by: Idris Mootee

Here’s another innovation from a Japan’s sake (Japanese wine) company. Japan’s younger generations tends to look at nihonshu (what they think of as Japanese sake) as “oyaji-kusai,” which translates in the nicest way possible as “reminiscent of a middle aged man.” 75% of young women aged 20-30 hardly ever drink them and the Sake Brewer’s Association is trying to to fix this. This is not just an image problem, it is also the product.

One sake manufacturer, Nihon Sakari, has created two new “entry-level” innovative products intended to win over new drinkers. The first is “Japan Taste Sweet and Sour Sake” and aims to attract women with a “refreshing” sweet flavor. The second, called “Japan Taste Samurai Rock,” promises a nihonshu that doesn’t taste very much like nihonshu at all (don’t know what it means). Instead, an addition of lime juice gives the beverage more of a cocktail feel, masking that distinct sake taste. I am curious what it tastes like and will check it when I am in Tokyo this July.

P&G is still actively investing in game-changing innovations even amid the recession. Consumer goods companies in general have been doing a pretty good job at innovation and less impacted by economic cycles. Over the last 20 years there were the steady flow of profitable new products—ranging from electric toothbrush to frozen dinners—that changed the daily lives of consumers.  Recently, these companies have become more and more reliant to innovate as the competition for shelf and mind space intensify and too many new products are being launched everyday. Product extensions are causally classified as innovation. Real innovation is becoming rare.

According to P&G's CEO Lafley, “In our industry only 15% to 20% of new products succeed. P&G's success rate is a little over 50%. But we were at that industry average in the '90s. We improved our batting average by clarifying and simplifying the innovation process. We set checkpoints with clear measures for each phase of the process from ideation through development and commercialization. If a project looks like it will not make it, we drop it. You learn more from failure than you do from success but the key is to fail early, fail cheaply, and don't make the same mistake twice.”

Innovation is always a challenge from both processes to categorizations. The creative brain-storming that used to produce new ideas don’t work anymore and same as their tried-and-true processes for picking ideas, and making investment decisions have become less productive. Many existing methodologies have turned into orthodoxies: established ways of doing business that reinforce the status quo and hinder the adoption of novel, tailored, and flexible approaches to innovation.

The most common problem is the question “What business are we in?” Often this helps to clarify one business focus but at the same time create corporate blind spots. The artificial boundaries of any industry reflect the orthodoxies also dictate what a company should not do but also direct resources to competencies that company should be focusing on.

CPG companies typically look to innovation to open new revenue streams, creating newness and exciting for consumers and try to justify price increases. Often the end result is market confusion and investments return suffers. Here’s a better way to do this. CPG must take more of a platform approach to innovation. The return is bigger and the risk is lower by exploring with variations within a platform concept. One doesn’t have to start from scratch each time, but can tee up big-hit innovation that offers "repeatability" across product lines.

Platforming is common in software technology and automobile, but not so in CPG. And platform takes on a very different meaning in the CPG business. One good example is Crayola; the company is “obsessed with consumer needs” and makes decisions based on insights about the consumer. The company’s innovative strategy is to “experiment, experiment, experiment” Jeff Rogers, director of portfolio marketing for Crayola explains, “Our biggest focus is on the consumer, who is front of mind in everything we do — in marketing, in product development, and as a corporation. We try and turn consumer insights into needs. We start with the consumer and keep them involved throughout our entire product development process.”

Here’s a important element for their success, 5 years ago the company reorganized itself into “Platform” teams, including marketing, for different product areas. The biggest change in innovation then was that we had often started our development with a technology, rather than starting with the consumer need and then identifying or developing a solution through technology, as we do now. They combine chemistry, design, mechanical and electronic capabilities, and these drive our unique and proprietary innovation.”

Many of Crayola’s innovations constitute first-ever technologies or markets for the company. Crayola launched a new range of products including Fusion Beginnings activity products for toddlers — the first time the company has targeted the under age 3 category. Ergonomically designed chunky crayons and spill proof, capless paints and markers are activated by a valve that regenerates itself when the child pushes down on the gumball tip.

Developing innovation platforms allows companies to select ideas from their portfolios that have the best chance of success. They need to break down the organization silos and forming teams based around platform. Closing the gap between consumer insights to develop platforms, I see many organizations having the challenges of:

  1. over reliance on traditional market research and not getting useful insights that are actionable
  2. inability to translate insight into application and ideas that are adjacent to their cores
  3. struggle to think “platform” and limiting ideas to packaging and extensions.

CPG companies need to accelerate their learning curve on “Platform Thinking”. Ops. Final call for my flight.

Original Post: http://mootee.typepad.com/innovation_playground/2009/04/the-secret-to-successful-innovaiton-for-cpg-companies-is-knowing-how-to-fail-early-fail-cheaply-pg-k.html

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