It seems the days of consumer-facing firms outperforming other verticals are coming to an end. The high-growth-at-constant-margins formula that served them so well for decades was starting to lose effectiveness even before the COVID-19 disruption. And, in the years since the pandemic, growth has proven elusive due to factors like high inflation.

In a challenging market, brands are dealing with intense competition, trying to meet heightened consumer expectations, and grappling with masses of siloed data that make it hard to harness new technologies. The net result is they’re struggling to create value.

So what’s caused this change? And, perhaps more importantly, what can they do to overcome these challenges, prevent further margin erosion, and support a new model of sustainable growth?

Four megatrends eroding the old Consumer model

The historic value creation model was to build strong brands, distribute in growing markets and channels, and manage costs. But four key trends are challenging this model and getting in the way of value creation.

Trend one: Macroeconomic slowdown

A variety of factors are contributing to a broad macroeconomic downturn. Population growth is stagnating, wealth expansion is moderating, and growth in China is slowing. McKinsey analysis suggests that, as a result of this macroeconomic slowdown, growth in the consumer sector moving forward will be half the rate it was in the 2000s.

Trend two: Consumer fragmentation

Consumer purchase journeys are fragmenting, as their attention turns increasingly to digital, and they engage and shop more fluidly using a variety of channels. There’s also growing interest in wellness and sustainability, which is impacting purchases, although there’s still confusion in these areas and some unwillingness to pay more for products that are good for people and for the planet.

Trend three: Mass merchant squeeze

Supermarkets are losing market share and, particularly in Europe, are struggling with profitability, which is making them tougher trading partners for consumer brands. Across the globe these supermarkets are pushing down prices and ramping up supplier fulfilment expectations. In Europe many supermarkets are exploring private label opportunities, as well as reducing headcount in areas like merchant teams.

Trend four: Volatile costs

While the recent inflationary period appears to be lessening, other factors such as supplier instability and fluctuating prices of raw materials, energy, and labor are likely to contribute to volatile costs in the coming years. The World Bank Group describes an extraordinarily tumultuous decade for commodity markets, with commodity-price volatility higher than in any previous decade since at least the 1970s.

Driving organizational agility and value

To create value in this tough environment, organizations must shift their approach and embrace enterprise-wide transformation strategies that foster sustainable business improvements.

Operations is the obvious place to begin optimization efforts, as the function that accounts for around 80% of total costs – from raw materials and packaging to labor costs and plant maintenance. By transforming and optimizing daily operations, consumer brands can shift their portfolios to drive top-line growth, increase resilience, reduce costs, and make a positive impact on the environment.

Digital is inevitably at the center of the transformation agenda, and with the emergence of generative AI (GenAI), the transformative potential has increased significantly. For example, it’s estimated the technology could generate up to $660 billion in value for retail and consumer brands through boosting productivity by up to 2% of annual revenues. Those companies who lag behind on AI adoption will be at a serious competitive disadvantage

To successfully capture value, companies will need to transform their operations with these levers as guides:

• A business-led digital road map, to align the senior leadership team on the transformation vision.
• The right talent, skills and capabilities to execute and innovate.
• Operating model agility, to increase the metabolic rate of the organization by bringing operations and technology together.
• Innovative solutions, allowing the business to innovate at pace.
• Connected and enriched data, that’s easily consumed across the organization to improve customer experiences and business performance.
• Change management to maximize value capture by ensuring the adoption and scaling of digital solutions, while managing transformation progress and risks.

Process Intelligence enables operational transformation

Process Intelligence enables Consumer companies to drive the transformation they need to create value and stay ahead of the competition in a tough environment. It integrates data from any source to capture real-time process performance. It then layers in standardized process knowledge and AI to create a process digital twin that acts as a holistic, contextualized foundation for business decision making.

Using process intelligence, consumer companies can continuously analyze, improve and monitor their processes, meaning they can understand where value is hiding in the business, as well as how to capture it.

Examples of Process Intelligence in action include:

• A leading food producer used Process Intelligence to accelerate its ERP migration, gaining full visibility of its main processes in just three weeks. This data-first approach enabled the company to better inform design and complete the rollout in 12 months – nearly three times faster than average.
• A leading CPG company used Process Intelligence to reduce waste in its outbound supply chain. By integrating multiple source systems into a single, unified view, it was able to cut freight costs, improve plan conformance, and drive savings across cost-to-serve metrics.
• A leading snacking company used Process Intelligence to cut revenue leakage and speed up product development. By unifying 20+ teams and systems into a single view, it improved SLAs, reduced cycle times, and minimized deductions— ultimately streamlining go-to-market efforts
• A leading retailer leveraged Process Intelligence to optimize its markdown process for perishable goods. By addressing SLA violations and providing real-time management visibility, it successfully increased sales and margins.

Putting Process Intelligence at the heart of AI efforts

Companies currently lack the contextual data they need to to effectively apply AI. There’s no unified data layer that provides the business context AI needs to work properly – context like KPI definitions, role hierarchies, and rules. It’s a bit like trying to use a GPS without the right navigation data.

Process Intelligence can provide companies, and their AI solutions, with this contextual data. The process digital twin fuels AI with input into how the business runs, end-to-end, across systems, as well as providing enterprise specific KPI definitions, root causes, and improvement opportunities. And it enables businesses to manage the performance of AI models by observing how they’re impacting process performance.

Three ways Process Intelligence is being used in AI efforts include:

• Process copilots: A copilot allows anyone in the organization to get rapid process insights from a ChatGPT-like interface. A global packaging manufacturer is using a copilot to reduce excess inventory by enabling plant technicians to easily find nearby warehouses with spare parts they can use.
• AI-powered apps: AI-powered apps allow users to review and approve AI recommendations. A global producer of health and hygiene products is using one for vendor deduplication – harmonizing purchasing terms by detecting duplicate vendors and mapping out parent-child relationships in the supplier base.
• Partner APIs: By leveraging partner APIs, Consumer brands can develop AI chatbots or agents that leverage Process Intelligence in external solutions. A global snack manufacturer is streamlining the Accounts Payable process by extracting payment terms from ingested PDF contracts via a Large Language Model to perform a four-way match.

Process Intelligence doesn’t replace talent

Process Intelligence on its own won’t enable operational transformation and value creation for consumer brands. It’s vital to tie the tech together with the right talent and capabilities to power sustainable growth. As McKinsey & Company partner’ Rahul Shahani explains,

“Operational transformation is contingent upon empowering your frontline to interpret and action insights from a data and technology landscape that is increasing in scope and complexity. Building the right talent and capabilities within organizations to do this is the foundation for sustained success."

Process Intelligence supports a new growth model in the digital age

The old value creation model might not work in today’s world, but there’s a new model of transformation and optimization that will help consumer brands create the value they need to compete in the digital age.

Get in touch to find out what Process Intelligence can do for your business’ journey to a new model of sustainable growth.