Rethink. Reshape. Rewire. Why now is the time for consumer businesses to optimise their value chain
With a unique combination of forces affecting consumers and consumer businesses alike, it’s safe to say 2020 was a year like no other. Companies found themselves compelled to take stock, then find new ways to survive and grow, all at break-neck speed. For many, it amounted to an existential threat. For some, while the challenges were and are numerous, growth is still attainable. But achieving it requires thinking well beyond the knee-jerk reaction of aggressive cost-cutting tactics. Increasingly, consumer businesses find they need to align their short-term tactics with their long-term strategies. That means optimising the performance of their entire value chain — suppliers, partners and customers — in ways that protect and create value.
Rethink: COVID-19 focuses the mindset COVID-19 has seen consumer businesses tackle unprecedented challenges. The necessary public-health restrictions saw the travel and hospitality sectors in particular grind to a halt. Many retailers were forced to pivot overnight to a digital offering, while the automotive industry weathered factory shut-downs, supply chain challenges and showrooms closing to the public. Consumer product companies found themselves having to manage unexpected fluctuations in demand as well as competition from direct-to-consumer business models. Unsurprisingly, the financial hit has seen many businesses forced to consider where they can strip back. But we’ve also witnessed others adopting a smarter, more adaptive mindset, with increased technology and the adoption of new, consumer-centric ways of doing business. Of course cost management is still critical, but the traditional ways are running out of steam. Many companies tend to view cost on a functional basis, seeking interventions department-by-department whether in human resources, marketing, procurement or IT. But while slashing costs may feel like the only way out, it’s rarely more than a short-term survival strategy. Reshape: Build back better The actions companies take to address COVID-19 now will have a major long-term impact., Consumer businesses must reflect on how their ‘return to growth’ strategies can benefit all their stakeholders — investors, staff and customers alike, as well as society and even the planet itself. The fact is, while the impact of COVID-19 has shaken us all, climate change remains a far greater challenge to our industry’s long-term health. All the more reason why survival-focused decisions taken today should never compromise on the ability to operate in tomorrow’s climate change-affected world. Rewire: Make smarter decisions and investments to promote growth With today’s actions impacting the long-term, a purely cost-out approach may keep the wolf from the door, but it helps neither long-term prospects nor is it an answer to the other challenges 2020 presented. At times like this, capital expenditure can feel counter intuitive. Yet some companies still anticipate positive revenue growth in the near future (particularly where they responded to, and recovered from, the pandemic’s early challenges). And when revenue growth is expected, investments in the future can be wisely made. Understanding where the opportunities exist for quality ROI across the value chain can also inform businesses where to spend, and so drive new sources of short- and longer-term sustainable growth. We believe the key to thriving in the next-normal is by using a smarter strategic approach. And by assessing the value chain in full, they can optimise their operating models, products & services and customer engagement, in ways that will protect and even create more value. Given all it threw at us, 2020 was a year when many consumer businesses showed themselves to be resilient and adaptive. A time of rapid response and adaptation, with companies forced to follow short-term survival strategies that required tough decision-making in the process. But equally, many have been surprised by their staff’s willingness to embrace change — sometimes even driving it. Amongst the many lessons to be learned from the crisis, the speed that companies were able to adapt, and the resilience shown by their consumers, should encourage them to take bold steps towards future growth.
The years since the global financial crisis have seen substantial changes in both the consumer economy and consumer businesses. Though different in nature to the structurally-driven downturn of 2008, it’s worth looking at the shape of businesses as they entered the current economic crisis. The recovery of the consumer industry post-2008, suggests a similar opportunity for growth post-COVID-19. So, compared to 13 years ago are consumer businesses in the right financial position to grasp the nettle, and capitalise on the growth opportunities of this year and beyond?
*Analysis of sector performance is based on the 98 highest revenue generating consumer businesses in the UK. Consumer Products = 33 companies; Retail = 18; Travel and Hospitality = 26; Auto = 21
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