Consumer Discretionary

How Does The Innovation Process Work?

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<p>Innovation is truly one of the holy grails of marketing! It often feels like business growth for free! After all, what does one really have to do? Figure out a product that is big globally but perhaps hasn&rsquo;t found its way to India yet. May a pretty wrapper, maybe some smart Facebook posts, and voila you are bathing in gold! But Innovation is perhaps the most precarious marketing tool. Too many brands and companies have lost their way on the back of an Innovation strategy that ran wild. Where you took out too much money to support the new kids on the block instead of investing in your core! However, there can really never be anything more gratifying for a business when an Innovation succeeds!</p><p>However, there are several concepts of Innovation that are important to understand, as well as a few learnings that can guide your journey. Some of the areas that we will cover are:</p><ul><li>Finding those Big Ideas!</li><li>Types of Innovation</li><li>The process of Innovation &ndash; Stage Gate Process</li><li>Innovations that work &amp; some of those that don&rsquo;t!</li></ul><p><strong>&nbsp;</strong><strong><u>Finding those Big Ideas!</u></strong></p><p>The cardinal truth of Innovation is to search for that unmet consumer need. That definitely sounds like jargon! However, remember what Henry Ford said, if I asked consumers what they wanted, they would have said a Faster Horse! So asking the consumer what she wants you to launch is definitely not a great idea! So what does one do? Where do those breakthrough ideas come from!</p><p>I learned in Diageo, that those ideas come from the Occasion! Whatever, your category, get into the occasion, visualize your consumer, what is he or she doing? Can you think of a simple way to make that task easier?</p><p>Some examples of such innovations are the launch of Crown Royal Apple flavored Whiskey. Marketers noted that in Canada, a whiskey cocktail with apple juice was becoming popular so they launched a Whiskey liquor with apple flavor!</p><p>Another such interesting example is Baileys. The occasion that Diageo was trying to crack, was one where women are comfortable drinking some alcohol, and lo behold, the dessert occasions, especially during Christmas lead to the launch of one of their 6 global giants.</p><p>However, the essence is always to dive deep into the occasion and identify what you will replace as the starting point for most innovations.</p><p><strong><u>Types of Innovations</u></strong></p><p>Now there are several ways of categorizing Innovations, however, the framework that I find most consumer-driven is &lsquo;New News&rsquo;, &lsquo;New Occasions&rsquo; &amp; &lsquo;New Behaviors&rsquo;.</p><p><strong>New News Innovations</strong> are basically those Innovations that replace an existing occasion, so if you launch a new flavor or variant, say a dark chocolate flavored milkshake, you are most likely to replace one of your existing milkshake occasions by this one. Recruit innovations bring in some fresh excitement for your Brand but typically cannibalize existing occasions and only bring limited incremental business. Hence it&rsquo;s often recommended that Recruit Innovations should come in and replace an existing SKU to manage business efficiencies and avoid that long tail.</p><p><strong>New Occasions Innovations</strong> give your existing consumers New Reasons to consume your Brand. So if your Brand is Cadbury Dairy Milk, launching Cadbury Dairy Milk Shots offers the consumer one new occasion to consume Cadbury Dairy Milk in, say an occasion where he might previously have consumed a sugar-boiled candy. I find Re-Recruit Innovations often the most successful as they often need limited investment to support and yet bring reasonable incremental business.</p><p>&nbsp;</p><p><strong>New Behavior Innovations</strong> are the most exciting and the riskiest. Most marketers should really tread carefully here. Because here you are venturing into the unknown, into a territory where your existing business has limited equity. So in my mind, the most important rule to follow with Disrupt Innovations is to research them adequately and create a war chest that you can afford. Phase them out, perhaps no more than 1 or 2 in a year with adequate money to support them and enough research/ in-market testing that the organization is ready to truly support them. An example of a Disrupt Innovation in recent years would be the launch of Smart TVs by Mi or the iwatch by apple.</p><p><strong><u>The Process of Innovation</u></strong></p><p>Most companies follow a structured Innovation approach called the Stage-Gate Process, it is usually divided into 5 Stages</p><ul><li>Idea</li><li>Concept</li><li>Full Mix</li><li>Launch</li><li>Post Launch</li></ul><p>The Stage Gate Process is basically driven by the right questions to be answered at each Gate and a project is only allowed to pass through if the right answers have been found by the team.</p><p>The Idea Phase is basically when new projects are introduced. The key question to be answered here is, what&rsquo;s the unique consumer opportunity that has been identified? The second question is &lsquo;How does this consumer opportunity fit the organization's pre-defined strategy? &amp; finally &lsquo;Does the idea hold the promise of making money?&rsquo;</p><p>In the Concept stage, you understand the consumer &amp; the occasion in detail &amp; arrive at the unique Concept that you are trying to solve. At this stage, a Concept Test is often done with industry benchmarks.</p><p>The third stage is the most crucial, as you now create a full mix &ndash; Concept, Product (Lab Sample), and Pack. The same is put into a Product Concept Test. This test is quite stringent &amp; if you get a reasonable volume estimate from the research, you can ask the organization for money for factory, lines etc.</p><p>Post Gate 3, you get into Launch preparation and your put your lines, etc, and validate that the product of the lines meets the norms prescribed in the lab sample.</p><p>And finally, in the Post Launch phase, you study the business impact basis metrics that were defined &amp; agreed upon!</p><p><strong><u>Innovations that Work!</u></strong></p><p>I have had the good fortune of witnessing many successful and a few not-so-successful Innovations in my career. However, I can broadly divide them into 2 clear buckets, those that worked &amp; those that didn&rsquo;t. And there were some fairly intuitive rules that made the difference!</p><p><strong>Innovations that Worked:</strong> Most of the Innovations that I have seen successfully aligned to one simple golden rule, they took the Brand proposition forward and avoided becoming the competition. Some examples are:</p><ul><li>Cadbury Silk Oreo: New News Innovation, that gives the consumer a reason to try a different Cadbury Silk and offers fresh excitement</li><li>Cadbury Shots: New Occasions Innovation that helps chocolates enter the candy occasions.</li><li>Cadbury Celebrations: A New Behavior innovation that made Chocolates from a modern meetha to an actual mithai replacement</li></ul><p><strong>Innovations that I am not a fan of: </strong>Those Innovations that are too close to a competition offer are innovations that I am not a fan of &amp; I have seen usually struggle.</p><ul><li>Cadbury Dairy Milk Crispello: Now it&rsquo;s a recent launch, and the verdict isn&rsquo;t out yet. But if you ask me, if I want to eat a Kit Kat, I will eat a Kit Kat!</li><li>Cadbury Fuse, Cadbury 5 Star Nutty: Again the same thing, if I want to eat a Snickers, I will eat a Snickers!<br /><u></u><u></u><u></u><u></u></li></ul><p>&nbsp;</p><p><strong><u>In Summary</u></strong></p><p>Running a robust Innovation funnel is one of the most critical tasks for any Marketing Manager. However, the crucial principles are important:</p><ol><li>Ensure that your Innovations ideas start from the Consumer or the Occasion, rather than directly a product idea, so you know that you are solving for a genuine gap in the market!</li><li>Build a healthy mix of all 3 types of innovations. The New News Innovations are similar to activations &amp; keep your Brand fresh. New Occasions usually are the most successful. New Behavior Innovations need Investment &amp; Timing.</li><li>The Stage-Gate process is an important tool to ensure clear decisions and made &amp; timelines are tracked.</li><li>Finally, Innovations that work start from the core of the Brand and extend the Brands usage into new occasions or behaviors. Innovations that don&rsquo;t work, usually try and take on the competition, in the competitor&rsquo;s turf!</li></ol><p>All, in all, a journey full of excitement &amp; perils to be navigated thoughtfully!</p><p>&nbsp;</p><p>&nbsp;</p><p>&nbsp;</p><p>&nbsp;</p><p>&nbsp;</p><p>&nbsp;</p>
KR Expert - Saurabh Bajaj