Q: What prompted you to want to speak on innovation?
A: It seems that almost every company ArchPoint speaks with these days is looking to some aspect of innovation to support future growth. In many cases, the product team is tasked with the challenge, but the best companies out there are making innovation part of every department’s objectives.
My work with VF Corporation exposed me to some of the most innovative global consumer brands and I enjoy sharing insights from my time there. Innovation was at the heart of what we did, and we pushed for it in all areas of the company.
Q: What should drive innovation?
A: It should be driven by consumer needs as opposed to what a lot of companies do, which is to innovate solely for innovation’s sake. It’s critical to identify a real consumer need and innovate around it. That’s the Holy Grail. Many companies have only internal dialogue as to what they want to create vs. considering if anyone actually wants what they develop. You have to go fairly deep into the consumer mindset before you go down the innovation path. Of course, this is easier said than done since many consumers struggle to articulate what they’d like before it’s put in front of them. I’m sure that smartphone engineers were told by a number of consumers “I just want a smaller flip phone”, and we all know how that turned out. The key is to be able to determine what consumers want based on their actions, not just by what they say they want.
Q: Give us your perspective on the current state of innovation in the CPG industry.
A: When we look at the world of consumer goods today, shoppers are looking for newness at an ever-increasing rate. Many companies rely too heavily on their product development teams for this newness, and often miss opportunities in other areas for significant return on investment. When the word innovation is mentioned, many leaders jump immediately to groundbreaking or LEAP innovation. While this is one aspect, and one that comes with potentially very high rewards, it also comes with very high risks.
For every successful breakthrough innovation, there are countless failures that had resources applied against them. In consumer goods, over 85% of new products fail in the market according to Nielsen’s 2014 Breakthrough Innovation Project. That figure coupled with the statistic that the total cost for a new product launch is approximately $15M (according to IRI/Symphony) should drive any leader to look at additional ways to innovate other than just R&D.
Q: How can companies innovate outside of product development?
A: To be clear, R&D should constantly be working on innovative new products. But there are a number of other areas where innovation can live and bring tremendous value to a business. Instilling a culture of innovation across your company with clear direction and focus from senior leadership can result in significant returns. New processes in operations, engineering or finance (yes, finance can be innovative) can reduce costs, gain efficiencies, and introduce entire new opportunities to a company. I’ve also seen incredible returns from new ideas in areas such as packaging, which many companies don’t review on a regular basis.
Q: If R&D isn’t responsible for leading innovation in your company, who should be?
A: It’s great if your company is of a scale where you can have a dedicated innovation resource—someone who’s expertise is in understanding how to get at these consumer needs and how to work within an organization to meet them. Large companies can afford these dedicated resources, but for companies who can’t, who do you hand it off to? Innovation needs to be a strategic initiative at the senior level where it’s actually owned across the entire team. Metrics should be put into place and every department should be responsible for owning some aspect of it.
The mistake so often made is when R&D owns innovation, everyone else looks at them and says “oh they handle it so we don’t have to worry about it”. The entire leadership team should be held accountable for the implementation and success of innovation initiatives.
Q: Can you provide some advice to business strategy leaders looking to drive innovation in their organization?
• Stop associating innovation simply with products.
• Ask yourself if you’re rewarding innovative thinking, or punishing it.
• When innovative ideas come up, make sure you are positioned to be able to capitalize on them.
• Be careful not to fall in love with your own ideas, ignoring consumer or market feedback. What might feel brilliant in an internal meeting simply might not be what consumers are looking for.
• At times, we’re all guilty of innovating for the sake of newness, but the best solutions are those that are applied against a known consumer need. If you can identify a consumer need, and bring newness against it, your rate of success will be much higher.
My definition of innovation is “something new or different that adds value”. It seems very simple, but it’s broad enough to allow everyone in an organization to contribute and reinforces the philosophy that all functions should share ownership of innovation. This definition also maintains that to be considered innovative something has to fit the parameters of being new and different (the classic definition), but ensures adding value remains of equal importance. If something does not add value, it’s just noise, and should be reevaluated as to whether or not it is owed priority in your innovation strategy.