To grow, innovation is a must.
In time, even the most successful products and companies will begin to decline as the market – and the competition – moves on. The ability to innovate, experiment, and evolve is, therefore, an essential characteristic of the brands and businesses most likely to thrive long-term.
But not just any innovation – Agile Innovation.
Sustainable Growth For New Product Development
Agile product development of consumer goods generates proven growth results, however this is still not yet the norm in Consumer Goods innovation.
Innovation in general creates long term value for shareholders and positive cultural change for any organisation. However, the costs of innovation, especially the risk of failure, are big barriers that come from the way Consumer Goods innovation has been approached for decades.
Innovation By The Numbers
A typical Consumer Goods company invests 3% of turnover on innovation – based on UK government published R&D tax credit data.
Although a simplistic measure, if Consumer Goods companies are investing 3% of their turnover on innovation and returning 7% in innovation (as indicated by AC Nielsen), then the ROI would be 233%.
This headline figure is certainly impressive, but it masks all kinds of issues and, more importantly, it can be significantly improved. The real accelerant is connected to how your innovation process works.
New Product Releases in Consumer Goods Fail 9 times out of 10!
A 90% failure of newly released products generates enormous waste – and indicates an inefficient process.
We have calculated that companies waste 2.7% of turnover due to innovation failure (failure rate of 90% and the cost of innovation being 3% of turnover).
To put it another way, 3% of turnover is funding the 10% of innovation that is actually successful. The Consumer Goods industry today accepts this model as standard practice, yet frankly, it is unsustainable, and when compared to other sectors, somewhat disconcerting.
Improving Innovation Success Leads to Faster Growth
Let’s see what would happen if we were to improve innovation outcomes.
What if 20% of innovation worked? 30%? Without becoming too over-confident, what if 50% of innovation worked? So, for every 2 products launched, 1 still sits on the shelf 12 months later.
On the face of it, this doesn’t seem to be that aspirational. But it is…
Assuming the percentage of turnover invested in innovation remains at a conservative 3%, moving from a failure rate of 90% to 50% will see your business 14x it’s ROI from innovation.
Eliminate the astonishingly high failure rate of current innovation. You will increase your net ROI by huge factors!
How Can You Change Your Failure Rates?
By changing the innovation process.
In our experience, investing in innovation that delivers less risky, higher return routes to growth is possible. After all, we achieve this with clients every day. But just look at how diverse industries go about innovation and importantly, their results. You’ll see that many have far lower failure rates. More interestingly, many of those used to have rates as high or higher than FMCG and CPG today.
For example, the technology sector also used to have a 90+% failure rate – they relied on the “waterfall” method to develop new products. Using a stage-gate approach, building features and marketing. Only then did they actually sell the end product. Sound familiar?
Why wait until the end of a project to find out if consumers actually want to buy what you made?
Changing the innovation process in technology to incorporate Agile principles, and a focus on “Can we sell this, and if so, can we build it?”, dramatically changed the sector, helping lower innovation failure rates to below 50%.
Not only did it reduce the failure rate, but it drove up the efficiency of innovation too. Investment only goes into NPD that can prove viability with consumers. Success rates increase and consumers get what they want.
You Don’t Have to Accept such High Failure Rates Either.
By adopting Agile product development, and combining this with leading-edge consumer behaviour testing, you can deliver real change financially and culturally in your business.
Our proven approach is to make innovation outcomes better for consumers, which has the benefit of generating more products, that carry less risk, at a lower cost. Using repeatable, verifiable, and frequent consumer tests, you can affordably prove or disprove the viability of your product proposals. Working in this Agile way, you refine your ideas, reduce cost and risk, and make better products, faster.
It’s simple. Improve the innovation process, to deliver more successful product development, that can turbocharge your growth strategy.
We Know Agile.
Vypr can help you transform your ROI by implementing an Agile and data-driven approach to innovation, driving more value out of your current process, and removing wastage. Contact us to find out how.