Adapting to change: Insights from the center of the consumer industry

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In the last few years, difficulties. consumer companies are forced to adapt at breakneck speed. While all companies have had to respond to customer preferences, consumer organizations have undoubtedly faced these challenges the most. The high growth and demand for containers, the introduction of digital channels, the global crisis, and rising prices have put a lot of pressure on retailers and logistics companies.

These challenges affect all levels of the organization. The C-suite gets more attention and credit when the company is doing well, and the front line enjoys some visibility as the face of the organization. But management—the heart of the organization—has the burden of translating strategies into action and results. The “middle” of the consumer group plays an important role: managers set the tone, gather customer information, and represent the next generation of great talent.

McKinsey’s 2022 Voice of Consumer Organizations survey gathered opinions from 1,470 top and middle managers of North American consumer organizations to understand their views.

Interviewees shared their company’s successes and challenges as well as the capabilities needed to succeed in the coming years. Based on the findings of this study, as well as McKinsey’s other research on high-performing organizations, we found leading organizations to be successful in five areas. This focus provides a path forward for companies looking to transform the landscape.

The ‘middle’ of the consumer group plays an important role: managers set the tone, collect customer information, and represent the next generation of great talent.

Technical clarity is essential for unlocking organizational performance. Companies need to ensure that employees at all levels understand not only the core business strategy but also how their actions contribute to meeting the stated needs. Our research showed a big difference: on average, managers understand their company’s goals, but 28 percent of managers say their company does not manage the goals and key results (OKRs) for the team or individuals.

This is important for two reasons. First, strategic clarity improves accountability and allows employees to be empowered decision makers rather than confined to operational silos. Second, connecting business priorities with each employee’s individual goals is critical to adding meaning and purpose to their work.

Many organizations still rely heavily on centralized decision making. In the supply chain and retail industry, management explains that difficult decisions are made centrally—that is, at a level other than where the work takes place. This phenomenon affects about 30 percent of office activities. While many decisions (such as innovation and global brand strategy) may lend themselves to centralization, others (such as building a common brand) may benefit from empowering functional teams with this authority. Speed can be a problem of central decision-making: local operations often have a lot of current and information that can make many decisions related to activities such as performance marketing and in-store advertising, but informing central decision-makers takes time and invites seniors. In many cases, companies can deploy organizational resources closer to where decisions are needed.

The most successful companies integrate their business and digital strategies. The digital revolution in the consumer sector during the COVID-19 pandemic has been well documented. Many companies have tried digital marketing programs, but the rate of progress varies widely. For example, 49 percent of high-performing companies have fully integrated digital into their business model, almost double the number of low-performing companies. A key differentiator of the most successful companies is that digital services are integrated into operations and geographies, not static in the IT organization.

Additionally, executives at high-performing companies are 1.4 times more likely to report that their team has digital talent primarily in-house at key locations and 1.6 times more likely to report that their digital program is going cross-functional.

Different opinions on the biggest gaps in the end. Consumer companies need to have diverse capabilities to implement their strategies, inform decision-making, and respond to changing trends. Our research revealed a difference in opinion between top and middle management about their organization’s capabilities. For example, in the real estate industry, middle managers were more likely than top managers to cite M&A initiatives and consumer awareness as potential opportunities. In contrast, senior management is more likely to cite data-driven marketing, digital-to-market (RTM), and revenue growth management as key opportunities.

Interviewees from the retail industry had limited contact. Both senior and middle managers cited AI and automation as a key differentiator, but had different views on other opportunities. The biggest difference between the two groups—at nine percent—involved better management of income growth.

Achieving consensus on capability gaps is essential before organizations can implement solutions. For example, managers have reported that redeploying existing talent is the most common way to close gaps. According to our research, however, skill building and recruitment are the most effective strategies, while updating existing talent ranks third.

Track changes for success. About two-thirds of managers reported that their company had started to innovate in the past three years. Of this group, 92 percent agreed that the effort was motivated by a good reason: digital transformation was the most cited reason, followed by cost reduction. Respondents also identified cultural change, post-merger integration, and growth as goals.

Reorganization is more difficult, because companies have to manage many things at the same time. When asked to name the most common challenges in reform, respondents cited poor leadership as the biggest obstacle. This result is consistent with McKinsey’s other assessment of the need for action from the top of the organization.

Shortening time was also a frequently cited problem.

Reorganization is more difficult, because companies have to manage many things at the same time.

Drawing on ideas from the most successful companies

Buyer managers who want to up their organization’s game should identify the strategies that companies follow to improve results in these five areas.

Ensure that the policy is translated throughout the organization. A clear vision cannot be effective unless it is translated into clear OKRs for the team and the organization. Leaders who prioritize these can motivate their work and teams with clear goals.

Connect products and make decisions closer to consumers. Speed and responsiveness are important. The most successful companies give their teams autonomy and decision-making power.

Rethink the user interface, and embed digital in everyday business. The pace of change means that companies need to regularly assess their performance and incorporate best practices. Requirements include performance and clarity of responsibilities. Organizations must push for simplicity, clarity, and accountability. In addition, digital should be “democratized” and integrated into business.

Develop a skills program. In order to fill the gaps in the right way, companies need to identify the next generation talent that is needed and create a multi-pronged plan to develop it. This effort should go beyond simply redeploying existing talent. Managers should be encouraged to take a closer look at the potential that counts (such as digital and analytics) and then receive support and training.

Do a good repair. Managers understand how innovation can improve business processes, but companies must embrace the “go home or go home” mentality and ensure that these efforts lead to lasting change. In addition to emphasizing accountability for implementation and change management, leading companies incorporate continuous change into the organization. In order to increase the positive results, the management should show the intention to develop the whole team and set the right time.

Managers are critical in translating business strategy into action and results. In addition, their experiences and insights show how organizations can improve their performance. Managers would do well to include their voice in planning, operations, and renovations.

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