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Home » The Risks and Rewards of Innovation in Consumer Packaged Goods

The Risks and Rewards of Innovation in Consumer Packaged Goods

April 23, 2012
SupplyChainBrain

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

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Transportation & Distribution Technology Forecasting & Demand Planning Product Lifecycle Management Sales & Operations Planning SC Finance & Revenue Management SC Planning & Optimization Supply Chain Visibility Global Supply Chain Management SC Security & Risk Mgmt Consumer Packaged Goods Retail
KEYWORDS Business Intelligence & Analytics Business Process Management Collaboration & Integration consumer packaged goods CPG Customer Relationship Mgmt. Event Management Forecasting & Demand Planning Global Supply Chain Management Innovation Strategies Product Lifecycle Management Retail Sales & Operations Planning SC Finance & Revenue Management SC Finance & Revenue Mgmt. SC Planning & Optimization SC Security & Risk Mgmt Supply Chain Analysis & Consulting Supply Chain Security & Risk Mgmt Supply Chain Visibility Technology Transportation & Distribution
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