Quick wins are good but big wins are better when it comes to new product development in grocery
It's tough to keep any fmcg sales graph from heading south this year. UK growth in 2008 is about 2%, down from 3% last year; further interest rate cuts are limited by inflationary commodity and oil prices; UK and US consumer confidence is low; and it seems the credit crunch will be around for a while yet.
Growth is always the overriding priority and key performance indicator for fmcg businesses and, as many surveys have shown, it is driven by innovation. It follows that innovating successfully and efficiently is critical.
But success is elusive. Ninety per cent of new products fail within two years [Ernst & Young/Nielsen] and only 300 new UK grocery products achieve sales of more than £1m [The Grocer/IRI]. Is this the best we can do?
At the Leatherhead Food International New Products Forum in Dublin this month , I spoke on Innovation Success and ran an interactive audience poll among 77 senior European marketing and NPD managers. The results were both revealing and disturbing:
l Only a quarter felt that "my company is successful at innovation";
l 42% disagreed with the statement, "my company is good at delivering innovation to market quickly";
l Two thirds disagreed with the statement "my company is efficient at managing innovation".
We can perhaps take a positive message from these candid results: that there is a healthy dissatisfaction among this audience with the status quo and an implied willingness to improve their speed to market and success rates. As the owner of an innovation services company, I can also be positive about the need for our services to improve the efficiency of product development.
The rewards from innovation are inseparably combined with risks, and significant breakthrough innovations will have lower strike rates, but the blanket acceptance of high failure rates cannot continue.
As an industry, we should surely aim to get better odds than 10-1. The savings in effort, investment and product would be substantial. The improvements in speed to market can result in businesses choosing to launch "low-hanging fruit" products. Some 80% of all new product launches are line extensions that are not news to consumers, but keep the supply chain busy. Quick wins are good, but big wins are better.
Looking forward, we asked our audience to consider the critical success factors for driving innovation in their companies. This time the top three responses were more encouraging:
l Development of marketing concepts before product development;
l Having an innovation strategy integrated to the business strategy;
l Engaging cross-functional support inside the business.
These responses not only reflect some best practices, but also illustrate a principle of innovation efficiency that we follow at MIH - and that is to focus effort on the 'fuzzy front end' of innovation. A particular bright spot in the survey was the need for marketing concepts to be developed before product development starts.
We believe in generating lots of ideas, turning them into marketing concepts quickly and then evaluating them hard and fast, using objective methods to eliminate losers. You can then focus resources on developing fewer, bigger, better concepts into products. It accelerates the pace of development for those few concepts that stand a good chance of success.n
Tim Nicol is managing director of MIH-Make Innovation Happen