STAGE 1:
Focus
âEffort and courage are not enough without purpose and direction.â
â John F. Kennedy
I recall a time when I was presenting some exciting new biscuit ideas to my management team. I was looking for approval to put the new ideas into full product development. The marketing director was thrilled with the results â so thrilled that she said, âWe should launch them into India too.â
Hear that? Thatâs the sound of the goalposts being moved. It was the first time India had been mentioned.
I checked the original scope of the innovation project. It was for a fast-tracked launch in Australia to fill an urgent sales gap. Adding a new country in parallel would delay this goal.
Once reminded of the original project intent, the marketing director readily agreed that Australia was the priority and gave the approval to proceed. Phew â scope creep averted.
Itâs scary how quickly scope creep can occur in an innovation project. Scope creep refers to changes, often unintentional or uncontrollable, that occur in relation to a projectâs focus. It happens most commonly when the project is not properly defined, documented or controlled, and it can feel like the rug is being pulled out from under you.
Whenever you commence a new project, you should always be clear on what you have committed to deliver from the start, and be ready to hold yourself and others accountable for this. While I know youâre excited to start developing new products, and your team is raring to go, now is the time to stop and decide what youâre going to focus your innovation efforts on. Trust me â doing this early will save you hours of wasted time and debate later.
It also helps to clarify just how far youâre willing to stretch as a business for this innovation project, and what it will take to get all your stakeholders in agreement. This stage will ensure you avoid that dreaded scope creep, as well as any awkward âBut I thought you meantâ conversations, which could trip you up later.
In Stage 1, Iâll show you how to set a product innovation growth goal, and how to match that goal to your innovation scope. Youâll also learn how to re-express your innovation challenge, and how to compile a list of innovation ingredients.
Set a Product Innovation Growth Goal
If you give a person a bow and arrow and tell them to shoot, their immediate response will be to ask, âAt what?â In contrast, if you set up a target and ask them to hit the centre, they now have something tangible to aim for. The same rule applies to product innovation â you need to decide on an innovation target to shoot for upfront. Otherwise, how will you know whether your innovation project was successful?
I call this a product innovation growth goal. And it should answer a simple question: How much sales growth do you need from your product innovation?
Itâs a question that many businesses canât answer.
This is why innovation agencies are let off the hook, time and time again, on what they deliver. Too often, I see businesses sign up with an innovation agency and agree on the delivery of a set number of ideas. âSure, weâll find and deliver ten ideas,â the agency agrees gleefully. This means youâll be left holding ten product ideas without any clue as to their value or worth to your business. There are not many other areas of business where this lack of impact or accountability is allowed.
To prevent this from happening, you need to link your product innovation requirements to commercial objectives. Specifically, the amount of sales growth youâre aiming for. This shifts the outputs and success measures of your innovation project to the quality and value of the ideas you create, not just the quantity of them.
There are lots of ways to set a sales target for an innovation project. Given that youâre aiming to create an innovation feast â whereby you have a menu of new product options that you can browse and select from as your business grows â Iâd like you to set a three-year goal. Three years is a great target to aim for as it aligns with most businessesâ sales planning horizon. Itâs also far enough out to give you the time to create truly innovative products to drive sustainable growth.
Hereâs how you do this:
Step 1: Determine your three-year total business sales growth target. Most businesses have an idea of this, even if they donât have the plans to support it yet. If you donât have long-term business growth targets, nowâs a good time to change that. Are you aiming for a steady three per cent per annum, or rocketing along at twenty per cent to fifty per cent? Your growth strategy will depend entirely on your category and business aspirations. However, it can be helpful to consider not just your own businessâs historic performance, but also whether youâre performing within growing or declining product categories overall. Category growth rates can be purchased from FMCG retail data providers, like Nielsen or IRI, or you could ask your retail buyer for category growth rates, as they track these and product sales performance regularly.
When setting your three-year business growth targets, some key questions to consider are:
â˘How fast have you been growing or declining for the past two years?
â˘Are you trying to outpace the market growth to increase your market share?
â˘Who is your best performing competitor and can you outperform them?
Step 2: Find out how much of your historic sales came from new products versus current ones. I define ânew productsâ as anything that was launched in the last three years, because some products require this much time to become established and fully penetrate a market. After three years, these are then counted as your current products. What percentage of sales, and what dollar amount, did each product type contribute annually? Donât worry about whether youâre using retail or ex-factory sales â pick whatever is easiest for you to measure and consistently track.
Step 3: Determine the gap between your total business growth and current product sales contribution. Split out your total business growth over three years, and project out the anticipated growth from your current products. Now is the time to consider your other growth levers too, such as organic market growth, new channel expansion, price increases, or increased advertising or promotions. Factor the impact of these growth drivers into your current product performance over the next three years. Now, compare your overall business growth targets for each year with your anticipated current product performance for each year. Do you have a gap between these? If so, this can become your new product innovation growth goal.
Itâs important to factor in all your other growth drivers as well as product innovation, because these build on your existing business strengths and capabilities and are often less time consuming and risky than new product innovation. As you answer these questions, create a Product Innovation Growth Goal chart to visualise the gap between your current product performance and three-year total business ambition. Iâve provided a simple example of what this might look like.
Product Innovation Growth Goal
To create a pipeline of new products that will provide sales of $9 million by 2021.
In my example, Iâm a producer of unchilled orange juices and have exhausted all my other growth levers in a declining product category. I estimate that my current products will continue to decline by ten per cent annually over the next three years, as retailers cut back on available shelf space and people buy more chilled juices, which they believe to be fresher and healthier. Iâm looking to turn around my business trajectory to a healthy five per cent growth per annum in order to keep my business running profitably. Accordingly, I have a sizeable $9 million sales growth gap over the next three years. This is my product innovation growth goal.
By doing this exercise, youâre forced to put a clear commercial value on the growth expectations you have of new product innovation. In my example, itâs clear that some fairly hefty new product innovation is required to turn this juice business around. A new pineapple-lime flavour extension simply isnât going to cut it. Thatâs why itâs not unusual for me to go into a large business and face a sizeable goal, like filling a $50 million sales gap over the next three years. Itâs critical at this stage for you to understand how much and what impact the product innovation needs to have.
Now you have your three-year product innovation growth goal â an actual sales target for new product innovation. The next step is to ensure this goal aligns with your innovation scope, so that youâre able to achieve it.
Match Your Innovation Scope to Your Innovation Goal
âIt was so disappointing. It barely lasted six months on the freezer shelf before it was delisted.â
I was told this by the product manager of an ice-cream manufacturer. She explained that a great tasting, new ice cream her business had launched had been delisted after six months due to low sales. The new product was their sixth new flavour variant for the range, presented in the same plastic tub, with the same design, at the same price point, and in the same sales channel as the existing five ice-cream flavours. The business had spent twice as long creating the new product â sourcing the ingredients, developing the recipe, designing the artwork and making the product â than the length of time it had sat on the freezer shelf waiting to be purchased. It hadnât even paid for the time, effort and investment required to make the new flavour.
So, what went wrong? In short, the business used the wrong type of innovation. Why is this problematic? Because not all product innovation is created equal.
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