Consumer Packaged Goods Innovation

Stephen DeAngelis

May 28, 2014

Last year Kellogg’s was number 54 on Forbes‘ list of innovative companies. Dennis K. Berman wasn’t impressed. “It measures nearly 3 inches by 5 inches, and it’s made from enriched flour, corn syrup and creamy peanut butter,” Berman writes. “This is Kellogg’s Gone Nutty! peanut butter Pop-Tart. If you agree with Kellogg CEO John Bryant, it’s one of the cereal company’s important products of 2013. He went so far as to call it an innovation.” [“Is a Peanut Butter Pop-Tart an Innovation?Wall Street Journal, 3 December 2013] Berman is not necessarily singling Kellogg’s out. “Listen to the chiefs of America’s biggest companies,” he asserts, “and you’ll find the Gone Nutty! Pop-Tart has plenty of company. Most CEOs now spray the word ‘innovation’ as if it were an air freshener. A little spritz can’t hurt.” Rather than get in a lather about whether a peanut butter Pop-Tart is an innovation, Kathy Gersch, an executive vice-president at Kotter International, “argues that in business, the innovation label applies in ways most haven’t considered, and that if you’re worried about whether the term belongs, you’ve most likely missed the point.” [“Professor Pop-Tart School Of Innovation,” Forbes, 12 December 2013] Both Berman and Gersch have good points to make.

The term “innovation” has certainly been exploited and, perhaps, even overused. Traditionally, something is an innovation if it solves the innovation formula. The innovation formula is: innovation = new x valuable x realized. I’m guessing that Berman doesn’t think that a peanut Pop-Tart is new. He certainly can’t argue that it is not valuable or that it didn’t come to market. Gersch writes:

“The WSJ article asks, ‘Where does survival end and real innovation begin?’ Do we really need to argue the semantics, and whether survival tactics or strategic advances warrant a badge called ‘innovation’? Adapting to stay ahead of the competition and remain relevant to your customers’ needs is innovation. That’s what is essential to survive and thrive in today’s fast-paced marketplace. Webster defines innovation as ‘the act or process of introducing new ideas, devices, or methods.’ Whether it’s disruptive innovation or it’s a small improvement, whether it’s finding a slightly better way to deliver what the customer expects or reinventing the product in a new way that customers love – remaining relevant by staying ahead of the customer is the key to success.”

The editorial staff at SupplyChainBrain agrees. “Innovation in consumer packaged goods isn’t a luxury in today’s competitive market – it’s a necessity. In an uncertain economic environment, most companies are struggling to achieve organic growth. … What’s intended as innovation might be no more than the extension of a current product line.” [“The Risks and Rewards of Innovation in Consumer Packaged Goods,” 23 April 2012] Girish Gulvady, director of integrated demand management and food service planning with Campbell Soup Co. (which was number 88 on the 2013 Forbes‘ list of innovative companies), told the SupplyChainBrain staff that simply extending a product could backfire. “A manufacturer might add flavors to an existing item,” he told them, “resulting in cannibalization of that product rather than a net increase in sales.” He continued:

“Look at the multiple assumptions that drive the business case, then stress-test [for] which assumption is going to drive success or failure. Focus all your energy around that assumption. At least you’ll know how to prepare for certain contingencies.”

Praveen Gupta, author of The Innovation Solution, believes that “most innovations will fall into the basic categories of human needs. The categories are safety, food, health, communication, productivity, entertainment, and comfort.” [“The Innovation Solution,” by Alliston Ackerman, Consumer Goods Technology, July/August 2012] Those categories are in the middle of the CPG industry’s wheelhouse. Arwen Petty adds, “Innovation is at the apex of our shifting global business dynamic. The speed of technological evolution guarantees no one market safety, promising only that clinging to old ideas and sheltering ourselves from data will lead to failure.” [“The Global Innovation Index 2013: Local Dynamics,” Mindjet, 23 October 2013] If innovation is so critical to future business success, especially in the CPG industry, how should companies proceed? Lisa Bodell, founder and CEO of futurethink, offers seven suggestions. [“Innovation: An Outside-In Approach,” InnovationManagement.se, 22 October 2013] The first suggestion begins with a question, “What would competitors need to do today to put us out of business?” She writes:

Kill your own company. To get to the most radical ideas, sometimes you have to put yourself in the mindset of competitors. Using the exercise Kill the Company, ask your staff: What would competitors need to do today to put us out of business? After brainstorming, work as a team to identify the biggest threats and prioritize change initiatives. This tool will not only bring your vulnerabilities to light, it promotes a proactive approach to staying competitive in the industry.”

If you’re not thinking about the “what if” scenarios, I can guarantee you that your competitors are. Bodell’s second suggestion recommends that you look for criticism.

Include ‘haters’ of your product in your brainstorms. Does your organization ask for customers’ feedback about what it was like to do business with you? What about asking non-customers why they don’t do business with you? Intentionally including people who dislike your product or services in a focus group can lead to more provocative conversations. Better yet, have naysayers sit in on internal planning meetings to share their thoughts on how product enhancements could affect their perception of your company.”

I would go beyond “focus groups” and find out what people are saying on social media and other online sources. Too often participants in focus groups say what they think you want to hear and hold back from providing their honest opinion. Bodell’s third suggestion involves showing a little humility.

Don’t take yourself too seriously. One of the first steps to innovation is realizing you could be doing things better. You aren’t perfect, your company isn’t perfect, and neither are your products. When you take this to heart, gaining an outside-in perspective that might identify shortcomings can be a lighthearted conversation, rather than a serious one. … Do you sell something that’s desperately in need of a modern makeover? Roast it. Do you have a product that doesn’t work as well as it should? Roast it. The goal of this exercise is to see your products objectively like your customers do; flaws and all. Use customer service emails as fodder to get you started. This is an opportunity for your staff to say what everyone in the room and all of your customers have probably already been thinking. You’ll get a good laugh, but more importantly, identify opportunities for innovation.”

Bodell’s fourth suggestion involves putting yourself in your customer’s shoes, especially if those shoes don’t fit very well.

Go from pain to gain. Think about your customers’ pain points when it comes to working with your organization and its products or services. Once you identify the low points, you can start brainstorming on how to make them selling points and key differentiators in the market. For example, if customers are frustrated with the wait time for resolving complaints, make that your number one priority for change. Empower less-tenured staff to make decisions that resolve customers’ issues immediately, rather than submitting requests to higher-ups.”

The late Ted Levitt, a Harvard Business School professor, was fond of reminding students that, figuratively speaking, companies were ultimately selling customers ¼-inch holes rather than ¼-inch electric drills. You need to understand what customers need if you are going to offer innovative solutions to their problems. Bodell’s fifth suggestion gets to the heart of this concept.

Figure out what your customers do all day. Think you know your target market? Not just their demographic, but what their life is actually like. What do they think about in the morning when they wake up? What are their high and low points throughout the day? What really makes them tick? Try giving your customers a diary for them to record what a day in their life is like. This will help you understand unmet needs.”

Bodell’s sixth suggestion involves shedding your company from the “not invented here” syndrome. Companies afflicted with the not invented here syndrome are blind to what clever people are doing elsewhere.

Copy good ideas from different industries. Sometimes business people think their company has unique circumstances that prohibit the emulation of problem-solving strategies that have proven successful in other industries. This could not be further from the truth. Many times, the best ideas are already out there; all you have to do is identify the ones that would work for your situation. Henry Ford got the idea for assembly line production for manufacturing cars from visiting slaughter houses that used a similar technique. Cattle and cars don’t seem to have much in common from the surface, but the strategy for efficiently delivering a final product to consumers is a great fit for both industries. What industries could provide radical change ideas for your company?”

You’ve heard that imitation is the highest form of flattery; but, I think that looking for good ideas in unfamiliar places goes well beyond flattery. Frans Johansson labels this kind of cross-sector exchange of ideas “The Medici Effect.” It is an effective technique that normally results in much better and more innovative solutions. Bodell’s final suggestion builds on the Medici Effect.

Evolve beyond obvious partnerships. A quick win for improving innovation is to partner with other organizations that could add value to your business. The key for promoting change is to get creative in how you think about the types of partnerships that could be beneficial. We recommend using a tool called Within, Adjacent, and Beyond. This exercise guides teams through the process of identifying new opportunities for win-win business relationships that previously weren’t on their radar.”

It’s easy to see why Bodell calls this an outside-in approach to innovation. She concludes, “To get outside of the box ideas, you need to look at things in new light. Use these tactics to force yourself to think in someone else’s shoes – your competitors, customers, other industries – to arrive at ideas you may not have thought of before. By regularly trying these exercises and ideas, you will unlock a different way of thinking in your organization and uncover new solutions to stay ahead.” I would go further and insist that, rather than looking for outside the box ideas, get rid of the box altogether. After all, nobody has ever insisted that consumer packaged goods have to actually be in boxes.