The Collaborative Planning Advantage. Unlocking Mutual Growth through Collaborative Partnership

Transcription

1 The Collaborative Planning Advantage Unlocking Mutual Growth through Collaborative Partnership

2 Contents Executive Summary Page 3 The Dual Key Necessity Page 4 The changing shopper has made traditional joint business planning difficult The Call for Collaboration Page 6 Despite increasing pressures, suppliers and retailers should embrace collaboration The Change Imperative Page 7 Market forces further emphasize the case for a new form of business planning Success Criteria Redefined Page 8 The key characteristics that set Collaborative Partnership Planning apart Building a Collaborative Partnership Planning Capability Page 9 The fundamental components of a CPP capability Process: Installing a collaborative approach for planning Page 9 People: Broadening competencies and creating incentives Page 12 Insights: Integrating knowledge to drive action & growth Page 13 Tools: Enabling higher-level strategic execution Page 13 Principles for Successful Implementation Page 14 Seven guiding principles for managing the shift to collaborative partnership The Look of Success Page 16 Case studies on how Caprē Group has delivered client results through CPP Unlock Success with Collaborative Partnership Page 17 2 The Collaborative Planning Advantage

3 Executive Summary The Collaborative Planning Advantage Unlocking Mutual Growth through Collaborative Partnership Suppliers once held all the keys to growth: the power of their brands and the insights behind them. As retailers grew in power and scale, so grew their ability to control suppliers access and influence the terms of doing business. The outcome of this shifting power dynamic a transactional, highly-tactical form of Joint Business Planning is no longer delivering the growth shareholders demand. Because the shopper has transformed, and unlocking growth now requires suppliers and retailers to stand side-by-side and work together to deliver results in the new CPG & retail landscape. The next generation of JBP is CPP: Collaborative Partnership Planning. Pioneered by Caprē Group, this new approach to business planning emphasizes category leadership, multi-year strategic collaboration, cross-functional connectivity, and joint stakeholder measurement. CPP requires organizations to think and act differently to build stronger, more impactful relationships with business partners. A CPP capability is built upon four pillars: Process, People, Insights, and Tools: Process: A Joint Approach toward Aligned Goals A six-step process deployed across two primary phases: Phase 1 secures commitment to the new process, conducts strategic assessments of both parties, aligns on joint goals and key success metrics, and develops category growth strategie Phase 2 creates a strategic plan that outlines insights-led strategies for capturing growth and, once the plan is deployed, continuously evolves the plan based on real-time results People: Broadened Competencies, Defined Roles, and Shared Metrics Shopper-centric, category-first competencies for the cross-functional organization Defined roles & aligned performance metrics that focus all parties on mutual goals Insights: Integrated and Sophisticated Knowledge Insights that span the full path-to-purchase and anticipate category future Application of insights to identify opportunities & create strategies to drive growth Tools: Enablers of Higher-Level Strategy Best-in-class tools that help drive to a common so what behind information Templates, frameworks, and training that synthesize expertise across organizations Leading supplier and retailer organizations have found unparalleled success by embracing the core tenets of Collaborative Partnership Planning. By working together to be category-first, lead with insights, solve each other s long-term business challenges, and prioritize sustainable mutual success, retailer and supplier collaboration can unlock market success. 3 The Collaborative Planning Advantage

4 The Dual-Key Necessity A lock is a simple and straightforward mechanism: if you have the key, you can open the lock. No matter the complexity of the lock s inner-workings or the layers of protection welded on the surface, finding the key is the path to what s inside the box it protects. Suppliers and retailers have been working to maximize their own benefits, but they can no longer work alone. Suppliers once held all the keys to growth, because they had the brands. Suppliers would leverage the power of their brands and the insights behind them to unlock desire and create demand at retail. The retailer might also benefit, but the power resided in the key master s hands. Over time, retailers discovered keys of their own. Advances in technology have produced sophisticated data suppliers can only dream about. As retailers grow in market power, so grows their ability to control suppliers access and influence the terms of doing business. And so, for a time, suppliers and retailers would jointly plan their businesses in a highly transactional manner granting each other limited access to keys in return for financial incentives. But while the supplier and retailer key masters have been working to maximize their own benefits, the shopper changed the locks. Because some things are too valuable for a single key to control: from safety deposit boxes to missile control systems, dual-key locks render your key ineffective unless you have a partner by your side to open it with you. Organizations can no longer rely on their single keys to reach the shopper, and those that do will be locked out. 4 The Collaborative Planning Advantage

5 The shopper is king, and they have the keys to the kingdom. Meeting shopper needs is increasingly difficult. The space between the consumer and shopper has narrowed, requiring integrated communications along all touchpoints. They live in a world of omnipresent information, and their rapidly changing lifestyles demand holistic wellness, authenticity, and instant gratification. An abundance of brand and retail choices await them on every physical and digital corner, and mobile ubiquity enables their seamless movement across channels. They want solutions that speak to them personally, create positive experiences, anticipate their needs, and provide exactly what they want when they want it and usually at the lowest price. Suppliers now routinely spend $2 on trade marketing for every dollar spent on brand and consumer messaging 1. Yet these rising investments are not being effectively converted into bottom line results. Retailers struggle to translate trade into profits 2, while suppliers are only seeing short-term tactical gains from retail initiatives, not sustainable competitive advantage 3. The shopper is king, and they have the keys to the kingdom. In this new shopper paradigm, suppliers and retailers must stand side-by-side and work together to unlock new levels of growth. Trade Spend Performance Does Not Break Even Makes Money Total Grocery Water Salty Snacks Soft Drinks Candy Frozen Foods Cereal Beauty Household Care Personal Care 1 Includes in-store promotion and coop advertising. A.C. Nielsen, Trade Promotion Practices, 16th ed. (2007), See chart. Nielsen, Trade Promotion Performance. Data accessed March N. Dawar & J. Stornelli. Rebuilding the Relationship Between Manufacturers and Retailers. MIT Sloan Management Review Magazine, Winter The Collaborative Planning Advantage

6 The Call for Collaboration The issues facing executives on both sides have grown exponentially. As margin pressure ripples throughout the CPG & retailer landscape, a multitude of business challenges stand in the way of growth: anticipating and adapting to holistic marketplace changes; managing cross-functional complexities; building sustainable core competencies; creating category influence and leadership; and, above all, delivering corporate P&L results for shareholders. These expectations do not befit a shallow, transactional planning process. There is too much urgency on either side to expect true joint planning, and where there should be collaboration there are instead winners and losers. But what choice do executives have? Why concern oneself with the challenges on the other side of the table when there are already so many pressing issues at hand? A select few prescient executives have answered that question, and those that have not will soon be forced to consider it. Despite powerful brands and market scale, suppliers and retailers are not achieving the results their investors require. The CPG industry grew only 2.1% in , and Supermarkets and Supercenters are expected to post just 0.4% and 2.9% growth rates respectively through 2019 after adjusting for inflation 5. Suppliers and retailers need to evolve their joint business planning (JBP) and work together to create mutual success on both sides. Caprē Group calls this approach Collaborative Partnership Planning (CPP). CPP combines best thinking, creates mutual differentiation through insights and strategy, and generates value for both sides it is the next generation of planning. DID YOU KNOW? Suppliers and retailers who collaborate on promotions strategy, category assortment, and in-store layout see average sales increases of 6.3% with a corresponding 3.9% increase in profits 6 4 Hinchcliffe et. al., Which Companies Drove US CPG Growth in 2014? BCG Perspectives. March Willard Bishop, The Future of Food Retailing Hua, X, et al. Collaboration today and tomorrow taking the right steps on the path to impact, ECR Europe and McKinsey & Company, May The Collaborative Planning Advantage

7 The Change Imperative Collaborative Partnership Planning does not just solve brand issues or retail issues it solves market issues. Shoppers are not done changing, and the entire retail arena is changing right along with them: Omni-Channel Ecosystems. Retailers are restructuring to integrate across physical, digital, and media touchpoints to reach the full range of conversion opportunities. Suppliers must in turn deploy their brands across multiple channels to win in this new multi-channel reality. Those who practice true collaboration are winning; those who face their challenges alone will be left behind. Hyper-Competition Across Formats. Shoppers are visiting fewer stores overall (22% decrease since ), and retailers are straining to compete as small formats and e-commerce competitors emerge. Meanwhile, logistics are becoming more complex as online ordering, e-delivery, and ship-to-store become expected fulfillment options. Growth of Private Label. Private label brands can build shopper loyalty, but they also erode national brands relationships with consumers. Retailer scale and access to data has made private label brands feasible options for growth but they also require retailers to build entirely new capabilities and compete with their biggest partners. Data Overload and Lack of Insights Application. The amount of digital data is doubling every two years 8, making analysis and extraction of insights an increasingly immense challenge. An even greater challenge is in the application of these insights many companies lack proficiency in effectively synthesizing and applying insights to their overall strategy. Merger & Acquisition Pressure. Shifts in consumer preferences and market disruptions are squeezing earnings and frustrating Wall Street. Shareholders are pushing M&A to drive growth and combat competitor consolidation. Meanwhile, leaders already undergoing M&A are seeing sharp reductions in budget and headcount, impeding strategic execution. These challenges only amplify the need for collaborative partnership. Successful CPP is marked by suppliers and retailers coming together to build cohesive strategies that drive mutually beneficial opportunities. Those who practice true collaboration are winning; those who face their challenges alone are will be left behind. 7 Kantar Retail ShopperScape EMC Digital Universe April The Collaborative Planning Advantage

8 Success Criteria Redefined Having a planning process does not mean collaboration is actually happening. According to one study, 40% of traditional JBP efforts have no sustained impact on business results, and the benefit is almost always distributed inequitably across parties 9. Caprē Group has identified four crucial traits that distinguish the Collaborative Partnership Planning capability: Category Leadership Retailers expect suppliers to demonstrate category growth, not just brand-centric opportunities. Seeking category growth alongside disproportionate brand success benefits both sides. Suppliers who establish themselves as true category leaders by understanding current and future category growth drivers will be sought by retailers as trusted partners. Multi-Year Strategic Collaboration Collaborative Partnership is an ongoing commitment to growth on both sides, beginning with a common vision for the future. Retailers and suppliers each have their own goals, from short-term performance metrics to long-term strategic imperatives. Successful CPP pursues joint multi-year goals and adapts as the rapidly changing shopper and retail landscape evolves. Cross-Functional Connectivity True CPP partners are connected and aligned throughout each other s organizations. Working to install multi-year strategies cannot be performed within an isolated department. To drive sustainable impact, successful partnerships look beyond sales to incorporate leadership from Marketing, Finance, Supply Chain, R&D, and even Human Resources. Stakeholder Measurement Finally, best-in-class CPP measures success through the realization of stakeholder priorities. For a supplier, this means being customer-back beginning with the retailer s goals and building a scorecard that reflects them. Suppliers that put customers goals first are able to more effectively identify opportunities, create winning growth strategies, and build lasting trust. 9 Brinkhoff, A. & Großpietsch, J. Secrets to successful manufacturerretailer collaboration, ECR Europe & McKinsey & Company, The Collaborative Planning Advantage

9 Building a Collaborative Partnership Planning Capability CPP requires organizations to think differently with manufacturers and retailers sharing a commitment to the evolved, dual-key approach and defining a strategic vision to steward efforts along the way. But organizations must also act differently by building a new capability to transform the way the organization pursues and achieves its goals. Understanding how to build the Collaborative Partnership Planning capability is the first step toward stronger, more impactful relationships with business partners. Process: A Joint Approach toward Aligned Goals Caprē Group s Collaborative Partnership Planning process establishes a consistent approach that keeps the category and retailer first and shopper insights at the center of planning. The six-step process is deployed across two primary phases: Pase I: Strategic Category Alignment Phase II: Collaboration Plan, Execution, & Training 9 The Collaborative Planning Advantage

10 Phase I Strategic Category Alignment Phase Secure Commitment to CPP Process. The first step is for the supplier and retailer to jointly commit to the new CPP process. Commitment can happen even when the two parties do not see eye-to-eye. Part of this step is assessing where the supplier & retailer relationship stands today, setting goals for improving that relationship throughout the process, and investing time and financial resources in the effort. Conduct Strategic Assessment. The strategic assessment is both inward- and outward-facing, looking at the synergies between supplier and retailer priorities and building a robust strategic view of the retail landscape to bring context to these priorities. Align on Joint Goals & Key Success Metrics. The third step of the Strategic Category Alignment Phase is gaining supplier and retailer alignment on their mutual goals for Collaborative Partnership Planning and pinpointing the key financial metrics that will drive success for the upcoming planning cycle. Remember, these joint goals should be category-first and focused on mutually beneficial outcomes. Develop Category Growth Strategies. What are the core issues and opportunities that will drive growth in the coming year? The focus should be on category growth, not brand growth, starting with the retailer s strategies and goals uncovered in Step Two. Being customer-back in category strategy establishes a suppliers category leadership voice with its retailers. 10 The Collaborative Planning Advantage

11 Phase II Collaboration Plan, Execution, & Training Phase Create Strategic Plan. Partners should emerge from Phase One with an Opportunity Blueprint that outlines insights-led strategies for capturing growth. Once finalized, this supports the creation of a multi-year strategic plan. From this the supplier and retailer align and commit resources to a Strategic Plan complete with monetized, strategic initiatives to guide the partnership for the coming fiscal year. Execute & Measure. The plan is put into action and continuously evolved based on real-time results. Subsequent iterations of the process will leverage this continuous feedback loop to strengthen future strategic assessments and goals. Critical here is the free-flow of information on the scorecard; it is not always easy to share profitability or inventory levels, but it is important that partnership are committed to providing each other the metrics outlined in the strategic plan. The Collaborative Partnership Planning process offers multiple benefits. It results in improved alignment and commitment to multi-year, strategic goals. It provides both sides with broadened marketplace perspective and continuous learning. It accelerates financial results and improves the tracking of ROI. But most importantly, it elevates the supplier & retailer relationship from a transactional to a true strategic partnership. Standing side-by-side, they unlock new levels of growth together. 11 The Collaborative Planning Advantage

12 A Collaborative Partnership capability is anchored by a strong, dual-key process, but just as critical are the People, Insights, and Tools that support it. Collaborative Partnership Planning Capability 2012 Caprē Group People People: Broadened Competencies, Defined Roles, and Shared Metrics Collaborative Partnership Planning ensures the organization s people are positioned for success. New competencies will need to be built a shopper-centric, category-first approach requires elevating the cross-functional organization in insights application, strategic thinking, and compelling communication. Roles and responsibilities must clearly identify who will be collaborating on the insights and strategy throughout the process. Additionally, establishing performance metrics aligned to the Strategic Plan keeps all parties focused on mutual goals. For example, rewarding brand managers for category growth creates incentive for a category-first mindset in a brand-focused part of the team. A shopper-centric, category first approach requires elevating the competencies of the cross-functional organization 12 The Collaborative Planning Advantage

13 Insights Tools Insights: Integrated and Sophisticated Knowledge The ability to translate data into deep and actionable insights is an essential component of Collaborative Partnership Planning. Sophisticated insights should encompass the entire path-to-purchase across all channels, including e-commerce, and should uncover the underlying drivers of shopper behavior and have the foresight to predict where the category is heading in the future. Successful collaboration also requires the application of these insights to identify opportunities, create strategies, and design tactical solutions to drive growth. Tools: Enablers of Higher-Level Strategy Sophisticated insights should encompass the entire path-topurchase, and be supported by bestin-class tools that drive to a common so what behind the information. A common lament from retail executives is the need for one version of the truth across the disparate pieces of data shared by suppliers and internal functions. Best-in-class tools help to solve this problem by synthesizing expertise across multiple parties into consistent templates, frameworks, training modules, and approaches that drive to a common so what behind the information. Tools vary in complexity, from simple yet disciplined models used to prioritize action and drive efficiency to more advanced tools such as multi-year strategic frameworks, advanced analytics, or scorecards to track and measure results. 13 The Collaborative Planning Advantage

14 Principles for Successful Implementation Even when positive, change creates friction. Suppliers and retailers must manage the shift to CPP by creating a sense of urgency, uniting around a common vision, giving a voice to internal and external stakeholders, and celebrating success. In Caprē Group s experience, successful firms also follow seven core principles of success: Stewardship at the Top is Critical Leadership must commit to advocating CPP s role in success. Change management will be necessary executive realignment and new routines are needed to promote cross-functional collaboration and build the new discipline. Instill Category-First Mindset Brands are not accustomed to putting the category and its shoppers at the center. Use compelling insights to prove how brands benefit when the category is growing, and consider building category incentives into performance metrics. Be Aggressive in Building Competencies Identify competencies needed by cross-functional teams and work quickly to build internal knowledge and skills. Focus first on those most heavily linked to success, such as insights and strategy.. Collaborative Partnership is the next evolution of CPP, and leading organizations have found unparalleled success by embracing it. 14 The Collaborative Planning Advantage

15 Pilot Robustly to Learn and Create Advocacy Pilot with key customer teams to test and learn what works and what needs refinement before organization-wide launch. Quick wins will prove the viability of Collaborative Partnership and build advocates in the organization. Leverage Success to Scale Rapidly Do not lose momentum waiting to close every gap and align every resource. Once pilots deliver successful outcomes, leverage those gains to quickly implement and scale Collaborative Partnership throughout the organization. Tailor Capability for Business Impact The initial Collaborative Partnership capability should evolve in real-time to maximize results. And like any structure, it should be tailored to suit the nuances of the surrounding environment to create even greater returns. The Collaborative Partnership Planning approach is the next evolution of JBP, and leading supplier and retailer organizations have found unparalleled success by embracing its core tenets. I cannot say enough about the positive, sustainable impact Collaborative Partnership will have on our customers and on our Company, says Jim Dinkins, Chief Retail Sales Officer of Coca-Cola. We have translated the momentum from successful pilots of the new process with key customers and spreading excitement across the company. CPP is elevating our ability to consistently deliver world class customer value creation and enable transformational change with our customers. By being category-first, leading with deep insights, solving for each other s cross-functional and long-term business challenges, and driving multi-year strategic collaboration, retailer and supplier collaboration can unlock market success. 15 The Collaborative Planning Advantage

16 The Look of Success For over a decade, Caprē Group has helped many leading suppliers and retailers build, activate, train, and evolve their Collaborative Partnership capabilities. According to one CPG Sales Leader, The Caprē Group transformed the planning and sales process for the entire company. The impactful process and engaged training helped our organization become partners with our retailers and drive robust category group. I would highly recommend Caprē Group to any supplier looking for the category leadership voice. Caprē Group customizes its proven approach to address clients unique situations, from designing visions to establish success criteria, to deploying our proprietary strategic blueprint to apply insights and capture opportunities, to piloting and scaling the capability with customer teams, to training the organization on the competencies needed for best-in-class CPP. Confection Leading confections firm heavily invested in insights, but not effectively applying to strategy Defined and deployed a proprietary process to apply insights to Collaborative Planning, Shopper Marketing, Store Operations, Supply Chain, and other functions Process became the cornerstone for a new shopper-centric collaborative partnership capability that eventually scaled across the entire organization Pet Care Leading pet care company struggled to deploy robust insights with marketing and customer teams Installed a hypothesis-driven approach to focus analysis and drive insights application Redesigned planning to focus on shopper and category strategies to leverage core insights strength Communicated new CPP capability to top retailers to signal new era of partnership Beverage In response to retailer feedback, leading beverage manufacturer committed to elevate planning to become retailers most trusted partner Created new CPP process and identified new category growth opportunities Instilled customer-back mindset throughout firm Deployed new JBP process first to top customers, then evolved and scaled for all customer tiers Food Service Supplier Industry-leading food service supplier growth was stagnant, and innovation pipeline and marketing strategy were severely underdeveloped Created customer segmentation and led intensive training on deploying insights and marketing strategy to customers based on needs and profiles New capability drove improved relationships and profitability with customers and was a core driver in putting business results back on track For these clients and others, Caprē Group delivers quantifiable results: Financial Results Outpacing Peer Groups Increased Leadership Voice & Advisory Roles with Customer Internal Alignment and Elimination of Cross-Functional Barriers 16 The Collaborative Planning Advantage

17 Unlock Success with Collaborative Partnership is ready to partner with you to bring Collaborative Partnership Planning capabilities to your organization. We have designed next-generation CPP capabilities for numerous Fortune 500 suppliers and retailers. Our consultants apply their deep industry expertise to customize each approach based on best-in-class practices and the individual goals of each organization. Our frameworks, tools, and methodologies create scalability across teams and build processes and routines that are quickly embedded into your company s DNA. And because our experts are embedded with customer teams from design stages all the way through training and implementation, we ensure the new capability takes root and evolves in real-time to drive immediate impact on your business. To start the Collaborative Partnership conversation, please contact info@capregroup.com. You can also reach us by phone at Caprē Group I 115 Perimeter Center Place I Suite 1120 I Atlanta, GA I capregroup.com The views expressed in this work represent the research and expertise of Caprē Group, Inc. Any quotes used with permission. No confidential client information was used to create this work. 17 The Collaborative Planning Advantage