As the COVID-19 pandemic continues and new consumer behaviors play out, it’s time for manufacturers to reimagine their innovation portfolios to lead in the next normal.
Business leaders and consumers have adapted after the initial shock of the widespread lockdown that followed the outbreak of the COVID-19 pandemic. Demand patterns have started to normalize, supply chains are largely stable, and shelter-in-place orders are being lifted and replaced by physical distancing across the United States.
Although many consumer-packaged-goods (CPG) leaders have come to terms with the crisis, they are still challenged to know what comes next. Seventy-nine percent of the executives responding to a survey believed that the COVID-19 crisis would have a lasting impact on their customers’ needs in the next five years. But fewer than 30 percent of all executives felt that their companies were well equipped to address such changes. Even fewer—only 10 percent of all executives—believed that they were well equipped to pursue net new growth1 and M&A.
The foundation for profitable growth
We see a three-step predictive growth process as the foundation for profitable growth: first, predicting levels and areas of growth in consumer consumption and spending; then, transforming growth levers in response; and, finally, sustaining growth with operating-model changes. Consumer behavior and engagement with products, brands, and channels have changed so much that innovation must now be top of mind for CPG leaders.
A midcrisis answer to what’s next on the innovation agenda is crucial for delivering outsized performance. During the first five years after the Great Recession of 2008, CPG leaders that could answer this question outperformed the market by an average of 20 percent (Exhibit 1).