The cause of stagnant innovation in consumer goods

April 22, 2013

Theresa Saldanha, Co-founder of WhyNot! Innovate, explains why consumer goods are under-represented in BRW's 2012 Most Innovative Companies.

When did you last see something truly innovative in consumer goods? Something that actually solved a frustration you've always felt? For example, what if you had something that ensured you never ran out of milk?

Chances are, you can't remember! Which is why only one, amongst the top ten, of BRW's 2012 Most Innovative Companies was from consumer goods (Coca Cola Amatil).

The commonalities among the majority, mainly technology winners, were:

They solved consumer frustrations
They harnessed technology to increase efficiency, reduce costs or reduce time
They innovated at the intersection of two 'realms' for example Healthcare and Lifestyle

So what do technology companies do differently?

Whilst looking at possible causes, the thought struck me that what we are looking at, is a classic case of "Marketing Myopia", a term coined by Theodore Levitt in 1960, basically asking the question "what business are you really in?"

To answer this, let's look at innovation practices in the consumer goods sector through 4 'lenses', and compare it with the technology sector:

	Consumer Goods (incl. FMCG)	Technology Companies
Lense 1: The Consumer	Branded innovation is funnelled within 'categories' - dairy, drinks, nutritious snacks, confectionery - definitions which have largely been driven by category management processes at the retailers end, and hence, adopted by manufacturers.	Take a broader look at the problem (read frustration) the consumer currently faces, where the gap is between what the consumer wants and the current market offering, and how they could bridge that gap by leveraging consumer triggers /frustrations /attitudes.
Lense 2: Innovation Processes	A stage-gate approach is applied to the development of innovation. In a business system driven by the need to reduce risk and increase certainty, a linear development process like stage-gate has its appeal. The problem with this method is that in today's world, consumers' ability to tell you what they want, is limited by their lack of knowledge of what is possible.	Utilise Agile, a cyclical process that involves rapid prototyping, refining with consumer feedback, and redevelopment. Thus, it's a 'learning driven process', that up-weights incubation and experimentation. It also allows for 'live' prototype testing upfront.
Lense 3: People and Teams:	External resources, and hence a fresh perspective, very rarely form a part of innovation teams, especially when intellectual property protection is a consideration. In fact, innovation teams tend to mimic the business, with representatives from key internal departments.	External input is routinely sought, through methodologies such as open innovation, hackerthons etc. In fact, in an industry where innovation is critical for survival, creativity boosting sessions are routine, and performance plans incorporate softer behavioural measures such as collaboration and mentoring in order to drive an innovative culture.
Lense 4: The Business	Heavily influenced by the needs of the biggest customer (for FMCG, Coles and Woolworths) rather than the consumer. The need to deliver volume and profitability targets through line or packaging extensions, is potentially at the expense of larger innovation projects.	Focus on the consumer's frustration and reduce market risk by launching a pared down offering, before scaling up for commercialisation.

So how can we break through this myopia?

Know thy consumer - Develop a broader, holistic view of your consumer. Extend your understanding into areas where 'realms' collide.
Cluster to collaborate and innovate - develop collaborative clusters (non-competing companies, suppliers, institutes), around a clearly defined consumer target where shared information, trends and insights enable the development of common innovation platforms and potentially joint project collaborations.
Use new tools to drive creativity and innovation - time based, fun, competitive challenges like hackerthons can be used to drive new understanding, creativity and innovation, for a target audience.

WhyNot! Innovate and Six Degrees will be hosting a cross-industry Hackerthon in May/June. For more information or to participate, contact Rachael Powell or Kristan De Sousa (03) 8613 3500.

Theresa Saldanha, Director

WhyNot! Innovate leverages joint collaboration to solve industry-wide problems, delivering growth, profitability and innovation. tsaldanha@whynotinnovate.com.au

0409 011 465