Get innovation right and it is a dependable engine for sustained growth
You only need to take a look at how the technology sector has performed since the beginning of the pandemic. This sector has spent many years honing its approach to innovation, which meant that it was in the perfect place to accelerate growth when for example video calling and shopping for essentials became a very real part of life in lockdown.
But this hasn’t slowed down the sector’s focus on innovation. It continues to seek new ways to improve its current offerings, such as improved quality and new useful features. In shopping terms, faster more flexible delivery and a wider offering are once again changing the market for us.
The technology sector recognises that innovation drives them and the industry forward, it’s an integral part of their business.
So, what has the tech industry got to do with your business?
In the consumer packaged goods (CPG) sector, a study from AC Nielsen found that innovating new products is responsible for around 97% of category growth – You can read more here
New product innovation is a key factor in individual business performance. A report by Boston Consulting Group (BCG) found that the ‘Top 25’ most innovative businesses had higher median profit growth compared to industry benchmarks 3.4% vs 0.4%
“Innovative companies grow faster and have richer product mixes than their peers. They expand more easily into adjacent or completely new categories and produce more patents than their laggard competition.” BCG Report
The rewards for the company that successfully innovates are proven.
So, why then aren’t more companies like yours experiencing these gains? The answer lies partially in accepted levels of failure
Unfortunately, many CPG brands, retailers and manufacturers are still not approaching innovation in an effective way. Instead, we experience a high rate of failure for any given success and accept it.
Commonly, the failure rate for new consumer goods over a 12-month cycle is around 90%. That’s nine failures for every ten new products that are launched!
Take this further by examining what it takes to get those ten products to market, the number and cost of the failures really starts to mount up. At every stage from concept to the checkout, too many poor ideas get time and resources spent on them, only for them to fail when its too late.
With so many poor products released and only one in ten leading to success, new product development is an unnecessarily expensive process. We explore the impact of reducing wasted development on your bottom line in our free white paper.
It’s difficult to believe that other businesses would accept this rate of failure. Can you Imagine a construction firm allowing 90% of its new builds to collapse? Or a farmer only being able to use 10% of their crop. It’s just unfathomable.
Technology companies do not experience failure anywhere near this level. They have been honing an approach to innovation for years, significantly reducing costs and risks by minimising the number of failed product proposals early. This approach is broadly called Agile Innovation and through platforms like ours, FMCG companies wanting to reduce the cost of innovation quickly and easily make significant savings and drive growth with innovation.
How does it work and what can you achieve?
By identifying and removing every proposal that simply won’t make it, as early as possible, Agile Innovation means you reduce cost, minimise wasted investment, and focus on developing only winning concepts.
By employing high frequency, low-cost real-time testing for every constituent part of a new product, you make small iterative improvements to refine the best idea. It’s only by testing every assumption and proposal, quickly and inexpensively that you focus investment this closely, with the goal to only make what customers will buy.
The principle is simple, the real breakthrough and the missing piece of the puzzle for FMCG companies, has come from the development of platforms like Vypr, which provide a virtual product development laboratory where you can conduct rapid, frequent, and inexpensive product testing.
By refining new products and introducing customer validation right through your process, you will begin to see new product failures fall to 0%. In so doing your cost of innovation falls, and your return on investment increases massively, which in turn makes sustained growth through real innovation a reality for you.
If you are interested in learning more about how agile innovation can improve FMCG product development, we have released a comprehensive white paper unpacking consumer goods innovation today.