Bringing truly innovative products to market—on a consistent basis—has long been a challenge for consumer products companies. A recent SymphonyIRI study found that 90 percent of consumer products launched in 2010 were brand extensions as opposed to truly new brands. Only three percent achieved blockbuster status (year-one sales of over $50 million).
To counter this challenge, many CG companies are implementing the business practice of Innovation Governance. These efforts, often supported by software technology, amount to systematizing and facilitating cross-functional decision-making across the innovation lifecycle. The results for such top brands as PepsiCo, Heinz, ConAgra, Church & Dwight, and Beiersdorf have included more high-value, even disruptive, new products.
A common first step for companies implementing an innovation governance system is to focus on improving their “gated” innovation processes. That’s because it is at the early decision “gates” where executives face the hardest choices: should they invest significant resources in a prospective new product or “kill” it to focus on other innovation opportunities? According to AC Nielsen, consumer goods firms with “effective and rigid” gates average 130 percent more new product revenue than companies with loose processes.
The vice president of research and development for a large food and beverage producer explains how this works in his company: “Weak projects are prevented from progressing and diverting resources from ideas with greater potential. In terms of portfolio value, this difference has been transformative.” A leading global producer of household appliances is among the substantial number of CPG manufacturers that have deployed Sopheon’s Accolade solution to enable innovation governance execution. The company reports that it has increased its volume of new product launches by more than 80 percent, cut development time by nearly three-quarters and dramatically improved margins.