The View from the Glass House
By Ajit Kambil, Patrick Conroy and Ryan Alvanos 
Photography By David Clugston

Lindsey Shindell is looking for the perfect business suit in a New York department store with her mother — who just poured herself a cup of tea in Cleveland. The store’s digital mirror streams video from the dressing room through a protected website to a laptop in the Shindell family kitchen. In real time, they’ll deliberate — Pinstripes or charcoal? Are the sleeves too long? — as if they were in the same room. Lindsey finally decides, and mom checks online to make sure the perfect suit isn’t cheaper somewhere else.

New information technologies let consumers, retailers and consumer packaged goods companies (CPGs) access and communicate varied, rich information in real time to transform key interactions and relationships. Transparency makes previously difficult-to-access information readily visible to all key stakeholders: companies, customers, unions, investors and the broader community. This creates opportunities for increased selling and top-line growth; competitive strategies based on micro-targeted, real-time marketing campaigns; collaborative shopping experiences; and shifts in bargaining power between retailers, CPGs and consumers. Company leaders and consumers alike know that transparency has turned the walls of corporate headquarters to glass.

Transparency challenges companies by making information about products and pricing, as well as corporate practices around labor, environment, healthcare and other issues, instantly available to potential customers. Empowered by YouTube and other new media, consumers have the power to reframe, even shatter, the reputations of products, services and companies. As transparency washes the windows of corporate headquarters, leaders of retail and consumer product companies will have to ask themselves:

• How will information technology increase transparency in the industry?
• How will transparency impact consumer behaviors, retailer strategies and producer strategies?
• How can we capture value and mitigate the challenges of transparency in terms of price, reputation and other drivers of purchase behaviors?
• How should we react to empowered stakeholders — from consumers to third parties like environmental lobbies — who can impact the reputation of the firm?

Competition in the glass house of transparency will require CPGs and
retailers to focus on:

• Creating customer trust and avoiding lapses that destroy reputations
• Co-opting customers to co-create value with the company
• Increasing responsiveness to customers by improving their abilities to sense needs, interpret requirements, frame responses, act to deliver, and learn from outcomes
• Competing on design and brand
• Strategically and proactively using information to define demand

Effectively executing the above strategies will depend on retailers’ and CPGs’ abilities to strategically ‘push’ and ‘pull’ key information to and from stakeholders.

Transparency’s key drivers

In recent years, the primary driver of transparency has been the widespread diffusion of new information technologies that allow accelerated and real-time access to information, rich communications, and analysis. Since the advent of the web, advances in information technologies allow consumers and businesses to increase real-time information access, insight generation and collaborative action that reshape how critical stakeholders interact and influence each other’s decisions about why and where they should buy something.

A secondary driver is regulatory mandates that require increased disclosure about products, services and even companies themselves. For example, country-of-origin labels on grocery products provide greater food safety through transparency about the source of key food products. On the financial side, disclosure required by Sarbanes-Oxley improved standards and made available more detailed control and risk information to investors. In the future, the transition to extensible business reporting language (XBRL) for corporate reporting will enable near real-time analysis to help find potential anomalies and risks.

Yet another driver relates to risk management. Growing concern among consumers around topics such as sourcing, product safety and identity theft suggests that companies need to be able to quickly respond to issues surrounding the far-flung links in their supply chains and the proliferation of their data-collection efforts. In the last decade, consumer businesses have made strategic investments in vertical integration, ancillary growth offerings and technologies, enabling them to acquire, consume, produce and share customer data. Companies need to better understand the risks associated with these endeavors and prioritize resources by focusing on high-risk business processes and data sets.

As technology improves and regulatory mandates for disclosure increase, executives in consumer product companies can expect stakeholders to begin redefining relationships in the marketplace. Transparency will create many moments of truth around key decisions. The purchase of products, the hiring of staff, the selection of job offers by prospective employees, and the actions undertaken by companies will be based on more complete sets of information.

Competing from the glass house: managing risks, seizing opportunities

Competing from the glass house demands new skills, technologies and strategies from retailers and product companies. To effectively compete, retailers and CPG companies will need to focus on six key areas:

1. Creating customer trust and preserving reputations
2. Involving customers to co-create trust and value
3. Competing on responsiveness
4. Competing on design
5. Competing on brand
6. Strategically and proactively using information to define demand

Indeed, the very technologies that are turning corporate headquarters into glass houses can, if recognized and used correctly, help companies improve execution in all of these areas.