Firms that embraced technology likely to grow profits: Bain & Company

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Companies that grew their technology investments the most over the past five years were likely to enjoy higher share price, revenue and profit growth than those that invested less.

This is according to new research from Bain & Company analysing 80 consumer products companies.

While earlier digitisation waves were focused on first digitising routine processes, followed by channels and supply chains, leading companies are now focused on a third wave of digital investments that enable differentiation.

Vast new territory

The emergence of generative artificial intelligence (AI) opens vast new territory for advancement. Bain’s research found that already 25% of consumer goods companies are experimenting with AI-led design modelling and innovation, and 50% are deploying or piloting a next generation, data-driven perfect sales execution.

“The decades-long technology marathon has turned into a sprint,” said Rajesh Narayan, a partner in Bain & Company’s Consumer Products and Enterprise Technology practices. “In many ways, this new wave of tech, aimed at delivering a competitive advantage in critical digital capabilities such as sales, marketing, and innovation, is the trickiest but the most important in predicting a consumer product company’s fate. Leading companies will need to develop a digital roadmap, enhance existing technology capabilities, and modernise their core systems if they want a shot at thriving in this competitive landscape.”

Bain found leading companies spent 60% more of their revenue on consumer, customer, and innovation than their lower performing counterparts. These companies are using AI technology for everything from pricing optimisation to predictive revenue growth management, increasing their competitive edge.

Struggling with digital transformation

Despite these advancements, many companies struggle with digital transformation due to gaps in talent and operating models. The top quartile of companies surveyed have grown their tech teams three times faster than bottom-quartile companies and have adopted a more flexible approach to digital change and implementation.

Outperforming by creating digital advantages may be challenging even among leaders, with only half achieving 80% of their digital transformation project target, according to Bain. Identifying and establishing a digital roadmap early on may be the key to achievement.

“Consumer goods companies are at an exciting juncture, where those leading in tech investments, are gaining substantial advantages vs peers by leveraging AI-led design (in areas such as pricing, promotion and in store execution) to bring to market the next generation of data driven tools,” said Federico Piro, a partner in Bain & Company’s Consumer Products practice in the Middle East.

Five imperatives

Companies that want to capitalise on the advantages of this new wave of digitalisation should focus on five imperatives:

*Make AI the first line of decision making. The best companies will take advantage of expanding AI capabilities to make better decisions, such as what the next best ingredient in a product should be or what the next product to introduce should be.

*Create two-way, personalised touchpoints everywhere. Companies will use the sharp rise in consumer touchpoints to personalise and reach the growing population of consumers who use digital channels to discover, consider, and purchase products.

*Use generative AI and digital twins for hyperefficiency and agility. The next frontier of efficiency and agility created by AI helps leading companies make leaps in everything from digital content creation to customer service.

*Build a real-time transparent data river. By creating a supply chain data river, brands can prove the provenance of their products and ingredients to both customers and consumers.

*Harmonise foundations to scale at speed. The current digitisation wave and impending move to SAP S/4HANA provides a great opportunity to build harmonised foundations and improve foundational data quality to scale use cases at speed.