The Indian consumer product market provides strong, long-term growth prospects and by 2025, the market is expected to become the fifth largest market in the world to hit 270 billion USD, rising at about 7.5percent per year. The development will be driven by strong economic engines and favourable demographic factors. The long-term outlook for the sector remains positive, guided by stable fundamentals. However, the composition of growth is likely to change for companies in the sector, particularly large established companies. There are two key forces that are reshaping the dynamics of the sector i.e, rapid change in customer tastes and the rise of start-ups.

Indian consumers are drastically changing, close to their global counterparts and are becoming more and more closely related, exchanging more knowledge and becoming more and more demanding. Much of the changes are powered by more than 400 million millennials who are redesigning what Indian customers want, how they shop, how they connect with brands and their relationship with goods. These consumers are progressively looking for products that match their individual values, such as health awareness or sustainability. They are looking for more personalized items that can suit their individual needs with increasingly shopping online, especially using mobile devices. We are now much more aligned with global trends than before with the increasing spread of social media. We prefer to become more asset-light by sharing ownership of goods and subscribing to utilities. Democratized access to technology has lowered entry barriers, while a responsive policy climate and increased access to financing have created a level playing field for potential companies. This has built a conductive field for start-ups to succeed.

These start-ups rely on creativity to differentiate themselves from competitors and drive growth. They are exceptionally skilled at identifying the dis-satisfied customer and using the latest technologies to resolve unexpressed needs. Competition from start-ups in India is on the rise, but it is still not as serious as some of the larger, global markets where start-ups are disrupting the top order.

Today, start-ups are giving tough competition to the large consumer product companies. Thus, it becomes important for the incumbents to set an agenda for identifying evolving customer needs with speed and provide products and solutions to meet them. It requires a rewiring of how these companies have operated traditionally and adopt speed over perfection. -Pinakiranjan Mishra, Partner and National leader, EY India

In order to stay competitive and retain leadership, incumbents must make radical improvements to their business models and in-still an innovative start-up culture. What sets start-ups apart is their ability to evolve rapidly by holding customers at the centre of any decision. This is not because the incumbents are not aware of how start-ups are innovating. Yet, despite their existing structures and operating model, they are struggling to quickly evolve at the organizational level. There are some basic variations between working methods for incumbents and start-ups that ultimately affect the culture of innovation.

Start-ups and incumbents carry two different but complementary skills sets to the table. They both recognize that developing proof of concept and scaling proof of concept are entirely different aspects of a company. While incumbents are aware of how start-ups are innovating, they are struggling to embrace and incorporate the start-up style of work. They refuse to shed the weight of their reputation and are still inexperienced in taking on new ways of working.

In order to see tangible effects and drive progress, the incumbents need to put progress centre stage, and any organizational decision should be focused around that. It includes the inculcation of a start-up community, which is not easy. Significant changes in business operations are expected. Obviously, these drastic changes are not feasible across the board, but companies need to intelligently pursue ways to incorporate creativity into their business model. To survive in the long term, the incumbents must wear two hats, one of a start-up for agile growth and the other of a legacy player for speeding up. Investing behind the five-wheel agility will provide the required momentum needed for the incumbents to become agile innovators.