Executive Briefings

The Risks and Rewards of Innovation in Consumer Packaged Goods

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. "Driving both the top and bottom line has been elusive," says Girish Gulvady, director of integrated demand management and food service planning with Campbell Soup Co. "Innovation is filling that void."

The technique carries its own set of challenges, however. What's intended as innovation might be no more than the extension of a current product line. For example, says Gulvady, a manufacturer might add flavors to an existing item, resulting in cannibalization of that product rather than a net increase in sales.

Good planning plays an essential role in determining where and how to innovate. "It takes a thousand ideas for one commercial success," says Gulvady. One key to minimizing the failures is adoption of a disciplined approach to innovation, involving constant stress-testing and monitoring at the early stages of a product's development. "Fail early and fail cheaply," advises Gulvady. "Learn from your mistakes."

Forecasting is an important part of the innovation process, although it's extremely difficult to achieve, given the absence of history for a new product. Gulvady says companies should allow for some uncertainty, then build in strategies for minimizing the impact of a failure. Examples include crafting flexible arrangements with vendors, allowing for a rapid response to real-life market conditions.

"Look at the multiple assumptions that drive the business case," he says, "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."

Campbell Soup Co. follows a select number of key metrics to track its own innovation efforts. They include a weekly look at how products are performing relative to the assumptions behind them. Details include sales, all-commodity volumes, the number of stores selling through, and the occurrence of product cannibalization. "As soon as we see an anomaly," says Gulvady, "we alert the right stakeholders."

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Keywords: Retail, CPG, Technology, Business Intelligence & Analytics, Business Process Management, Collaboration & Integration, Customer Relationship Mgmt., Event Management, Forecasting & Demand Planning, Product Lifecycle Management, Sales & Operations Planning, SC Finance & Revenue Mgmt., SC Planning & Optimization, Supply Chain Visibility, Global Supply Chain Management, Supply Chain Analysis & Consulting, Supply Chain Security & Risk Mgmt, Innovation Strategies

The technique carries its own set of challenges, however. What's intended as innovation might be no more than the extension of a current product line. For example, says Gulvady, a manufacturer might add flavors to an existing item, resulting in cannibalization of that product rather than a net increase in sales.

Good planning plays an essential role in determining where and how to innovate. "It takes a thousand ideas for one commercial success," says Gulvady. One key to minimizing the failures is adoption of a disciplined approach to innovation, involving constant stress-testing and monitoring at the early stages of a product's development. "Fail early and fail cheaply," advises Gulvady. "Learn from your mistakes."

Forecasting is an important part of the innovation process, although it's extremely difficult to achieve, given the absence of history for a new product. Gulvady says companies should allow for some uncertainty, then build in strategies for minimizing the impact of a failure. Examples include crafting flexible arrangements with vendors, allowing for a rapid response to real-life market conditions.

"Look at the multiple assumptions that drive the business case," he says, "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."

Campbell Soup Co. follows a select number of key metrics to track its own innovation efforts. They include a weekly look at how products are performing relative to the assumptions behind them. Details include sales, all-commodity volumes, the number of stores selling through, and the occurrence of product cannibalization. "As soon as we see an anomaly," says Gulvady, "we alert the right stakeholders."

To view video in its entirety, click here


Keywords: Retail, CPG, Technology, Business Intelligence & Analytics, Business Process Management, Collaboration & Integration, Customer Relationship Mgmt., Event Management, Forecasting & Demand Planning, Product Lifecycle Management, Sales & Operations Planning, SC Finance & Revenue Mgmt., SC Planning & Optimization, Supply Chain Visibility, Global Supply Chain Management, Supply Chain Analysis & Consulting, Supply Chain Security & Risk Mgmt, Innovation Strategies