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The Consumer Driven Digital Economy: Creating Value in a Digital World Where the Consumer is in Charge
Dear Customers and Partners,
In the age of the digital consumer, we can no longer refer to the “consumer products” industry – it is now the “consumer outcomes” industry.
By 2020,the world’s population will grow to 7.7 billion people,1 and everyone on earth will have one thing in common – they will all be digital consumers.2
Billions of new consumers are joining the global middle class, bringing trillions in net new spending power. Demand for water, natural resources, and key food categories may outstrip supply. Consumers are living longer, healthier, and differently. They are increasingly urban, hyper-local, and “always on,” connected to one another and to the world around them in real time.
Despite decades of process improvement investments for efficiency and scale, complexity and cost continue to grow. “Personalization,” such as SKU proliferation, shorter product life cycles, and more channels, only challenges service delivery, increases inventory, and drives cost.
Couple these considerations with 30 years of downward trending median industry profitability,3 declining brand loyalty and market share among the industry’s top 100 brands ,4 and projections that the industry, in its current form, is unlikely to grow beyond population growth rates, and it becomes clear that there is an economic imperative to act now.
In the new digital economy, competition, consumer engagement, and operational effectiveness are fundamentally changing, and accelerating. New competitors are redefining the landscape at unprecedented rates.
Building and keeping trust mean delivering exceptional brand experiences, every time, via agile processes that balance consumer needs with cost to serve. One size does not fit all.
Engaging consumers and capitalizing on new opportunities depend on the capacity to identify, act on, and deliver high-value experiences and outcomes like joy, confidence, security, and control, all in the span of a moment, exactly where and when a consumer or business need arises. Miss the moment, miss the opportunity.
In this environment, profitable growth will not result from doing things incrementally better, but from doing things fundamentally differently by shifting from products to outcomes. How?
• Reimagine business models – Integrate vertically and virtually to compete as an ecosystem, transform products into services, and capitalize on knowledge
• Reimagine business processes – Engage consumers with real-time personalization, enable hyperlocal demand and supply networks, and optimize capacity with hyperconnected manufacturing
• Reimagine work – Fundamentally transform productivity, exponentially improve enterprise intelligence, and empower a flexible, agile workforce to enable agility at speed
The time to unleash the power of digitization is now, both to maintain a healthy business and to drive new growth, and to balance current infrastructure and future innovation without disruption.
Here we offer our perspective on the future of the industry and how SAP contributes to the transformation of the consumer-driven digital enterprise. Thank you for your interest, and I look forward to our journey together.
SVP, Global Head of Consumer Products
1. The World Bank, http://datatopics.worldbank.org/hnp/popestimat es
2. Global internet users to reach 7.6 billion within the next 5 years, http://www.broadbandchoices.co.uk/news/2014 /09/global-internet-users-230914
3. “Consumer Products Trends: Navigating 2020,” Deloitte University Press, June 25, 2015, http://dupress.com/articles/consumer-producttrends-2020/
4. “2015 American Pantry Study,” Deloitte, June 2015, http://www2.deloitte.com/content/dam/Deloitte /us/Documents/consumer-business/us-cb-2015- american-pantry-study.pdf
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