Many consumer packaged goods companies (CPG) and their retail trading partners seem to be like cars caught at a perpetual red light. They are idling—burning up resources, but not making any significant forward progress. And then there are companies, notably in the technology field, that seem to embody agility—the ability to move forward with grace and strength at just the right moment. Too often, these differences are written off to the burden of scale. However, our research suggests that agility is a trait companies can develop regardless of size or industry.
What the Trade Told Us Keeps Them Up at Night
What separates the Idle from the Agile, and can idling companies learn how to escape their current position and become agile? Those are two of the questions A.T. Kearney, in association with The Wall Street Journal, set out to answer as part of its continuing Consumers@250 project, which examines what American shopping patterns will look like in the year 2026. In search of the root causes of—and solutions for—the current industry malaise, we launched a unique and probing quantitative and qualitative study of 170 CPG and retail C-suite executives. All of the executives surveyed workat companies with sales in excess of $2 billion and 22 percent of the companies surveyed have annual sales of $10 billion and above. Respondents were identified only by title, company category, and sales ranking and not by name or any other personal identifier. Therefore, we use the words, “they,” and “their” to characterize their responses since we have no way of knowing their actual gender.
You don’t need a survey to tell you that the world of consumer goods manufacturing and retailing is undergoing a radical change, but exactly what to do about it is still a matter of heated debate on the part of both practitioners and pundits. As the challenges to established branding and retailing become more complex, a prolific variety of strategies have been suggested, ranging from the Idlers who stand pat, hoping to buy time, hoping the winds of change will somehow die down to the Agile, who eschew many of the foundations of past traditional success in favor of newer, entrepreneurial models more often associated with Silicon Valley than Main Street.
It Takes People to Move from Idle to Agile
Nearly two-thirds (64 percent) of the executives we polled report that becoming more agile is an urgent/top priority at their companies. But they are also clear that many of the challenges they face have more to do with internal corporate culture than they do market forces or competition. In fact, 40 percent of responding executives say that cultural issues are the main obstacles to agility.
Let’s look at talent acquisition and retention, for example. We asked executives the following question, “By 2026, how will your organization approach recruitment of top talent?” Nearly nine out of ten (87 percent) companies told us that when they are recruiting new talent they prioritize cultural fit over disruptive thinking. In other words, even though they know that traditional thinking is failing, most companies feel that diversity—in the form of challenging opinions—isn’t the solution. Only 13 percent of the executives polled believe that in 2026 they will be deliberately recruiting for diversity of thinking, even if it means hiring disruptive individuals. Almost half of all respondents (49 percent) say they would still be hiring for the “best cultural fit,” and the remaining 38 percent say they would look for “non-disruptive diversity,” that is, individuals whose values align to their organizations.
Building a Better Mousetrap
These results might seem a bit paradoxical in the fact that two-thirds of respondents say their companies need to become more agile. The CEO of a convenience store chain with sales of over $10 billion said they face a major challenge with the “lack of human capital.“ But bear in mind that clearly not everyone agrees about the need to reinforce existing culture. One CPG COO told us that they believe that, “bringing in members of management from outside to bring new perspective” is one of the keys to developing an agile mindset. A retail/grocery CFO said that new ideas may be just as useful as new people, noting, We have to continue to bring new ideas into the company and motivate employees to be innovative and creative.” Another retail/grocery COO adds that it is important to change how, where and why work is done. Employers, they say, need to supply “constant feedback, better work environment, greater training and ensuring career advancement to employees.”
Responding executives report seeing three significant barriers to their efforts to become more agile: risk aversion, talent deficiencies, and inefficient empowerment.
Since we’ve addressed at least the diversity aspect of talent, let’s turn to risk aversion for a moment. One CEO of a specialty food company with sales of over $10 billion said that, “One barrier is to get over fears of totally overhauling a system that’s been proven to work.” In other words, “If it ain’t broke, don’t fix it.” Of course, some would argue that—if not fully broken—many branding and retailing organizations today are fraying a bit around the edges, especially in the face of evolving competition from digital competitors.
Another respondent, the COO of an apparel company with over $2 billion in sales, said, “I think the biggest factor [driving risk aversion] is the inability to evolve, not wanting to make the necessary changes to keep up with the latest trends of the corporate world.”
The Empowerment Issue
It appears there are multiple forces driving inefficient empowerment of employees. The CFO of a CPG food company with sales in excess of $10 billion told our survey that they feel there is a “…lack of trust with younger managers.” That perceived “lack of trust” may have several sources. The CEO of a $5 billion-plus department store said, “Entrenched individuals are reluctant to give up control.” And, the COO of a clothing company with sales of over $2 billion added they sense “…a lack of buy-in from leadership.”
One of the things the A.T. Kearney/Wall Street Journal poll highlights is the fact that executives fully realize that understanding that change is needed is not the same thing as understanding how to change. In broad terms, many see the need for new ideas, new workforce models, new metrics and, yes, even some disruption thinking if they want to stop Idling and achieve ability. But they are also pragmatic enough to see that, in some cases at least, it may be themselves, their peers and the culture they have inherited and nourished that are the greatest impediments to progress.
The same dynamic tension points the survey surfaced in terms of culture, risk aversion, and talent acquisition are apparent in other critical areas. For example, we found executives are primarily focused on expanding their portfolios instead of simplifying and improving the customer shopping experience.
And nowhere is that more evident than in the gap our study found in terms of industry and customer attitudes around data. Respondents say they feel that investing in technology and data projects ranks second on their list of critical steps to becoming more agile. Executives clearly perceive data as a key driver of agility and personalization, but believe they still face severe limitations on its use.
Ninety percent of the companies we polled are actively incentivizing customer data sharing and 24 percent of respondents consider data gathering to be the most important step to offering their customers a more personalized experience.
Data also creates problems: “Having lot of information which can turn into analysis paralysis,” the CFO of a grocery chain with sales of over $10 billion told us. Legacy systems can also hamstring agility. “Incorporate systems that work across all states still compatible with headquarters is the main barrier to become more agile,” said the CFO of a cosmetics and jewelry retailer with sales of over $2 billion. And there are also issues of data availability and timing. A COO of a $2 billion-plus retailer complained of a “…lack of data and systems for quick, fact-based decisions at key points of influence.”
But as executives keep pushing to obtain more data from clients, consumers are getting increasingly concerned about privacy. Our research finds that 90 percent or more of shoppers are concerned with a variety of issues associated with data gathering and privacy, online and in physical stores.
Agility Is More than a State of Mind
It takes effort, insight and innovation to move from Idle to Agile. Resolving the inherent dynamic tensions that lie at the heart of some of these issues is both critical and tough. For many companies, it won’t be an easy transition but—like the distinguished group of industry leasers we surveyed—we believe it is necessary not just for growth, but for long-term survival.
Overcoming risk aversion, finding and holding the best talent, creatively addressing the challenges surrounding data gathering while meeting a new generation of consumers’ demand for more and more personalization of products and services and all the other steps necessary to move toward Agility still remain largely unexplored territory. And that’s one of the reasons we continue to expand our Consumers@250 database, which allows us to co-develop the future with the industries we serve.