How Fast-Moving Consumer-Goods Companies Use Speed as a Competitive Weapon

How Fast-Moving Consumer-Goods Companies Use Speed as a Competitive Weapon

          
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How Fast-Moving Consumer-Goods Companies Use Speed as a Competitive Weapon

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  • How Fast Is Fast?

    Managing for speed can make a big difference. Studies of a cross-section of FMCG companies in a variety of industries showed a significant gap between high and ordinary performers. BCG’s benchmarking database indicated that leading FMCG players developed new products within 15 months. That’s 7 months faster than, or one-third, the median—22 months. Some players needed 30 months or more. The benchmarking shows what a company can accomplish by following the lead of “speed champions.” (See Exhibit 1.)

    exhibit

    Analyzed by sector, beauty product companies were the fastest, and companies in heavily regulated industries such as alcohol and tobacco were among the slowest. The overall fastest consumer-goods companies were in the fashion industry. Zara led the way, designing, producing, and delivering new products within two weeks. The average of fashion companies—around ten months—was still much faster than speed champions in FMCG as a whole.

    New products aren’t the only projects that benefit from speed. New formats and product renovations are key instruments in a product manager’s toolbox. Average performers took 11 months to get these changes to market, while the slowest performers needed 18 months. Speed champions took only 5 months.

    Temporary promotions are significant sales drivers in many FMCG sectors. Limited editions and add-ons are effective tools for countering declining customer loyalty or strengthened private-label offerings. Agility in promotions can be particularly useful to counter competitive actions or react to market dynamics. It took the average company four months to get a promotion on the shelf, while the best-in-class performers needed only a single month. Some companies needed as much as a year.

    Those numbers represent standard development projects only. Leading players understand that certain products and markets require unusually fast development times. For example, the opportunities are so great that a project is worthy of special attention. Maybe the market is unusually well primed for the product, or a competitor is rumored to be at work on the same angle. Or the product simply shows such promise to be a winner that the company is eager to rush it through.

    For these cases, many FMCG players allow accelerated development. Speed champions can get products to market in an average of only four months, one-third the time it takes for most new products. Ordinary performers need six months on average. (See “Ultimate Speed,” below.)

    Ultimate Speed

    Kraft Foods experimented with speed very successfully with the DiGiorno Ultimate product series, which pushed the boundaries of “premium” in the frozen-pizza category.  A full-time cross-functional team developed and tested the prototype in only 8 weeks and needed just one more month for some quick consumer experiments on taste and pricing. Weekly cross-business-unit and functional meetings prevented bottlenecks and maximized the learning from each step, enabling developers to complete many of the tasks in parallel. With another month for production, the product hit the shelves in a total of only 16 weeks—record time for completely new product development.

    The bet paid off handsomely. The new line of products spurred double-digit growth in DiGiorno sales and profits, enabling the brand to compete directly against home-delivered pizza long before surprised competitors offered a rival version. Retailers gave the brand a good deal more shelf space, benefiting DiGiorno’s other lines too.

    Procter & Gamble, for example, successfully fought off private-label attacks in the U.S. diaper segment by focusing stringently on speed. P&G decided to launch continuous waves of technically superior products as often as every six months. The company differentiated with Pampers New Baby, Active Fit, and Easy Up and launched the lower-price Pampers Simply Dry and premium Active Fit with Dry Max. By launching new SKUs so frequently, P&G successfully fended off low-cost imitators.