“Agile ways of working” for Fast Moving Consumer Goods Industry; Success or Failure?
Part 1 – Understating the Agile methodology
When a good idea surfaces within an industry, it is only a matter of time before people outside the industry take notice and start looking for ways to apply the idea in their own work. The concept of project management itself is a perfect example—while it was once confined to a few fields such as engineering and construction, project management is now a core element in essentially every industry around the world.
Chathura Ganegoda
Recently, the concept of “agile working “has begun to migrate beyond its initial place in software development. As technology continues to transform the way people work, the process of designing and building software is more and more visible to people outside IT Industry and development. As other business units become more familiar with the development process, it is only natural, that they would take an interest in the ways that developers manage their projects. The use of agile methods in industries other than software development has become known as the “business agile methodology”.
The agile approach to software development was first introduced about 15 years ago, as an alternative to the traditional “waterfall” methodology that had been in use for decades. While the waterfall approach still worked well for predictable projects, software developers needed a more flexible approach for dealing with projects in which the challenges, and even the desired result, were hard to define.
Agile development places a focus on flexibility, throughout the project life cycle, allowing project teams to respond quickly to new insights or changes in the project scope or deliverables. Typically, an agile project involves multiple short rounds of development, after which the project stakeholders evaluate the work and adjust their plans based on any new information that may have come to light. The goal of the agile development methodology is to deliver higher quality products and solutions on shorter timelines, with less need for extensive rework or revision.
“…. deliver higher quality products on shorter timelines….”
The business agile methodology is a way to manage business processes in a highly unpredictable environment. Just as software developers use agile methods to respond to changes in project requirements, businesses can use agile methods to
- respond to organizational change,
- to increase productivity
- and to meet unexpected customer needs.
The business agile methodology is gaining popularity in a wide range of industries and can help organisations cut costs and retain customers in an increasingly competitive marketplace. This does not necessarily have to mean sticking to all the elements of agile approach that follows. Agile Scrums place an emphasis on flexibility and rapid decision making rather than relying on traditional bureaucracy ensuring faster turnaround in terms of product and solutions delivery. Creating cross-functional teams that are tasked with solving specific problems, rather than allowing departments or business units to pass responsibility for issues back and forth between each other.
Embracing mobile technology and cloud-based project management tools, freeing employees to work outside traditional office settings.
Working to shorten project timelines so that the organisation can enhance its products or services more rapidly in response to changes in the market.
Why “Agile” for FMCG?
The biggest question mark is to understand how best practices of IT industry be suitable for Non-tech industries. “The matrix organization” has long been the dominant model for fast moving consumer goods (FMCG) companies. Yet, with the expansion of their own scope in business, the matrix is collapsing under its own weight and contributing to their decline. FMCG companies have become slow and bureaucratic. The time and resources they devote to coordinating, reporting, and aligning across the matrix robs them of the ability to engage in the productive activity that drives demand. Consequently, smaller, younger, and more nimble companies are out-flanking them to steal a disproportionate share of growth.
To compete against their newer and smaller competitors, leadership should embrace the test-and-learn and self-managed teams of agile.
Executives who dismiss agile as a methodology limited to software development (its birthplace) or financial service (where it has migrated) should re-wire their thinking. Agile practices travel well across industries and help solve the problems of complexity and bureaucracy.
Agile increases productivity, speed, and focus while radically reducing time spent in meetings and on coordination. It puts more resources into customer-oriented activities. Agile organisations have more doers, fewer managers, and, therefore, lower costs.
With a market which is highly evolving, FMCG needs to change its gears to adapt. Agile and FMCG ought to be a natural fit. These companies have a long history of innovation in organisational and management practices: they were pioneers in both brand and category management in the last century. They embraced the advantages of scale earlier than companies in most other industries and were early adopters of the matrix organisation to manage competing tensions and requirements within global, scale-sensitive enterprises.
Scale and the matrix structure have lost their punch at FMCG companies. It was built to take advantage of global scale, efficiency, and control, the resulting organizations tended to have rigid functional silos and bureaucratic hierarchies.
As new capabilities, such as e-commerce and digital marketing, came into existence, these companies began to add new dimensions to the matrix or increase the size of their already sizable centers of excellence.
The idea was that, rather than have individual business units hire HR, pricing, and other functional specialists, the company should create a center populated by these specialists, whose expertise could then be shared across the businesses. But shared resources are often unaccountable resources.
These developments have an ironic twist. In FMCG companies, our decision making slowed down and became further separated from the market and customer desires. With internal bureaucracy rising, cooperation across the matrix weakened, and employee engagement lagged. These companies are now drowning in their devotion to scale and the matrix at a time when they face their most serious competitive threat in decades.
These newer competitors have been winning without the typical advantages of scale, as the era in which the domination of big manufacturing, big media, big brands, and big retail comes to an end.
- Contract manufacturing enables small brands to essentially rent production scale.
- E-commerce provides a route to market (E-RTM) for products that would otherwise not secure shelf space.
- Digital media allows companies to reach consumers at a fraction of the cost of big media campaigns.
At the same time, consumers have gravitated toward niche brands that fulfill specific needs, such as organic food, natural home care products, and energy drinks. Also, the rise in the digital and social media presenting trends and choices to consumers and resulting in ever evolving demands requires FMCG to keep up with the pace.
It is not just external developments that have allowed these smaller companies to win. They are fluid and focused, acting swiftly and creatively to bring their brands to life. Their simplicity has allowed them to outmaneuver the giant global brands that once seemed so indomitable.
Now the question is how should “Agile approach” be embedded to the organization culture. Which departments, what functions should be approached first etc.
Next week in the Part 2 of this Article, let us explore how FMCG companies can adapt to AGILE.
Sources:
- https://www.mckinsey.com/business-functions/marketing-and-sales
- https://selleo.com/blog/agile-software-development-process-everything-you-need-to-know
- https://www.clarizen.com/business-agile-methodology-an-introduction/
- https://www.scrum.org/
By: Chathura Ganegoda (BSc (USJP), MCIM (UK), MBA(UOC))
“Lead the world to New Dimensions”
LinkedIn – @Chathura Ganegoda
Email – Chathura.d.ganegoda @gmail.com
WhatsApp – 0777371229