listening To Customers. To the surprise of no one reading this blog, Uber has changed the lives of millions around the world. However, Uber’s founders invented the breakthrough ride-hailing service by simply listening to their very own complaints while trying to hail a taxi in Paris in 2008. We can hardly remember the days before Uber, but back then, who hadn’t grown frustrated by trying to locate a taxi or not having the cash to pay the driver? What Uber’s founders did was solve a few really frustrating problems within a complacent industry. The taxi industry failed to recognize that consumers were looking for more in this relationship – more convenience, more transparency and more flexibility, and Uber was able to offer a better alternative. Now, the taxi industry will be hard pressed to ever return to its prior glory. Consumers will continue to evolve and have new frustrations and thus, we will be required to adapt. Once organizations lose sight of this, it is only a matter of time before consumers find a way to bypass them entirely.
Habit 3: Empowering Employees. Industry disruptors recognize that breakthrough ideas rarely come from the top. Instead, ideas can come from any level within an organization. Companies must embrace the mentality that good ideas can come from anywhere and empower employees to bring new ideas forward. Just take a look at one of the hottest (pun intended) products from Frito Lay – the idea for a new flavor of Cheetos came from a janitor.
Habit 4: Collaborating With Others. The benefits of workplace collaboration are well-known to many industry executives as we see many corporations shifting to new methods, including open office environments, to encourage teamwork and cooperation. However, the brightest leaders will not stop at their own organization. Freedman suggests that industry collaboration is also important to ensure that companies maintain a forward-looking mindset. The Consumer Goods Forum provides one of these collaboration opportunities.
As marketers, we all want to make sure we stay ahead of disruption. While this will never be a foolproof process, the tools summarized here and outlined at the annual congress of the Future Leaders Programme will hopefully encourage a mindset to ensure you and your organization are not avoiding, but leaning into, future change.
Authors:
Kiren Devereux, PepsiCo Marketing
Justin Schwarz, PepsiCo Marketing
