How AI Will Revolutionize Annual Business Planning
Annual business planning is one of those constants, like taxes and change, that nearly every organization can count on each year. It is enormously important to consumer goods organizations, and is a complex and ongoing process throughout a fiscal year where brands continuously shift priorities and strategies to meet performance gaps and adjust to fluctuating business conditions.
And this is all still largely done on spreadsheets.
Planning tool evolution (or lack thereof) aside, CPG organizations typically inform their annual planning decisions with historical sales trends and year-over-year performance data to paint a predictive view of how the year ahead might play out.
It is a strategy built on looking backward to go forward. This model has been reliable; learning from history has always been a competency, rather than a liability, and the consumer goods industry has typically been one of stability and predictability. However, history also tells us what worked before is not always going to be what works going forward (just ask Blockbuster Video).
CPGs (as most of us do) often miss black swan events, those rare sea changes in the market, because they are repeating what was done before. In our current environment of ever-advancing artificial intelligence and machine learning capabilities, we can now more accurately look ahead, better preparing brands for what may seem unpredictable. Further, the benefit of AI is continuous learning and an ongoing, realistic view of the direction in which a brand’s portfolio is heading, providing predictive outcomes against which to work and to plan.
The application of AI to annual business planning is a tipping point in organizations’ operations, resourcing, and capabilities. With smarter, evolved predictive market analytics, CPGs can lead the market in making the annual business planning process more manageable, and more importantly, more accurate.
It All Begins With Reliable and Relevant Data
The last few years may have produced some of the most historically unreliable data on consumer behavior. The COVID-19 pandemic, inflation and record-high costs resulted in brands facing highly unpredictable situations. Across the board, supply, labor, health, and macroeconomic trends created one hurdle after another for the production and delivery of goods of any kind.
When it comes to annual business planning, brands working backward to look forward aren’t fully armed to make the best decisions about what part of history will repeat itself. AI-powered predictive analytics integrate multiple sources of data, stabilizing volatility and creating a continuous learning model, enabling it to constantly import new data, test, learn and readjust to only deliver the most relevant information.
Produce Actual Insights on Category Futures
AI capabilities, when applied to annual planning, shift mindsets on portfolio investments. With predictive analytics at its heart, the future performance of categories and product classes/packs informs the most appropriate growth targets and levels of investment, optimizing profitability and effort. Imagine the efficiencies that could be attained through knowing, before hindsight is available, which categories are shifting in maturity? The cycle of growth and decline in any category (and the creation of new categories), based on consumer behavior and sentiment, is the moving target within which brands bet on growth investments and performance, all of which begins with the annual business planning process.
- Emerging / Growth categories. These categories are where new entrants, or even evolving established products, begin defining new niches within an existing category. At one time, ‘energy’ was not a category, but is now one of the largest categories in any cold vault, with most trend data pointing to continued growth ahead. Winning in newly defined space is both potentially a higher risk and a bigger reward. This is a category that will see many new competitors enter the category, but there is a big growth potential, and AI can help brands identify where to invest and take advantage of the white space in the market.
- Mature categories. These more developed categories face limited incremental space availability and more competition within existing space. But small amounts of growth in these categories can be worth more dollars in totality, since household penetration is likely higher in a mature category. Here, AI can enable brands to appropriately optimize strategic goals and investments to maximize potential.
- Declining categories. In these categories, space is often shifted to emerging categories as a result of sustained declines overall. Which is not to say that a category will eventually be eliminated, but sized appropriately, it could eventually evolve into a growth category with new entrants and evolution of offerings. AI can help brands optimize portfolios, but the technology can also help identify how to disrupt a declining category to bring back growth trends.
Shifting from Setting Targets to Closing Gaps
Annual business planning is just getting started once the targets are set. This continuous cycle on which nearly all business routines are anchored is one of measuring progress and performance against targets and plans, closing gaps, adjusting strategies and solving challenges that arise. AI can quickly help teams optimize strategies to focus on the best opportunities to shift resources and priorities to achieve plan goals. Further, if teams are using AI continuously in this process throughout the year and make it an ongoing part of reporting and performance measurement, trends could be better predictive and prescriptive analytics can used to take the most efficient and effective action possible.
AI Is Annual Business Planning
It’s important to note that AI doesn’t remove the human in the middle of the data. AI helps find the most impactful needles in the haystack for teams to consider and around which to develop strategies.
AI/ML never stops learning, so organizations and teams can be prepared for fluctuations and changes in near real-time, removing inefficiency in guesswork, creating options for action, and ultimately, enabling plan achievement. At its core, AI technology is annual business planning. Customized solutions are designed to look at where a brand / organization is sitting relative to the category and market, identify where the consumer / trends will go, harmonize data streams to inform financial deliverables, and then manage to and against those targets in aggregate through continuous learning.
Put the Spreadsheets Away
Establish leadership in the industry by shifting the paradigm on annual business planning. Free up resources currently mired in planning and re-planning to get back to the business of thought leadership. Take advantage of what innovative technologies offer and evolve dynamically beyond the complexity of a static spreadsheet. Enabling the future means finding better ways to work smarter: the thoughtful application of AI in your data environment is the best way to do that now.
To learn more about how AI can create efficiencies in resources and accuracy in both macro and micro-trend planning, click here.