RCPG leaders are seeking innovation prowess from their execution providers

The latest HFS Horizon study highlights a critical disconnect in the retail and consumer packaged goods (CPG) services landscape. While clients continue to value service providers for their execution capabilities, they are increasingly unsatisfied with their ability to deliver innovation. Retail and CPG leaders lean heavily on their external partners for transformation in a business environment shaped by rapidly changing consumer behaviors, intensifying margin pressures, and constant digital disruption. These enterprises need more than just dependable IT execution; they need partners who can quickly anticipate change, reimagine operations, and drive innovation.

Execution still wins points, but it’s not winning the market

Execution still earns providers recognition. Nearly 31% of surveyed clients rated their provider an 8 or higher for execution, and 28% gave a perfect score of 10. This demonstrates that providers perform strongly in traditional areas such as IT operations, integration, and modernization. Clients appreciate their providers’ breadth and depth of services, industry expertise, delivery excellence, and responsiveness. However, the expectations from retail and CPG clients have evolved significantly. In today’s environment, where physical and digital commerce must function as a unified system, execution must expand beyond system reliability and cost reduction. Enterprise leaders are grappling with digitalizing stores, shifting to direct-to-consumer models, optimizing last-mile delivery, and orchestrating seamless omnichannel experiences- challenges that demand more than just technical delivery.

Innovation shortfalls are destroying provider credibility

Providers are faltering in innovation—only 29% of enterprise clients rated providers a nine or 10 on innovation, which is becoming the primary measure of differentiation. A concerning 46% gave middling scores of six or seven, and 8% rated innovation efforts below five. This signals a credibility crisis. In retail and CPG, where transformation involves reinventing the entire value chain from production to consumption, innovation must be deeply embedded and outcome-oriented. In this context, innovation must produce measurable results across manufacturing, supply chains, storefronts, marketing ecosystems, and all other operations across the value chain.

Innovation can’t remain a siloed initiative confined to R&D labs or an innovation center. It must become a business capability integrated into every provider’s delivery and strategy layer. Without this shift, providers risk becoming indistinguishable in an increasingly crowded market, viewed not as transformation partners but as commoditized, low-cost IT vendors. To stay relevant and differentiated, providers must shift their go-to-market strategy from pushing cloud and automation solutions to solving concrete business problems—helping clients reduce product returns, improving private label profitability, and scaling environmentally responsible sourcing practices. Perhaps most critically, they must prove their transformation capabilities with real-world examples demonstrating revenue impact, business model evolution, and pilot-to-scale successes and outcomes that matter to CEOs and CMOs, not just CIOs.

The Bottom Line: Retail and CPG enterprise leaders must stop selecting partners based solely on past performance or technical credentials and start demanding proof of future-ready innovation.

Innovation needs to move beyond presentations and into practical, scalable execution. Pilots or prototypes don’t measure actual progress; it’s reflected in measured business outcomes at scale. Leaders should ask targeted, results-oriented questions: What measurable business challenges have you addressed? How have you contributed to revenue growth? Can your solutions scale effectively from experimentation to full operations?

Providers who cannot demonstrate such real-world impact with clear evidence may not be the right fit for guiding transformative change.