hype cycle for consumer good 252194

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G00252194

Hype Cycle for Consumer Goods, 2013Published: 31 July 2013

Analyst(s): Don Scheibenreif, Dale Hagemeyer

Consumer goods manufacturers continue to focus on technologies that willdrive competitive differentiation by engaging customers or consumers. Usethis Hype Cycle to guide your planning and investment decisions, and to setrealistic user expectations in light of market hype.

Table of Contents

Analysis..................................................................................................................................................3

What You Need to Know..................................................................................................................3

The Hype Cycle................................................................................................................................ 3

The Priority Matrix.............................................................................................................................6

Off the Hype Cycle........................................................................................................................... 7

On the Rise...................................................................................................................................... 8

Virtual Store Research................................................................................................................ 8

Intelligent Image Interpretation.................................................................................................. 10

Manufacturer In-Store Monitoring Analytics...............................................................................11

Retail Activity Optimization........................................................................................................12

Retail Mobile Shopping (Nonpayments).....................................................................................14

Consumer Goods E-Commerce............................................................................................... 17

Climate-Driven Forecasting.......................................................................................................19

Content Marketing....................................................................................................................20

At the Peak.....................................................................................................................................21

Marketing Mix Modeling............................................................................................................21

Demand Signal Repository....................................................................................................... 23

Gamification............................................................................................................................. 24

Real-Time Customer Offer Engines...........................................................................................26

Crowdsourcing......................................................................................................................... 28

Operations Intelligence............................................................................................................. 30

Social Media Marketing Platforms.............................................................................................31



Sliding Into the Trough....................................................................................................................33

Digital Offers............................................................................................................................. 33

Retail Digital Coupons...............................................................................................................35

Social Analytics.........................................................................................................................37

Social Gaming Ad Networks..................................................................................................... 38

Augmented Reality................................................................................................................... 40

Multiechelon Inventory Optimization..........................................................................................42

Trade Promotion Optimization.................................................................................................. 43

Master Data Management for Consumer Goods.......................................................................44

Enterprise Manufacturing Intelligence........................................................................................47

Climbing the Slope......................................................................................................................... 49

2D Bar Code Marketing............................................................................................................ 49

Quality Process Management Applications............................................................................... 51

Trade Promotion Management (C&SI).......................................................................................53

Merchandising and Category Optimization................................................................................55

PLM for Apparel, Footwear and Accessories............................................................................ 56

PLM for Packaged Food, Beverages and Personal Care Products............................................58

Stages 2 and 3 Sales and Operations Planning........................................................................ 60

MES Applications..................................................................................................................... 61

PLM for Durable Consumer Goods...........................................................................................63

Appendixes.................................................................................................................................... 64

Hype Cycle Phases, Benefit Ratings and Maturity Levels.......................................................... 66

Recommended Reading.......................................................................................................................67

List of Tables

Table 1. Hype Cycle Phases.................................................................................................................66

Table 2. Benefit Ratings........................................................................................................................66

Table 3. Maturity Levels........................................................................................................................67

List of Figures

Figure 1. Hype Cycle for Consumer Goods, 2013.................................................................................. 5

Figure 2. Priority Matrix for Consumer Goods, 2013............................................................................... 7

Figure 3. Hype Cycle for Consumer Goods, 2012................................................................................ 65

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AnalysisThis document was revised on 2 August 2013. The document you are viewing is the correctedversion. For more information, see the Corrections page on gartner.com.

What You Need to Know

In 2013, consumer goods manufacturers show further signs of having accepted the new marketreality: low market growth. As a result, they are focusing more on technologies that will steal shareaway from competitors based on what the consumer experiences at the store shelf or along thepathway to purchase. At the same time, several market forces remain unchanged, such as risingcommodity and energy costs and global political uncertainty. Conservative spending behaviors thatconsumers adopted in response to the recession, especially the growth of private-label purchases,still do not appear to be moderating. Economic realities that have been prevalent in the marketplacefor nearly five years have left a lasting change on consumer buying patterns. There are a few brightspots, such as personal rewards and luxury items, that are responding to pent-up demand.Basically, people still consume less. But for some items, such as gourmet chocolates, they trade upto more luxury products.

The Hype Cycle

This year's Hype Cycle for Consumer Goods (see Figure 1) is intended for IT and supply chainprofessionals that advise and work closely with sales, marketing, and supply chain organizations inconsumer goods companies around the world. We haven't seen meteoric rises in any particulartechnology since 2012. This year's Hype Cycle does have a number of new entrants that reflectcommon questions from Gartner's consumer goods clients about driving growth amid uncertainconditions and increasingly connected consumers and customers. They are:

■ Virtual Store Research: Exposes a shopper to a 3D simulated store environment to gauge theirreaction. This is much easier and cheaper than building a mock-up and bringing the shopper toit.

■ Retail Mobile Shopping (Nonpayments): Using a mobile device in the store to gauge where ashopper is at any moment in time and make appropriate offers in real time based on where ashopper is standing or what he or she is scanning with the device.

■ Content Marketing: Assists with the creation and management of digital content in amarketplace that is becoming increasingly digital.

■ Gamification: Making business processes and interactions "fun" and engaging by making themmore like a game and less like an application.

■ Augmented Reality: Driving consumer engagement through new technologies like GoogleGlass.

These additions complement a number of analytical solutions on the Hype Cycle that continue tounderscore a trend we have seen for several years of moving away from transactional systems in

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favor of those that are more analytical and, in some cases, predictive in nature to better sensedemand in the marketplace and manage uncertainty.

We continue to recommend that consumer goods manufacturers evaluate the technologies that willgarner them increased share in the short term, or position them as more agile and stronger playersas the market improves. We tend to see consumer goods companies looking at solutions based oncompany types:

■ Type A companies (early adopters) are considering enterprisewide solutions, such as demandsignal repositories, marketing mix modeling and trade promotion optimization.

■ Type B companies (fast followers) are typically examining assortment optimization or PLMinitiatives.

■ Type C companies (steady adopters) are focused on more-transactional capabilities, such asretail execution and monitoring, and sales and operations planning.

Our Hype Cycle continues to take a long view of the industry. Consumer goods companies tend tobe steady technology adopters. There is rarely a technology that meets with a "bandwagon rush" ofconsumer goods companies vying to adopt it, because the industry tends to adopt and integratenew technologies at a slow and steady pace relative to other sectors. We are also seeingmicrocosms of demand based on factors such as social media that have to be monitored in nearreal time in order to profit before the trend is over. This requires the ability to rapidly sense demandand drive increasing efficiencies from consumer, trade and supply chain activities while still beingcost-effective.

For the foreseeable future, technologies that focus on what the consumer experiences relative tothe purchasing of products will be key to the space, in addition to the ongoing work thatmanufacturers do with their retail partners. These include virtual store simulation, promotionoptimization, social media, context-aware offers, gamification, augmented reality and predictiveanalytics. This will result in:

■ A better understanding of consumers to ensure that the right quantities of the right products areavailable at the shelf for the appropriate demographic that surrounds the store. While this mayseem like a perennial and simple problem, it is still pervasive.

■ More direct engagement with consumers before, during and after the purchase decision thatwill help to understand and shape consumer behaviors and attitudes.

■ Streamlining of product development to be more nimble and in touch with what consumerswant right now, as opposed to what they wanted last season or last year.

We expect investment to be up compared to 2012 as companies realize that economic conditionswill not return to prerecession levels in the foreseeable future. Failure to make key investments inemerging technologies poses the risk of lower growth rates as more-aggressive competitors makinginvestments are able to improve their competitive position and effectively steal market share.




Figure 1. Hype Cycle for Consumer Goods, 2013

Innovation Trigger

Peak ofInflated

Expectations

Trough of Disillusionment Slope of Enlightenment

Plateau of Productivity

time

expectations

Plateau will be reached in:

less than 2 years 2 to 5 years 5 to 10 years more than 10 yearsobsoletebefore plateau

As of July 2013

Virtual Store Research

Intelligent Image Interpretation

Manufacturer In-Store MonitoringAnalytics

Retail Activity Optimization

Retail Mobile Shopping (Nonpayments)

Consumer Goods E-Commerce

Climate-Driven ForecastingSocial Gaming Ad Networks

Content Marketing

Marketing Mix Modeling

Demand Signal RepositoryGamificationReal-Time Customer Offer EnginesCrowdsourcing

Operations IntelligenceSocial Media Marketing Platforms

Augmented Reality

Digital OffersRetail Digital Coupons

Multiechelon Inventory OptimizationTrade Promotion Optimization

Social Analytics

EnterpriseManufacturing

Intelligence

2D Bar Code MarketingQuality Process Management Applications

Trade Promotion Management (C&SI)

Merchandising and Category OptimizationPLM for Apparel, Footwear and Accessories

PLM for Packaged Food, Beverages and Personal Care Products

Stages 2 and 3 Sales and Operations Planning

PLM for Durable Consumer Goods

MES ApplicationsMaster DataManagement for

Consumer Goods

Source: Gartner (July 2013)




The Priority Matrix

The 2013 Consumer Goods Hype Cycle, like those of previous years, does not have a technologywith a transformational benefit that will mature during the next two years (see Figure 2). This islargely to be expected, as disruptive technologies are not typical in this sector. A good example isdigital technologies, which could be disruptive in the B2B sector, but have a much more dissipatedimpact on consumer goods. It is also due, in part, to the adoption profile of consumer goodscompanies and is exacerbated by a cautious environment, where companies are being conservativein their technology investments. This trend is likely driven by consumer goods companies' reticenceto embrace transformational technologies quickly and some of the commodity cost pressures thatare impacting overall operations. However, Retail Mobile Shopping (Nonpayments), OperationsIntelligence and Trade Promotion Optimization offer the ability to transform their categories over thetwo-to-10-year horizon. This is an interesting combination because Retail Mobile Shopping(Nonpayments) and Trade Promotion Optimization can impact the offer that is given to theconsumer in the grocery store, while Operations Intelligence is focused on making sure the itemsare available from the supply chain. Hence, multiple areas across the enterprise will benefit.

PLM solutions continue to provide high benefit in the two-year-plus time frame as computer goodscompanies seek to accelerate new product innovation and manage existing product portfolios. Thisis largely unchanged from last year. But the growing theme for 2013 is more consumer-centrictechnologies. By this we mean those that impact what drives the consumer to the store shelf andwhat the experience will be at the moment of making a purchase decision. We expect to see notonly high-impact technologies exerting their influence two to 10 years in the future, but also more ofthem. This is a significant theme in the Hype Cycle as shipping becomes more social and morevisceral to orchestrate and optimize product/packaging development initiatives, from planningthrough end of life.

Solutions with moderate potential (such as consumer packaged goods e-commerce) providemanufacturers with a direct-to-consumer revenue channel, offer new insight into shopper behaviorand increase collaboration with retailers. Maximizing these benefits necessitates broad integrationwith existing applications, and involving internal and external stakeholders. In other words, itrequires an agile organization and strategically focused executive management. The tight alignmentof IT initiatives with business priorities will facilitate the quick achievement of specific short-termobjectives via a phased rollout, because these solutions encompass multiple applications.




Figure 2. Priority Matrix for Consumer Goods, 2013

benefit years to mainstream adoption

less than 2 years 2 to 5 years 5 to 10 years more than 10 years

transformational Operations Intelligence


Trade Promotion Optimization

high Crowdsourcing

Demand Signal Repository

Enterprise Manufacturing Intelligence

Merchandising and Category Optimization

Multiechelon Inventory Optimization

PLM for Apparel, Footwear and Accessories



Social Analytics

Social Media Marketing Platforms


Augmented Reality


Master Data Management for Consumer Goods

Real-Time Customer Offer Engines



moderate 2D Bar Code Marketing

Content Marketing

Digital Offers

MES Applications

Retail Digital Coupons

Social Gaming Ad Networks


Climate-Driven Forecasting


Gamification


Manufacturer In-Store Monitoring Analytics

Quality Process Management Applications

low

As of July 2013


Off the Hype Cycle

There were several name changes to entries on this year's Hype Cycle. Consumer Packaged GoodsE-Commerce was changed to Consumer Goods E-Commerce to focus on manufacturers of all




types of consumer goods selling products directly to consumers. Social Coupons and E-Couponshave been consolidated into Retail Digital Coupons to reflect the growing maturity of digitalcoupons in retail. Mobile Coupons was expanded and renamed Digital Offers to include offers likedaily deals or specialized and targeted offers from retailers while shoppers are on the go. Finally,Inventory Strategy Optimization was renamed Multiechelon Inventory Optimization to reflect theinclusion of other facets of the supply chain (for example, sourcing, pooling and replenishmentstrategies) to support the development of segmented supply chain response strategies for customerand channel segmentation.

Promotion Execution Monitoring has been taken off the Hype Cycle due to component technologiesbeing absorbed into other technology classes such as Manufacturer In-Store Monitoring Analytics,Intelligent Image Interpretation and other point of sale (POS) analytics applications. Retail Executionand Monitoring has also been removed after having become sufficiently mature. But a newmanifestation of it, Retail Activity Optimization, includes the same underlying transactionalcapabilities but gives guidance and direction on which stores to visit and what to do while there inorder to yield the greatest return on time and resources. Thus, Retail Execution and Monitoringeffectively lives on, but in a more outcome-driven version. Assortment and Space Optimization wasremoved and replaced by Merchandise and Category Optimization to reflect changes in howretailers are viewing these merchandising activities and how manufacturers can support them ascategory captains.

On the Rise


Analysis By: Don Scheibenreif; Marc Halpern; Janet Suleski

Definition: Virtual store research utilizes sophisticated online 3D renderings of store environmentsthat enable consumer goods (CG) manufacturers and retailers to visualize merchandise and spaceplanning scenarios, and study consumer behavior in simulated shopping situations.

Position and Adoption Speed Justification: Today, most retailers and CG manufacturers visualizespace, like shelves, racks or aisles, using flat 2D software applications, or store shelves in actualretail or mock "laboratory" stores. Virtual store research changes this by using animated 3D onlineenvironments that can be delivered on a variety of devices, such as a laptop, a tablet and a full-size"virtual store laboratory." These applications are challenging the traditional 2D view of space andassortment planning and consumer research. Video game-quality 3D environments have beencreated for a number of retail channels selling consumer products, including mass merchandise,grocery, drug, convenience, apparel and hardware stores. These technologies enable the testingand simulation of multiple scenarios that would otherwise be cost prohibitive if done in a physicalenvironment.

Retailers are just beginning to explore this opportunity. Gartner primarily sees Tier 1 manufacturersand retailers using these technologies, but we are also seeing signs that Tier 2 and Tier 3 playersare becoming interested in the benefits of this technology. Space planning in grocery stores andconsumer market research is a very mature business process, with established technologies and




vendors. Changing these long-standing behaviors, and getting retailers and CG manufacturers touse this new visualization technology in place of existing technology investments and vendorrelationships, are the biggest barriers to adoption of virtual store research technology.

User Advice: IT professionals and shopper marketing or category management professionals in CGcompanies should pay attention to these technologies, especially if you are looking foradvancements to help reduce the costs of in-store or in-market testing programs, and to betterprepare your sales organizations for selling new products and new promotions. If you are a Tier 2 orTier 3 CG manufacturers, consider using these innovative technologies to win category projects andleadership positions from larger competitors. All of the vendors listed below have experience in CGmarket research and understand retailers, which is critical. Most are U.S. based, with several newerfirms in Europe and Latin America. Many of the vendors have project experience in Europe, SouthAmerica and Asia, in addition to North America. Vendors will offer a range of capabilities, from puremarket research to integrated space and assortment planning to process consulting. Startupinvestments will be required to construct the 3D shelf environments for a particular category ofproducts and a particular retail environment if it has not already been constructed by the vendor.Once the initial investment is made, then it is a matter of updating images and running scenarios ona project or retainer basis. On the consumer research side, virtual store research should be viewedas one among multiple tools a CG manufacturer should use in the consumer and shopper insightprocess.

Business Impact: Virtual store research tools can help both manufacturers and retailers save timeand money in space planning, category management and consumer research through thesimulation of multiple scenarios. By eliminating physical space as a constraint in planning andresearch, this technology helps take costs out of the process. It also creates innovationopportunities for both retailers and manufacturers by offering economical alternatives to creatingphysical virtual store labs. CG manufacturers can learn how consumers react to different concepts,and help their salespeople sell more effectively by showing retailers how their ideas will look in theretailer's environment. This insight can be used to help drive more-effective product launches,promotions and other merchandising concepts that drive revenue for both parties.

On the consumer research side, it is also is a viable tool to drive greater collaboration between CGmanufacturers and retailers because of the engaging, visual nature of the approach, along with therobust analytics built in to the applications. Short-term benefits aside, the expansion of this 3Dtechnology among retailers to consumer-facing applications could signal what the future ofshopping could look like.

Benefit Rating: High

Market Penetration: 1% to 5% of target audience

Maturity: Emerging

Sample Vendors: Dassault Systemes; Decision Insight; Fifth Dimension; InContext Solutions; IVDShopper; Keytree; Nexium Customer Solutions; Red Dot Square

Recommended Reading: "Cool Vendors in Consumer Goods, 2011"




"Cool Vendors in Consumer Goods 2013"


Analysis By: Dale Hagemeyer

Definition: Intelligent image interpretation is a technology that transforms digital images ofmerchandised product displays and planograms, captured by a standard digital camera orsmartphone in-store, into usable information and analytics. Pictorial views of the shelf displays anda series of analytics and statistical information can be produced to understand shelf conditions anddrive merchandising actions that can lead to increased revenue and consumer satisfaction.

Position and Adoption Speed Justification: Intelligent image interpretation analyzes the captureddigital image through identifying color, package size and label design, as well as mapping theseattributes against its reference data warehouse. This capability is early in its life cycle and is slowlydeveloping the key capabilities needed to embed it successfully into production-quality applicationsand to integrate it with digital merchandising applications. This will enable manufacturers andretailers to better understand out-of-stocks, new product compliance, and shelf or displaycompliance. In 2012 and early 2013, we have seen substantially more interest in this area, which isdriving rightward movement on the Hype Cycle. This is a result of both successful pilots andimprovements in image recognition success above the 90% accuracy level. We are also seeingincreased ability to capture pricing from shelf tags, which would further bolster KPIs about shelfconditions.

User Advice: Consumer goods manufacturers looking for a quick and easy way to check in-storeconditions should consider how simple digital images could lead to significantly greater compliancemonitoring and richer insights that can inform their assortment planning and customer-specificshopper marketing programs. To derive the potential business benefits, the user must capture thedigital pictures of the shelf (showing the products that have been merchandised), and then transferthem to the application for processing, to identify the products, count facings, and record productpositions and shelf conditions. Despite the advances in technology, manual checks are stillnecessary, especially when it comes to identifying products in complex or very small packaging.Not all vendors cover all product categories, so expect a learning curve for the system if yourproducts represent a new category. Be sure to review vendor development road maps to gaugeinvestment and scaling of the technology.

Business Impact: The main business benefits can come from the ease with which space-planningplanograms can be compliance-audited quickly, allowing corrective actions to be taken simply bycapturing a digital picture and processing it. Manual involvement in the process can help ensurecorrect interpretation of the captured image, but significant productivity gains can consistently bedelivered versus existing methods. Therefore, the benefits include better planogramming, reducedcosts of auditing and greater insight to in-store conditions.

Benefit Rating: Moderate

Market Penetration: Less than 1% of target audience




Maturity: Emerging

Sample Vendors: Accenture; Nexium Customer Solutions; Planorama; ShelfSnap

Recommended Reading: "Cool Vendors in Consumer Goods, 2013"

Manufacturer In-Store Monitoring Analytics

Analysis By: Don Scheibenreif

Definition: In-store monitoring analytics is a collection of service, software and hardware offeringsused to capture observable behavior of shoppers as they journey through the store, interacting withindividual sections and products. Using a combination of data inputs (video and sensors) andadvanced analytics, this technology provides retailers and manufacturers visibility on actualshopper behavior in an unbiased environment, and analytics to inform the design and execution ofmore effective shelving, merchandising, display and pricing programs.

Position and Adoption Speed Justification: These capabilities are still developing, and primarilyinvolve tracking mechanisms such as video cameras or sensors to follow shoppers' movementsand actions. Examples of metrics include total store traffic, traffic-to-aisle conversion (percentage oftotal shoppers who visit an aisle or section), engagement rate (percentage of shoppers who stop atthe location), dwell time (how long shoppers spend in a particular location), purchase conversion(percentage of shoppers that purchase) and traffic flow patterns (how shoppers get to the locationand shop the store). Prior to these technologies, consumer goods manufacturers obtained thesetypes of insights through labor-intensive and expensive methods like in-store observation, shop-alongs and video methods with manual tabulation.

Consumer goods manufacturing adoption of this technology is still low and limited to Tier 1companies, with the first few early adopters beginning to evaluate it, and experiment with it, as itrelates to understanding shopping behavior at the shelf. They are motivated by the desire to createmore effective shopper marketing and category management programs to increase the returns fromrising trade spending. On the retailer side, a limited but growing number of grocery andconvenience store retailers have contracted with vendors to deploy these services. Vendors willfund the startup costs, charge manufacturers for access to the information analytics, and sharerevenue with the retailer. To gain greater retail participation, vendors will have to help retailersunderstand the growth opportunities and operational benefits of these technologies beyond justmeasuring merchandising activity for consumer goods manufacturers. Also, consumer goodsmanufacturers will have to use the insights from these analytics to drive greater category salesgrowth. We expect these vendors to continue to build their store panels and learning laboratoriesfor manufacturers and retailers, thereby increasing adoption of this technology over time. However,we are not seeing increases in adoption of this technology by consumer goods manufacturers. Webelieve this is due to several factors, including a limited number of test stores with a limited numberof retailers, and an industry slow to embrace a new set of metrics represented by the technology.Hence, the position on the Hype Cycle has not changed from 2012.




User Advice: Progressive consumer goods companies should consider this type of analytictechnology service for their shopper insights team, because having personnel evaluate retailconditions is an expensive proposition due to travel costs and labor intensiveness. Users shouldevaluate the trade-off of using direct point of sale (POS) data, combined with in-store personnel, asopposed to paying for this type of service. Identify high-potential or high-growth categories thatwould benefit from new insight, and invest in a pilot test by working with your shopper insight teamto identify a brand that has sales challenges.

Business Impact: In-store monitoring analytics fills a critical gap in understanding the link betweenshopper behavior and purchasing behavior. Additionally, it helps manufacturers collaborate withretailers, because they both have a vested interest in driving traffic, increasing sales and improvingthe shopping experience by recognizing the retail store as the center of multichannel retailing.Retailers and manufacturers can determine whether shoppers are engaged, and whether plannedmerchandising tactics are working by anonymously tracking actual shopper movement in the store— and how that translates to purchases. These analytics complement existing sources of data likePOS data, loyalty data, and traditional attitudinal and observational shopper and consumerresearch. The insight developed from these tools leads manufacturers to make bettermerchandising recommendations, and creates value for retailers, manufacturers and shoppers. Ithelps answer these elusive questions that can't be understood by traditional research reports alone:How do shoppers shop brands and categories? How can you best engage them in-store? Whatwould make them buy more, or more frequently? Being able to win at the point of decision, and atthe store shelf, is still aggressively pursued, and having a digital image plus related metrics that canfacilitate internal and external conversations based on facts, as opposed to secondhandperceptions, has real merit.



Maturity: Emerging

Sample Vendors: Infosys; RetailNext; ShopperTrak; VideoMining

Recommended Reading: "Overview of In-Store Monitoring Analytics for Consumer GoodsManufacturing"

"Shopper Marketing in Consumer Goods Manufacturing Requires an IT Partner"

"Predicts 2012: Demand Sensing Will Be Key to Success and Growth in Consumer GoodsManufacturing"

"Cool Vendors in Consumer Goods, 2012"







Definition: These technologies use advanced modeling (regression analysis and linearprogramming) to drive the activities that manufacturers want executed by field sales personneldedicated to in-store activities, such as retail merchandisers, broker retail sales forces and directstore delivery drivers. The technologies include data accumulation and analysis, pushing theactivities out to the field sales force through mobile devices (such as tablet PCs or handhelds), andcollecting the inputs or outcomes from the mobile devices.

Position and Adoption Speed Justification: In the past, this area was the subject of someexperimentation and custom development, but is now gaining attention as consumer goodscompanies move from executing activities at retail to optimizing those activities. However, we didn'tsee much increase in penetration in 2012 and early 2013 because of data quality issues and lack ofstatistical modeling expertise at many of the vendors looking at this area. Given that tradepromotion optimization is gaining momentum in the marketplace, it's only logical that the in-storeexecution that supports promotions should become a focus for optimization. Examples of theactivities to be optimized include:

Which stores to visit and not to visit

■ Optimal routing in order to visit a determined list of stores in the most logical sequence

■ Recommended order quantities

■ Prioritization and tasking of in-store merchandising activities, such as addressing products outof stock, auditing and building displays

■ Activities that need to be executed based on predictive models to avoid an undesirableoutcome, such as a product out of stock

Key inputs into the optimization may include direct point of sale (POS) data, syndicated POS data,shipment data and company imperatives. Other inputs could include fuel costs, personnel costs,distance to the store and so forth. It's important to note, however, that no single vendor isoptimizing all the sales activities; hence, there are several vendors, but the space is too immature tohave a consistent definition of what to optimize or how to do it.

User Advice: Type A adopters (technologically aggressive) should be watching this marketplacethrough 2013 and be ready to commit as these products evolve, and as the vendors withoptimization capabilities combine their expertise with vendors that have more-traditional retailexecution and monitoring offerings. Type A adopters that are experiencing high degrees of pain inexecuting at retail may want to proactively engage their retail execution vendors to help shape thisspace. Type B (mainstream) adopters should continue to automate their retail execution capabilitiesby pushing activities out to the field via mobile devices, so that they will be ready when thesecapabilities mature.

Business Impact: Business impact is high and will be higher as soon as the various approachesmature, and there's momentum behind optimizing a complete set of retail activities, as opposed tojust one or two (such as route or order quantity optimization). Consumer goods manufacturersconsistently identify the ability to execute better and "win at the shelf" as the top areas requiring




improvement to drive competitive advantage. Given the increases to, and volatility of, fuel costs,getting more benefits from a retail store is critical.

Also, the ability to direct the retail sales force toward the activities that will yield the greatest returnsis very intuitive to user organizations. As a general rule, retail activity optimization has the mostbenefit where a delivery driver or salesperson has the possibility to not visit a set of stores, becauseinventory levels or store conditions do not warrant it. This can favor all retail execution models —merchandising, van sales and direct store delivery.



Maturity: Emerging

Sample Vendors: Accenture (CAS); AFS Technologies; RW3 Technologies; Tactician; The TerrAlignGroup; Visicom; Xtel

Recommended Reading: "Vendor Panorama for Trade Promotion Management in ConsumerGoods"


Analysis By: Don Scheibenreif; Miriam Burt

Definition: These applications support consumers' ability to shop in consumer goods retailchannels using their mobile devices. They allow retailers to provide consumers with shopping toolsand promotional information that can enhance the shopping experience; some could also supportmobile payment transactions.

Position and Adoption Speed Justification: Over the past 12 to 24 months, a handful of largegrocery retailers have launched these applications, whether they be browser-based, message-based, downloadable to a mobile device or native applications that come preinstalled on the mobiledevice. Consumer goods companies have been participating in these efforts by contributing couponoffers and other forms of content, such as product information. The applications can supportshopping activities, including the ability to find stores, browse items, build shopping lists, reserveitems, "check in" to see whether their friends are in their vicinity, receive and review promotions,receive coupons, get and share in community reviews, check prices and inventory, check the statusof their loyalty program points. Retailers can use these applications to conduct advertising andmarketing, and to increase brand awareness and loyalty.

Several grocery retailers have chosen to launch these nontransactional mobile websites andapplications as "first steps" before implementing more robust mobile capabilities, including mobilepayment. Consumer goods manufacturers have been participating in these efforts. Examplesinclude Ahold USA's Stop & Shop, Michigan-based Meijer, and Casino in France. Walmart recentlyannounced the expansion of its self-scanning consumer mobile application beyond its pilot of 200stores. What makes these applications interesting is the potential to deliver context-aware contentwhile a shopper is engaged in the shopping process. This involves determining a shopper's precise




location in the store, and marrying that with a complex ecosystem of data and analytics that candeliver highly relevant offers at the point of decision. Today's applications are primarily focused onself-scanning and self-check-out, and potentially lay the foundation for a future of context-awareoffers in real time.

In the past 12 months, there has been escalation of activity and concomitant raised levels of hypeon solutions in the broader retail market. The following factors have contributed to this:

■ The trend toward the convergence of mobile and social is growing with the rise of mobile socialnetworking (for example, native mobile social networking sites such as Foursquare). Socialnetworking websites have also been creating mobile applications to give their users instant andreal-time access from their devices.

■ Retailers' interest is increasing in activity around vendors' development of geofencing solutions,in order that geofencing data can be used in conjunction with push notification systems (forexample, to push location-based offers to consumers in real time as they visit the store and usetheir smartphones to find and research products).

■ A trend toward consumers using mobile applications on tablets in their homes has also caughtthe interest of retailers.

■ The emergence of the HTML5 standard is expected to have a major impact on mobiletechnologies, especially in terms of portability across platforms.

For the grocery channel, we estimate that this specific grocery-focused mobile application ispresent in fewer than 1,000 actual retail stores. While these mobile technologies are acceleratingamong other Tier 1 retailers, the grocery channel is slow to adopt new technologies; hence, we seeit at an earlier stage of maturity. A key barrier to the adoption of these technologies is manufacturer-retailer collaboration. For these applications to realize their potential, there must be a significantlygreater level of data sharing than exists today. That may change, however, if leaders like Walmartembrace the technology and expand it across their systems.

User Advice: Consumer goods manufacturers should follow this technology carefully, as they willlargely fund the development of these mobile applications through the discounts and offers theyfund, and of other relevant content for shoppers. We think it will represent the next battleground formerchandising activity. Early adopters will want to have discussions and participate in pilot projectswith vendors currently working with retailers on these types of mobile applications. They will need tolearn how the applications work at their retail partner, what type of offers and content are mostrelevant, and how to leverage their unique insight of consumer and shopper behavior to driverevenue for themselves and their retail partners. Retailers themselves are learning how theseapplications can support customer service basics. Gartner retail consumer survey researchindicates that "finding a store location" is the No. 1 priority in terms of the way consumers want touse their mobile devices. However, the ability to check stock availability, check and compare prices,read product reviews, and get promotions also ranked high on the list of things that consumerswant to do with their mobile devices. Additionally, consumer goods manufacturers will want to:

■ Assess your organization's readiness to have discussions about context-aware offers.




■ Take an inventory of your current context-aware and mobility strategies and capabilities.

■ Integrate your own data (such as shipments, promotions and POS), and be ready for the nextlevel of manufacturer-retailer collaboration

■ Facilitate a move to trade promotion optimization, and use predictive modeling.

■ Work with industry groups such as the Direct Marketing Association and the GroceryManufacturers Association to develop regulations/policies/best practices concerning acquiring,maintaining and retaining consumer data.

Business Impact: According to the Point-of-Purchase Advertising Institute, 70% to 75% ofpurchase decisions for consumer goods are made inside the store. Delivering the right offer to theright shopper in the right precise location and in the right context represents the ultimateachievement of consumer goods marketing. Consumer goods companies that understand andknow how to participate in this new technology will have a distinct competitive advantage overthose that rely solely on traditional means of working with retail partners. While our retailer researchindicates that, through 2016, most retailers expect mobile commerce (m-commerce) to influence6% of overall revenue, we feel the mobile channel will be important in driving cross-channelrevenue, and could influence a significant percentage of sales (completed in other channels). Forexample, a mobile application used to find the nearest store that has a desired item in stock mayinfluence a customer to go to that store and purchase the item. Or, a review checked on a mobilesite while a customer is in a physical store may push the consumer to purchase the item. One thingthat could drive consumers to purchase via mobile devices is an increased use of flash sales byretailers, which adds a time element to a product sale or promotion. If this behavior becomescommonplace, retailers should evaluate adding commerce capabilities to all their applications andmobile websites.

Benefit Rating: Transformational


Maturity: Emerging

Sample Vendors: Catalina Marketing; Point Inside; QThru; SAP

Recommended Reading: "Me Marketing: Get Ready for the Promise of Real-Time, Context-AwareOffers in Consumer Goods"

"Me Marketing: Prepare for the Challenges of Real-Time, Context-Aware Offers in ConsumerGoods"

"How Manufacturers Can Harness the Power of Tech-Savvy Consumers"

"Survey Analysis: Tier 1 Retailers Must Capitalize on Consumer Use of Mobile as Key Gateway inCross-Channel Shopping "






Definition: Consumer goods e-commerce enables consumer goods manufacturers to sell theirproducts to consumers via the Internet through a variety of online and brick-and-mortar retailpartners. Consumers can access these e-commerce sites directly through storefronts on brand-specific websites, online marketplaces or social networks using desktop or mobile devices.

Position and Adoption Speed Justification: Consumer goods manufacturers have traditionallydabbled in e-commerce, often viewing it as a benign market presence to ensure access to themarket, and to provide consumers choice in areas where their products are not offered. However, inthe past several years, selling consumer packaged goods (CPGs) on the Web is seeing renewedinterest and activity. Instead of having items delivered to the home for a fee in dedicated deliverytrucks from retailers, new e-commerce sites are having goods shipped directly to the home viaparcel delivery. Manufacturers have begun to change their expectations for e-commerce, viewing itas a viable means of responding to market shifts, generating revenue and developing a directrelationship with their consumers. In recent Gartner research, direct-to-consumer e-commerce wasseen as the No. 1 channel investment priority for consumer goods manufacturers in the U.S. andU.K. Additionally, the ecosystem of service providers to support direct online sales of consumergoods (e-commerce hosting sites like PFSweb, distribution networks and parcel delivery like UPS)has matured, making it more efficient to aggregate and ship these items with point-to-pointsolutions.

Category selection is still limited to household essentials on most sites, including personal andbeauty care, household care, over-the-counter medicines, nonperishable food and beverage, andpet care. Grocery retailer sites like Peapod offer a wider range of products that you would find in abrick-and-mortar store. We classify these sites into two main categories:

■ Branded e-commerce site: Web and/or mobile site for online selling of products and/or servicesthat is owned by the seller and operated either by the seller or on behalf-of the seller (forexample, P&G eStore, Nike, Estee Lauder and Nespresso). On these sites, pricing is carefullymanaged so as to not undercut or alienate Tier 1 retailers.

■ E-commerce marketplace site: Web and/or mobile site for online selling of products and/orservices that aggregates the products of multiple sellers. The site is owned by the marketplace,and is operated either by the marketplace or on behalf of the seller (for example, Alice.com,Ocado, Amazon and its subsidiaries like Soap.com). Most sites offer free ground shipping witha minimum item or dollar purchase.

Consumers have become more comfortable shopping for items online that they generally wouldhave purchased in person, and this trend is extending to everyday-use items normally purchased intrips to a retail store. Purchasing these items online saves time for consumers, and potentiallyeliminates a separate shopping trip and associated transportation costs. An increasing number ofleading consumer goods manufacturers are experimenting with these e-commerce sites, either insites with other brands or, in more cases, on their own brand-specific e-commerce websites. Theyare testing different e-commerce consumer-direct models to see whether there is value to the




organization and to the consumer. The e-commerce platform technology is fairly standard, with themore innovative marketplace sites allowing users to create shopping lists, receive reminders toreplenish frequently used items, and share experiences with friends via social applications. Moreand more retailers are experimenting with different e-commerce models, with the most popularcombining online ordering with home delivery and in-store pickup. Online-only retailers such asAmazon and Ocado are also increasing their investments in the grocery channel by offering same-day delivery in some cases.

We view this technology as a source of insight on consumer shopping behaviors, and a platform forexperimenting with different types of offers as part of a manufacturer's shopper marketinginitiatives. With e-commerce sales of consumer goods currently representing only 2% of CPG retailsales in the U.S., and projected to grow 25% per year through 2015 (according to Nielsen), we donot see e-commerce supplanting traditional brick-and-mortar retail stores. However, we do see thee-commerce platform technology as being a viable choice for consumers to purchase routinelyused items, much like consumers split their shopping baskets among multiple retailers. These sitesalso offer manufacturers the opportunity to sell niche items that have a loyal following but don'tjustify shelf space. A key driver of adoption will be increasing selection on the marketplace sites,and making the experience as easy as shopping in a retail store, without alienating existing retailcustomers. The current limited item selection, paired with the consumer goods industry's slow paceof change, is why it will take five to 10 years for this technology to reach maturity. However,increases in the numbers of consumer goods companies selling at least some of their products toconsumers directly online has resulted in advancing the maturity of this technology further up on theHype Cycle.

User Advice: Experiment with selling products on one or more of these platforms, as more andmore manufacturers embrace this channel. In addition to your top-selling items, you can also sellniche items that might have low distribution or be slow movers at retail (such as specials, seasonalitems and event-oriented products) but have a loyal consumer following. Or, even sell exclusiveprerelease products online that could serve as an early indicator for broader production. Start withconsumer segments that are already heavy users of e-commerce for their personal purchases.Avoid items that may not be practical to ship in consumer quantities, have high supply channelcosts, and have high rates of return or risk conflict with your retail customers. However, as morespend shifts online, the more returns are to be expected (even if you are only shipping items thatdon't traditionally have high rates of return), and that is certainly what retailers are makingprovisions for. CPG companies that operate their own branded e-commerce sites have to ensurethey have a smooth and hassle-free process to handle returns and customer service inquiries ingeneral. Learning from retailers how they handle customer service issues could help you avoidembarrassing situations and maintain a good relationship with the consumer. Leverage the potentialfor consumer innovation and direct feedback on product performance by having a plan for what youwill do with the data, and for how it will be translated into insights that can be leveraged in shoppermarketing efforts for other channels, such as assortment planning, cross-merchandising, orpromotional activity.

In Asia, we are seeing manufacturers very focused on creating multichannel experiences forconsumers that involve both their physical and online stores. For example, a retailer can increasestock in the brick-and-mortar store for items that are highly rated online. It is very important to share




these insights with retailers to maintain a cooperative relationship. A lot can be learned, and severalof the vendors provide fulfillment for retailers out of the same facilities. Understand the trade-offsbetween experimentation (which could jeopardize existing retail relationships) and sitting on thesidelines

Business Impact: Direct selling of consumer goods enables manufacturers to develop a one-on-one, database-driven relationship with consumers, and could provide valuable insight on purchasebehavior that can be leveraged in high-revenue channels. These channels also offer a venue to sellitems without the threat of private label. However, the business impact is low, given the low share ofsales coming from this channel, and the still-emerging ability to leverage insights to other channels.



Maturity: Emerging

Sample Vendors: Alice.com; Amazon; Digital River; eBay (GSI Commerce); MyWebGrocer; Ocado;PFSweb; Soap.com

Recommended Reading: "Optimization Strategies for Multichannel Consumer ElectronicsRetailers"


"Meet Alice. She'll Show You the Path to the Pantry."

"Survey Shows Consumer Goods Manufacturers Must Embrace Digital Marketing to MaximizeImpact"


Analysis By: Noha Tohamy

Definition: Climate-driven forecasting incorporates the impact of weather changes on futurecustomer demand. Traditional demand forecasting has long accounted for the seasonal impact oncustomer behavior. Climate-driven forecasting is a logical extension that leverages improvedanalytics, and the availability of structured and unstructured data. Some of the climate-drivenforecasting solutions exploit existing demand signal repositories, but others rely on proprietarydatabases.

Position and Adoption Speed Justification: Despite having been in use in some aspects of theapparel and consumer products (CP) industries for more than 10 years, these capabilities are stilllimited in forecasting solutions. Most companies still rely on historical data to forecast demand,without incorporating the impact of real-time data like weather conditions. As such, the adoptionlevels of climate-driven forecasting haven't seen any significant increase over the past year.




Additionally, this means that it will be more than five years before the impact of climate conditions iswidely incorporated into consumer goods planning and forecasting.

User Advice: Certain climatic conditions can have a significant effect on customer demand and thesupply chain response. For CP categories that are clearly affected by the climate, clients shouldconsider adoption to help improve their forecast accuracy. For CP categories that are not directlyimpacted by weather conditions, seasonality analysis might be a sufficient approach to account forweather changes.

Business Impact: By combining weather insights with consumer and market insights, companiescan enhance the accuracy of their demand forecasts. This, in turn, can be used to generate a bettersupply response in various areas like transportation, inventory and production processes. This canresult in making more efficient and profitable decisions to meet customer demand.



Maturity: Emerging

Sample Vendors: Climpact; Oracle; Planalytics; Weather Trends International

Recommended Reading: "Predicts 2012: Demand Sensing Will Be Key to Success and Growth inConsumer Goods Manufacturing"

"Next-Generation Supply Chain Predictive Analytics: A Cornerstone to Demand-Driven ValueNetworks"

Content Marketing

Analysis By: Jake Sorofman; Allen Weiner

Definition: Content marketing involves the process and practice of creating, curating andcultivating text, video, images, graphics, e-books, whitepapers and other content assets that aredistributed through media platforms and the social graph. These assets are used to tell stories thathelp brands engage with and nurture customers, prospects and other audiences. The goal ofcontent marketing is to drive awareness, demand, preference and loyalty through deeperengagement with customers.

Position and Adoption Speed Justification: Great content marketing is easier said than done.Many brands find themselves poorly equipped to become true content marketers. But that hasn'tdampened the interest in this technique, which is fundamental to effective social marketing. Contentmarketing relies on digitally savvy workflows and creative techniques to reach consumers with high-quality, authentic content that audiences want to consume and share. With both brands in search oftools and platforms to facilitate content marketing and customers hungry for engaging content, asubstantial opportunity has emerged for new vendors focused on tools for automating andstreamlining content creation, curation and activation. Today, the majority of these vendors haveless than $10 million in annual revenue.




User Advice: Assess your content marketing requirements in line with your social marketingprograms. Consider partnering with content marketing, social marketing or digital marketingagencies to help bootstrap your efforts and investing in human capital (in the form of professionaljournalists) and technology that help you create a sustainable pipeline of high-quality contentassets.

Business Impact: When done well, content marketing can help brands generate awareness,demand, preference and loyalty through social and other earned media channels. Also, contentmarketing can complement paid media campaigns through content co-creation, sponsorship andnative advertising programs available through many publishers and digital media properties.



Maturity: Emerging

Sample Vendors: Kapost; Percolate; PublishThis

Recommended Reading: "Content Marketing Pushes Digital Marketers to Adopt NewsroomHabits"

"Digital Marketers: Are You Ready to Think Like a Publisher?"

"How American Express and Intel Excel at Brand Publishing"

At the Peak



Definition: Marketing mix modeling refers to analytical solutions that enable marketers to maximizeROI on their marketing expenditures by determining the best set of advertising and targetedcampaigns across various channels (offline and online) and media (traditional, digital and social).These technologies help companies better allocate resources and budget money to marketingprograms and campaigns across the entire marketing mix, not just within the advertising or directmarketing silos.

Position and Adoption Speed Justification: Recent advances in optimizing marketing spendacross trade and consumer activities, and new entrants in the category, have caused interest toincrease in the consumer goods industry, resulting in a slight movement up the Hype Cycle.Gartner's assessment of marketing mix modeling, a component of marketing performancemanagement (MPM), is that it remains an immature area of marketing automation in terms ofmarketing adoption and solution sophistication. Challenges include the lack of prepackagedsolutions, the inability to source the right data and the need for expertise in developing appropriateoptimization models. Critics of marketing mix modeling from the media industry claim these models




treat sales lift from marketing activity the same, potentially undervaluing awareness-building mediain favor of in-store promotional activities. Although many firms want to optimize their marketingmixes, particularly with the current economic pressures, few are able to overcome the currentchallenges. Additionally, the decision to use a marketing mix modeling solution may haveorganizational and political implications, particularly the influence that an advertising or mediaagency would have on the chief marketing officer (CMO). Overall, we expect the economicenvironment to continue to constrain marketing budgets, which will drive the need to optimizemarketing mix resources. With the consumer goods industry growth in the low single digits, Gartnerexpects that this will drive greater interest in and adoption of MPM solutions, and will drive softwarevendors to develop or acquire more robust, prepackaged capabilities.

User Advice: This should be a top priority for consumer goods brand managers, because it givesthem better insight into the cause and effect of brand-building activities and where they can get thebest return on their marketing spending. This becomes even more important as segments ofconsumers become smaller and smaller with the advent of technologies like social media andpredictive analytics. Users should evaluate the current methods of marketing mix analysis bypartnering with brand marketing, agencies, finance and marketing analytics/BI to define current-state available data and KPIs versus the desired future state. Agencies may see these models as athreat to their current way of advising clients on marketing spending. Including agencies in thedevelopment and pilot process will help them understand the benefits of marketing mix modeling byshowing the impact of reduced budgets (to protect them from being cut) or increased mediaspending (which would benefit the agency). Deployments can take as little as three months, sousers should look to quickly bring these capabilities online for use in planning for the coming year.With income volatility remaining high in the current economy, the simulation capabilities are key tounderstanding questions such as what the expected yield of marketing activities is across channels.Marketing analytics, business intelligence and finance functions should be heavily involved indeployments.

Business Impact: Marketing mix modeling drives customer value and revenue growth by aligningresources with the highest-value opportunities, which promotes the best consumer and customerexperience. Brand managers and CMOs can measure and achieve return on marketing investment(ROMI), use it to fuel their strategic planning, and make adjustments on an ongoing basis, ratherthan on annual cycles. This is especially important, as the diversity and number of channels to reachconsumers has become increasingly complicated. Consumer goods organizations with which we'vespoken have achieved very positive results by making this an element of the brand manager'stoolkit. It takes some time to adapt to the additional rigor and to trust the algorithms, but the ROMIis significant because the implementations are quite rapid compared to those for trade promotionmanagement.



Maturity: Emerging

Sample Vendors: Accenture; Catalina Marketing; Dunnhumby; IBM (DemandTec); IRI;MarketShare; MMA; Nielsen; Oracle; ThinkVine




Recommended Reading: "How Analytics Helps Consumer Goods Brand Managers With MarketingMix Modeling"

"Six Types of Providers for Marketing Performance Management"

"Magic Quadrant for Marketing Resource Management"

Demand Signal Repository

Analysis By: Steven Steutermann

Definition: Demand signal repository (DSR) is a centralized database that stores, harmonizes andnormalizes data attributes, and organizes large volumes of demand data — such as point of sale(POS) data, wholesaler data, electronic data interchange (EDI) 852 and 867, inventory movement,promotional data and customer loyalty data — for use by decision support technologies (categorymanagement, account team joint value creation, shopper insight analysis, demand planningforecast improvement, inventory deployment, replenishment and transportation planning).

Position and Adoption Speed Justification: While the term "DSR" is often misunderstood, withconfusion existing between account-specific solutions and enterprise solutions, the use of DSRs bysales, marketing and supply chain teams continues to expand. As a result, DSRs are maturing, andsolutions are being actively sought by leading organizations to differentiate their product andservice offerings. Cash remains king, and driving continued interest in DSRs is the need to bettertarget and reach consumers, improve cash flow and reduce working capital requirements betweentrading partners. The consumer products industry is active in piloting, learning and scaling DSRsolutions across the enterprise. Industry adoption will continue as rising expectations to managecost, service and inventory between trading partners continue to increase. For now, DSRs remain atthe top of the Hype Cycle, pending further investment and scaling of DSR solutions across theenterprise, as well as the anticipated future use of unstructured data.

User Advice: Sales and marketing departments within consumer goods manufacturers, with aspecific interest in account-related information and market trends, may want to ensure that theadoption of DSRs is focused on the specific retail and wholesale accounts that are important to thebusiness, rather than trying to address all corporatewide reporting and analytics requirements.Similarly, supply chain organizations will want to ensure that their needs, such as improved forecastaccuracy, inventory management, customer service, on-shelf availability and retail compliance, arecovered in the solution. Given that there are many potential solutions in this area, focus on thosethat provide insightful analytics, tied to business strategy and joint value creation between tradingpartners.

Business Impact: The analytic capabilities of DSRs can provide a framework from which to drivethe operations of a consumer goods business, and to drive a wide spectrum of planning andinformation systems. DSRs are more than just a single version of the truth. They can also be acritical tool to identify new sales opportunities, manage stock more effectively, drive agileresponses, provide a basis for business forecasting and planning, and link suppliers to downstreamdata.






Maturity: Emerging

Sample Vendors: Acosta; IRI; JDA Software; Nielsen; Oracle; Orchestro; Relational Solutions; RetailSolutions; Retail Velocity; SAP; Shiloh Technologies; Teradata

Recommended Reading: "The Downstream Data Maturity Model for Increased Capability"

"Use Downstream Data Collaboration as the Supply Chain Differentiator"

"How to Differentiate Your CP Supply Chain With Metrics"

"Why Not Use Downstream Data to Create Joint Value?"

"Harness Downstream Data to Grow Your Top Line and Enhance Supply Chain Performance"

"Harnessing Demand Signal Repositories to Enhance the Bottom Line"

"Case Study: How ASM Is Redefining Field and Headquarter Services at Walmart With DownstreamData"

"Why Is It So Hard to Turn Downstream Data Into Profitable Supply Chain Response?"

"Kraft Foods Partners With Leading Retailers to Improve Trade Promotion Effectiveness and On-Shelf Availability"

Gamification

Analysis By: Brian Blau; Brian Burke

Definition: Gamification is the use of game mechanics and design to drive engagement in a targetaudience for nongame purposes to achieve a target business outcome. Many types of gamesinclude game mechanics, such as points, challenges, leader boards and incentives, that makeplaying games enjoyable. Gamification applies these game mechanics to motivate the audience tohigher and more meaningful levels of engagement. Humans are "hard-wired" to enjoy games andhave a natural tendency to interact more deeply in activities framed in a game construct.

Position and Adoption Speed Justification: Gamification is used to change behavior, developskills or drive innovation. Some examples of gamification's many uses include customerengagement, education, employee performance, innovation management and healthcare. While theconcepts behind gamification are not new, its first use in 2007 coalesced specifically around usinggame mechanics derived from video games. Today, gamification is gaining traction in theenterprise. But its current "sweet spot" is the consumer market, which has the most deploymentsand gamification is integrated into marketing campaigns, customer loyalty programs, productdesign of mobile apps and services, and is intended to increase customer interaction andengagement. The fastest-growing segment of gamification is internal-facing enterprise uses, in




which it is deployed to increase employee engagement in areas like training, innovationmanagement, collaboration and employee performance. This trend is set to accelerate as largervendors, such as salesforce.com, begin to integrate game mechanics and analytics into theirsoftware offerings.

Early adopters, such as consumer brands and services, and mobile apps, show that gamificationhas had significant positive impact on user engagement rates when applied in a suitable context.However, gamification also has significant challenges to overcome before widespread adoptionoccurs. Designing games is no easy task — during four decades of video game development, manygames have failed despite developers' best intentions. A basic level of game mechanics (pointssystem, leader board, achievements, awards or basic challenges) is often not enough to sustainincreased engagement, as incentives and rewards must be aligned to motivate the target audience.Gamifying activities represent another challenge, one that requires careful planning, execution anditeration. Overcoming these challenges will require successive integration of gamification in a widevariety of consumer and enterprise scenarios.

User Advice: Gamification can increase user interactivity and change behaviors, resulting in greateruser engagement. When fun is built into the interaction model, users are more likely to continue toengage. Gamification has many uses that target consumers, customers, employees or any otherdefined audience, and it impacts many areas of business and society.

Organizations planning to leverage gamification must clearly understand the target audience theyintend to engage, what behaviors they want to change, what motivates the audience and maintainstheir engagement, and how success will be measured.

Gamification technology comes in three forms;

■ General-purpose gamification platforms delivered as software as a service that integrate withcustom-developed and vendor-supplied applications

■ Purpose-built solutions supplied by a vendor to support a specific usage (for example,innovation management or service desk performance)

■ Purely custom implementations

Organizations must recognize that simply including game mechanics is not enough to realize thecore benefits of gamification. Making gamified solutions sufficiently rewarding requires carefulplanning, design and implementation, with ongoing adjustments to keep users interested. Designinggamified solutions is unlike designing any other IT solution, and it requires a different designapproach. Few people have gamification design skills, which remains a huge barrier to success ingamified solutions.

Enterprises trying to encourage new employee behaviors can use gamification as motivation.Organizations are beginning to use gamification as a mechanism to inspire and reward newinitiatives, and to recognize contribution and participation that augments and furthers the purposeof their businesses and their customer communities. Implementing gamification means matching




player goals to target business outcomes to attract and sustain a deeper level of interactivity,relationship or engagement with users.

Business Impact: Gamification techniques can be used in a wide range of scenarios to enhanceproduct and service strategies. Its use is relevant, for example, to marketing managers, productdesigners, customer service managers, financial managers and HR staff, whose aim is to bringabout longer-lasting and more-meaningful interactions with customers, employees or the public.

Although gamification can be beneficial, it's important to design, plan and iterate on its use to avoidthe negative business impacts of unintended consequences, such as behavioral side effects orgamification fatigue.

User engagement is at the heart of today's "always connected" culture. Incorporating gamemechanics encourages desirable behaviors, which can, with the help of carefully planned scenariosand product strategies, increase user participation, improve product and brand loyalty, advancelearning and understanding of a complex process, accelerate change adoption, and build lastingand valuable relationships with target audiences.



Maturity: Emerging

Sample Vendors: Badgeville; BigDoor; Bunchball

Recommended Reading: "Technology Overview for Gamification Platforms"

"Business Model Games: Driving Business Model Innovation With Gamification"

"Gamification: Engagement Strategies for Business and IT"

"Best Practices for Harnessing Gamification's Potential in the Workplace"

"Gamification: The Serious Side of Games Can Make Work More Interesting"

Real-Time Customer Offer Engines

Analysis By: Robert Hetu

Definition: Real-time customer offer engines have the ability to create personalized promotions fora specific customer or customer segment by taking real-time interactions and transactions, andusing advanced analytics to determine the "best offer" in real time that can be delivered to thecustomer. These systems are becoming context-aware to formulate an offer — for example,consumers' locations shared by their mobile phones or consumers' social network activities can beused to create more relevant offers.

Position and Adoption Speed Justification: Gartner estimates continue to show that only 1% to5% of Tier 1 retailers use real-time offers. Three trends continue to converge and support increased




interest in and adoption of real-time customer offer engines. First, the ability to access context-aware, real-time information on customers is increasing (for example, customers' locationscommunicated via their mobile phones). Second, advances in database and cloud computing aresignificantly increasing the analytical capability to produce real-time offers. Third, some consumersare becoming more receptive to receiving and requesting promotions "in the moment" (for example,on their mobile devices and via Twitter).

The ability to create customized promotions has been in use in retail for a while. This is typicallyexecuted as an offer based on a specific item purchased and issued at the point of sale or deliveredwith a customer receipt. However, store offers were not determined in real time. Rather, they weredetermined in days/weeks prior using data that was available at the time. In fact, many customeroffers and promotion analytics remain activities that are predominantly not done in real time (excepton the Web). In the next few years, Gartner expects that real-time customer offer engines willconverge with online product recommendation on the Hype Cycle.

User Advice: Creating a compelling offer requires more than just promotional algorithms. Retailersthat are considering real-time offer engines will require good customer data (ideally, across allinteraction channels), context-aware data (for example, location), and a vehicle by which customerscan receive and respond to offers. Real-time customer offer engines should be evaluated not onlyon their science, but also for their speed and ability to be integrated into any customer process inany channel. Even if the engine is fast, the way it retrieves and delivers an offer can be constrainedby the performance of the delivery systems, which defines the customer experience.

Retailers should not attempt to supply customers with real-time, customized, 1-to-1 ratio offers untilthey are confident that they have adequate segmentation and behavioral analysis. The promise toprovide meaningful, relationship-building and relevant offers can frustrate or offend consumers ifthey arrive late or seem irrelevant.

Business Impact: Real-time customer offer engines are designed to improve sales, margins,satisfaction and frequency of visits.



Maturity: Emerging

Sample Vendors: FICO; Fujitsu; IBM; Infor; NCR; Oracle; Retalix; SAP; SAS; Teradata

Recommended Reading: "CRM Vendor Landscape: Multichannel Customer Analytics Is a CriticalCRM Capability"

"Cool Vendors in Retail, 2013"

"Survey Analysis: Tier 1 Retailers Must Capitalize on Consumer Use of Mobile as Key Gateway inCross-Channel Shopping"




"Personalization and Context-Aware Technology's Impact on Multichannel Customer Loyalty"

Crowdsourcing

Analysis By: Carol Rozwell

Definition: Crowdsourcing is the processes for sourcing a task or challenge to a broad, distributedset of contributors using the Web and social collaboration techniques. Crowdsourcing applicationstypically include mechanisms to attract the desired participants, stimulate relevant contributionsand select winning ideas or solutions.

Position and Adoption Speed Justification: Crowdsourcing is being successfully applied tonarrowly-defined tasks, open-ended challenges or simply calls for ideas. It can be used internally orexternally and, in either case, can be available to any participant or confined to a group of experts.

Successful crowdsourcing requires the sponsoring organization to:

1. Specify the task or challenge (including time frame for responses, guidelines and rules) andnotify potential contributors.

2. Manage payments.

3. Assess intellectual property (IP) implications.

4. Ensure some level of quality control regarding access, contributions (particularly if prizes orpayments are involved) and voting.

In its broadest sense, crowdsourcing can be viewed as synonymous with collective intelligence, thatis, Web-mediated mass-collaboration such as Wikipedia or open source. However, it is more oftenused to refer to a focused effort by a company or organization to achieve a specific task, or identifyopportunities, by drawing on contributors outside the immediate control of its management orcontractual structures.

Crowdsourcing has been applied in a range of areas in government and private sector organizationsfor nearly a decade, with rapid acceleration in its use during the past two to three years for ideageneration in organizational innovation programs. Innovation activities where customers or "thecollective" create and rank ideas, or design marketing campaigns, are the most popular. Thesecrowdsourcing activities generate ideas that are increasingly selected through voting by participants— with the final selection made and developed by the organization's employees.

As more people interact on the social Web, providing frequent updates on their location andactivities, crowdsourcing all types of status information — mixed with context information —becomes practical. For example, drivers can alert fellow "road warriors" to traffic conditions,travelers can offer suggestions for good restaurants nearby, and knowledgeable people can answerother people's questions.

There is large, untapped potential in applying crowdsourcing to a much broader range of tasks andgoals. However, there is still more to be learned and experienced about where the practice is mosteffective compared with other approaches. The tools to establish a crowdsourcing environment,




particularly those involving recognition incentives or micropayments, are becoming widely available.However, as with any technology, effective practices in crowdsourcing remain the critical successfactor.

User Advice: Look for creative ways to use crowdsourcing, beyond idea generation. Consider tasksthat can be broken down into smaller chunks and attacked in parallel — such as classifying images— as candidates for crowdsourcing. Use crowdsourcing for innovation in areas that can be focusedand well-defined as a challenge. Look, in particular, for opportunities to crowdsource tasks to whichvolunteers (internal or external) would be prepared to contribute. Also, extend your ability toinnovate or resolve these tasks in a resource-constrained environment. Government organizationsare particularly well-positioned to take advantage of the willingness of citizens to help out in areasthat affect their local environment or special interests.

Also, when employing crowdsourcing with nonemployees, be prepared to grapple with IP issues. Insome cases, you will reveal your own IP (for example, your internal or future plans) to outsiders. Inother cases, you will need to deal with the terms of IP ownership for any relevant contributions fromexternal participants.

Business Impact: There are multiple areas of business impact:

■ There is the potential to open your innovation efforts by stimulating and capturing creative ideasfrom outside your organization. Companies like Heineken are crowdsourcing ideas fornightclubs and new package designs, and Volvo is using Facebook to ask consumers how theyuse the space in their cars.

■ Crowdsourcing offers the ability to dramatically increase the available human resources thatcan be applied to a task or challenge — well-designed crowdsourcing efforts will attract interestand creativity to a task.

There is an opportunity for organizations to crowdsource core business competencies, extend theiraccess to key capabilities and change their associated cost structures.



Maturity: Adolescent

Sample Vendors: Amazon; Clickworker; CloudCrowd; Crowdcast; CrowdFlower; Directly;IdeaScale; InnoCentive; Quora; TopCoder

Recommended Reading: "Maverick* Research: Crowdsource Your Management of OperationalRisk (The Supply Chain View)"

"Who's Who in Innovation Management Technology"

"Predicts 2013: CRM for Customer Service and Support in the Age of the Everywhere Customer"




"Market Insight: Future of IT Services, 2020; the 'Survival of the Fittest' Scenario"

Operations Intelligence

Analysis By: Simon F Jacobson; Leif Eriksen

Definition: Operations intelligence (OI) takes manufacturing data beyond the traditional reportingfacilitated by enterprise manufacturing intelligence (EMI) applications. It incorporates businessprocess management (BPM) and business intelligence (BI) disciplines. This focus on a greater rangeof data and information enables organizations to place manufacturing's performance in the contextof longer-term business outcomes.

Position and Adoption Speed Justification: As companies demand more predictability from theirmanufacturing operations, demand for analytical capabilities that enable a feedback loop betweenbusiness performance and manufacturing capabilities increases.

Real-time environments need near-real-time information. Early adopters of EMI are looking for morethan the historical, descriptive, and post facto analytics provided by their current dashboards andwidgets. EMI provides a mechanism for data capture, aggregation and analysis. OI goes a stepfurther than EMI by incorporating the creation and management of data models, using data miningand discovery tools, and leveraging simulation and scenario analyses to monitor and add context tothe large volumes of data generated from complex production processes that are housed withindistributed and heterogeneous plant systems. It also adds business process management (BPM)discipline to enable an event-driven architecture that supports the ability to report and act on real-time discovery of events, not just alarms. It also helps guide operators or targeted stakeholders tothe appropriate actions.

The end goal is to create an architecture that places real-time operational data (such as assetavailability and capability, work in process, test and quality status, and inventory movements) in amore holistic and actionable business context.

Currently, Gartner sees more adoption in strategy and pilots than in wider-scale deployments. Theemergence of enterprise use cases looking at this level of architecture has pushed it closer to thepeak from its past position. As more commercially available offerings continue to emerge fromindustrial automation providers like GE Intelligent Platforms or specialist providers like SavigentSoftware, when systems become easier to deploy (via exploiting cloud and mobile technologies)than today's "build it yourself" architectural frameworks to stitch together multiple applications andas companies report back business value, the maturity will progress, and a shorter time to plateaucan be anticipated.

User Advice: Do not confuse OI with EMI. This is more than reporting and isn't a capability that'seasily achieved with traditional BI applications or data warehousing techniques and skill sets. Real-time environments need real-time systems. Specialty vendors and skill sets are required.

Here are two key points to consider for companies starting this path:

Identify suitable uses cases that can span scenarios across new product design and introduction(NPDI), asset performance management, energy efficiency, quality, contract manufacturing,




customer sales and aftermarket services, and manufacturing network design. A prevalent scenariois one where a chemicals producer is combining historical data and unit metrics on assetperformance, cost factors and process cycle times by shift, day and month with current standardprocess models and real-time performance data from the automation and controls layer with ERP-based data. It has created simulation models that use current and historical performance data topredict the impacts of unplanned changes in energy and material costs on asset performance andtotal margins. Over time, this will impact decision making on production sequencing, productportfolio management and activity-based costing.

Define how real-time OI needs to be. Identify which users need what information and when tosupport advanced decision making. Also, ensure that information usage, value and disseminationhappen quickly and efficiently. Business leadership from manufacturing, supply chain and IT mustshare responsibility when deciding where the information should be used and building the businesscase.

Business Impact: OI delivers manufacturers an ability to mine, model, manage and simulateoperations data over an extended hierarchy of time scales and business priorities that extendsignificantly beyond the production environment. It's the foundation for a closed-loop capability thatenables a knowledge-based enterprise where not only executives, but functional workers, haveaccess to the kinds of analytics they would not otherwise have. Overall, this increases visibility intohow the company is running and what is happening in its external environment. Individualcontributors and managers have improved situational awareness, so that they can make faster andbetter decisions based on high-quality information that's extracted and distilled from multiple datapoints.



Maturity: Emerging

Sample Vendors: Apriso; AspenTech; Camstar; Dassault Systemes; GE Intelligent Platforms;Invensys Operations Management; Microsoft; Rockwell Automation; Savigent Software; SAP; SAS

Recommended Reading: "The Nexus of Forces Is Ready to Advance Manufacturing 2.0"

"The Manufacturing Performance Dilemma, Part 2: From Enterprise Manufacturing Intelligence toOperations Intelligence"

"Operations Intelligence Adds Context to Manufacturing Metrics That Support DDVN Goals"

"Asset Management in DDVN, Part 2: Data Shows Performance Improvements Are Within Reach"


Analysis By: Julie Hopkins; Andrew Frank




Definition: Social media marketing platforms supply tools, templates and services that enable thecreation, maintenance and optimization of commercial presence in online social environments,including social applications and promotions for marketers and media companies. Most are specificto networks and services, such as Facebook, Twitter, LinkedIn and YouTube, but support for newerplatforms, such as Pinterest, is on the rise.

Position and Adoption Speed Justification: With the increased adoption of social mediamarketing platforms to support broader operations, the refinement of offerings, and the integrationof acquired features into platforms, we see where platform offerings are moving off the peak, andwithin the next two to five years, will move into mainstream productivity.

The rise in consumer involvement with social media over the past five years has transformed socialmedia marketing from a mystery to a necessity for most consumer brands (and many B2B brandsas well), for whom Facebook fan pages have become a baseline requirement. Although socialmarketing in general remains a broad and fragmented concept, covering activities frommicroblogging to app design to monitoring and analysis to social CRM workflow, a clear category ofproducts with a fairly consistent set of core capabilities has emerged around the concept ofestablishing, growing and maintaining social presence for brands. However, there is stillconsiderable variation among their more advanced features, as well as their overall breadth ofscope.

Social media marketing platforms first emerged in 2006 and 2007, and they have grown steadilysince then. In the last two years, acquisition and consolidation have been the name of the game, aslarge vendors work to piece together complete social marketing solutions. Alongside the acquisitionactivity, smaller "freemium" vendors have established a strong client base and have advanced theirfunctionality, expanding the number of solid options in the market. These platforms have nowgained widespread acceptance among brand marketers, and despite the wide range of new andexisting point solutions still available for social marketers, we expect consolidation to continue asmore "megavendors" race to shore up social media and cloud credentials. Given the overall positivemarket reception to this category and its association with both social and cloud computing, weexpect these tools to be incorporated in many general marketing suites and social CRM packageswithin a few years.

User Advice: Social media marketing platform users should continue to focus on the following:

■ Refine social media marketing objectives and capabilities in line with business goals and rapidlyevolving marketplace realities. Your first step should be to define a social media measurementstrategy that will track progress against objectives, and support the strategy with consolidatedmetrics and analytics to gain visibility into the effects of social media marketing activities. Whilemost social media marketing platforms supply metrics and analytics, integrating varioussources at scale, to get the big picture, remains a challenge.

■ Address the challenge of how social media marketing is establishing cross-divisionalgovernance. Many groups are focused on social media from various angles: customer services,sales, public relations, branding, security and so forth. Social media engagement, however,must operate from a consistent set of principles and guidelines to present — as much aspossible — a unified brand image. This makes adoption of social media marketing platforms




more difficult, as they tend to expose rifts in governance, and marketing must recognize theneed for buy-in and participation from more than its usual core constituents.

■ Examine how the properties in your digital Web ecosystem work in concert with one another.Your brand site may not achieve as much status as your social destinations, but the lattercannot replace the former. Consider what properties work most effectively to deliver what typesof content, to host applications, and to make connections and linkages, and how eachgenerates different types of traffic and buzz.

■ Develop a process to evaluate and incorporate feedback. Marketers should consider input andfeedback from social media environments to be at least as important as their outboundactivities, and they should use social media as an ad hoc research tool to stimulate and gathernew ideas and areas for improvement, to promote loyalty and evangelism, and to refine theirsense of the voice of the customer.

■ Most importantly, marketers must plan for social presence to be a long-term commitment.Unlike campaign-based marketing efforts, maintaining social presence is not a periodicdiscretionary activity, and inactive fan pages and other community destinations are an invitationto detractors and vandals. Campaigns may work through social channels and may thus driveperiods of higher (versus lower) activity.

Business Impact: As social media marketing matures as a discipline, and as the ROI of investing inthese programs continues to be explored and revealed, these platforms will become an increasinglymeaningful part of the tools employed by marketers to manage campaigns. The insights, alone, thatcan be revealed through use of these platforms can greatly shift what marketers have theopportunity to do. Social media is a data-rich environment, and mastering the data associated withit is a key to using it effectively for marketing purposes. While most social media marketing toolshave stand-alone analytic dashboards, integrating this data with other sources, such as sales andCRM, leads to new requirements for more powerful data analytic tools and platforms. These toolsand platforms, in turn, must be exposed and integrated with outbound marketing efforts.




Sample Vendors: Adobe; Expion; Lithium; Oracle; salesforce.com; Spredfast; Sprout Social

Recommended Reading: "Learn Best Practices for Adopting Social Marketing Technology"

"Top Use Cases and Benefits of Social for CRM in 2013"

Sliding Into the Trough

Digital Offers

Analysis By: Mike McGuire




Definition: Digital offers are communications from daily deal sites and aggregators, flash sale sites,group buying sites, and related time-based promotion support and infrastructure services formerchants and marketers. Digital offers can be sent to consumers via multiple channels and inmultiple ways, including from within a browser page, email, social network, or social media site orapplication, and they can be sent to mobile devices via an SMS message, dedicated application, orother mobile technology.

Position and Adoption Speed Justification: For 2013, we've consolidated "Mobile Coupons"under the broader topic heading of "Digital Offers" to better reflect the spectrum of opportunities inmarketing and sales.

In our Hype Cycle, the "Digital Offers" category has moved quickly from being located just shy ofthe peak in 2012 to descending into the trough this year. Early entrants, such as Groupon andLivingSocial, initially rode a wave of aggressive pyramidlike geographic expansion that hidoperational risks and long-term merchant value questions. The market became saturated, bringingthis category quickly back to earth.

Despite the early hype, we anticipate digital offers, including e-coupons, will increase in popularitybecause of several factors:

■ Consumer adoption of smartphones, accompanied by the devices' context- and location-awarecapabilities, plus social applications. Mobile devices (smartphones and tablets) accounted for48% of time spent shopping online in the first quarter of 2013, according to comScore. And34% of smartphone users shop online while in a store (aka "showrooming"), according toCompete.com.

■ The desire of retailers and brands to improve their ability to personalize and develop morerelevant offers in real time.

■ The availability of applications that give consumers a tool to manage and use digital offers, suchas Apple's Passbook and Google's enhancements to Google Wallet. These tools enable usersto store and manage digital offers ranging from simple coupons to airline e-tickets, to loyaltyprogram offers in the app, as opposed to having to access and manage them from separateapps. The offers can be time- and date-specific, and can offer context-aware functionality. Forexample, a ticket to a movie bought from Fandango can be dropped into Passbook and sendreminders to the user regarding the date and showtime for the movie.

Gartner is also increasing the market penetration rating for digital offers in 2013 to 5% to 20% ofthe market because major retailers and brands are starting to see the results of various campaignsand grasp the potential for digital offers.

User Advice: Because there are a number of tech vendors targeting this space, it is relatively easyto implement a digital offer, such as mobile coupons.

Gartner cautions marketers to recognize the impact of deep discounting on brand equity andcustomer loyalty. Bargain hunters often prove to be fickle customers, or even critics, while loyal fansmay react negatively to seeing discounts from favored brands, especially if they recently paid more.




Marketers should look to take advantage of apps such as Passbook and Google Wallet that make iteasier for consumers to use and manage digital offers.

Businesses should be prepared to adopt technology that gives consumers the ability to access andredeem coupons in any channel. Tight integration between campaign management systems and thecouponing systems of the brand manufacturers will be required. Retailers must monitor therelevancy of their offers and play an active role in managing customer opt-in and privacy settings toavoid spamming customers.

Business Impact: The biggest advantage of digital offers is that they can be delivered throughmultiple channels — especially mobile devices. Digital offers, such as passes designed for coupon-management apps, can have the added value of leveraging basic context-aware functionality (forexample, notifying the consumer about the offer's expiration date). Digital offers are also a greatway to get customers and prospects to opt-in and receive future communications and offers fromyour organization. You can get additional insight into who is claiming offers and what messagingand offers are the most impactful.



Maturity: Emerging

Sample Vendors: Cellfire; Coupons.com; Groupon; Scanbuy; You Technology; Zavers

Recommended Reading: "How Can Retailers Get Started in Mobile Commerce?"

"Mobile Consumer Shopping Preferences, 2010: U.S."

"Creating Real-Time Personalized Offers for Consumers"

"Consumer Survey Shows What's Ahead for Retail Coupon Management"

Retail Digital Coupons

Analysis By: Edmond Jeannot; Robert Hetu; Miriam Burt

Definition: Digital coupons, also known as electronic or e-coupons, are the electronic form of apaper coupon or voucher. They can encompass several formats, including mobile and socialcoupons.

Position and Adoption Speed Justification: Digital coupons are now widely deployed by retailersand provide an important link to existing traditional coupon users. For example, retailers have usedcoupons delivered via email for many years. In the past 24 months, "social" coupons — digitalcoupons delivered through community websites — and mobile coupons have also taken off tosome degree. A 3Q12 Gartner consumer survey confirms the trend toward the convergence ofsocial and mobile activities while browsing or purchasing products. For example, "accessing theirprimary social networking websites" appears in the top five shopping activities that consumers




conducted on their mobile phones in the 12 months prior to the survey period. Further, the surveyshows that 71% of consumers visited a retailer's Facebook page seeking coupons or special offers.

However, in the past 12 months, vendor hype and retailer interest have definitely been focused onthe use of mobile coupons to target customers with personalized offers. We expect this hype tocontinue for at least the next 12 months.

Digital coupons provide a dynamic and traceable link to promotions. Moreover, when combinedwith real-time offer engine technology, these types of coupons could deliver timely offers to well-targeted customers and, thus, increase the likelihood of redemption.

However, retailers are still maturing in the distribution and redemption of the newer forms of digitalcoupons, such as mobile coupons. A key challenge is execution of these types of coupons incustomer cross-channel shopping processes. Moreover, in general, customers still favor papercoupons over digital forms. For these reasons, we expect this technology, which combines variousforms of digital coupons, to reach the Plateau of Productivity nearer to five years from now, ratherthan in the next 24 months.

User Advice: Establish a well-developed promotion plan to coordinate coupons across channels. Adigital coupon can be part of a single-party process, where a retailer issues a coupon via itscampaign management system for redemption in its stores, or it can be a multiparty process, suchas digitized brand manufacturer coupons that are distributed in a variety of ways, such asredeemed in stores or processed by clearinghouses.

Given the growth and use of mobiles for research, customers should be incentivized to use mobilecoupons. Good execution of highly personalized promotions is essential to help build customertrust. One way this can be done is through the use of a real-time offer engine with integration toloyalty programs that help the retailer to recognize and reward customers across all channels.

It is critical, therefore, that once an offer is "pushed" to a customer, a retailer is able to execute onthat offer to the customer's convenience. Retailers should, therefore, take into consideration theimpact that digital coupons will have on the operational execution of stock management, inparticular in cross-channel processes such as buy online and pick up in store. It will be especiallyimportant in the store, where cross-channel processes are largely fulfilled, to ensure stockavailability to satisfy customer demand raised through the redemption of coupons.

Business Impact: Digital coupons should be viewed in the light of a 3Q12 retailer survey, in whichTier 1 retailers estimated that their mobile and social channels respectively contributed toapproximately 6% and 3% of store sales.

The benefits of digital coupons for retailers, other than cost savings derived from not having to print,distribute and track paper offers, center on increasing the frequency of visits to the store andincreasing the overall customer transaction value. Sales, margins and customer loyalty are alltargeted to increase as a result.

Through personalization and recognition of the customer, these types of coupons can contribute tobuilding customer loyalty and increasing the likelihood of repeat transactions.







Sample Vendors: Coupons.com; Facebook; Groupon; LivingSocial; Mobilize Systems; Zavers

Recommended Reading: "Survey Analysis: Tier 1 Retailers Must Capitalize on Consumer Use ofMobile as Key Gateway in Cross-Channel Shopping"

"CRM Vendor Landscape: Multichannel Customer Analytics Is a Critical CRM Capability"

"Survey Analysis: Multichannel Retailing Drives Revenue to Stores From E-Commerce, Mobile andSocial Shopping"

"Price and Availability Drive Retail Consumers' Choice of Purchase Channel"

Social Analytics

Analysis By: Carol Rozwell

Definition: Social analytics is the process of collecting, measuring, analyzing and interpreting theresults of interactions and associations among people, topics and ideas. These interactions canoccur in virtual social environments used in the workplace, in internally- or externally-facingcommunities, or on the social Web. Social analytics is an umbrella term that includes a number ofspecialized analysis techniques, such as social filtering, social network analysis, social channelanalysis, sentiment analysis and social media analytics.

Position and Adoption Speed Justification: The desire to find meaning in the myriad of sources ofsocial information available on the social Web, as well as inside the workplace, is spurring interest insocial analytics. There are huge volumes of data that appear in a variety of forms and thiscontributes to the complexity of the analysis.

Veteran social software vendors have added tools for social analytics to their collaborationapplications that measure adoption and growth to provide an understanding of communitydynamics. Analytics vendors are adding tools for social analytics to their applications that providean understanding of online community and popular social media dynamics. The addition of socialdata makes individual behaviors, content and interactions visible. Although social analytics is by nomeans a mature technology, there are well-identified use cases that explain its value.

User Advice: Organizations should ensure that their initiatives are positioned to take advantage ofsocial analytics to monitor, discover and predict. Knowing what questions to ask and then having aplan about what to do with the information uncovered are critical components of getting value fromsocial analytics. Some enterprises will be content to simply monitor the conversations andinteractions going on around them. Enterprises with social software platforms that provide socialanalysis and reporting can use this information to assess community engagement. They can also




easily monitor what is being said about the company, its products and the brand using simplesearch tools or more sophisticated sentiment analysis applications.

The results of social analytics (for example, discovered patterns and connections) can be madeavailable — often in real time — to the participants of the environment from which the data wascollected to help them navigate, filter and find relevant information or people. Other enterprises willmine the social analytics data, actively looking to discover new insights using a wide range ofbusiness intelligence applications. At this time, the use of social analytics information for predictivepurposes is a largely untapped source of value. However, marketing and product developmentteams express great interest in this capability.

In many organizations, social analytics applied to external activity (for example, sentiment analysisacross the Web) will be sourced by marketing professionals and others (such as the legaldepartment, product development and customer support). In those cases, the IT department needsto play a leadership role in orchestrating a coordinated set of activities across departments to, forexample, minimize duplication of effort, ensure coordination between efforts and standardizetaxonomies.

Business Impact: Social analytics is useful for organizations that want to predict trends based onthe collective intelligence laid open by the Internet. For example, a biopharma researcher couldexamine medical research databases for the most important researchers, first filtering for the searchterms and then generating the social network of the researchers publishing in the biopharma's fieldof study. Similarly, social analytics could be used by marketers who want to measure the impact oftheir advertising campaigns or uncover a new target market for their products. They could look forbehaviors among current customers or among prospects that could enable them to spot trends(deterioration in customer satisfaction or loyalty) or behaviors (demonstrated interest in specifictopics or ideas).



Maturity: Early mainstream

Sample Vendors: Attensity; BuzzLogic; IBM; News Patterns; salesforce.com; SAS; TrampolineSystems; Visible

Recommended Reading: "Cool Vendors in Analytics, 2013"

"Cool Vendors in Content and Social Analytics, 2013"

"Advanced Analytics Enables Real-Time Business Optimization"


Analysis By: Andrew Frank




Definition: Social gaming ad networks are networks offering advertising in social games with whichplayers are encouraged to engage in exchange for virtual goods or game credits. The advertisingoften contains a video element, along with social and interactive elements. The concept ofexchanging attention to ads for some sort of immediate value offer is referred to as "incentivizedviewing."

Position and Adoption Speed Justification: Social gaming experienced a dramatic downturn inthe past year, as Zynga and EA reported precipitous declines in social gaming revenue and activeusers, and Facebook expressed open disappointment in the category's performance. On the mobileside, both Millennial Media and Velti pointed to incentivized ads (typical of gaming apps) as reasonsfor missing targets. This propelled social gaming ad networks quickly past the Peak of InflatedExpectations into a steep decline in hype. Category pioneers, such as SocialVibe and Jun Group,distanced themselves from the category label, repositioning as "engagement ads" and "opt-in videoads," respectively.

Although audiences have declined, there's still reason to believe that social gaming ad networkscan recover, as they continue to engage audiences and provide opportunities for brands to reachotherwise elusive consumers in social contexts. The gaming industry is notoriously cyclical and islikely to recover as new hits are produced and discovered. The decline in social gaming has notbeen reflected in an overall decline in social media use, suggesting the audience is still there, justotherwise engaged.

User Advice:

■ Brand advertisers and media buyers may find that the challenges faced by large gamedevelopment houses hide opportunities for breakout sponsorship deals for promising new titles.

■ Publishers and content providers still need to consider how they can participate in theecosystem of incentivized views by incorporating elements of the model into their own socialand paywall strategies. Social games also continue to provide an important testing ground toassess the optimal balance between direct and advertising-based compensation for digitalcontent experiences.

■ Privacy advocates and regulators need to address the issue of participation by minors head-on.

■ Ad networks and exchanges need to work with developers and publishers to augment thesupply of premium social gaming ad opportunities and look beyond the diminished audiencesize.

Business Impact: Social gaming ad networks have the potential to open an important newbranding channel, and in doing so, disrupt a number of media businesses competing for brandrevenue. Television is chief among these. To date, television has largely weathered the ill effectsthat online advertising has had on newspaper ads (especially classifieds) and consumer directories,largely on the basis of its claims to superior emotional branding capabilities and the safety of acontrolled environment.






Maturity: Emerging

Sample Vendors: Google; Jun Group; KlickNation; SocialVibe; WeeWorld; Yahoo; Zynga

Recommended Reading: "Advertising Finds a Home in Social Games"

"Market Trends: Worldwide, Social Gaming, 2011"

Augmented Reality

Analysis By: Tuong Huy Nguyen; CK Lu

Definition: Augmented reality (AR) is the real-time use of information in the form of text, graphics,audio and other virtual enhancements integrated with real-world objects. It is this "real world"element that differentiates AR from virtual reality. AR aims to enhance users' interaction with theenvironment, rather than separating them from it.

Position and Adoption Speed Justification: The original hype around AR was driven by theinterest and proliferation of mobile devices and geolocation services. Recent focus has shifted tovision-based identification AR. This technology supplements location-dependent AR and providesadditional use-case scenarios. A growing number of brands, retailers, manufacturers andcompanies in various verticals have shown interest in, or are using, AR to enhance internal and/orexternal business processes. Since the hype around AR has died down from previous years, it hasallowed more companies to look beyond the initial hype to explore AR's potential to providebusiness innovation, enhance business processes and provide high value to external clients.

AR will play a role in mobile contextual interactions, and will be particularly powerful for:

■ Discovering things in the vicinity

■ Presenting real-world objects of potential special interest

■ Showing a user where to go or what to do

■ Providing additional information about an object of interest

A number of factors continue to hinder AR adoption:

■ Gimmicky AR campaigns that add little value and use AR for the sake of the technology itself

■ Rigorous device requirements restrict the information that can be conveyed to the end user

■ Privacy concerns for both location and visual identification-based AR

■ Data costs for always-on connectivity

■ Standardization for browsers data structure

User Advice:




■ Communications service providers: Examine whether AR would enhance the user experienceof your existing services. Compile a list of AR developers with which you could partner, ratherthan building your own AR from the ground up. Provide end-to-end professional services forspecific vertical markets, including schools, healthcare institutions and real estate agencies, inwhich AR could offer significant value. A controlled hardware and software stack from databaseto device will ensure a quality user experience for these groups. Educate consumers about theimpact of AR on their bandwidth, to avoid being blamed for users going over their dataallowance.

■ Mobile device manufacturers: Recognize that AR provides an innovative interface for yourmobile devices. Open discussions with developers about the possibility of preinstallingapplication clients on your devices and document how developers can access device features.Build up alliances with AR database owners and game developers to provide exclusive ARapplications and services for your devices. Secure preloading agreements and examine howyou could integrate AR into your UIs or OSs.

■ AR developers: Take a close look at whether your business model is sustainable, and considerworking with CSPs or device manufacturers to expand your user base; perhaps by offeringwhite-label versions of your products. Integrate AR with existing tools, such as browsers ormaps, to provide an uninterrupted user experience. Build up your own databases to provideexclusive services through AR applications. Extend your AR application as a platform thatindividual users and third-party providers can use to create their own content. Explore how toapply AR, through different applications and services, to improve the user experience — withthe aim of predicting what information users need in different contexts.

■ Providers of search engines and other Web services: Get into AR as an extension of yoursearch business. AR is a natural way to display search results in many contexts.

■ Mapping vendors: Add AR to your 3D map visualizations.

■ Early adopters: Examine how AR can bring value and ROI to your organization and yourcustomers by offering branded information overlays. For workers who are mobile (includingfactory, warehousing, maintenance, emergency response, queue-busting or medical staff),identify how AR could deliver context-specific information at the point of need or decision.

■ Brands, marketers and advertisers: Use AR to bridge your physical and digital marketingassets and drive increased engagement with your user base. For example, use AR in printedads and catalogs to let consumers visualize things such as furniture or appliances in 3D in theirhome, or trying on clothes and accessories. Beware of campaigns that use AR just as atechnology gimmick.

Business Impact: AR is used to bridge the digital and physical world. This has an impact on bothinternal- and external-facing solutions. For example, internally, AR can provide value by enhancingtraining, maintenance and collaboration efforts. Externally, it offers brands, retailers, marketers andthe ability to seamlessly combine physical campaigns with their digital assets.

CSPs and their brand partners can leverage AR's ability to enhance the user experience within theirlocation-based service (LBS) offerings. This can provide revenue via set charges, recurring




subscription fees or advertising. Handset vendors can incorporate AR to enhance UIs, and use it asa competitive differentiator in their device portfolio. The growing popularity of AR opens up a marketopportunity for application developers, Web services providers and mapping vendors to providevalue and content to partners in the value chain, as well as an opportunity for CSPs, handsetvendors, brands and advertisers.




Sample Vendors: Catchoom; GeoVector; Google; Layar; Metaio; Mobilizy; Nokia; Qualcomm;Tonchidot; Total Immersion; Zugara

Recommended Reading: "Top Recommendations to Prepare for Augmented Reality in 2013"

Multiechelon Inventory Optimization

Analysis By: Tim Payne

Definition: Multiechelon inventory optimization (MEIO) helps users optimize their supply chainresponse strategies across a multiechelon supply chain by helping them determine appropriateinventory strategies. It also increasingly helps users look beyond inventory to include other facets ofthe supply chain (for example, sourcing, pooling and replenishment strategies) to support thedevelopment of segmented supply chain response strategies for customer and channelsegmentation.

Position and Adoption Speed Justification: Previously known as inventory strategy optimization,MEIO now reflects the more common term for this type of technology. Most MEIO products useoptimization-based technologies with some business intelligence and analytics capabilities. Overtime, they're adopting event-based and discrete-event simulation, and stochastic algorithms thatenable companies to model uncertainty factors. Long-term business what-if evaluations andscenario planning will eventually be commonplace to support any number of strategies and tacticalwhat-if scenarios. However, users will need frameworks to support the allocation of products tospecific supply chain response models. MEIO tools will move to the plateau in two to five years.This is mainly driven by the fact that they are required for more mature inventory planning/optimization processes, and this is one of the more popular processes for companies to develop asthey look to improve supply chain (particularly service and inventory) performance.

Fewer independent vendors remain in the market, because supply chain planning (SCP) and ERPvendors have developed or acquired the capability to offer MEIO as an add-on to their applicationsuites. There are, however, a small group of specialist vendors aimed at offering MEIO for spareparts. Longer term, it's likely that the operational and tactical inventory optimization capability willbe subsumed into the SCP suites to support integrated inventory policy optimization. Morespecialized modeling tools — for example, the ones supporting segmented supply chain design andpostponement strategies — will likely merge and/or integrate with integrated business planning/




Stage 4 sales and operations planning tools to support more strategic supply chain analysis anddesign.

User Advice: For complex, distribution-intensive industries (such as consumer products, retail,aerospace and defense, utilities, and telecommunications), use these and classic SCP tools toextract the greatest value from inventory and supply chain assets. User skills and competencies willneed careful management to ensure that value can be used. Otherwise, results can bedisappointing.

Business Impact: MEIO solutions enable enterprises to use supply chain assets — people,equipment, inventory, money, suppliers, routes, locations and promises — more effectively, whilerealigning or segmenting their use across multiple customer and channel segments.




Sample Vendors: Barloworld Supply Chain Software; IBM; JDA Software; LLamasoft; Logility;Oracle; SAP; Terra Technology; ToolsGroup

Trade Promotion Optimization


Definition: Trade promotion optimization (TPO) technologies apply techniques such as regressionanalysis or linear programming to trade promotions to simulate promotional outcomes, such asincremental lift, total volume, ROI, and total funds spent on consumer goods marketing andsalespeople. There are actually two elements in this technology: simulation and optimization. Theformer is an interim step to help people with the scenarios, and the latter is more prescriptive. Fornow, we will include both elements under this entry until they become distinct.

Position and Adoption Speed Justification: In 2012 and early 2013, we saw more TPO projectsstarted than completed, which indicates increased momentum in this space. We also saw projectsat companies of various sizes. TPO technologies are maturing and capturing the interest of moreand more companies with less than $1 billion in annual revenue. As a practical concept, TPOtechnologies seek to simulate promotional outcomes based on scenarios for pricing, promotionaltype (such as display, advertising and secondary display), duration, timing, frequency, specific itemand product family. They're available as stand-alone as well as embedded solutions. Theembedded solutions are helping accelerate adoption because stand-alone solutions require twosystems: one for the trade promotion, and one for the simulation.

Adoption of these solutions is farther up the Hype Cycle than consultative and custom offerings,because with TPO, it often takes consulting efforts, in addition to a solution, to get the changemanagement and customization just right. We believe that two factors will accelerate TPO adoption:an improved economy, and more companies fully using trade promotion management (TPM)




solutions, the logical extension of which is TPO. Once deployed and fully utilized, TPO solutionsdramatically improve promotions. The issue is that substantial data integration is required just tosee what happened in the past, let alone model what will happen in the future. We estimate that80% of companies simply have not placed their focus on data integration — often because it isdifficult and costly and, in many cases, because it is part of a future phase of their TPM project.

User Advice: Consumer goods companies that have stable, server-based TPM solutions in place;have integrated the requisite datasets for driving predictive models; have multiple years of cleancausal data (like POS or syndicated data); and have automated key processes, such aspostpromotion evaluation, should consider adding capabilities that would give users more ability tosimulate outcomes. Other user organizations should first get a server-based (as opposed tospreadsheet-based) TPM solution in place, and then begin training personnel to think in terms ofscenarios, as well as to evaluate real results to be improved and optimized. These userorganizations will then be ready to use simulation tools to move to the next step. There is also valuein having a select set of power users on TPO, while the balance of users are learning and goingthrough change management because of the significant benefits to be had from optimizingpromotions.

Also important is a mindset of continuous improvement, whereby management encourages usingTPO to improve outcomes over the long run, not as the basis for punishment when a promotionmay not live up to its expected outcome.

Business Impact: Case studies and recent research point to high business benefits from anapproach that focuses on outcomes. In the absence of outcome-focused capabilities, promotionplanners tend to execute the same promotions repeatedly, and about 50% of trade promotions donot achieve a positive ROI. Thus, the upside is substantial as the industry shifts from "same old,same old" to "optimized and differentiated." This technology has the potential to change the natureof retailer-manufacturer relationships by being able to drive outcomes as opposed to relying on thesame tired promotions year after year. All indications with only about 1% of the addressable marketdoing TPO show that retailers react very favorably to the insights and business benefits that can bedriven by TPO.



Maturity: Emerging

Sample Vendors: Accenture (CAS); AFS Technologies; Data Ventures; IBM-DemandTec; Mindtree;Nielsen; Oracle; SAP; Sequoya; Tabs Group; Wipro (Promax Applications Group); Xtel

Recommended Reading: "Vendor Panorama for Trade Promotion Management in ConsumerGoods"

Master Data Management for Consumer Goods

Analysis By: Andrew White; Bill O'Kane




Definition: Master data management (MDM) is a technology-enabled discipline in which businessand IT work together to ensure the uniformity, accuracy, stewardship, semantic consistency andaccountability of the enterprise's official shared master data assets. For consumer goodsorganizations this tends to include customer, product, vendor, item, and hierarchy master data, insupport of a wide range of business investments spanning e-commerce, retail collaboration, B2B,supplier/spend leverage, business intelligence (BI) and business process improvement.

Position and Adoption Speed Justification: Consumer goods organizations struggle to get valuefrom numerous business application-based strategies, spanning e-commerce, CRM, ERP, productlife cycle management, procurement, as well as newer, consumer-facing investments related to bigdata, social data, demand-driven supply networks and so on. In every case, master data of differenttypes links the major business processes across these systems. The quality and consistency of thatmaster data hampers the ability to get the value desired from using these systems. MDM is oneinformation management discipline that helps align business and IT to govern that data — helpingassure better business outcomes from those investments.

Use MDM techniques and technologies to achieve consistency, accuracy and integrity ofinformation assets in operational environments. Many consumer packaged goods (CPG) firms stillfocus on drill-down domain requirements using MDM for product data for individual departmentalprojects, such as in support of the Global Data Synchronization Network, e-commerce, ormultichannel integration. Other uses include improving consumer experience via consistency in dataacross multiple channels, or in creating a single view of customers to support loyalty programs andcustomer engagement initiatives. Some of these programs link to governance of content (mastercontent management), which really only entered the market as a (hyped) concept two years ago.There is a potential role for tactical MDM technologies in solving semantic inconsistency issues indownstream, BI, analytical and corporate performance management environments.

In 2013, MDM vendors — despite often being specialists in industry orientation or data domain (thatis, customer or product data) — are being asked by consumer goods companies to either integratewith other MDM solutions, or act as multidomain MDM solutions to act as single vendors to masterany data. Both of these requests are daunting for most vendors. The requirements across industryand data domains can be very different. The buyers are very different and the applications' scope isvery different. As a result, these requests remain a big challenge for CPG companies in 2013.

Increasingly, many ERP users are also now looking into application-specific informationstewardship applications that are designed to manage the information in specific applications.These are not MDM solutions — they are just better solutions built to manage data inside businessapplications. An MDM program would treat such hubs as if they were ERP data hubs only. Suchapplication data hubs do not negate the need for MDM. However, how the MDM hub integrates andgoverns the data in remote hubs is certainly a concern for many CPG companies today.

User Advice: Organizations must ensure that these activities mesh with their MDM initiatives in theoperational environment. They must create cross-departmental collaboration in adopting thediscipline to realize and sustain the benefits. All MDM initiatives must be aligned with the objectivesof the organization's enterprise information management (EIM) program, which could span masterdata, content, analytical data, social data and so on. When addressing MDM issues by subject or




domain (such as customer or product), companies should leverage expertise to expand into otherdomains. MDM efforts can originate in any function but, for maximum value, initiatives must beconsolidated into a comprehensive EIM program.

MDM is a discipline, so don't focus only on technology. The keys to successful MDM in a retailorganization are:

■ Line of sight to a business case

■ Business leadership

■ Governance and stewardship of master data established in a line of business

■ Metrics and analytics to guide progress

■ Viewing such initiatives as programs that are ongoing, not projects that stop

Business Impact: CPG firms spread master data across many systems. It is fragmented and ofteninconsistent. This makes it difficult for organizations to streamline business processes andoperations efficiently and develop agile new business processes across business units, marketsand channels. This also affects customers who often will not perceive a single view or consistentexperience with a given supplier across all channels. With one view of master data, CPGorganizations can achieve benefits in such areas as:

■ Upselling, cross-selling and leveraging CRM and other customer-facing processes

■ Operational benefits from merger and acquisition activities

■ Increased efficiencies on the buy side with deep insights into spending data and vendoranalyses

■ More effective data compliance

■ More competitive new product introduction processes

■ Reduced time to market

■ Improved basis for collaboration and joint business planning with retail partners

■ Increased integration across multicommerce processes for improved customer service, reducedout-of-stock instances and increased use of inventory

■ Increased productivity of human capital

■ Greater visibility of the status and performance of the value chain and master data movingthrough it

As consumer goods organizations adopt MDM, their consumers will also see the following benefitsor impacts:

■ More consistency in marketing messages from their partners/suppliers

■ Improved and unified brand management and execution




■ More reliable service including more accurate customer/social data through to available-to-promise inventory




Sample Vendors: hybris; Heiler Software; IBM; Oracle; Riversand; SAP; Stibo Systems; TibcoSoftware

Recommended Reading: "Research Library for the Seven Building Blocks of MDM"

"Should Organizations Using ERP 'Do' Master Data Management?"

"Mastering Master Data Management"

"MDM Products Remain Immature in Managing Multiple Master Data Domains"

Enterprise Manufacturing Intelligence

Analysis By: Simon F Jacobson

Definition: Enterprise manufacturing intelligence (EMI) depicts the performance of manufacturingoperations by synthesizing and analyzing information from highly granular, manufacturing-relateddata made visible and understandable through dashboards and portals. Therefore, it is useful inproviding decision support to various business and operational roles.

Position and Adoption Speed Justification: Organizations seeking to leverage manufacturing'scapabilities to make better supply chain decisions continue to struggle with visibility into theiroperations. This prevents them from computing composite metrics from key performance indicators(KPIs) aggregated from multiple plant sources, and doesn't allow the business to understandmanufacturing's true capabilities, costs and constraints. Client activity and inquiry on EMI continuesto increase, and clients have a plethora of options from which to choose: point solutions,manufacturing execution system (MES) vendor add-on modules, and frameworks provided by ERPand service firms. Additionally, more manufacturing segments are starting to embrace EMI. Asadoption rates grow, it will move beyond the early mainstream of maturity.

The hazy functional scopes of most EMI offerings are pushing it further into the trough. EMIapplications and frameworks should encapsulate the following capabilities:

Aggregate — Aggregate information from a variety of real-time and diverse back-end data sources,including automation, historians, MES operational databases, laboratory information managementsystems (LIMSs) and relational database systems.




Contextualize — Create and maintain persistent functional/operational relationships between dataelements from disparate sources. It may be useful, for example, to maintain relationships (context)between certain named process variables and ranges of time series data.

Analyze — Transform data into real-time performance intelligence through the application ofbusiness rules (that is, calculating the range of KPIs using raw process performance and cost-based information from ERP and other business-level systems).

Visualize — Provide intuitive, graphical representation of intelligence that supports context-basednavigation of information based on persistent interrelationships, enabling drill-down from multiplantrepresentations to individual facilities and systems.

Propagate — Automatically transfer relevant operational performance information to theappropriate business-level systems (such as enterprise asset management [EAM], ERP, supplychain management [SCM] or product life cycle management [PLM]).

The majority of EMI approaches do not provide much more than analysis and visualization. Thisfunctional inadequacy of many EMI providers means that any associated process changes are doneseparately, and local quick wins at the local level tend to take center stage, versus using theintelligence to drive more widespread improvement of product supply capabilities.

The following will accelerate the EMI market's ascension toward the plateau:

Some EMI providers continuing to add deeper functionality through products designed to do morethan provide descriptive analytics and report on manufacturing performance. These second-generation or add-on products will be participating in the operations intelligence (OI) market, whichis gaining momentum at this stage. Do not expect EMI to become obsolete or fully overtaken by OIat this stage. The two technologies are complimentary of one another, and it is not uncommon thata vendor will have offerings in both camps.

Overcoming multisite scalability hurdles. The majority of EMI approaches start with simple overallequipment effectiveness (OEE) dashboards to understand performance on a local level (such as lineor asset), with the intention of scaling into multiple line or multiple site deployments. These initialbeachheads often deliver quick wins and rapid returns on initial cash outlays, validating that EMI isa low-risk, high-reward investment. However, it also elongates the deployment cycle for multiplesites, which is why the time to plateau has been elongated.

User Advice: EMI provides the following kinds of decision support:

■ Machine-state data (up, down, stopped and idle) translated into OEE

■ Information on energy efficiency and consumption

■ Process variable history translated into dollars-per-unit volume production

■ Quality-reject data translated into dollars per finished goods scrapped (or the cost of poorquality [COPQ])




Organizations without a clear understanding of what it is they need to measure will face longer timeto value from their investments.

Whether or not an application can satisfy your performance-monitoring requirements dependslargely on how the application is architected. Conventional analytics applications operate ondatasets that have been staged, but this introduces latency into the process, since data is captured,transformed and then stored into the analysis set. There are also applications that can performanalytics "on the fly" as data is extracted from shop-floor sources, but this places a heavy burdenon the network, thus limiting the applicability of these tools for high-volume, high-refreshapplications. The kind of EMI application to use should be dictated by how "real time" yourorganization's data and information requirements are. In some cases, using the add-on EMI modulefrom an incumbent provider might be more sensible than layering a third-party application.

Business Impact: Manufacturers seeking competitive advantage understand that manufacturingoperations must no longer constrain supply network responsiveness. They are linking supply anddemand, while decreasing manufacturing costs and increasing agility. To strike this balance, KPIsare needed to provide visibility into asset availability and capability, work in process, and inventorymovements. EMI helps overcome the visibility hurdle that stands in the way of this realization.




Sample Vendors: Apriso; Epicor; GE Intelligent Platforms; InfinityQS; Invensys; IQity; Oracle;Parsec; Rockwell Automation; SAP; Shoplogix; Siemens

Recommended Reading: "Debunking the Hype of OEE"

"The Manufacturing Performance Dilemma, Part 1: Overcoming Visibility Hurdles With EnterpriseManufacturing Intelligence"

"The Nexus of Forces Is Ready to Advance Manufacturing 2.0"

Climbing the Slope

2D Bar Code Marketing

Analysis By: Sandy Shen

Definition: Creating marketing materials using 2D bar codes enables people to access informationsuch as websites and product information, or download content such as coupons and businesscards, onto mobile phones. Companies can print bar codes on advertisements, posters, brochuresand product packages. Users can then scan these bar codes with a camera-equipped phone toaccess the information.




Position and Adoption Speed Justification: Brand-name companies can use 2D bar codes todrive customer engagement by encouraging interaction with the printed content. They can also usethem to track usage in order to gauge the effectiveness of advertising campaigns. We have seen 2Dbar codes being used by an increasing number of companies across various industries. Forexample, newspapers and magazines use 2D bar codes in print advertising to generate much-needed revenue. Broadcasters and advertisers include bar codes in TV shows and commercials toenable interaction and access to more information. Local businesses such as retailers use barcodes on posters and flyers to increase footfall and extend loyalty programs with in-storepromotions. Online retailers use bar codes to direct people to their online stores.

2D bar code usage is on the rise over the past year. A comScore study in September 2012indicated that the usage of quick response (QR) codes among smartphone users in the major fivecountries in Western Europe increased by 96% in one year. A Pitney Bowes study in January 2013indicated that the U.S. is even further ahead of Western Europe in terms of bar code usage, with39% of those aged between 18 and 24 having scanned a QR code, compared to 27% in Germany,the country with the highest reported usage in Western Europe. Such fast adoption of 2D bar codesis due to increasing consumer awareness, the prevalence of bar codes on printed materials, and theinclusion of bar code readers in smartphones and mobile apps. Major online retailers, includingeBay and Taobao, have also built bar code scanning directly into their shopping apps.

Advertisers increasingly view promotional bar codes as an important marketing technology withwhich to reach users. A Gartner survey conducted in August 2011 found that over half (53%) of theadvertisers and agencies in the U.S. and U.K. that responded already included QR codes in theirmarketing, and an additional 30% were "somewhat likely" or "very likely" to include them in the next24 months. This makes bar codes the No. 3 emerging technology in a long list that includesFacebook fan pages (No. 1) and dual-screen TV app platforms (No. 17). Bar codes also beat mobilesearch advertisements, branded apps for media tablets, viral videos and promoted tweets onTwitter in the same list.

2D bar codes are a simple technology to implement, compared with Near Field Communications(NFC) as they involve fewer ecosystem players. This enables shorter implementation times andlower costs for marketers. However, 2D bar codes face competition from SMS and, to a lesserextent, Bluetooth in the short term. They will also face a challenge from NFC when this technologymatures and becomes widely available.

User Advice:

■ Mobile platform providers should include bar code scanning as a standard capability in theiroperating systems to provide a consistent experience for users.

■ Brand-name companies should consider 2D bar code marketing for campaigns andpromotions, but be fully aware of the different coding schemes and the requirement ofsmartphones.

■ Print publishers should encourage advertisers to include 2D bar codes in advertisements toimprove the fill rate and reduce the pressure to discount.

Business Impact:




■ Brand-name companies can cut paper, printing and mailing costs by employing bar codemarketing. They can also dynamically change the content without having to replace the barcode in the field. They can also monitor the usage to measure campaign effectiveness.

■ Print media companies can position themselves as more effective channels for advertisers byenabling brand-name companies to track the effectiveness of advertising campaigns, if theyhave reporting mechanisms in place.




Sample Vendors: 3GVision; Ecrio; Mobile Tag; Mobiqa; NeoMedia Technologies; Neustar; Scanbuy

Recommended Reading: "Three Techs Make it Easy to Use Internet of Things in Marketing"

"Survey Analysis: Big Advertisers Overcome Digital Aversions"

Quality Process Management Applications


Definition: Quality process management applications are a subset of quality management systems(QMSs) that digitally represent standard operating procedures that govern, support and enforceconformity to International Organization for Standardization (ISO) standards, or other industry-specific or customer-mandated quality standards.

Position and Adoption Speed Justification: For most organizations, the various methods andprocedures for quality management are enforced through fragmented business processes and ITarchitectures populated with point applications for specific functions, such as corrective andpreventive action (CAPA), failure modes and effect analysis (FMEA), or audit management. Theseloosely integrated data models and workflows only increase data latency, cost and risk, and lead toa lack of accountability.

Buyers continue to evaluate new systems and approaches. What they find is that a space oncedominated by point application purveyors is now heavy with options from not just manufacturing-centric providers from the manufacturing execution system (MES) and product life cyclemanagement (PLM) domains, but also from ERP and governance, risk and compliance (GRC)providers. The choice of using a quality management system (QMS) suite or the quality capabilitiesprovided by broader applications will depend on individual circumstances.

In turn, the providers of quality process management applications are delivering intuitive process-modeling environments to allow companies to centrally develop, deploy and manage quality-oriented processes, such as complaints and audits. While this has, on one hand, created acapability for customers to internally manage their systems and deployments themselves (andestablish commonality across the business), on the other, this freedom, enabled by the provider, is




detrimental: In absentia of a disciplined approach to QMSs, customers can find themselves creatingan overabundance of process and workflows that end up being just as fragmented as their currentprocesses (or in some cases, overlapping with parallel processes, such as EH&S, for example). Untiltighter architectural discipline can be enacted on the users, with guidance from their providers onhow to deploy and scale the applications, the time to plateau has been extended for this applicationclass.

User Advice: Enterprises in all industries should deploy quality functionality, especially those inconsumer-facing industries, and particularly the ones that deliver products targeted for use bychildren or for consumption, such as food or pharmaceuticals. However, too many companies focusquality efforts on their products, and treat business process attributes in the value chain separately.Endless kaizen events and lean Six Sigma efforts at the plant level to drive local quality gains are aperfect example of this. But value chain quality requires companies to define and manage allproducts and business process attributes that impact customer satisfaction. Business processesmust link the capabilities that coordinate supply and demand, as well as product design, with thevalue chain. This creates a feedback loop between what the customer wants and what the endresult is, while balancing costs and productivity at the same time. It's a transformation that startswith tearing down the thick walls that have traditionally segregated quality, and moving thesefunctions and resources into supply chain lines of business.

Create an approach that encompasses multiple tiers of suppliers, contract manufacturers andcustomers to enforce procedural and product compliance. Focus on complete approaches thatexpand beyond niche functionality, and provide integrated workflow support to ensure that not justproduct-specific standards are met, but other regulatory compliance standards are, too.

Business Impact: Organizations often claim they orchestrate quality processes, but it's often withinspecific functions versus addressing the full value stream. Outside finance, there is no one businessdiscipline that touches and impacts more organizational functions than quality. Corporateoperations continue to be exposed by gaps in their quality processes and supporting data, with thefinancial performance implications and risks only increasing. Businesses that have multinational andoffshore manufacturing centers are particularly vulnerable to negative brand impact from qualityissues, such as lead paint in children's toys, poor quality in automobile tires, or contaminated foodor medical products. A stringent quality compliance program supported by robust tools can preventunsafe, dangerous or shoddy products from reaching the market.




Sample Vendors: EtQ; Intelex Technologies; MasterControl; Oracle; Pilgrim Software; PTC; SAP;Siemens; Sparta Systems

Recommended Reading: "Best Practices for Taking Quality Beyond Manufacturing and Into aBusiness Capability Supporting the Value Chain"

"Cost of Poor Quality Is a Component of Supply Chain, Not Just Manufacturing"




"EQM Hubs Unite Quality Management IT Systems Across the Value Chain"


Analysis By: Michael Dominy

Definition: Trade promotion management (TPM) consulting and system integration (C&SI) servicesseek to improve the effectiveness of trade promotions. These services address trade promotionprocesses that are embedded in packaged trade promotion solutions (such as assortment planning,pricing, promotional tactics and simulation) and processes that have yet to be addressed bygenerally available solutions (such as optimization and predictive modeling).

Position and Adoption Speed Justification: TPM consulting services are offered by a handful ofstrategy consultants, as well as some consulting and system integration consultancies. One reasonwhy too few consultancies participate in this space is that many TPM vendors are relatively smalland don't typically work with large service providers. By comparison, two of the largest TPMsoftware vendors, Oracle and SAP, have alliances with leading service providers, while CAS, theother major TPM vendor, was acquired by Accenture. More recently, IBM acquired DemandTec andWipro acquired Promax. The acquisitions by the service providers, especially IBM and Wipro,illustrate the increasing importance of trade promotion, analytic and optimization services. Demandby enterprises for comprehensive TPM services (that is, trade promotion transactional processes,planning, optimization and analytics) remains limited because many of the smaller and midsizeenterprises are unable to resource software and service solutions.

Consumer packaged goods (CPG) is the most advanced market for solution adoption, withconsumer health and consumer electronics showing some interest. Other manufacturers ofsemidurables and durables show little interest in these types of solutions, primarily due to theirinfrequent use of trade promotions. Many of the late adopters have not automated the TPMprocesses from spreadsheets, so there is little appeal in having consultants help them in theprocess until they see an urgent need for total process improvement, or technology implementationto support or enable process improvements.

TPM consulting services moved slightly this year on the Hype Cycle. Here are two reasons for thisshift along the curve: the uncertainty related to acquisitions of TPM solutions by service providershas eased, and there has been an expansion of trade-promotion-related services during the last 12to 18 months. These services include optimization services offered by consulting firms that acquiredsoftware vendors and services, such as data cleansing and harmonization services, which arerequired as consumer goods companies move from TPM to trade promotion optimization (TPO).

User Advice: Work with a service provider to evaluate your TPM process and technology options,in light of industry best practices and available solutions. Define your TPM improvement road mapin phases with short-term opportunities, such as trade spending and postevent analysis early on,and more sophisticated optimization and scenario planning positioned in later phases. TPMincludes deduction and accrual management with trading partners, and should be part of the earlyphases of your TPM road map. The benefits of streamlining and improving trade-spendingeffectiveness/efficiency, and driving top-line revenue using TPO tools, are significant, but do not




underestimate the time and resources necessary to achieve them. In particular, the changemanagement requirements will be considerable.

Explore analytic service offerings that are focused on optimizing a specific promotional event orcategory within the event. Also, ask the service providers about how to leverage shopper behaviorand consumer demand data in the TPM process. These analytic and optimization services areavailable from multiple providers that provide business process outsourcing (BPO) in addition toconsulting and integration. Have the service provider demonstrate how using its service woulddeliver better results than your current approach to trade promotion planning.

Consider leveraging BPO providers to help offload reporting and administrative activities from thesales organization, particularly when establishing or expanding into emerging markets. Several verylarge consumer goods companies are using BPO providers to support trade-related activities inemerging markets, which enables the manufacturer to deploy a different organizational andoperating model to support those markets.

Beware that most service providers are biased toward their TPM partners. Once you align yourselfwith one consultant, you are unlikely to be exposed to all the options available in the marketplace. Ifyou are considering a service provider that has acquired a TPM software vendor, ask the providerfor a product development road map.

Business Impact: TPM consulting, system integration and BPO services can improve revenuestreams and margins by ensuring solution adoption, and by establishing more effective andappropriate promotional timing, effectiveness and relevance to buyers at a more granular andmeasurable level. Buyers of TPM services can drive near-term benefits from process andtechnology innovation in the market, and enable greater control and oversight, resulting in anincrease in trade promotion revenue as a percentage of sales. Industry research and Gartner'sexperience working with consumer goods companies indicate that at least 50% of trade promotionsare not believed to achieve positive ROI. TPM consulting services can help organizations identifyand reduce spending on low-value efforts, and integrate TPM technologies to support strategicpromotion decisions. In recent months, companies have been increasingly looking at tradepromotion initiatives as a way to grow revenue, not just as a more efficient and effective method tospend trade funds.




Sample Vendors: Accenture; Clarkston Consulting; Deloitte; IBM Business Consulting; Infosys;Wipro

Recommended Reading: "SAP Supply Chain Management System Integrator Assessment andSelection Guidance"

"Oracle SCM System Integrator Assessment and Selection Guidance"




"How to Select the Right SCM Service Provider"

"What Supply Chain Leaders Need to Know About Business Process Outsourcing for Supply ChainManagement"

"Seven Key Considerations When Choosing a Trade Promotion Management Solution"

Merchandising and Category Optimization

Analysis By: Don Scheibenreif; Robert Hetu

Definition: Merchandise and category optimization covers seven key merchandising processgroupings: price, promotion, markdown, assortment and optimization, replenishment, size andpack, and space. Optimization is derived from using business goals, product, location andcustomer intelligence data to inform the merchandising and planning decision process.

Position and Adoption Speed Justification: Consumer goods manufacturers are importantcontributors to a retailer's merchandise and assortment planning process. Through disciplines likecategory management, they are able to contribute insights, promotional funding and planningexpertise to ensure retailers and manufacturers can achieve their revenue and consumersatisfaction goals. Our retail research finds that traditional planning applications are good atmanaging and automating planning tasks. Optimization takes this a step further by improving andautomating decision making required to support seven optimization areas — assortment andallocation, space, replenishment, price, promotion, markdown, and size and pack — to adjustassortments by store or cluster, determine buy quantities, optimize space allocation andplanograms, and maximize product allocation and availability. Price, promotion and markdownoptimization are directly linked to merchandise and category optimization; for apparel and footwearretailers, size and pack optimization is required. Optimization technology can come from individualmodules in larger retail suites, best-of-breed vendors or advanced analytics business intelligencevendors. The market has matured to the point where most of the major merchandise planning andcategory management vendors offer some degree of demand forecasting and optimization as partof their offerings. Early-adopter retailers have already implemented these advanced technologies inone or more of their merchandising processes. Space optimization is gaining popularity withgrocers and discounters, while size and pack optimization is popular with apparel retailers. Asretailers implement optimization capabilities into more of their merchandising processes, they areseeking an architecture that centralizes forecasting and optimization assets across all areas. Forexample, a retailer with promotion optimization and replenishment optimization will want a singleforecasting capability feeding both applications for a consistent demand forecast.

In the area of assortment specifically, interest is being driven by retailers adopting customer-centricmerchandising strategies, with aspirational goals of store-specific or store-cluster-specificassortments. The integration of recent acquisitions of vendors by large, global, diversified solutionsand consulting firms — and several mergers of complimentary solution providers — representopportunities to integrate a broader range of consumer insights and demand-sensing capabilitiesthat will improve the effectiveness of the assortment and space optimization process. However,




opportunities for integration of dynamic consumer behavior data (for example, social media) andstronger manufacturer retailer collaboration still remain.

User Advice: Retailers are actively researching and implementing merchandise optimizationapplications. Cross-channel shopping behavior, combined with multichannel order managementand in-store fulfillment capabilities, is causing an acceleration of interest in this technology. If youare a consumer goods manufacturer assigned to be a category captain for a retailer, it will beimportant for your technical specialists to be familiar with these technologies, and their applicationin a retailer's merchandise and promotion planning process. Additionally, you will want to be able toeffectively contribute your insights and analysis of shopping behavior and consumer preferences viathe category management process.

Business Impact: Ultimately, these technologies will help retailers achieve higher sales andmargins in their local markets. They facilitate the complex management that micromerchandisingrequires, enabling the retailer to do more-detailed planning with fewer resources. This technology isrequired to support customer-centric merchandising. Actively collaborating with retailers in theprocess can help improve the overall effectiveness of the merchandising and category assortment,and should result in increased sales and customer satisfaction if the plans are executed effectivelyin-store.




Sample Vendors: 4R Systems; 7th Online; Galleria; IBM (DemandTec); JDA Software; NexiumCustomer Solutions; Oracle; Predictix; Quantum Retail Technology; Revionics; SAP; SAS; SoftSolutions; SymphonyEYC; TXT e-solutions

Recommended Reading: "Multichannel Pressures Drive Optimized Merchandising"

"Merchandising Optimization for Multichannel Fashion and Short Cycle Clothing Retailers"

"Multichannel Pricing: Strategically Consistent, Opportunistically Flexible"

"Assortment and Space Optimization Capabilities for Consumer Goods Manufacturing"

"The State of Retail Merchandise Optimization for Assortment, Space and Life Cycle Price"


Analysis By: Janet Suleski

Definition: Product life cycle management (PLM) for the retail, apparel and footwear industries,collectively called the fashion industry, is a class of software that enables the design anddevelopment of products. Its purpose is to coordinate the design, costing, specification andsourcing workflow to deliver new products in less time. Harnessing supply chain contributions to




product development activities is a core element of creating an effective coordination and controlplatform. In addition, it provides visibility throughout the entire process.

Position and Adoption Speed Justification: The pace of consolidation within this segment of PLMhas decelerated, but targeted acquisitions continue to take place as some larger software vendorsseek to close any gaps that still exist in their solution footprints. As the retail, apparel and footwearindustries continue to solidify their adoption of standardized platforms and processes, interest isgrowing in functionality such as costing, analytics, virtual product prototyping, product portfoliomanagement (PPM) and integration to assortment planning. Additionally, interest in the use ofmobile technologies and the integration of customer feedback and opinions obtained through socialmedia channels is in the very early stages, but gaining traction. Early adopters have benefited fromimplementations of PLM, and a growing number of second- and third-generation implementationsare currently underway.

While PLM adoption in this market is still increasing, research points to more mature deploymentsand a growing number of companies replacing first-generation, and even second-generation, PLMapplications with more advanced capabilities. It will, however, be two to five more years before PLMtechnology will be considered solidly mainstream in the fashion, apparel, footwear and retailindustries.

User Advice: The top criteria for adoption of these solutions are typically to capture ideas forinnovations from across the value chain, increase visibility throughout the product developmentpipeline, improve the speed of development of new designs from concept to store shelves, ensureproduct quality, and reduce costs and cycle times in the product development, sourcing andcommercialization processes. Successful PLM implementations in the fashion industry combine aneffective platform and best-practice business processes, adapted to meet the specific requirementsof the organization. This requires expert advice and assistance throughout the project to ensure thatall aspects of change management are accommodated. Getting designers, for example, to adoptand actively use PLM technology is not easy. So, the right combination of understanding ofbusiness processes, business culture implications and change management must be found. Onekey recommendation is to ensure that the software is implemented by people with experience in thefashion and retail businesses and its unique processes, not just in the technology of the PLMplatform.

Business Impact: Retail, apparel, footwear and accessories companies seek to use PLM softwareto coordinate the entire product development cycle, from idea to delivered product. Reducing thetotal cycle time and getting the product to market quicker are often critical objectives of PLMadoption. Increasingly, PLM initiatives are coordinated with other supply chain cycle time efforts,and their performance is closely tracked and measured by roles responsible for total product leadtimes, from concept to sale. Other key business objectives often include gaining better control ofcosts, coordinating global teams internally, collaborating more effectively with external tradingpartners, improving the success rates of new designs, and improving visibility across the entireprocess and the product development pipeline. Increasingly, users are asking PLM applications tostretch beyond even these boundaries and support the wider set of marketing, sales, packagingand other functions required to see a product through to full commercial launch.







Sample Vendors: Centric Software; Core Solutions; Dassault Systemes; Gerber Technology;Lectra; PTC; TradeStone Software

Recommended Reading: "Invest in PLM for Sustained Supply Chain Success in the ApparelIndustry"

"Five Ways Apparel Companies Can Reduce Lead Times"

"PLM and Private-Brand Management Differences Matter When Selecting Applications"

"PLM's Role in Becoming Demand-Driven in the Apparel Supply Chain"

"Reference Model for PLM in the Retail, Footwear and Apparel"


Analysis By: Janet Suleski

Definition: Product life cycle management (PLM) for packaged food, beverages and personal careproducts is a suite of software applications that supports the process of conceiving and developingformula-based products that require packaging. It supports designing the formulations, packaging,labels and manufacturing processes, while continuously improving the products. The applicationssupport the processes of creating, revising, managing and reusing all of the product data necessaryto support the various phases of a product life cycle.

Position and Adoption Speed Justification: This category of commercial PLM software began toevolve during the early 1990s. Many of the early software vendors in this space have been acquired,or they are now out of business. Several have been acquired by larger PLM vendors or enterprisesoftware companies, and their capabilities added into the functional footprints of these vendors. Anincreasing number of manufacturers are investing in this software and getting value. However, thecapabilities are not yet mature enough, nor easy enough to deploy, to address the needs of manysmall manufacturers. The deployments require more investment in technology and in the time andeffort needed to move down the PLM learning curve than most small manufacturers are ready tomake. It will be more than five years before this changes significantly.

User Advice: Functional areas, such as specification management and product portfoliomanagement (PPM), typically deliver the fastest value most reliably, because manufacturers,software vendors and service providers have more experience deploying them than other PLMcapabilities. Deployment of formulation and recipe management have also delivered value, but areless mature in adoption. It is best to embrace a multiyear phased deployment approach so thatcompanies can invest in these sequentially. Most early adopters invested in specificationmanagement first, because it has an immediate positive effect on existing manufacturing




operations. Then, they look to link recipe/formulation management to specifications. PPM can beadopted in parallel with these efforts, because it addresses a different user role versus specificationand recipe/formula management. Adopters should define and validate desired processes beforedeploying the software, or defining data schema to be used in specification and recipe/formulationmanagement.

Business Impact: The primary business benefit is faster time to market for cost-effective andquality products. This class of software has reduced the cost of executing approval processes tochange formulations and packaging by more than 40%. Some manufacturers have cut the time toexecute change processes by 70% or more. The tools make regulatory compliance more efficientby automating electronic signature for mandatory regulations, such as 21 CFR Part 11. Additionally,they are becoming increasingly important to address environmental, health and safety (EH&S)legislation, such as the European Union's Regulation for Registration, Evaluation, Authorization andRestriction of Chemicals (REACH), which limits the use of toxic chemicals in formulations andmanufacturing processes. PLM applications keep audit trails of past actions and changes made tothe formulation throughout the development life cycle, which assists with historical analysis andtracking actions in the case of regulatory or compliance issues. And, as PLM activities play anincreasingly influential role in sales and operations planning (S&OP) and new productcommercialization strategies, PLM technology becomes part of the platform used to expandcollaborative activities with suppliers and retail customers, in particular. PLM applications becomethe system of record for the single version of the truth about a product as it moves through iterativecollaboration cycles, both with external trading partners and with internal business partners fromthe supply chain, S&OP and commercial teams.




Sample Vendors: Accelrys; Dassault Systemes; Infor; Oracle; SAP; Selerant; Siemens; Sopheon;Trace One

Recommended Reading: "A Guide to PLM Providers for Formulated Packaged Goods Industries"

"PLM Drivers and Software Needs in Formulated Packaged Goods Industries"

"Cool Vendors in Product Design and Life Cycle Management, 2013"

"Align PLM Improvements Carefully for Success in Process and Packaged Goods Industries"

"Food, Beverage and Personal Goods Firms Accelerate Business Performance Through PLM"

"PLM for Process Manufacturers Provides a Competitive Edge in Global Markets"





Analysis By: Tim Payne

Definition: Gartner recognizes five maturity stages of sales and operations planning (S&OP). Atadvanced stages (Stages 4 and 5), it facilitates value trade-offs across the supply chain. Technologyis used at each stage of S&OP, but it changes as the process matures. For Stages 3 and below,technology needs to support the aggregation and harmonization of operational plans. However, themost prevalent technology for Stage 3 and below S&OP is still the spreadsheet, albeit supported byERP and supply chain planning (SCP) systems.

Position and Adoption Speed Justification: The concept of S&OP — to harmonize businessstrategies and operational plans — has been around for many years, and it's particularly well-knownin manufacturing organizations. However, at lower levels of maturity, the strategic and financialdimension is mostly absent, only really being present in processes at Stages 4 and above. Stage 3S&OP is mainly focused on operational reconciliation, typically using SCP as its basis. On thatbasis, we haven't changed the position of this Hype Cycle entry since last year.

Successful adoption of S&OP has been limited by organizational issues, and by the inability oftechnology to support a truly cross-functional process with integrated what-if and executioncapabilities. SCP and ERP vendors are focusing on providing basic S&OP capabilities for Stage 3and below, as well as some pure-play solutions. Specific S&OP technology, as opposed to usingexisting SCP applications, is maturing, with some vendors adding more capability to bring astronger financial analysis dimension to the process. This is often good technology to support a lateStage 3 S&OP process, but is often more suited to supporting a Stage 4 S&OP process whenfinancial impact analysis and stronger what-if support are more valued.

Interest in S&OP from end users is still very strong. Many are re-examining their processes andtrying to determine how to make them more effective. Interest is driven by the need for bettervisibility and scenario management in the supply chain to help evaluate different potential outcomesand effects arising from increased uncertainty on the supply and demand sides.

User Advice: To support your early-stage S&OP process initiatives, evaluate the different tools inthe market. Pay attention to how they support the business processes of S&OP and, specifically,the different stages of S&OP maturity — not just the data aggregation and representationrequirements. Understand that the demand planning, sales pipeline planning, or product anddistribution planning solutions that have been extended with S&OP screens and reports will helpwith Stages 1, 2 and 3 S&OP, but won't necessarily support all the process requirements andfinancial impact analyses of Stages 4 and 5 S&OP. Vendors for Stage 3 S&OP include SCPapplications, ERP suites, business intelligence suites and best-of-breed applications.

Business Impact: Stage 3 S&OP applications help companies make better use of resources bybalancing supply with demand. They also deliver improved collaboration throughout theorganization, what-if and scenario management capabilities to help in the evaluation of alternativeoperational options, and the reconciliation of operational plans to financial plans and budgets.







Sample Vendors: Demand Management; IBM (Cognos); JDA Software; John Galt Solutions;Kinaxis; Logility; Oracle; SAP; Steelwedge

MES Applications


Definition: Manufacturing execution system (MES) applications are a specialist class of production-oriented software that manages, monitors and synchronizes the execution of real-time, physicalprocesses involved in transforming raw materials into intermediate and/or finished goods. Theycoordinate this execution of work orders with production scheduling and enterprise-level systemslike ERP and PLM. They also provide feedback on process performance, and support traceability,genealogy and integration with process history, where required.

Position and Adoption Speed Justification: MES applications have taken a step back on theHype Cycle, with an extended period to plateau for the following reasons:

The $1.5 billion MES market is very fragmented by industry focus. Vendors will often focus on aspecific industry or unique grouping of industries (vendors that provide functionality for chemicalmixing and blending are often considered in active pharmaceutical ingredient [API] manufacture, forinstance). As a whole, the market is moving from point MES applications, expanding the functionalscopes to include capabilities for quality and test management, and operations intelligence (OI). Indoing so, competition from encroaching forces, such as ERP, and product life cycle management(PLM) providers looking to claim their portions of manufacturing operations, intensifies and, in somecases, creates an opportunity for market consolidation. In other cases, point solutions that passivelycollect, report on or distribute information, such as pure work instruction systems, offline plantscheduling packages and enterprise manufacturing intelligence (EMI) toolkits claiming to offer MES-like functionality, only serve to obfuscate the definition and scope of MES, which confuses buyers.

While the market size pales in comparison to other enterprise software segments like ERP or supplychain management (SCM), MES applications are relatively mature and remain on top of the list ofprioritized manufacturing investments for companies seeking control and consistency across theirmanufacturing operations. Not only does MES provide the digital enforcement of processes,methods and procedures in manufacturing, but it also provides the necessary genealogy traceabilityinformation required for compliance purposes, making it a strategic nucleus of broadermanufacturing architectures. Companies re-examining their manufacturing architectures, however,must encounter the manifold currently deployed, homegrown and monolithic MES applications.Site-level reluctance to "let go," fuzzy understandings of cost, ROI and poor business casejustifications are obstacles to scale and success. They contribute toward and create roadblocks inthe form of competition with other IT projects and resourcing issues.

User Advice: For companies in the process of selecting a new MES, choosing a product that's rightfor your environment is ultimately determined by two things:




■ The functional capabilities a product has to offer

■ The degree of domain specialization required

A note on the latter: There are vendors that play predominantly in the aerospace and defense (A&D)segment, offering capabilities that have been designed to manage reporting (such as job costing)and regulatory requirements that are specific to the defense sector. However, these products maybe perfectly capable of performing in a general discrete manufacturing environment. For thisreason, Gartner advises clients to not rule out a vendor that meets their requirements solely on thebasis of installed base.

Although single-vendor MES solutions can still be more cost-effective to implement within a site,several manufacturers, as part of efforts to standardize manufacturing best practices, continue topursue multiple site deployments. The successful ones do not eye deployments of MES in isolation.They seek to integrate the MES with other business processes at the plant, across themanufacturing network and throughout the supply chain. This means companies looking at newMES investments must identify customer-facing opportunities, such as optimizing lead times anddecreasing new product introduction cycles, not just site-specific goals, like decreasing legacy ITtotal cost of ownership (TCO) or "going paperless."

Thus, with respect to implementation and long-term success, consider the following:

■ Don't stop at local cost reductions and efficiency gains. Leverage the value of product andprocess information that MESs provide to identify process risk, decrease cycle times andincrease cross-functional collaboration across the manufacturing network.

■ Use communication and education, not spreadsheets, to sell leadership on the larger benefitsof an MES as a platform that supports standard manufacturing processes, as well as enhancescompliance, flexibility and time to market.

■ Improved flexibility and responsiveness are difficult to quantify, but are often desirable toexecutives who control the budget and funding. Include both strategic and tangible benefits inyour business case.

■ Partner with your vendor. MES vendors have decades of combined experience and bringsizeable domain knowledge to broaden the perspective on potential benefits.

Companies that challenge the maturity of MES applications are the same organizations that havemismanaged their MES deployments. The success of these projects requires elimination of projectgovernance disconnections (such as the dearth of C-level executive sponsorship and ITprioritization for the complete project life cycle), as well as clear understandings of the integrationrequirements and business process re-engineering efforts. When grossly underbudgeted,inappropriately performance-managed and understaffed, these projects don't deliver businessvalue. Partner with your vendor or a specific service provider during the implementation to learnhow the MES integrates with critical business processes. Internalizing this knowledge will assuageany pains of long-term support postimplementation and lessen the deployment costs over time.Failure to do so will hinder any benefits and business value realization efforts.




Business Impact: The benefits of MES can primarily be found on factory and plant floors throughcost reductions, boosted quality through error-proofing and the elimination of manual workprocesses. However, if scoped and implemented appropriately to integrate with other processes forproduct supply, it can support the growth goals of the business while removing costs andcomplexity, driving process optimization, and directly impacting the bottom line.



Maturity: Mature mainstream

Sample Vendors: Apriso; AspenTech; Camstar; CellFusion; Eyelit; GE Intelligent Platforms;Honeywell Process Solutions; iBaset; iTAC Software; Invensys Operations Management; Oracle;Performix; Rockwell Automation; SAP; Siemens; Werum Software & Systems

Recommended Reading: "Vendor Guide for Manufacturing Execution Systems, 2012"

"Governance, Not Technology, Drives Measurable Business Value From MES"

"Toolkit: Choosing the Right MES Functionality"


Analysis By: Marc Halpern

Definition: Product life cycle management (PLM) for durable consumer goods is a suite of softwareapplications that support the process of conceiving and designing consumer products that includemechanical parts, electronics and, increasingly, embedded software. Additionally, this category ofsoftware includes capabilities to design the manufacturing processes that best support the productdesign.

Position and Adoption Speed Justification: This class of software has been evolving since themid-1980s. Adoption has moved beyond the large manufacturers to many progressive small andmidsize manufacturers. Smaller PLM vendors that had key strengths in these capabilities eitherhave grown to become larger vendors or have been acquired. Support for key capabilities, such asengineering change processes across a supply chain, has become increasingly standardized.Gartner sees adoption in the mainstream market accelerating.

User Advice: Manufacturers adopting this class of software should prioritize support not just formechanical design, but also for electronics design and software (embedded and not embeddedalike) as key vendor selection criteria. This means that the software should support the mechanicaland electronic design software formats that they and their suppliers use. Many of the leadingvendors now provide templates with predefined workflow and data schema, particularly forengineering change processes. Users should ensure that these templates support their preferredworkflow, but also have the flexibility to adapt the workflow to unique aspects of their business




processes. Early adopters prioritize product portfolio management capabilities, as well as productdata management support.

Although it is more efficient to select a single vendor that provides all the PLM support, Gartnerfinds that many durable consumer goods manufacturers prefer best-of-breed portfolio managementproviders that are not the same as their backbone PLM vendors because of superior productportfolio management expertise embedded in the software. Requirements management and systemengineering are becoming increasingly important to this PLM discipline. Consumer goodscompanies interested in adopting PLM should prioritize these competencies. Also, sincemechanical hardware and electronics historically require longer lead times to develop and adjustthan software, several Gartner clients report that software is often validated later in the developmentcycle and becomes the bottleneck to product release. Whenever possible, manufacturers shouldaccelerate the software development process to alleviate software bottlenecks when managementis anxious to deliver the product.

Business Impact: Manufacturers using this class of software reduce their engineering changeprocesses by more than 40%. The improvements in product data timeliness and accuracy havereduced scrap and rework substantially. This leads to significant reductions in product developmentcosts, manufacturing costs and time to market. Increasing the emphasis on requirementsmanagement and system engineering improves market readiness and the ability to create productvariants to different market sectors.




Sample Vendors: Autodesk; Dassault Systemes; Oracle; PTC; SAP; Siemens; Sopheon

Recommended Reading: "Q&A: Streamlined BOM Management From Design to Production forDiscrete Manufacturers"

"Case Study: Electrolux Increases Product Portfolio Management Discipline"

"PTC Addresses Embedded Software With MKS Buy"

"Three Top Issues to Address When Evaluating PLM Service Providers"

"A Guide to Choosing PLM Service Providers, 2010 Update"

Appendixes




Figure 3. Hype Cycle for Consumer Goods, 2012

Technology Trigger

Peak ofInflated

Expectations

Trough of Disillusionment Slope of Enlightenment

Plateau of Productivity

time

expectations

Plateau will be reached in:

less than 2 years 2 to 5 years 5 to 10 years more than 10 yearsobsoletebefore plateau

As of July 2012




Consumer Packaged Goods E-Commerce

Manufacturer In-Store MonitoringAnalytics

Promotion Execution Monitoring

Assortment and Space Optimization


Marketing Mix ModelingTrack and Trace

CrowdsourcingSocial Coupons

Real-Time Customer Offer EnginesMobile Coupons Operations Intelligence

Demand Signal RepositorySocial Analytics

Master Data ManagementEnterprise Manufacturing Intelligence

Trade Promotion OptimizationInventory Strategy Optimization

2D Bar Code Marketing

E-CouponsQuality Process Management ApplicationsTrade Promotion Management (C&SI)





MES Applications

Retail Executionand Monitoring






Hype Cycle Phases, Benefit Ratings and Maturity Levels

Table 1. Hype Cycle Phases

Phase Definition

Innovation Trigger A breakthrough, public demonstration, product launch or other event generatessignificant press and industry interest.

Peak of InflatedExpectations

During this phase of overenthusiasm and unrealistic projections, a flurry of well-publicized activity by technology leaders results in some successes, but morefailures, as the technology is pushed to its limits. The only enterprises makingmoney are conference organizers and magazine publishers.

Trough ofDisillusionment

Because the technology does not live up to its overinflated expectations, it rapidlybecomes unfashionable. Media interest wanes, except for a few cautionary tales.

Slope ofEnlightenment

Focused experimentation and solid hard work by an increasingly diverse range oforganizations lead to a true understanding of the technology's applicability, risksand benefits. Commercial off-the-shelf methodologies and tools ease thedevelopment process.

Plateau ofProductivity

The real-world benefits of the technology are demonstrated and accepted. Toolsand methodologies are increasingly stable as they enter their second and thirdgenerations. Growing numbers of organizations feel comfortable with the reducedlevel of risk; the rapid growth phase of adoption begins. Approximately 20% ofthe technology's target audience has adopted or is adopting the technology as itenters this phase.

Years to MainstreamAdoption

The time required for the technology to reach the Plateau of Productivity.


Table 2. Benefit Ratings

Benefit Rating Definition

Transformational Enables new ways of doing business across industries that will result in major shifts inindustry dynamics

High Enables new ways of performing horizontal or vertical processes that will result insignificantly increased revenue or cost savings for an enterprise

Moderate Provides incremental improvements to established processes that will result inincreased revenue or cost savings for an enterprise

Low Slightly improves processes (for example, improved user experience) that will bedifficult to translate into increased revenue or cost savings





Table 3. Maturity Levels

Maturity Level Status Products/Vendors

Embryonic ■ In labs ■ None

Emerging ■ Commercialization by vendorsPilots and deployments by industry leaders

■ First generationHigh priceMuch customization

Adolescent ■ Maturing technology capabilities and processunderstandingUptake beyond early adopters

■ Second generationLess customization

Early mainstream ■ Proven technologyVendors, technology and adoption rapidlyevolving

■ Third generationMore out of boxMethodologies

Maturemainstream

■ Robust technologyNot much evolution in vendors or technology

■ Several dominant vendors

Legacy ■ Not appropriate for new developmentsCost of migration constrains replacement

■ Maintenance revenue focus

Obsolete ■ Rarely used ■ Used/resale market only


Recommended ReadingSome documents may not be available as part of your current Gartner subscription.

"Understanding Gartner's Hype Cycles"

"Business Drivers of Technology for Consumer Goods Manufacturing Sales and Marketing"

"Predicts 2013: Converging Technology Promises to Reinvent Sales and Marketing Processes inConsumer Goods Manufacturing"

"Me Marketing: Get Ready for the Promise of Real-Time, Context-Aware Offers in ConsumerGoods"

"Hype Cycle for Consumer Goods, 2012"




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