Fewer, bigger, better – hitting the innovation sweet spot
The idea of achieving ‘fewer, bigger, better’ innovations is nothing new; it’s a rallying cry that comes from the boards, CFOs, and CEOs of most large multinational companies from time to time. Over the past 18 months as the signs of economic recovery become more apparent the cries have been growing louder.
The logic of the idea is simple; ‘Fewer, Bigger, Better’ innovations should mean spending less money and getting better results.
Aligning on the innovation outcome
It should avoid duplication of effort between brands and across territories and markets. It should mean providing R&D teams with fewer, tighter, more focused briefs, ensuring they can develop technology platforms that meaningfully differentiate products.
It should make it possible to support the innovations actually launched with more money and for longer (there is compelling evidence that this makes a big difference to success).
The logic makes sense, the objective is prudent. The more interesting question is how do you achieve it? It’s a big topic and I will be exploring some of the challenges and how to overcome them in a number of papers over the next few months which will include:
Defining what it means
- Developing the innovation strategy – how to use segmentation, consumer needs, commercial strategy, foresights and trends to create a winning innovation strategy?
- Capitalising on what’s already in the cupboard – how to turn the ideas, concepts, products you’ve already spent money creating into winning innovation?
- Leveraging existing assets – getting the best innovation from existing brands and production capabilities.
- Achieving real transformational innovation – how to create lasting, profitable, sustainable, legacy-building and career-making innovation.
The first and often overlooked step towards success is defining what everyone means by ‘Fewer, Bigger, Better’. The word ‘innovation’ itself means different things to different people – some people think big, some think small, some think of a product, some think of a business model, some people even still think that if they develop a more creative culture where ideas are welcomed it will sort itself out!
The problem is that this very often creates a mismatch of expectations between the board and the people who need to deliver the results.
The Spectrum of Innovation below is a useful place to start to define the type of innovation we want to achieve.
Spectrum of Innovation
This simple framework defines three types of innovation. Understanding how each type has its own characteristics, requires different governance and reward models and has different business objectives can dramatically increase the chance of success of a ‘Fewer, Bigger, Better’ effort.
Strengthen – NPD / EPD / Renovation
This is innovation within existing categories. Either refreshing existing SKUs with new benefits or claims, or new SKUs that grab a bigger share of the category. This type of innovation should naturally be driven by category teams; it generally works well with a standard funnel and gate process and it should be an integrated ongoing business process.
For the most part, it will capitalise on evolutions to existing technology or packaging and be possible to get to market on a 12-18 month cycle.
Should / can this type of innovation be part of a ‘Fewer, Bigger, Better’ initiative? My view is yes it can and must be. In three recent projects we conducted we found 20-40% duplication of effort / reinvented concepts across markets and brands within the businesses.
Category teams left to their own devices will create and recreate innovations that do little more than proliferate SKUs and ‘eat themselves’. Unchecked and with poor strategic guidance it can be a massive source of wasted effort.
A carefully orchestrated process of compiling and analysing ideas and concepts that have been created across categories and over the last 2-3 innovation cycles can help reduce duplication, but more importantly it often also identifies opportunities to scale existing ideas into platforms (whether technology or brands) which can improve focus, investment and become more defendable.
That doesn’t mean it’s impossible to achieve a ‘big’ innovation with a single NPD. One such NPD I worked on has since delivered more than $300m of net incremental value since launch and it was in market within 12 months of the ink drying on the Post-it note.
The innovation was Vanish Oxi Action Crystal White – not really what most people would call a game changer, but with a commercial performance that many business leaders looking for ‘Fewer, Bigger, Better’ would appreciate. The trick in this example (and often with simple NPD) is finding a genuine insight on which to build the idea that brings a new group of consumers into the category.
‘Stretch’ – Adjacencies
Here we are looking for opportunities to leverage a brand or asset (technology platform, IP or infrastructure) into an adjacent category. The business objective is about leveraging more value out of an asset you’ve already invested in. There are some well-documented rules about how to do this successfully, a simple summary of these is:
- Do we really want to play in the category?
- Is it attractive (growing and with good margins)?
- Do we know anything about the category / do we have any expertise in it?
- Does it fit with our business model, assets and commercial strategy?
- Does our brand have any right to play there (is there any fit with existing brand perception, is there any aspect of the brand we can leverage)?
- Can we create any sort of meaningful right to win there (a benefit that trumps incumbents)?
The world’s most famous example of achieving brand stretch (largely successfully) is Virgin and the above rules apply to this sort of stretch, but assets (such as a packaging technology or a gadget) can be leveraged in the same way. Reckitt Benckiser did this successfully taking their Airwick Freshmatic air fragrance gadget into the adjacent category of pest control and using it as the basis for the Mortein Automatic Insect Control System.
Either approach should, in theory, meet the need for a few, big innovations. However, there are two big challenges which are often overlooked in addition to the rules above:
The core brand needs to be in good health – the brief often goes out for brand stretch when the core brand is in decline – Ministry of Sound tried to stretch their HedKandi brand into clothing at a time when the clubbing and CD market was in decline.
It didn’t work (amongst other reasons in this case) because the core brand wasn’t in good health. Generally trying to milk an ailing brand in another category to prop up profit targets in the core is not a viable strategy.
Doing this successfully requires different rewards and governance to EPD / NPD.
The planning horizon and reward schemes of category teams are generally not very well set up to do it – planning and delivery horizons generally fall outside of the 12-month planning cycle (up to 3 years).
In large organisations with multiple brands in, for example, household and personal care, different power brands will end up chasing the same adjacent categories and all their effort will be spent arguing about which brand should go after the opportunity.
Most marketing / category managers / directors don’t have much experience doing it – most will only do it once or twice in their careers.
The most successful governance model for this type of innovation is when responsibility is at the C-suite / VP level with a dedicated special project team and where there are clearly defined rewards for succeeding over a longer time period.
The key point is that responsibility rests with people charged with growth but who don’t have a vested interest in that growth coming from an existing category. Hiring an innovation specialist who has done it a few times before is also a smart move.
There is one final challenge which is, of course, spotting the right opportunities in the first place. This is not a linear process and requires the right balance of creative thinking and rigorous analysis – more on how to actually do it in future papers.
‘Supersede’ – Game-changers or transformational innovation
I think that transformational innovation is what most boards and CEOs have in mind when they demand ‘Fewer, Bigger, Better’ innovations. And if that’s not what they’re thinking, it is often what the brand and innovation teams think they mean.
In all likelihood neither have thought through the implications of delivering transformational innovation in terms of time, capabilities or investment needed. The net result is missed objectives, missed expectations and ultimately failure of the ‘Fewer, Bigger, Better’ programme.
To qualify to be transformational an innovation needs to be significantly differentiated and defendable, its role is to ‘protect the future of the business’. Most businesses find this much more challenging to achieve for four main reasons.
Transformational innovation usually needs some smart IP to jump off the end of an S curve which is currently limiting the core benefits of a category, examples:
In painkillers the end of the S curve is defined by speed, strength, duration and safety of current molecules.
Pre-budget airline, the edge of the S curve was defined by price which was limited by sales model
Transformational innovation often takes a long time to make money.
- Nespresso – 20 years from acquiring the technology to breakeven
- (Phillips) Sonicare – 13 years from technology development to major commercial success
- Southwest Airlines – just 2 years, but narrowly avoided bankruptcy in year 1
Transformational innovation needs different people with different skills and reward plans to make it successful.
Very rarely is transformational innovation going to be successful in a 12-month timeframe, which is usually the planning and reward cycle for category teams. When you dig into corporate history most truly transformational innovations are developed and championed by an odd sort of person with an entrepreneurial mindset (Intrapreneurs).
In many cases, these people have lied, cajoled and hidden what they are working on in order to dodge the official system and keep the ideas alive long enough to succeed. Standard market research protocols (ie. volumetric screening / STMs) will almost certainly kill the ideas at birth.Transformational innovation often needs new capabilities:
Whilst any innovation should leverage capability that already exists in a company to some extent, transformational innovation usually means doing some things that are new which are not core capabilities of the existing organisation.
The mistake many innovators make is assuming that they need to build everything themselves. For large organisations, it’s often smarter to buy in new capabilities through mergers, acquisitions, partnerships and corporate ventures.
Despite all of these challenges, it is possible to make transformational innovation a deliberate, risk-managed part of the ‘Fewer, Bigger, Better’ innovation strategy. I will explore the most successful approaches to doing this later in the series.
Delivering ‘Fewer, Bigger, Better’ innovation means having a coherent plan across the Spectrum of Innovation with each type of innovation playing a clearly defined role and with its own bespoke governance and the right blend of creativity and analysis to deliver that type of innovation.
The first step on the pathway to success is being clear about what you want.