#2. AGILE or RIGOROUS
Agile Product Development is a popular trend nowadays across various industries. Private Labels have the best potential to be agile in product development across the entire CPG. But does it mean the “agile” must be the goal every time? What lies behind the additional flexibility in project development? How to blend different development methods for the best result? Let’s discuss this in the article.
The “Agile” trend came from the Tech industry. We think TECH - we mean AGILE by default. Scrum and Kanban are everywhere - from a small start-up to a TECH giant. The most important is to progress quickly and adjust success criteria on the go. At least, this is the impression it makes for those who look from the outside.
Many CPG companies attempted to become more agile. Some of them succeeded, most got stacked in the journey, some failed. The majority in CPG still rely on the traditional and pragmatic Stage & Gate approach and respect criteria for success that are clearly defined upfront.
Private Labels of the consumer goods industry stand in the best place to apply agile methods. And should learn from Tech to become rapid and adaptable in product launches, to obtain a competitive advantage in the market niche.
However, the agility in the CPG may be associated with additional risks. So the main question is:
❓How to implement the most advanced methods for business benefit, and not to lose?
Answering this question, let’s begin reviewing a few significant challenges to overcome in CPG to unlock the full agility potential. These challenges lie in the core of today’s CPG business models but not existing in Tech. And it makes the difference, and we have to take it into account!
💡Impact on consumers
CPG provides physical products to the end consumer, and the consumption process is usually associated with the risk of harm for the client. Either it is home care, tools, small electronics, personal care, or food - the manufacturer's main priority will be to avoid a negative impact on consumers' health. Mistakes here could kill the business.
TECH applications typically can not cause immediate harm to the user's health. Liability mainly correlates with the level of consumer satisfaction. The worst thing that may happen is the app's deletion from the device and a negative review. Regulation may exist for some specific aspects of tech products related to privacy and data security. However, user satisfaction is a leading CSF.
💡Compliance and regulation
CPG has to comply with regulatory documents and requirements. Requirements are mandatory and vary from market to market. Compliance and certification documents are specific for each CPG category and dictate how the final product should look like to appear in the market.
TECH is not slowed down with multilayer requirements and compliance unless particular components like privacy, security, and some others.
💡 Technological complexity
CPG product launch may involve a diverse range of knowledge and expertise. Natural science, chemistry, material science, technology, production methods, etc. Often new CPG products are associated with scientific research and new technology development. All this complexity requires a precise orchestration and multiple checkpoint system.
TECH mainly relies on one established technology area and set of skills. The main complexity lies in the amount of program code to generate and the number of MVPs to test.
💡Physical Assets
CPG products are always associated with production tools, equipment, and other assets. Product development must be complete before making a capital investment. It applies limitations to the quantity and variety of MVPs and rapid testing. The MVP in CPG is very close to the final product solution.
Assets in TECH - computers, servers, data centers - appear more flexible for most products. The necessary investment in tools and equipment is possible to assess and prepare independently of the final MVP.
🔒 TECH business models are better fit to be agile and flexible by nature, while the CPG business model’s design has to meet quality standards at any stage.
❓Is there a way to tackle these challenges?
Absolutely YES, and addressing these challenges would go beyond just the technical deployment of Scrum and even beyond the organization's behavioral change.
Becoming agile in consumer products would mean adjusting and even changing the entire business model - becoming more "tech" than a "CPG." The most “agile” CPG companies of the technology era can demonstrate the following abilities:
📝 Outsource Production (co-manufacturer, contract factory, vendor), do not own production assets.
📝 Acquire/purchase/borrow the necessary capabilities quickly instead of developing technology internally.
📝 Share/delegate to manufacturer complexity with the product regulatory compliance.
📝 Share/delegate maximum product liability to the manufacturer.
📝 Invest more in digitally integrated demand prediction and sales management, less in the product.
❓ Does it sound confusing?
I assume it could. The rules above go against some basic principles and beliefs of the traditional CPG maintained for decades. And if your first reaction now is something like, "no, it doesn't make sense. It's just impossible" - then I have a clear argument here.
Amazon Private Label is a brilliant model of the agile CPG business. Most Label Owners are practicing these approaches already today: defining contract factories, discovering new products and technologies, setting contract requirements and conditions, etc. Some actions are demanding agility, flexibility, and speed. Some may be too risky and can harm the entire business.
❓ What is the right set of priorities for Private Labels to stay ahead of the competition and avoid harmful mistakes?
Here is how the most optimum balance should look like:
There is a simple logic here. All steps must be progressed as soon as possible, except those which may put the business under financial risk or destroy it.
💻 Areas to demonstrate “agility”:
⭐ Interaction with your client.
Any point of collaboration with your consumer is an area to stay innovative, flexible, adaptable, and finally, agile.
⭐ Digital infrastructure of the Private Label
Digital is equal to 50% of today’s Private Label business, as most sales are happening online. Product representation online, selling websites, eCommerce stores, activities in Social Media, and even systems to manage the team’s collaboration in the area of business agility.
⭐ Supply chain development
Product supply is an essential factor for success. Private Label can win the competition today when having flexible and capable manufacturing and delivery set-up. Scouting for new product technologies, production capabilities, and delivery routes are crucial zones of business agility.
⭐ New Products Conceptualization
The NPD area requires agile approaches to be first in the market. It includes ideation, prototyping, and market testing.
📦 Areas to put maximum attention to and stay “rigorous”:
⭐ Product commercialization
Putting a product on the commercial equipment for mass production, developing the specification, defining quality attributes, feasibility criteria, and viability (financial) targets are essential for consistent business performance and must follow a conservative approach.
⭐ Relevant Quality Management process
A well-maintained quality process must avoid financial harm and business destruction. It is a critical area to practice a pragmatic and fact-based approach.
📝 In conclusions
☝️ Agile project/product development methods (Scrum, Kanban) will apply for any activity in the consumer management area, digital space, supply chain development, and building new product ideas.
☝️ A conservative Stage & Gate management process is a relevant solution to address the Private Label’s product commercialization and quality management needs.
Sincerely,
