We’ve all heard the saying “innovate or die”. It is no doubt true that in a constantly changing world, theability to adapt to changing needs, competitor activities and market situations is absolutely key to both the short and long term survival of a business. In fact, according to a new book called Unrelenting Innovation, companies need to be ruthless about innovating, even to the point of cannibalising their own products if they want to stay ahead of the pack.
The importance of innovation is perhaps most apparent in technology related fields, where the rate of change is unprecedented and global. Apple and Google are good examples of the power and value of innovative cultures. Blackberry, Palm and Kodak may well be examples of what happens when you fail to adapt quickly.
But, how important is this ruthless style of innovation to FMCG companies, where needs and behaviours from a consumption point of view are not changing anywhere near as fast?
Don’t get me wrong, innovation is essential and aninnovative, ideas culture absolutely ideal. But is product innovation always the best way to achieve your short term marketing goals? Every year hundreds of new products are launched onto the market, at great cost and time. Very few of these can be considered successful enough to justify the expense. Especially when you consider the opportunity cost of resource taken away from making existing, successful products even more so.
In fact, taking an innovative approach to marketing an already successful product may well have a more positive impact on profit than launching a new extension, range or brand. Coca-Cola Classic will remain an enduring example of innovating for innovations sake. The “share a Coke” campaign is an example of clever (and successful) marketing innovation to drive sales of an existing product.
Of course, there is absolutely a need for vigilance and for innovation in the products offered to consumers by FMCG companies. But the starting point to this is not “we need innovation,” but rather “what threats are there and how can we address them?”
Central to success in innovation (and business survival) is keeping a keen eye on changing consumer needs and evolving tends, and spending time regularly identifying threats to your business. In addition, dedicating time and staff to addressing these threats in the longer term is absolutely essential. I think Nescafe is perhaps a good example of this – they spent years looking at how they could compete with the growing trend towards “real coffee”, a threat they identified long before every second street corner held a Starbucks or similar. They had an entire innovation department working on it, for years. They identified the business threat and made it a priority of a dedicated someone, rather than just an add-on to some poor over-burdened instant coffee brand manager. Nespresso is the reward for that investment.
So, next time you start a conversation with “we need some innovation”, it is perhaps worth considering what threats you are responding to and what your real objective is.