The pressures mounting on the consumer goods industry are fast and furious—and coming from every direction.

An abrupt end to price-driven growth has forced companies to rapidly shift gears and devise strategies for volume growth. The runaway advances in artificial intelligence (AI) and other next-generation technology have left companies scrambling to keep pace. Companies face a growing need to prepare themselves for turbulence in everything from supply chain disruptions to geopolitical unrest to natural disasters. New business models powered by technology have lowered barriers to entry for younger, nimbler competitors at a time when more customers and consumers are demanding the tailored products and faster service that these insurgents can provide. To pursue opportunities unlocked by new technology, companies need to upskill their existing workforces and attract new talent—and this during a time when employees are redefining what will motivate them to accept and thrive in a job.

It's a lot to deal with, and taking control of this dynamic future begins with a fundamental step: building a modern, adaptable organization.

Consumer products executives know what they need to do. When we recently asked 77 of them to list their operating model priorities, the top three were:

• instill Agile ways of working;
• build capabilities through talent and technology; and
• enable cross-functional collaboration.

All of these priorities require a well-devised organization (see Figure 1).

Figure 1

Leading consumer products companies are moving in the right direction for building dynamic organizations. They’re setting up different delivery systems for innovation, connecting sales and marketing with analytics to maximize returns on commercial investments, and making investments in platforms that deliver new benefits of scale, for example. It can be challenging, however, to reap the full benefits of these actions without taking a thoughtful review of the broader organizational design. A single example: A company may create a leadership role in generative AI, but that leader won’t be nearly as effective on their own as they would be if the company also sets up a cross-functional generative AI team to deliver on clear missions for the new capability.

Many companies wait for a trigger event (for instance, a new CEO, a refreshed strategy, an acquisition, or pressure from activist investors) before taking a major look at their organization. Or they make only incremental organizational changes to meet a cost plan without stepping back to fully consider the higher-level strategic requirements that are needed today. Yet, leading companies across industries are now starting to recognize the need to nurture and refine their organizational design on a continuing basis instead of relying on one-time resets. Such organizations are fueled by collaborative teams that stay focused on clear missions, and they are governed by quarterly action reviews. The aim is to achieve a new organizational nirvana of flexibility, focus, and speed.

How to create a modern consumer goods organization? We see three pillars.

Organize to disrupt

The most effective companies focus their top talent and resources on “change the business” efforts that position the company to innovate and adapt to shifting consumer preferences, emerging technologies, and competitive disruptions. At the same time, they work to manage “run the business” activities as efficiently as possible.

Procter & Gamble has been a leader when it comes to looking for new ways to unearth consumer innovations. For example, its Connect + Develop program enables cross-functional teams within the company to seamlessly collaborate with a host of external partners, each bringing different perspectives. The ability to break down both internal and external silos has helped P&G develop products such as Olay Regenerist and Swiffer Dusters.

Other companies create dedicated change teams focused on building the capabilities that spur transformative change within the organization. Similar to many other tech leaders, Spotify uses cross-functional teams comprising marketers, designers, and developers that are all focused on specific new features for its platform. The act of empowering cross-functional teams has become a recipe for success across industries, with companies assembling a diversity of thought and skills to tackle critical missions.

Introduce dynamic resource allocation

The ability to continuously respond to changing environments and priorities often means upending traditional planning and budgeting structures that can be rigid and challenging. By contrast, a dynamic model allows for in-year adaptability, positioning the company to put the best people and investments toward the most valuable opportunities at any given time. Companies discovered this need to quickly shift during the Covid-19 pandemic, when many reallocated supply chain resources to the few highest-demand hero SKUs. It’s what industry leaders do, such as Hershey when it diverts significant resources to improve efficiency in the face of all-time-high cocoa prices.

Companies can maintain a strategic backlog of initiatives aligned with the organization's overall strategy. Then they can use rolling forecasts and quarterly action reviews to continuously monitor and adjust financial and operational plans based on changing market conditions and performance indicators. This enables the company to make data-driven decisions, anticipate risks, and seize opportunities in real time. Companies also can take a venture capital approach to allocating resources based on the planned return on investment, strategic alignment of initiatives, and proven progress in market.

Winning companies establish governance structures that pursue the appropriate mix of run and change activities. For example, some companies aim for allocating 50% of leadership’s time to building the future company. They also require roles to be 100% dedicated to distinct run vs. change missions. Within IT, for example, they might have a leader whose job is to run the foundational elements of IT as efficiently as possible while they also have a leader who works on driving the growth and developing new digital products.

Become a talent maker

Many incumbent consumer goods companies are losing the war for top talent. Less than 5% of Fortune’s “100 Best Companies to Work For” are consumer products companies. Some have struggled to keep up with tech companies’ dynamism, opportunities to innovate, and perks, as well as with financial services companies’ potential for substantial compensation.

There’s no denying that a new generation of employees with a new set of needs has entered the workforce. Major changes such as hybrid work and alternatives to career ladders have emerged as the norm, and many companies within and beyond consumer goods are grappling with ways to attract, retain, and inspire this next generation.

Moreover, many companies are striving to link their new business imperatives to the specific capabilities, skills, and talent they need. Frequently, it means taking a future-back view of talent needs and more proactively managing the talent pipeline to get there. It means upskilling existing talent to broaden their career path. It means attracting new talent with a differentiated employee value proposition. In our experience, the most effective C-suite leaders devote 30% of their time to talent development.

Companies can use better workforce planning to identify current and future talent needs, gaps, and opportunities that are aligned with business objectives and market trends. For example, a skills-based approach helps a company better assess, develop, and fully leverage each employee’s strengths while highlighting where there are also gaps to fill. Also important: Companies can emphasize career passports that expose managers to functions across the organization as opposed to single-function career ladders that can result in siloed thinking. It’s a way to retain top talent, offer mobility, encourage cross-functional collaboration, and foster a culture of continuous learning and growth.

Johnson & Johnson is piloting a skills-based talent management approach, with emerging success. The company is assessing and mapping the skills of its workforce through data analytics to enable targeted development and mobility opportunities. It’s a move that allows J&J to better understand and utilize employees' skills, leading to improved talent retention and adaptability as well as allowing the organization to meet changing market demands.

Workforce planning and a skills-based approach are essential to a company’s talent strategy being successful. It’s also critical to thoughtfully establish an employee value proposition to acquire, retain, and inspire the best talent. For example Nvidia, Glassdoor’s 2024 No. 2 “Best Place to Work,” offers robust employee training and education programs, including specialized workshops within its Deep Learning Institute, as well as financial support for higher education through a graduate fellowship program.

Many consumer products companies fully acknowledge the need for a modern and adaptable organization. Some have made substantial progress on these three pillars; others have trouble getting started. Those struggling can begin by asking (and answering) five fundamental questions.

• Is your operating model (including structure, processes, and talent) evolving continuously or is it reset by irregular (and often, disruptive) external events?
• Do you use dynamic resource allocation to deploy resources to the best opportunities and redeploy as you learn?
• Do you separate run vs. change activities for prioritization, resource allocation, and business reviews?
• Do you have dedicated, cross-functional teams constantly improving capabilities within the business and working with the front line to test solutions?
• Do your business leaders own talent development and spend at least 30% of their time on it?