Bangkok Post

Heroes Can Save Consumer Products Innovation

Consumer goods companies need an innovation in innovation.

By Nicolas Willemot, Louis Lim and Allan Schulte

Published on February 28, 2016
min read


This article originally appeared in Bangkok Post. Consumer goods companies need an innovation in innovation. The largest companies invest an average of US$1.4 billion in research and development, typically 2% to 5% of their net sales, each year to bring new products to market. When they factor in costs beyond R&D, however, such as advertising investments and supply chain enhancements, companies may find themselves devoting up to 30% of their resources to innovations. Unfortunately, far too often there is little to show for the huge investment. For example, a study of new products introduced in Western Europe in 2011-13 determined that only 15% survived after their second year. Executives at these companies often see sales growth drop for their top products and become convinced that those best-sellers have maxed out their potential. They may then attempt to compensate by unleashing a host of variations of new products or brands, with the hope that at least one will eventually catch on. However, excessive innovation can actually hurt overall growth by shifting resources away from supporting existing winners. In essence, innovation ends up causing more bleeding to the core portfolio. Identify the heroes We advise executives to make their "heroes" the focus of their innovation strategy. Heroes are the handful of products for any particular brand that every shopper will know and look for and that contribute the bulk of sales and profits for both the manufacturer and the trade. *Read more at the Bangkok Post.* Written by Nicolas Willemot, a partner in Bain & Co's Brussels office; Louis Lim, a partner in the Singapore office; and Allan Schulte, a partner in the Bangkok office. All are members of the firm's consumer products practice.

This article originally appeared in Bangkok Post.

Consumer goods companies need an innovation in innovation. The largest companies invest an average of US$1.4 billion in research and development, typically 2% to 5% of their net sales, each year to bring new products to market. When they factor in costs beyond R&D, however, such as advertising investments and supply chain enhancements, companies may find themselves devoting up to 30% of their resources to innovations. Unfortunately, far too often there is little to show for the huge investment. For example, a study of new products introduced in Western Europe in 2011-13 determined that only 15% survived after their second year.

Executives at these companies often see sales growth drop for their top products and become convinced that those best-sellers have maxed out their potential. They may then attempt to compensate by unleashing a host of variations of new products or brands, with the hope that at least one will eventually catch on. However, excessive innovation can actually hurt overall growth by shifting resources away from supporting existing winners. In essence, innovation ends up causing more bleeding to the core portfolio.

Identify the heroes

We advise executives to make their "heroes" the focus of their innovation strategy. Heroes are the handful of products for any particular brand that every shopper will know and look for and that contribute the bulk of sales and profits for both the manufacturer and the trade.

Read more at the Bangkok Post.

Written by Nicolas Willemot, a partner in Bain & Co's Brussels office; Louis Lim, a partner in the Singapore office; and Allan Schulte, a partner in the Bangkok office. All are members of the firm's consumer products practice.