The Transformation Mindset

How Consumer Products Companies Drive

Sustainable Growth in an Uncertain World
THE TRANSFORMATION MINDSET: HOW CONSUMER PRODUCTS COMPANIES DRIVE SUSTAINABLE GROWTH IN AN UNCERTAIN WORLD

Midsize consumer products companies are adjusting their approach to business transformation by rethinking
traditional organizational priorities, according to a new survey by the SAP Insights research center.

Innovation in technology, products and services, and sustainability surfaced as crucial drivers for growing revenue and efficiency,
operating more sustainably, and adapting to new risks. In addition, surveyed business leaders revealed the priorities, opportunities,
and threats that they are considering now and for the near future, as well as their transformation plans for elevating their
profitability and competitiveness.

SETTING THEIR SIGHTS ON GROWTH

When asked to rank three key organizational priorities for now With regard to core revenue drivers, business leaders identified
and beyond the next 12 months, respondents reported increased sustainability of their products and services as a top
increasing revenue growth as most important, followed by priority (see Figure 1). This finding suggests that sustainability is
improving operational efficiency and mitigating risks. And a key, albeit new, strategy for growing revenue, joining the ranks
they expect these priorities to remain the same beyond the of traditional tactics such as introducing new products
one-year horizon. and services, expanding to new market segments, and improving
brand recognition and reputation. Lower on the list was
introducing new business models (23%).

Figure 1: Top Three Priorities for Improving Revenue Growth

What are your organization’s top three priorities to improve revenue growth?

Introducing new products or services 38%

Expanding to new market segments 35%

Increasing sustainability in your 35%

products and services
Improving brand recognition and 34%
reputation
Increasing sales to existing 33%
customers
0 10 20 30 40

LOOKING AT SUSTAINABILITY AS A KEY TO REVENUE GROWTH

Our survey shows that sustainability has emerged as an In doing so, these companies not only reduce their
important factor in accomplishing business priorities. Across environmental and social impact but also gain the opportunity
the board, organizations are incorporating sustainability directly to run more efficiently. They rely on tactics such as limiting
into their business strategies for driving revenue growth and wasteful production practices and packaging, optimizing the
improving efficiency. This represents a significant shift in use of natural resources, locating plants closer to the consumer,
priorities, with sustainability considered to be connected to and decreasing the distance that goods travel around the world.
overall brand recognition and reputation. In addition, companies search their network to onboard and
retain vendors that demonstrate ethical labor practices,
Business leaders from midsize consumer products companies regulatory compliance, and the ability to consistently deliver
have come under intense pressure from customers, industry goods that are affordable, safe, and high in quality.
activists, investors, and governments to prioritize sustainability.

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THE TRANSFORMATION MINDSET: HOW CONSUMER PRODUCTS COMPANIES DRIVE SUSTAINABLE GROWTH IN AN UNCERTAIN WORLD

TAKING ON EFFICIENCY DRIVERS

Surveyed business leaders cited cost control, spend tasks, gain real-time insights, and collaborate with colleagues,
management, sustainable operations, and process automation employees can produce more-effective outcomes ‒ including
as their top focuses for efficiency improvement. Making supply reduced costs, improved productivity, and faster delivery of
chains more dependable was also considered important. While products to market.
increasing emphasis on supplier and partner networks is a
traditional supply chain strategy, it’s also increasingly viewed as For consumer products companies, rethinking their use of
a top driver for efficiency. Other top priorities include divesting intelligent technologies and data is key to their success. Doing
inefficient businesses (28%), bringing supply chains closer to so allows them to optimize sourcing, supply, and promotional
markets (24%), and allowing employees to choose their and pricing decisions that traditionally required considerable
preferred work environment (25%). manual human effort and are highly time-consuming.
In return, current planning roles can be transformed from
Business leaders recognize that these high-priority areas are determining how many cases need to be produced to
interrelated and can be tackled together if addressed understanding and selecting the right algorithms. (see Figure 2
strategically. By having the right tools to automate lower-value for the top five priorities).

Figure 2: Top Three Priorities for Improving Efficiency

What are your organization’s top priorities to improve efficiency?

Improving cost control and spend management 45%

Making operational processes more sustainable 41%

Increasing the amount of automation within 39%

processes

Ensuring that supply chains are more dependable 38%

Increasing emphasis on supplier and partner networks 32%

0 10 20 30 40 50

The bottom line: Sustainability is now an essential element of the bedrock activities
of growing revenue and increasing efficiency ‒ and achieving these goals requires the right
data and enabling technology.

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THE TRANSFORMATION MINDSET: HOW CONSUMER PRODUCTS COMPANIES DRIVE SUSTAINABLE GROWTH IN AN UNCERTAIN WORLD

VIEWING RISK IN A NEW LIGHT Figure 3: Top Three Priorities for Reducing Risks

It’s no longer enough for businesses to think What are your organization’s top priorities to reduce risk?
about traditional risk areas, such as thwarting
existing competitors and protecting against Strengthening supply chains 47%
new market entrants. Instead, these factors against fragility
have been pushed aside by threats rooted in Avoiding damage to brand reputation 43%
current emergencies, such as supply chain
fragility, resource scarcity, and cyberattacks, Reducing reliance on scarce resources 37%
that can significantly erode these businesses’
brand reputation (see Figure 3). Protecting against cybersecurity attacks 35%

Preventing internal talent shortages 35%

While these risks are contemporary, they
have become more pressing in recent years. 0 10 20 30 40 50
For example, keeping shelves stocked is a
balance between anticipating what consumers
want and producing just enough product
Figure 4: Future Global Risks for Which Organizations
to limit spoilage. But when empty shelves result
from a recall, plant shutdown, or transportation Must Prepare
delay, consumers are more likely to find a
comparable ‒ if not, better ‒ product to meet Which of these future global risks will your organization need to prepare for?
their immediate needs. (Select any that apply.)

For longer-term global risks, surveyed Economic stagnation 48%

organizations still rank the fear of economic
stagnation and global shortages in natural Global natural resource shortages 40%
resources at the top of their list. However, they
Employment and livelihood crises 39%
consider employment and livelihood crises,
climate change, cyberattacks, and widespread
Climate change 37%
distrust and misinformation as almost equally
urgent (see Figure 4). 32%
Widespread distrust and misinformation

0 10 20 30 40 50

Business leaders expect their

operations to be impacted by
the ripple effects of growing
economic and societal concerns,
including global shortages of natural
resources, economic stagnation,
and the intensification of
employment and livelihood crises
and climate change.

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THE TRANSFORMATION MINDSET: HOW CONSUMER PRODUCTS COMPANIES DRIVE SUSTAINABLE GROWTH IN AN UNCERTAIN WORLD

Fueling Digital Transformation Progress

Regardless of their size, consumer products companies have a Over two-thirds of respondents claim to have made progress,
transformation imperative to tackle three critical challenges: with 51% transforming some planned areas and 17% completing
their journey as initially conceived. However, the survey findings
1. Increasing global uncertainty and volatility: Shift the do not portend good things for companies that haven’t already
business from a mindset of economies of scale and cost started transforming – most of them expect to make very little
reduction to a line of thinking centered around resiliency, progress two years from now.
agility, and speed.
Looking ahead, participating leaders view technological
2. Changing consumer behavior: Replace traditional innovation (81%) as their top priority in the next three to five
product category structures to adapt to consumers who seek years, with innovations in products and services (77%)
the best outcomes, not products. and sustainability (75%) following close behind.

3. Rising number of touch points: Consider selling through The technologies most sought by midsize consumer products
retail online channels, marketplaces, and direct to consumer organizations reflect recent hardships experienced during the
in response to the increasing variety of ways in which COVID-19 pandemic and resulting economic disruption and
consumers enjoy engaging with brands. labor shortages.

Calling into mind the industry’s growing attention to consumer These organizations are investing in technologies ranging from
and customer outcomes, the right transformation drivers employee collaboration tools and cybersecurity infrastructure
separate the leaders from the laggards. Companies that not to cloud computing and automated business intelligence (BI)
only survive but also thrive are the ones that are resilient, dashboards to transform their processes (see Figure 5 for the
agile, and fast. top five responses). Business process intelligence (61%),
application development platforms (58%), and data
Surveyed leaders recognize this reality, underscoring the management architectures (54%) also rank highly.
importance of their organization’s digital transformation to help
increase business performance today, better respond to future Surveyed business leaders recognize that
risks, and remain competitive. In fact, approximately 90% of their organization’s digital transformation is
respondents see a positive relationship between profitability critical to help increase business performance
and competitiveness and their organization’s transformation.
today, better respond to future risks, and
remain competitive.

Figure 5: Critical Technologies for Improving

Business Processes
Which technologies are important to the improvement of business processes?
(Select any that apply.)

Employee collaboration tools 78%

Cybersecurity infrastructure 76%

Cloud computing 71%

Automated BI dashboards 61%

Business process intelligence 61%

0 10 20 30 40 50 60 70 80

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THE TRANSFORMATION MINDSET: HOW CONSUMER PRODUCTS COMPANIES DRIVE SUSTAINABLE GROWTH IN AN UNCERTAIN WORLD

RECOMMENDATIONS The key to overcoming these risks is adopting data management

solutions that break down those silos, integrate information
Without question, leaders from midsize consumer products sources onto a single platform, and extend visibility and insight
companies highlighted sustainability as a critical driver for across the business. With the help of such solutions, every
growing revenue and increasing efficiency. And research data organization can leverage business intelligence dashboards and
shows that they are going beyond the expectations of advanced analytics to calculate actual profit margins, increase
customers, industry activists, investors, and governments by control over costs, and enhance spend management practices
entering a circular economy focused on minimizing waste. They by accessing one source for all business-wide information.
are also prioritizing outcomes that protect human and animal
health and advance social justice in internal and supplier Another approach is the use of a business network that
practices in R&D, production, logistics, and labor management. connects internal supply chain operations with external
suppliers and vendors. Whether they build their own or
At the same time, the goals of sustainable operations and participate in their B2B customers’ network, companies can
products must be balanced with supply chain capacity and benefit from the integrated system to gain full visibility into
inventory availability. Keeping shelves stocked with high-demand future demand, current supply, plant performance, and
products is critical to long-term retailer relationships and emerging risks. Doing so allows the businesses to adapt
ongoing revenue growth. This also means that the supply chain production operations based on shifts in demand, base costs,
must be resilient enough to pivot to new suppliers and service marketing campaigns, sales trends, and more.
providers when manufacturing capacities are low, logistics
are delayed, and existing resources, components, and Last, but certainly not least, midsize consumer product
ingredients are limited. Plus, operations must be compliant companies can further improve business transparency and
to limit product recalls, and companies must possess the track- real-time data insights by leveraging intelligent technologies,
and-trace visibility to proactively identify products that may such as artificial intelligence and robotic process automation.
not be safe for consumption or use. They can automate time-consuming, manual activities to reduce
errors, increase operations efficiency, and accelerate business
Most growing companies, unfortunately, do not yet have the data outcomes. And more importantly, employees can be redirected
management resources required to gain the level of visibility and to focus on higher-value work and make decisions that
insights needed to address these challenges. Times of expansion contribute more to the overall business success.
inevitably create new information and communication silos.

THE ROAD AHEAD

In a turbulent period of increased global risk, midsize consumer products companies place high importance on boosting revenue
and efficiencies while continuing to mitigate risk and enhance resiliency, speed, and agility. Underlying these fundamental initiatives
is sustainability, a new imperative that will become increasingly essential to core strategies in coming years. To make more progress
on transformation, which is seen as critically linked to business performance, business leaders need to further improve processes,
increasing flexibility and interconnectedness.

Please contact your SAP partner to learn how SAP solutions can help your business transform.

ABOUT THIS RESEARCH

The SAP Insights Midmarket Senior Executive Priority study collected data from 10,507 executives from companies with annual
revenues of less than US$1 billion across 41 markets and 28 industries. Respondents possessed the highest level of line-of-business
responsibility and oversight, with titles ranging from director to chief officer. The surveys were conducted from September 2021
through December 2021, with a 10-minute online survey used to collect the data.

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