CEO Forum

Building an innovation platform

Consumer goods companies typically look to innovation to open new streams of revenue, stay ahead of competitors and justify price increases.

Par Paul Calthrop

First published on septembre 24, 2007
min


Consumer goods companies typically look to innovation to open new streams of revenue, stay ahead of competitors and justify price increases. But nine out of 10 innovations die in the pipeline, and about three-quarters fail after launch. Searching for growth, the temptation is to pump out more and more in hopes of finding a few big winners—often an expensive and ineffective approach. There is a better and less costly way. It involves screening what goes into the pipeline far more carefully by using innovation "platforms" to generate ideas with higher potential and lower risks of failure. That approach provides parameters for innovation and gives lift—you don't have to start from scratch each time, but can tee up big-hit innovation that offers "repeatability" across product lines. It's an approach that carmakers and technology firms have used to build multiple models from the same core parts, but that consumer goods makers have only begun to exploit and adapt broadly. In car manufacturing, a platform may be a new technology—say, a new engine. In consumer products, it is more likely to be a consumer insight that fosters new product innovation (not just technology) including "occasions", channels, and packaging. Take, for example, Danone. In the 1990s, the company saw that consumers' increasing concern for healthy eating—in particular a healthy start to their day—offered a platform to reposition its yogurt and biscuit products for innovation and growth. First, Danone identified a new occasion for health-based innovation: breakfast. Traditionally, the firm's yogurts and biscuits competed in both the snack and dessert categories for the whimsies of mid-day munchers. But breakfast, Danone noted, was an occasion where consumers not only wanted healthy choices, but also exhibited high product loyalty, eating the same thing day after day. Danone innovated its formulas, creating yogurts and yogurt drinks that contained special enzymes to aid digestion (Activia and Actimel). And it developed convenience packaging that combined yogurts with cereals (Light 'n Fit Crave Control). It repeated the approach with its biscuits line, developing nutritious biscuits (the vitamin-packed Sunshine breakfast biscuits in Asia) designed to give consumers a natural energy boost at the start of their day. Growth followed: Launched in 1997, by 2004, Actimel yogurt drinks accounted for 16 per cent of Danone's yogurt sales in France. The right innovation platform can lead to a new business. One entrepreneur, who came up through the school of market research at Procter & Gamble, saw huge potential for innovation around the interest teenage boys began to take in personal grooming. The US market included 22 million pre-teens and young teens who had no personal care products made just for them. The entrepreneur used the insight as a platform to launch OverTime, a business that makes a line of grooming products branded OT, just for boys aged 9 to 16. The platform led to a range of products that iterate on boy-friendly packaging—all red and yellow—with names charged with adrenaline, including Pit Defense deodorant, Head to Head shampoo, Lid Lock hair gel and Body Slam body wash and scent options "Power Rush" and "Vertical Blast." Other personal care companies, like L'Oreal, are seeing a similar platform for innovation around increased interest among pre-teen and young teenage girls in personal grooming. Of course, platforms, too, need renewal. Hennes & Mauritz, the Swedish clothing retailer, was quick to jump on the insight that the mass market wanted affordable haute couture. Just three years ago, it launched value designer wear, starting with a collection by Karl Lagerfeld and a big splash opening on Fifth Avenue. It replicated this the following year with a collection from Stella McCartney and later with Dutch designers Viktor & Rolf. In each case, it repeated its innovation formula—launching designs in flagship stores in select cities, and creating not only more offerings for customers, but also a media event that reinforced its brand. Now, in the fast world of fashion, H&M is looking at this platform from another angle, recently announcing it will launch an up-market chain of stores for shoppers willing to pay for even higher-end, but still affordable, couture and service. Companies need to be as rigorous as they can in assessing the potential of their new product portfolios. Many companies simply add up the revenue potential of the products in their pipeline and assume they have enough innovation to meet their growth goals. When pushed to quantify the net-expected value of the pipeline—after product failure, cannibalisation and competition—the shortfall often comes as a shock. Developing innovation platforms allows companies to select products from their portfolios that have the best chance of success. To succeed, consumer product companies need to understand the true size of their "innovation gap", investing in consumer insights to develop platforms, and then making sure those platforms have the right resources to thrive.

Consumer goods companies typically look to innovation to open new streams of revenue, stay ahead of competitors and justify price increases. But nine out of 10 innovations die in the pipeline, and about three-quarters fail after launch. Searching for growth, the temptation is to pump out more and more in hopes of finding a few big winners—often an expensive and ineffective approach.

There is a better and less costly way. It involves screening what goes into the pipeline far more carefully by using innovation "platforms" to generate ideas with higher potential and lower risks of failure. That approach provides parameters for innovation and gives lift—you don't have to start from scratch each time, but can tee up big-hit innovation that offers "repeatability" across product lines.

It's an approach that carmakers and technology firms have used to build multiple models from the same core parts, but that consumer goods makers have only begun to exploit and adapt broadly.

In car manufacturing, a platform may be a new technology—say, a new engine. In consumer products, it is more likely to be a consumer insight that fosters new product innovation (not just technology) including "occasions", channels, and packaging.

Take, for example, Danone. In the 1990s, the company saw that consumers' increasing concern for healthy eating—in particular a healthy start to their day—offered a platform to reposition its yogurt and biscuit products for innovation and growth. First, Danone identified a new occasion for health-based innovation: breakfast. Traditionally, the firm's yogurts and biscuits competed in both the snack and dessert categories for the whimsies of mid-day munchers. But breakfast, Danone noted, was an occasion where consumers not only wanted healthy choices, but also exhibited high product loyalty, eating the same thing day after day. Danone innovated its formulas, creating yogurts and yogurt drinks that contained special enzymes to aid digestion (Activia and Actimel). And it developed convenience packaging that combined yogurts with cereals (Light 'n Fit Crave Control). It repeated the approach with its biscuits line, developing nutritious biscuits (the vitamin-packed Sunshine breakfast biscuits in Asia) designed to give consumers a natural energy boost at the start of their day. Growth followed: Launched in 1997, by 2004, Actimel yogurt drinks accounted for 16 per cent of Danone's yogurt sales in France.

The right innovation platform can lead to a new business. One entrepreneur, who came up through the school of market research at Procter & Gamble, saw huge potential for innovation around the interest teenage boys began to take in personal grooming. The US market included 22 million pre-teens and young teens who had no personal care products made just for them. The entrepreneur used the insight as a platform to launch OverTime, a business that makes a line of grooming products branded OT, just for boys aged 9 to 16. The platform led to a range of products that iterate on boy-friendly packaging—all red and yellow—with names charged with adrenaline, including Pit Defense deodorant, Head to Head shampoo, Lid Lock hair gel and Body Slam body wash and scent options "Power Rush" and "Vertical Blast." Other personal care companies, like L'Oreal, are seeing a similar platform for innovation around increased interest among pre-teen and young teenage girls in personal grooming.

Of course, platforms, too, need renewal. Hennes & Mauritz, the Swedish clothing retailer, was quick to jump on the insight that the mass market wanted affordable haute couture. Just three years ago, it launched value designer wear, starting with a collection by Karl Lagerfeld and a big splash opening on Fifth Avenue. It replicated this the following year with a collection from Stella McCartney and later with Dutch designers Viktor & Rolf. In each case, it repeated its innovation formula—launching designs in flagship stores in select cities, and creating not only more offerings for customers, but also a media event that reinforced its brand. Now, in the fast world of fashion, H&M is looking at this platform from another angle, recently announcing it will launch an up-market chain of stores for shoppers willing to pay for even higher-end, but still affordable, couture and service.

Companies need to be as rigorous as they can in assessing the potential of their new product portfolios. Many companies simply add up the revenue potential of the products in their pipeline and assume they have enough innovation to meet their growth goals. When pushed to quantify the net-expected value of the pipeline—after product failure, cannibalisation and competition—the shortfall often comes as a shock.

Developing innovation platforms allows companies to select products from their portfolios that have the best chance of success. To succeed, consumer product companies need to understand the true size of their "innovation gap", investing in consumer insights to develop platforms, and then making sure those platforms have the right resources to thrive.