According to a recent Accenture report, 75% of global consumer packaged goods (CPG) executives say the stakes for innovation have never been higher. And there’s good reason for these big company executives to feel that way. The report found that large and mid-size CPG companies had seen their market shares drop from 65.7% in 2016 to 62.8% in 2020. During that same period, small, extra-small, and private-label companies have steadily expanded their market share.
Like most global enterprises, large CPG firms aren’t built for speed. They’re built for quality, reliability, and repeatability. The path to winning products requires a structured process that lays out defined deliverables at each stage of the product development timeline. The conventional approach can be long and tedious, but it ensures that everything necessary to get a product to market happens properly and on time. It provides strong cross-functional and strategic alignment and a sound basis for decision-making across multiple types of portfolios of products.
By contrast, smaller CPG firms are more adept at deploying methodologies that allow for more flexibility through each stage of product development. They can turn on a dime and make changes as specific challenges arise.
So, the burning question is this: How can larger CPG companies that need and employ strong product development processes innovate at the speed of smaller, more flexible upstarts? In short, they can’t. But they can move faster while still maintaining many of the aspects of governance that companies of their size need to minimize risk.
Traditional processes can be counterproductive
The early phases of development in a conventional process, such as Stage-Gate®, typically contain dozens of completed tasks and deliverables before the team can move on to the next stage. The thoroughness of this approach prevents details from falling through the cracks. However, many of these action items don’t always take into account the unique nature of individual teams and aren’t always necessary to move to the next stage. As a result, advancing products forward takes more time and work than necessary, ultimately delaying time-to-market.
It’s also worth considering the impact that unnecessary tasks can have on the morale of team members. Anyone who’s spent enough time on the same team understands which duties actually contribute to achieving the end goal and which ones feel more like required busy work. It can be disheartening when your desire to launch innovation is slowed by tasks that don’t necessarily contribute to the end goal. This kind of frustration can lead to talent erosion over time.
Add to this the fact that all industries are seeing significant employee turnover, as the American workforce considers their options like never before. With less experienced team members, the number of tasks in each stage can be daunting and more challenging to complete, further slowing time-to-market and adding to job dissatisfaction.
A hybrid approach to spur consumer goods innovation
More CPG leaders are moving toward a hybrid—or "zero-based"—approach to product development, which incorporates comprehensive processes that big companies need while retrofitting agility for each stage. This is accomplished by only assigning tasks that align with the team’s function and the type of innovation they focus on. In short, the tasks must make sense.
In this method, teams are presented with what we like to call a minimum viable process consisting of a limited number of tasks necessary for each team to move on in the early stages of product innovation. Instead of 25 tasks, teams are laser-focused on the three or four that directly move things forward. This is the “zero-based” starting point that ensures the team creates the minimal information required for effective governance by business leaders.
Then, as the project progresses, team leaders incorporate tasks that reflect learnings and new challenges or directions. This process is not only flexible, but it instills trust in leaders who are instinctively aware of their team’s goals and the best ways to reach them. Think of it as structure with empowerment—or scalable flexibility. And with technological advances, team leaders are presented with recommendations regarding tasks that they can either accept or decline. And with each decision, the recommendations are more on-point and the process more refined.
CPG product innovation is a race, and those who can get a new product to market first will have an advantage as competitors try to catch up. Large CPG firms must have just enough structure to ensure the quality of the products that have contributed to their leader status but be agile enough to launch them in a timely fashion. Embracing a zero-based approach can move them toward the comprehensiveness and speed they need to maintain market dominance.
Check out this Sopheon e-book for a deeper dive into a hybrid approach to CPG product development.A Zero-Based Approach to Stage-Gate® E-Book