J&J turns to innovation to fend off startup competitors
Through a special arrangement, presented here for discussion is a summary of a current article from the bi-monthly e-zine, CPGmatters.
Digitization continues to upend the CPG business by enabling start-ups to launch businesses much more easily and faster than ever before, according to Alison Lewis, global chief marketing officer for Johnson & Johnson.
The traditional barriers to entry in the CPG business have been large in-house research and development organizations, owned-assets in the supply chain, large listing fees to allow placement on the shelves of retailers, and large media budgets to create broad-based awareness and reach. But digitization is enabling start-ups to outsource these areas including marketing directly to prime prospects.
“They seek out that little teeny tiny white space in the market and build an entire business around it,” said Ms. Lewis. “And finally, they use performance marketing versus pure brand marketing. And what do I mean by that? Well, they really think like a retailer.”
J&J can compete effectively against both its larger multinational competitors and startups, Ms. Lewis said, by following five key principles:
- Innovation: “We still have large global breakthrough platforms for innovation. These are things that have significant science behind them.”
- Product and package: This “heart of consumer packaged goods” must be balanced with digital services that bring unique value propositions to life.
- Modern marketing: “We want the brand to be the brand everywhere around the world. We balance that with intense local execution and amplification so that the brand feels very much like it was made for you in the country in which you reside.”
- Win in new retail: Winning in the traditional channels of food, drug and mass must be balanced with winning in e-commerce and in specialty channels.
- Evolve work processes: “We have to operate at scale, but we also have to be nimble like a startup, and that is really important as we think about shifting our culture.”
Ms. Lewis stressed that innovation drives 70 percent of J&J’s growth and relies on four pillars: driving new occasions, being human centric, digital technology and data and business models.
“[Innovation] also allows us to build value into our brand, so that we continue to premiumize and drive pricing in the marketplace,” said Ms. Lewis.
Discussion Questions
DISCUSSION QUESTIONS: What advantages and disadvantages do larger CPG brands have competing against the new breed of digitally-supported startups? Which points mentioned in the article best illustrate how larger CPG brands should be evolving?
Poll
BrainTrust
Dave Wendland
Vice President, Strategic RelationsHamacher Resource Group
Patricia Vekich Waldron
Contributing Editor, RetailWire; Founder and CEO, Vision First
J&J certainly has some key advantages: 1.) company heritage; 2.) supply chain efficiency; 3.) global reach; 4.) resources (lots of them!); and 5.) strong category footholds. On the other hand, they will need to “fail fast” and become far more nimble. Additionally, right-sizing assortments for various classes of trade, creating consistent launch strategies and recognizing the omnipresent retail landscape will be keys to their success. Finally, I certainly believe J&J will continue its acquisition quest (e.g., Zarbees) to enter new categories, new forms, and new markets.
CPG brands — large and small — are evolving quickly to keep up with and get ahead of changing consumer demands and preferences!
While large CPG companies certainly do have product innovation and marketing power, they struggle with matching startups’ speed to market.
Large CPG brands have the advantage of name recognition with consumers, established relationships with channel members, and money for research. However, established processes also can limit new approaches to research, consumer understanding, integration of new technology, and speed. Companies need to find a way to balance innovation and sound management. J&J’s approach appears to focus on several areas of innovation such as product development, marketing, packaging or work processes. This is a lot of innovation affecting many parts of the company to manage. As such, it is an interesting approach to watch.
Love this. Going forward CPG brands have the opportunity of creating a specific relationship with consumers — many might argue they have to because new disruptors will do this because they no longer have to go through the big retailers to get their products into the hands of consumers.