FOCUS 6
2. Rigorously prioritise allocation of investment and resources
In a growing market most investment decisions, good or bad, will often deliver acceptable returns. When resources are readily available, any failures can be explained away as an unavoidable consequence of driving innovation and pursuing new growth opportunities. As a result, the processes and governance structures required to manage investment decisions often become too relaxed, with insuffi cient challenge and rigour applied to optimise the multiple trade-offs that invariably exist.
However, in a challenging market, weaknesses such as these are exposed and many companies have found themselves with a long tail of innovations and investments that have failed to achieve ambitious targets. With more obvious – and often easier – investment opportunities available in developing and emerging markets, European divisions hoping to secure investment funds will need to demonstrate strong returns from their R&D and marketing initiatives.
To do this, CPGs must be more selective in the investments they make and ruthlessly prioritise initiatives, executing only those that will achieve their targets and have a material impact on the bottom line. This will require making fewer but bigger bets that underpin delivery of the business strategy.
Liberating funds for investment behind the power brands will require the rest of the organisation to be as lean as it can be. Support functions that were charged with delivering ‘best practice’ service levels during the good times must readjust and accept that in an era of affordability, a pound or euro invested in the front offi ce is worth more than one in the back offi ce. Organisations must therefore leverage the scale that Europe represents, minimising duplication across countries and targeting ‘best in cost’ rather than ‘best in class’ performance across support functions.
3. Make the matrix work
As organisations and strategies have evolved, almost all companies have embraced the drive to create more centralised structures, establishing global support functions and dedicated category organisations, and investing in global service centres. While this has delivered a reduction in costs in most cases, it has also resulted in the creation of more management layers, moved key decision-makers further away from consumers, created a complex web of stakeholders each of whom require management, and slowed down decision-making. What was meant to be an agile, consumer-focused structure is actually an unwieldy behemoth that distracts an organisation and its people from what is should be focusing on: Winning with consumers.
© 2013 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
Few consumer goods organisations have fi gured out how to operate the matrix model successfully. But to succeed in these challenging times it will be essential to defi ne and embed the core processes and governance structures necessary to:
• Simplify stakeholder engagement and streamline decision-making across geographic boundaries, but without neglecting national interests and priorities
• Maintain suffi cient connection and understanding of local markets and consumers while leveraging the cost and capability benefi ts that greater centralisation provides
• Eliminate duplication within and across functions to ensure that activities are only performed once and by the most appropriate person or team within the organisation
• Maintain a ruthless focus on the things that really matter, help to differentiate versus competition and drive value for shareholders
Our experience has shown that there is no ‘best practice’ operating model for Europe since the suitability of each will depend on the business model, strategy and culture of each organisation; however, irrespective of the model adopted, clarity of how the model will work is ultimately what will differentiate an organisation and enable it to deliver outstanding performance.
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