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A Benchmark Study of Top Companies in New Product Innovation
An E-Report by
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the 2014 Consumer Packaged Goods Innovation Report
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If you examined the top-performing consumer packaged goods
companies, could you identify a formula for their success? Are
there common traits that allow them to consistently launch better
products? Conversely, are there characteristics that innovation
laggards share that consistently hold them back?
Many studies have attempted to answer these questions, but
Affinnova approached it from a different angle. Instead of
interviewing C-level executives about their innovation practices
(the way innovation studies are typically done), we surveyed 400
innovators on the front lines directors, managers and analysts
intimately familiar with
everyday new product development practices. We then created a
benchmark of best practices by examining the key differences
between survey responses from companies with higher levels of
self-reported new product success and those with self-reported
lower levels.
Our biggest ah ha: Having a formal innovation stage gate process
or structure is not a key factor separating top-and
bottom-performing companies. Neither is size or revenue. Instead,
organizational culture and behaviors play the biggest roles in
determining competitive advantage for new product innovation.
executive summary
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What the Most Successful Consumer Packaged Goods Companies Have
in Common
4 Key Learnings:1. The impact of environment is bigger than you
thinkWe found that top-performing companies are not just giving
their innovators more intellectual resources (budget, data,
technology) for innovation, they are also giving them
more emotional resources (guidance, support and running room).
They are less likely to encumber their innovators
with frustrating internal politics and more likely to put the
full skills and talents of their people to use. Innovators are
returning the favor by dedicating more to the job and staying
loyal to the company.
2. Knowing your consumer is no longer enough to
winTop-performing companies are doing a better job of
under-standing consumer needs through research and data. Thats not
surprising. But what is surprising is that they are
also providing innovators with data to benchmark ideas and
innovations against competitors, which enables them
to establish differentiated propositions for their products.
3. When it comes to collaboration, not all input is created
equalWhile its important to involve consumer insights, brand and
R&D in the innovation process, involving sales can make a big
difference. In fact, top-performing
companies are leveraging sales more often in the process from
ideation to package design and price considerations.
Sales provides knowledge about competition and consumers, which
pays dividends at all stages.
4. Greater risk taking leads to greater rewardsOne important
characteristic that distinguishes top-performing companies is their
creativity. Top-performing companies are more likely to encourage
their innovators to take
creative risks and try out novel ideas. As a result, they are
highly effective at generating the level of breakthrough
thinking required for consistent innovation.
Areas for ImprovementThrough the study, we also learned that CPG
com-panies have much to improve when it comes to enabling and
managing innovation. For example, overall satisfaction with
collaborative practices in companies is currently very low among
front-line innovators (76 percent believe there isnt enough).
At the same time, many innovators (47 percent) believe their
companies are not taking enough cre-ative risks. By understanding
what their front-line innovators most need and want, CPG leaders
can take action to promote environments and behav-iors that boost
new product development success.
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Affinnova conducted its innovation study from November 2013 to
February 2014, surveying 400 innovators globally. To participate,
respondents had to qualify as being innovators on the front line.
In other words, they had to:
Have worked on a new product innovation project within the past
year
Rank below the C-level (VP, director, manager or analyst) to
represent an intimate,
day-to-day perspective of the process
Respondents represented a wide spectrum of the consumer packaged
goods industry, including food, beverage, personal and home
products, and also some retail. Company size was evenly balanced,
with 58 percent of respondents from companies worth $10 billion or
larger and 42 percent from companies below that threshold. A wide
range of job functions within innovation were also represented (Fig
1).
inside the data
Measuring Innovation Performance on Six Dimensions
Job Roles of Participants in the Survey
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Innovation Scoring System The survey measured innovation
performance on six performance areas or dimensions, which were
defined based on past academic and industry research on innovation
best practices (Fig 2). Attitudinal questions were used to
understand respondents perceptions of their organizations
innovation processes. Behavioral questions probed into specific
actions and procedures.
From this data, we sought to better understand the kind of
environment top-performing companies are providing innovators as
well as the key behaviors that most drive success.
6 Dimensions of
innovation
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ReseaRCH anD DeveLoPment
BRanD maRKetinG/innovation manaGement
saLes/tRaDe
maRKet ReseaRCH/ConsUmeR insiGHts
finanCe/aCCoUntinG
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26%
39%
11%
11%
4%
9%
Fig 1
Fig 2
EFFECTIVE LEADERSHIP
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profiling top innovators
Our survey asked respondents to report their average success
rates for new products launched. Respondents were then grouped into
four evenly distributed clusters from lowest to highest average
success rate (Fig 3).
Separating the Best from the Rest
Performance Groupings (determined by new product success
rate)
Our performance model was based on comparing success rates
reported by respondents. However, we also found a
correlation
with launch rates. Respondents from Quartile 1 reported an
18
percent higher launch rate than reported by respondents from
Quartile 2 and a 109 percent higher launch rate than reported
by
Quartile 4 respondents.
40 percent was the average success rate reported by all
respondents in the study.
Looking at the top-performing quartile and the bottom-performing
quartile, we then sought to identify patterns. Did Top Performers
share something in common that contributed to their high
new-product success rates?
Finding #1: Bigger is Not Better At first, we assumed that
top-performing organizations were larger in size, benefiting from
better resources and larger budgets. But this was untrue. The
majority of Top Performers were smaller in size than the average
companies in the study (Fig 4).
Finding #2: Structure Isnt the Difference Our second assumption
was that top-performing organizations were more likely than other
companies to have formally established innovation structures and
processes that would help weed out bad ideas before launching to
market. But there was little difference between Top Performers and
average companies in terms of innovation structure (Fig 5).
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55%15%
Quartile 4
Quartile 3
Quartile 2
Quartile 1
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Fig 3
Fig 4
Fig 5
PERCENTAGE OF ALL RESPONDENTS
PERCENTAGE OF TOP PERFORMERS
under $1 billion
$1-20 billion
over $20 billion
completely structured
no structure / semi structured
32%
60%
31%
40%
37%
under $1 billion
$1-20 billion
over $20 billion
29%46%
25%
PERCENTAGE OF ALL RESPONDENTS
PERCENTAGE OF TOP PERFORMERS
completely structured
no structure / semi structured
63%37%
What Matters: Environment and Behaviors If size and structure
didnt make a difference, what did? Comparing Top Performers against
Bottom Performers in the six areas measured by our study, we
identified four factors that lead to new product development
success.
Self-Reported Success Rates
Bottom Quartile
Cutoff
Top Quartile Cutoff
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success factor #1
Top-Performing Companies Create Cultures Where Innovators Thrive
and Feel Supported
Compared to Bottom Performers in our study, innovators at Top
Performers are:
1.3x more likely to feel that they have the resources to
innovate globally
1.4x more likely to feel encouraged and rewarded to take
creative risks
2x more likely to feel that their organizations promote learning
and adjustment from failure
2x more likely to feel supported by leadership
2x more likely to feel that they have access to advanced
technology to support new product development
Compared to Top Performers, innovators at Bottom Performers
are:
1.3x more likely to feel that their talents are being
underleveraged
1.7x more likely to feel that politics play a bigger role than
they should in decision making
2.9x more likely to feel that senior leadership is a barrier to
their innovation
3x more likely to consider leaving their company to work for
more innovative companies
3x more likely to feel that they are working for a company that
is losing to competitors
4
Were successful when senior leadership backs the project
with strong resources.
Were often forced to move in a direction because of gut
feel or senior management dictated direction.
TOP PERFORMER
BOTTOM PERFORMER
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Top-performing companies create learning environmentsQ. How
would you classify your confidence in your companys approach to
measuring success
and encouraging ongoing adjustment and learning
from failures?
Top-performing companies are distinguished by good leadersQ. How
would you classify your confidence in your companys approach to
providing clear
direction from leadership on innovation strategy
and practices?
52%43%
72%64%
Bottom Performer
Bottom Performer
Top Performer
Top Performer
[VeRy ConfidenT/ ConfidenT]
[VeRy ConfidenT/ ConfidenT]
Fig 6 Fig 7
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success factor #2
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Top-Performing Companies Arm Innovators with Better Insights
Consumer Insights Drive Understanding Common sense dictates that
companies that can deliver on consumer needs will be more
successful. Our study confirms this point. Compared to Bottom
Performers, Top Performers are significantly more effective at
empowering innovators with data and insights to understand consumer
needs and bring them to the forefront of planning. As a result,
innovators at Top Performers show greater confidence in their
ability to understand consumer needs, leading to more relevant
products. (Fig 8).
Conversely, Bottom Performers are 1.3x more likely to feel that
their companies arent doing enough to understand consumer needs
(Fig 9).
Competitive Data Drive Differentiation Top Performers are
significantly more effective at considering competitive
advantages/weaknesses in their innovation processes than Bottom
Performers (Fig 10). Compared to Bottom Performers, innovators at
Top Performers are more actively evaluating ideas and innovations
in a competitive context to understand key points of
differentiation and distinct value to consumers. Competitive
evaluation could take the form of benchmarking of concepts or
designs or third-party competitive analysis. Whats important is
that Top Performers dont stop at considering consumer needs they
also ask, Is our idea better, and by how much?
Consumer-Centricity Q. How confident are you in your companys
approach to bringing
consumer preferences to the forefront
of planning to ensure successful new
product development?
Consumer Understanding Q. How strongly would you agree with the
following statement:
We need to better understand
consumer needs.
Competitive Understanding Q. How confident are you in your
companys approach to considering
competitive advantages/
weaknesses to ensure successful
new product development?
60%
79%
63%
81%
61%
53% 53%
45% 47%
81%
Bottom Performer
Bottom Performer
Bottom Performer
Top Performer
Top Performer
Top Performer
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Current insight Gaps Respondents felt that more consumer and
competitive insights were needed throughout the
entire innovation cycle but were most needed
in the early strategic planning, ideation, concept
screening and price determination stages of the
innovation process. This was true across Top and
Bottom Performers.
Q. At what stages of the innovation process do you think
more/deeper insights are needed?
more Competitive insight needed
more Consumer insight needed
39% 39%
38% 30%
We dont give our customers what they are looking forwe
give them what we think they want.
BOTTOM PERFORMER
Fig 8 Fig 9
[VeRy ConfidenT/ ConfidenT]
[STRonGly AGRee/AGRee]
[VeRy ConfidenT/ ConfidenT]
STRATEGY
IDEATION
CONCEPT
PRICE
Fig 10
Fig 11
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success factor #3
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Top-Performing Companies Encourage Better Collaboration and
Knowledge Sharing Across Teams
Harnessing the Power of We Collaboration is often considered a
key factor in innovation. For front-line innovators in our study,
it was the second most critical factor for success, behind consumer
insights. A companys effectiveness at collaboration essentially
measures its ability to maximize the value of different
stakeholders across the business to spur better ideas and maximize
opportunities. Innovators at Top Performers felt their
organizations were more effective at supporting and encouraging
cross-functional collaboration for innovation (Fig 12).
Knowledge Sharing Q. How confident are you in your companys
approach to
sharing best practices of new
product development?
56%
67%
Bottom Performer
Top Performer
Were most successful when we all do our part very well, in
synchronization, in harmony, on time and with interest!
TOP PERFORMER
Sales Involvement Q. Where in your current process is
sales/trade participating?
In a separate study, published in
January 2014, Affinnova found a
correlation between collaboration and
innovation performance. Comparing
CPG innovation projects with different
levels of collaboration, Affinnova
found that ideas developed by
five or more people outperformed
those developed by two people by
218 percent, based on consumer
preference. Teams with greater
cross-functional collaboration also
achieved better results. Affinnova
found that ideas developed by
people from three or more different
functions across the business
outperformed those developed from
one business function by 94 percent.
Looking deeper into who was
collaborating in the process, we
found something unexpected. All
organizations were pretty consistent
in involving business functions such
as consumer insights, R&D and brand
in new product collaboration. But
Top Performers were more likely to
involve sales/trade in critical stages
of the innovation process. Among
Top Performers, sales appears to be
a valued contributor to idea shaping
and marketing-execution strategies
(Fig 14). Innovators are leveraging
sales unique understanding of the
market and consumers to make
their products highly differentiated
and relevant.
Collaboration Effectiveness Q. How confident are you in your
companys approach to
enabling and encouraging
cross-functional collaboration to
ensure successful new product
development?
64%
77%
Bottom Performer
Top Performer
Inviting Sales to the Party
Learning from Each Other As a subset of collaboration, we also
examined how well respondents felt their organizations were at
sharing best practices related to new product development. Here
again, Top Performers were more successful, revealing environments
that are more collegial and transparent (Fig 13).
Fig 12
37%
27%
STRATEGY
24%12%
CONCEPT
18%
PACKAGE DESIGN
25%
PRICE
54%
30%
Bottom Performers
Fig 14
Collaboration improves innovation Performance
top Performers
[VeRy ConfidenT/ConfidenT] [VeRy ConfidenT/ConfidenT]
Fig 13
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insuccess factor #4
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Top-Performing Companies Encourage More Breakthrough
Creativity
Creating New Product Breakthroughs Respondents considered
breakthrough creative thinking to be the No. 3 most critical factor
to innovation in our study, behind customer insights and
collaboration. Here, Top Performers also excel. On average, we
found that innovators at top-performing organizations were two
times more confident in their companies approach to encouraging
breakthrough creative thinking for new products (Fig 15).
Risk Taking Makes a Difference Looking deeper into why
breakthrough thinking is more common in Top Performers than Bottom
Performers, we found one interesting connection: Top Performers
appear to create environments that are more supportive and
encouraging of risk taking. Prior research in the field of
innovation has established that encouragement of risk taking is one
of four factors most contributing to a teams ability to develop
innovative products. Encouragement of risk-taking affects a teams
willingness to deviate from routine problem solving and try novel
approaches (Cross-Functional Product Development Teams, Creativity
and the Innovativeness of New Consumer Products, Journal of
Marketing Research, February 2001) (Fig 16).
Creativity Q. How confident are you in your companys approach to
encouraging
breakthrough creative thinking to ensure
successful new product development?
Risk Taking Q. How strongly would you agree with the following
statement: Creative risk
taking is encouraged and rewarded.
30%
29%
65%
40%
Bottom Performer
Bottom Performer
Top Performer
Top Performer..
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Innovators at both top-performing
and bottom-performing
organizations reported that
the most creative, outside-the-
box thinking happens at the
Ideation stage of the new product
development process. Innovators
reported very little creativity in
the areas of concept, package
design and pricing, showing a
need for organizations to loosen up
the reigns on creativity across all
innovation stages (Fig 17).
54%
20%
6%
5%
5%
3%
3%
3%
2%
iDeation (i.e., explore possibilities)
stRateGiZe/iDentifY oPPoRtUnities
ConCePt sCReeninG
PRoDUCt/sensoRY testinG
PaCKaGe DesiGn
PRiCe sPeCifiCation
PoRtfoLio imPLiCations
otHeR
LaUnCH PLanninG (i.e., distribution, media, etc.)
Creativity Stops at ideation
[VeRy ConfidenT/ ConfidenT]
[STRonGly AGRee/AGRee]
Q. Where in the current process is the most creative risk-taking
or outside-the-box thinking being encouraged?
Fig 15
Fig 16
Fig 17
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To Improve Innovation, Target Behaviors
Looking at the data gathered from frontline innovators, we learn
that behaviors and practices play critical roles in determining new
product successmore than size or innovation structure. At the same
time, these behaviors influence the attitudes and feelings that
innovators have toward their companies. While top-performing
companies are doing better than others to nurture and support
healthy environments for innovation, overall, most CPG innovators
we surveyed are clearly frustrated with their companies current
processes and lack of competitive advantage. in fact, 40 percent of
CPG innovators admitted they are currently considering leaving
their companies to work for more innovative companies. No doubt
lack of engagement and low morale are also having an impact on
performance.
among the biggest areas of frustration identified by CPG
professionals in our survey:
inadequate tools: 75 percent believe their companies are using
outdated technology for innovation.
slow processes: 49 percent feel that their companies cant move
fast enough to keep up with competitors and the pace of the
marketplace.
Lack of creativity: 62 percent say creative risk taking is not
supported by their companies, limiting breakthrough ideas.
subjective decision making: 55 percent believe that internal
politics not datais guiding most new product decision making.
Limited customer insight: 66 percent believe their company isnt
doing enough to understand consumers and map product back to their
needs.
For CPG leaders and executives, these findings as well as the
characteristics of Top Performersoffer a general prescription for
improving innovation practices. But the best insight can only come
from measuring within. Instead of relying on general industry data,
leaders should look to better understand how their innovators
specifically feel about processes and seek to identify the
constraints affecting performance as well as morale.
Want to See How You Compare to the Top and Bottom
Performers?
Benchmark yourself using the 6 Dimensions of innovation.
Understand the relative effectiveness of your innovation
process
and culture as it relates to your industry peers.
Diagnose key areas of strength and opportunity.
Assess attitudes toward your company to uncover morale or
disengagement issues that could pose long-term threats.
Contact Us!
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Contact Affinnova
Watch our Intro to Affinnova video
about affinnova
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Background and Results
Affinnova helps companies dramatically improve their innovation
and marketing success rates.
Traditional creative research tools and techniques typically
force trade-offs between creative exploration and accurate
prediction. Marketers are forced to suppress creativity to reliably
analyze one or two ideas or to work through complex processes with
long cycle times that still end in suboptimal executions.
By contrast, Affinnovas technology platform fully unleashes the
power of creativity through a combination of collaboration
software, evolutionary optimization technology and predictive
analytics. Affinnovas collaboration software empowers teams to
fully explore their ideas and create a wide space of product,
advertising and design possibilities. That creative space of ideas,
often representing millions of variations, is then processed by
patented evolutionary algorithms using individual and collective
consumer feedback to find the optimal concepts or executions that
are then measured against competitive benchmarks to predict
performance and provide actionable business insights.
Affinnovas technology can be applied to a broad range of
creative executions, including product concept development, product
packaging, communication strategies, traditional/digital
advertising, web/mobile site design and store design.
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Proven Results
Reach Across 40+ Countries
CPG Clients
1.8x
2.6x
