Light touch key to product innovation

21 June 2010

NEW YORK: Successful innovation in the FMCG category is based on a nuanced combination of clear structure and the ability to "manage ideas lightly", a new study has found.

The Nielsen Company, the research firm, assessed the new product development strategies employed by 30 of the biggest consumer packaged goods firms in the US on 50 different dimensions.

It found that greater involvement among senior managers in the ideation and creation processes generally leads to launches that enjoy lower success rates.

More specifically, brands and extensions that came to market with modest input from these executives typically generated revenues that were 80% higher than when this was not the case.

Further factors that can lead to sub-optimal results include basing R&D units responsible at or near a corporation's headquarters, which can restrict inventiveness.

Businesses that locate this kind of "Blue Sky innovation team" a meaningful distance away from their HQ derived 5.7% of their total sales from recently introduced offerings.

This could be measured against the figure of 4.8% for organisations without any sort of "Blue Sky team" and 2.7% for their rivals that housed this group in their primary office.

"While we don't dispute senior management's strengths and good intentions, they are often too quick to get involved in the creative process," Tom Agan, managing director of The Nielsen Company, said.

"Their mere presence can stifle free-thinking and boundary-less ideas – which can doom the new product development process to failure."

However, Nielsen's study also showed it was incumbent on business leaders to closely monitor the innovation cycle.

Brand owners that have a clearly defined roadmap which informs their NPD output have unveiled goods which provide revenues that are some 130% higher than where a less rigorous model was used.

Ideally, the first stage will take the form of suggesting possible launches, followed by building a prototype and then undertaking final analysis to determine whether consumers are ready to buy in to the item in question.

Roll outs linked to growing brands rather than assets which have recently been purchased or prioritised by the board also yielded better returns.

Similarly, it is important to look two or three years into the future when considering the viability of projects, according to Nielsen.

Finally, corporations should produce "formalised scorecards" to compare their on-going efforts, conduct a "post-mortem" on all initiatives and build systems enabling employees to access this data.

"Companies with successful innovation track records go to great lengths to create an ideal creative environment and the right behaviours, supporting policies and procedures," said Agan.

Overall, manufacturers which leverage these and a range of other best practice guidelines saw the revenues from their new products jump by 650% against the norm, Nielsen reported.

Data sourced from Nielsen; additional content by Warc staff