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Saturday, May 25, 2024

Leading through change

Les Brookes outlines everything that should be on your senior leadership team agenda for 2024

FMCG businesses need to be ready to face the new challenges of 2024, not still fire-fighting the problems of 2023, especially with the global economy changing after the energy and food price shocks from the Ukraine war, inflation and high interest rates.

Here are the big issues CEOs must be discussing now with their leadership team so they are implementing their strategy in the coming months, not blown-off course by the surprise events that will (almost) inevitably happen this year.

Economically, we are now in a situation where inflation globally is dropping, while at the same time supply chain lead times are at last decreasing.  Demand is currently soft, hence service is improving but has there been a real improvement or just circumstances aligning and will your teams be ready for an upturn when it does come?

All levels of management will need extra visibility across the supply chain to re-prime it in order to take advantage of the opportunities from improved conditions…and not be caught by old problems quickly being replaced by new ones.

For instance, the past few years’ problems of supply shortages and rising costs are about to begin to be reversed and businesses must be careful to avoid suddenly finding themselves caught with excessive levels of inventory.

To achieve this, CEOs particularly need to make sure their SLT is focusing on the future radar, and ensuring a high quality of thinking behind all business plans linked to delivering strategy. It goes without saying that the financial outcomes and predictive variance analysis is an essential part of your SLT radar. Teams that have not moved to rolling plans and revised business models should be aware of the dangers of too much focus on “the year” and the short-term budget mentality it creates.

Financially, after several years of disruptions and shortages, the supply chain is catching up again and there will be a surge of working capital problems as the threat starts to come from “over-trading”, not under-trading.

CEOs must ensure the demand picture is fully understood or a financial crunch point will come as increased production outstrips working capital.  This requires enhanced financial planning and forecasting, with your business making the maximum use of integrated systems.

Generally, and especially now, all your business decision processes need to be engineered to improve the quality of the future view, rather than the backward view around meeting outdated annual plans based on old numbers.

Part of this is ensuring the FD and finance team are prioritising forward-looking activity and predictions rather than backward looking “getting the numbers done”.

Using modeling with AI to better inform your integrated business planning discussions is particularly important.  CEOs must be ensuring this is happening across the business as a priority for their mid- and senior management teams.

AI and 2024.  We all know that in 2024 we are going to start using AI for maximum benefit, and for business planning your key question is “how are we using AI to improve the quality of SLT decision-making?”, and specifically how are you using AI to understand customer behaviour as your markets change as we emerge from the cost-of-living crisis.

CEO’s must ensure their business is implementing AI to achieve this, and that the insights are being fed throughout the decision-making process so that management at all levels is learning how best to use AI analysis to give the clearest possible demand picture… not just deploying it at an operational level.

Managing the thinking behind strategic plan assumptions and latest views is essential in driving improved quality of the future plan and reducing visibility of gaps.  CEOs need to be challenging their SLT on “how can we use AI so that we are focused on improving our thinking, decision-making, and productivity” but this must be is directed by the business to meet specific challenges rather than being allowed to multiply uncontrollably because it’s in vogue.

Skills for the future.  Integrating AI and its insights will give businesses a huge boost to their ability to identify and react to market changes.  In 2024 FMCG businesses really need to understand what new skills they need strategically so they are bringing in the right capabilities given the technology changes going on.

Bringing in these skills will take time and there will be high demand for them.  As it can’t all be done at once, you need to start early.  But you also need to make sure your business is focussing on tech that enhances performance… Not tech that simply consumes more of our time!

To achieve this, CEOs need to make sure their SLT is developing a strategy that looks at both the business benefits and risks coming from AI, and prioritizing the actions to ensure business benefits are maximised. The SLT also needs to buy into decision-making that is enhanced with the use of AI.

Experience says that business benefits will only be delivered by technological change if people are either redeployed to higher value-added activities or removed. It’s an imminent SLT task to deliver these benefits.

Sustainability and environmental plans.  Sustainability is a megatrend, and rightly so, that is getting bigger, not smaller, and any remaining executives that still think they can hide behind greenwashing will cause long-term damage to their business. Customers will look for greater clarity around business plans and they are becoming more and more aware.

Ensuring delivery against your sustainability goals continues to be important (in fact, still of growing importance).  Make sure you and your SLT really do appreciate that whole environmental piece is much bigger than “whether you put a bit of extra plastic in the box” and covers every aspect of your business operations, energy footprint and end-to-end supply chain over a multi-year horizon in terms of carbon, customer service, product and recyclability, marketing, sourcing of materials etc.

Being able to set out a strategy and clear plans is essential and as such it’s critical that your business’s radar earlier contains these and that their delivery is being measured across a multi-year horizon.

CEO’s need to be ensure their business has clear plans and measurements that show it is genuinely changing quickly to as low a carbon footprint as is feasible, or you will find customers (especially large retail chains) steadily drifting to your competitors.

A Need to rethink the business model

A big part of the full integration of business planning is now achievable through technology and its ability to join multiple data sources to enhance overall business intelligence and planning. But be aware that whilst there is the need for this technology, so often success comes from the focus on people and behaviours required to ensure any change succeeds.   But it is easy to forget that it is not just the teams who work for the SLT that will need to change… but also the SLT. Probably more so.

Given the vital role of the SLT on focusing on the future, not firefighting today’s problems nor micromanaging its teams, the biggest question the CEO needs to be asking his or her leadership team in 2024 is – given all the other changes, how do we need to change?

 

Les Brookes is Partner at Oliver Wight EAME. He has led and advised countless businesses on large transformation and Integrated Business Planning initiatives. With over 50 years’ experience, Oliver Wight is recognised as one of the UK’s leading business improvements specialists. https://oliverwight-eame.com

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