Indian consumers are evolving rapidly, getting closely connected, sharing more information and are becoming more demanding, at the same time, several start-ups have started mushrooming to address unmet consumer desires, states EY’s latest report ‘Incumbents to disruptors: Adopting the start-up culture for innovation’. These start-ups are highly adept at spotting the unhappy consumer through digital means and then leveraging the latest digital technologies, such as data analytics, to address their needs. Individually these start-ups may not pose significant threat to the large consumer product companies, but together, they are forming a formidable challenge.
Pinakiranjan Mishra, Partner, and National leader, Consumer Products and Retail, EY India said, “Today, start-ups are giving tough competition to the large consumer product companies. Thus, it becomes important for the incumbents to set an agenda for identifying evolving customer needs with speed and provide products and solutions to meet them. It requires a rewiring of how these companies have operated traditionally and adopt speed over perfection. With the advent of emerging technologies, which are disrupting the consumer products marketplace, large companies must make fundamental changes in their company’s operating model and inculcate the agile start-up culture.”
Consumer preferences are evolving quickly, given the shortening shelf life of technology. While start-ups thrive in such fast-changing environment, the incumbents find it difficult to adapt to this pace of change. EY’s consumer survey across cities, age-groups, and income brackets along with in-depth interviews with start-ups and large consumer products companies aimed to get their perspective on what Indian consumers want and how they make purchase decisions.
- 60% of consumers across age groups said that social media was an important influencing factor to try a new brand.
- 75% of consumers chose to try a new brand because they thought it was ‘better-for-them’ (i.e. free from harmful ingredients, more effective or healthier).
- Value-for-money continued to be a critical factor while making purchase decisions. It was the second most important reason for trying a newer brand.
- Indian consumers exhibited a strong appetite for premium products as they aspire for greater value, healthier products or natural ingredients. 80% of consumers are willing to pay up to 25% higher prices if they receive the desired value.
The measures through which incumbents can inculcate the start-up culture to drive agile innovation are:- Keep consumers at the heart of every decision
- Increase direct-consumer interaction for the c-suite
- Define area of play using analytics
- Reduce product turnaround time by at least half
- Foster innovation-led culture
- Set up monthly innovation day for leadership
- Organize a focused internal disruption team
- Diversify leadership and board to include young leaders
- Design lean organization structure
- Design locally empowered lean teams with shared objectives
- Cut down on review iterations and block common decision-making time
- Break the silo style of working between functions
- Develop a flotilla-like operating model to support multiple niche brands
- Develop a portfolio of many smaller brands and effectively track the performance of each brand
- Redesign channel partner relationship for the new environment
- Provide a central ecosystem to the flotilla of brands
- Invest with long- term vision
- Set different performance tracking metrics for a start-up brand compared to an incumbent brand
- Set up an internal venture capital arm or an accelerator/incubator
- An acquisition is not complete until it is successfully integrated
