Chapter 2

Innovation

Innovation is the process of turning ideas into manufacturable and marketable form.

Watts Humprey

INNOVATION SUCCESS AND FAILURE

Frito-Lay Baked! Lay’s

As early as 1991, Frito-Lay began working on developing a new, “better-for-you” potato chip. Frito-Lay’s potato chips is a brand with almost universalrecognition in the United States, and the leader in the snack food category. Thecrunch and flavor were a desired favorite for millions of consumers. Yet, potatochips were 30% oil or liquid fat by weight and processed by frying potato slicesin large vats of oil. Frito-Lay marketers saw a concerning trend amongstconsumers. Nine out of ten people were selecting “better-for-you” foods andwere willing to pay more to get them.1 Fatty foods like conventional potatochips were not perceived by consumers as “better-for-you”.

To produce a potato chip without “bad-for-you” oil was a challenge.Essentially, Frito-Lay was tasked with taking a tasty potato chip that derives itsflavor and mouth-feel from deep fat frying and making it healthier by mini-mizing the percentage of oil used. In other words: Make a potato chip that tasteslike it was fried, but without frying it.

After more than four years of research, Frito-Lay offered early prototypes ofa “baked chip” to test groups of consumers. The results in August of 1994 wereunacceptable – it was dry and tasted like cardboard. It was clear that to give riseto a tasty and healthy new chip, Frito-Lay needed to further develop theirprocess. By the end of 1995, consumer research reported a chip that was readyfor the market in both texture and taste (Figure 2.1).

In 1996, the baked potato chip was introduced as Baked! Lay’s�. For Frito-Lay, it was a chart breaker. The test market results returned the most positiveresponse to a product introduction ever experienced by Frito-Lay. In the first

1. R. Mathews, Efficient New Product Introduction, July 1997, Supplement to Progressive

Grocer, pp. 8–12

Breakthrough Food Product Innovation Through Emotions Research. DOI: 10.1016/B978-0-12-387712-3.00002-5

Copyright � David Lundahl 2012. Published by Elsevier Inc. All rights reserved. 11

FIGURE 2.1 Scores of product Liking from early stage prototypes of Baked Lays� as adapted

from US patent application (Adapted from Dreher, M. et al. 1988. Process for Producing Low Oil

Potato Chips. Assignee US Patent 4,756,916. Frito-Lay, Inc., Dallas, TX) and from reported scores

throughout the product development process prior to market lanuch (Adapted from Mathews, R.

1997. “Efficient New Product Introdution,” July 1997 Supplement to Progressive Grocer, pp. 8–12).

12 Breakthrough Food Product Innovation Through Emotions Research

year, the product grossed over $100 million in revenue and they experienceda 25% overall brand sales growth.2 More than a decade later, the Baked! Lay’sbrand is still a $100þ million a year revenue product.

This case study is an example of innovation. While invention is the creationof something new, it does not ensure success. Inventions are seen in every areaof industry: in product development as new products; in the technical researchand development (R&D) centers as a new process or basis for a new product;and in universities or research centers as new ideas. Inventions may be scientificbreakthroughs, but it takes innovation to make that something new intoa market winner. True innovation is the process of taking of an idea and makingit a commercial success.

In the case of Frito-Lay, marketers applied their domain expertise tounderstand how consumers were changing attitudinally and behaviorally.Researchers were tasked with the role of seeking out inventions that could beapplied to solve the problem of developing an acceptable potato chip with littleor no oil. At every step of the product design and development process,consumers were involved to help guide the innovation and developmentprocess. The innovation process started and ended with the consumer.

Orbitz: A Failure in Innovation

In 1994, Clearly Canadian Beverage Corporation had only $66 million in sales,compared to $141 million in 1992. In an effort to boost their slumping sales,

2. Ibid.

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the company sought to apply innovation and develop new products. Theirintroduction of the Orbitz drink in 1996 will live in the minds of manyconsumers as one of the great product failures of all time. Touted asa “texturally enhanced alternative beverage,” Orbitz contained tiny ediblegelatinous gum balls floating in a fruit-flavored beverage. The industry initiallyhailed it for its inventiveness and it received numerous accolades for its design:

l 1996 Mobius Award in recognition of the outstanding package design.l 1996 Clear Choice Award from the Glass Packaging Institute.l 1996 BevNet! Beverage Awards for best packaging and appearance.l Named the “Hot drink of ’96” by Rolling Stone Magazine.

In spite of this great inventiveness, it was those very gelatinous gum balls thatultimately fast-tracked the product off the shelves, due to poor sales.3 Withintwo years, the product was no longer commercially available. Instead ofboosting sales, millions were lost in development and launch promotion. Whatwent wrong?

Obviously, with any innovation there are risks. Innovation is the lifeblood oforganizations; without innovation, companies experience missed opportunities.But there is no certainty that introducing a new or improved product to themarket will bring success. It is important that companies recognize the reasonsfor both product failure and success. There are three generally accepted reasons:

1. How well the innovation is founded with regard to corporate strategy.2. How well the innovation is directed by marketing research information.3. How the innovation is differentiated in the mind of the consumer.

In the case of Baked! Lay’s, the product line was well founded. The companyhad done its homework in understanding consumer desire to consume “better-for-you foods.” The iterative product development process was guided byconsumer product research into how well prototypes were liked. In addition, theresulting product launched into the marketplace was highly differentiated onthe basis of being the first low fat, enjoyable potato chip product on the market.

In the case of Orbitz, Clearly Canadian had not accurately identifieda purpose for Orbitz in the marketplace. While the product was highly differ-entiated with regard to product features (i.e. the floating balls in the liquid),consumers who tried the product did not want to repeat the experience.Therefore, the product was not differentiated in a way that motivatedconsumers to continue to repeat purchase. The product did not help the brandachieve a positive, sustainable emotional connection to consumers. It ulti-mately failed to fulfill an important role in the lives of the target consumer.Marketing research did not help guide successful development of the product.

3. Olivia Putnal, “The Biggest Food Product Duds of All Time,” posted April 23, 2009 from

WomansDay.com. http://www.womansday.com/Articles/Food/The-Biggest-Food-Product-Duds-

of-All-Time.html

14 Breakthrough Food Product Innovation Through Emotions Research

It is important that companies learn from their mistakes. The continuedsuccess of Clearly Canadian after the Orbitz failure suggests the company didlearn from its mistake. By ensuring that innovation is founded, directed anddifferentiated, the benefits from success can be realized. Successful innovationsbenefit companies financially by achieving or exceeding revenue forecasts andprofits. Innovation can also provide excitement in the marketplace, creatingnew enthusiasm and value for whole product categories. This excitement canalso extend to employees and staff and, in turn, that excitement can inspire anincrease in the number of new ideas.

As seen with the case of Orbitz, however, failure can be a painful lesson.Undirected, unfounded or undifferentiated innovation wastes valuablecompany assets. Failure discourages employees and, in extreme cases, can leadto company failure.

Voice of the Consumer

The success of Frito-Lay’s Baked! Lay’s and failure of Clearly Canadian’sOrbitz are the book-ends of innovation case studies from the 1990s. This wasa time of transition, when many companies in the food and beverage industrybegan to realize the importance of the voice of the consumer to successfulinnovation. This time of transition also saw the development of a number ofinnovation processes (e.g. Stage-Gate�) and advances in the techniques tobring the voice of the consumer into the beginning (i.e. “fuzzy front end”),middle (i.e. “concept development”) and end (i.e. “product guidance”) stages ofthe innovation process. These techniques typically involved face-to-facemarketing research and sensory research methodology.

In the early years of the 21st century, there was a dramatic shift in themarketing research industry from face-to-face (“offline”) research to Internet(“online”) research. This shift in research methodology dramatically decreasedthe cost of the voice of the consumer. As a consequence, innovators were able tomore rapidly access more data than ever before to make decisions throughoutthe innovation process. However, the shift to online changed the mode oflistening to the voice of the consumer. The “vibe” that researchers were able toget from face-to-face research was replaced by rational responses in a typicalQ&A self-reported mode of research. While less expensive and faster to attain,rational-based information is subject to many more errors in judgment and bias.Further, the rapid popularity in online panels brought with it issues in dataquality. As a consequence, the ability to hear the true voice of the consumer hasbeen weakened.

These changes in how companies have been bringing the voice of theconsumer into their innovation process are extremely important to note. Asquantitative research increased in popularity, the quality of the informationcontent decreased, resulting in fewer insights into the “whys” of consumerbehavior, thus compromising the ability of companies to establish a solid

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foundation for innovation, to be able to accurately direct innovation and tobring to market products that are differentiated in ways that achieve positiveemotional impact.

Today, companies are realizing that more information does not meanbetter insights; they acknowledge that they need to deepen insights throughresearch – not only to listen, but to observe and dialogue in new ways. Thenumber of new research techniques being launched today is unprecedented inthe history of marketing research. Companies are realizing that what theyneed is not more information, but better information. The research communityis grappling with the question, “what is better information?” A better questionmight be, what information can the organization best use to achieve innova-tion success?

The P&G Success Story

In 2000, Procter & Gamble (P&G) was in disarray. The company was sinkingunder the weight of too many new products and organizational changes. Only35% of their new products met financial objectives. R&D productivity hadleveled off with R&D spending unable to meet growth objectives. New CEOA.G. Lafley was brought in to turn things around. Lafley knew what innovationmeant to successfully grow a company.

In his book The Game-Changer,4 Lafley and co-author Ram Charan writeabout a vision for the “innovation company.” This vision started with a basicpremise that the consumer was at the center of everything. This led toa consumer-centric definition of innovation: a creative process, expressing howconsumers view and experience the product. They further defined the consumerexperience in broad terms: the brand, the product function and other types ofbenefits, the business model, the supply chain, and the cost structure that makesthe product successful. They also changed the P&G organization in a number ofways to achieve the following objectives:

l Make sustainable organic growth through innovation a priority.l Think about innovation in different ways.l Increase the innovation pipeline through co-innovation.l Better direct innovation through research that achieves learning for how

consumers want to use P&G products.l Organize around innovation.

Lafley further restructured the P&G innovation process – simplifying it into thefollowing steps:

1. Understand the customer.2. Establish a product strategy.

4. A.G. Lafley and R. Charan, The Game-Changer: How You Can Drive Revenue and Profit

Growth with Innovation. Random House, Inc., New York, NY, 2008, pp. 336

16 Breakthrough Food Product Innovation Through Emotions Research

3. Use a simple process to gather and convert ideas into concepts andprototypes.

4. Apply a simple development and qualification process.

In an interview in 2008, Lafley discussed his realization that P&G had to go toconsumers to find out how they were using, and wanted to use, P&G products.5

He placed special importance on developing internal consumer research anddesign functions. The consumer research at P&G during this time became moreexperiential, putting a new emphasis on observing consumers in the context ofreal-life experiences. In addition, he realized that the 7,500 internal researchersin the company were not sufficient resources to create the level of innovationrequired to turn the company around. So, he set a goal calling for 50% of allinnovation to come from outside the company. He embraced the concept of“open innovation,” establishing leading business processes to broaden thecompany’s innovation resources to 1.5 million researchers and scientistsworldwide.6

By the time he stepped down to become full-time Chairman for P&G inJune 2009, their stock had increased from $28 to $52 per share. Lafley had notonly galvanized the company around innovation, he made sure innovation wasfocused in the right ways. He had pushed P&G toward higher-margin areas likehealth, beauty, and personal care with $23 billion in brands, including Tide,Crest, Pampers, Gillette, Olay, Pantene, and the latest addition, Gain laundrydetergent. At the end of his tenure, profits had tripled to more than $10 billionon $76.5 billion in revenues.

Yet, in spite of all of Lafley’s vision and successes, there are indications thathe felt the job was far from complete. Business Week’s, Bruce Nussbaum,interviewed Lafley several times over his tenure at P&G. He wrote thefollowing in his column,

“Even with those abilities, Lafley believes that the job of changing P&G’s culture from

conventional to innovative is only 10% accomplished – at best. Building an innovative

culture in old-style, big organizations takes a generation, even with the best of lead-

ership. Corporations in the US especially, have not had Lafley-like CEOs and it’s one of

the basic reasons why it is in economic and geo-political decline.”7

Lafley realized what so many companies do not – that successful innovationrequires more than simply better information or better processes. Innovationneeds to be integrated into the very DNA of a company. Innovation must also be

5. A.G. Lafley, Innovating at Procter and Gamble, Front End of Innovation (FEI), April 2008. http://

frontendofinnovation.blogspot.com/2008/04/cnbc-has-recently-posted-interview-with.html

6. L. Huston and N. Sakkab, Connect and Develop: Inside Procter & Gamble’s New Model for

Innovation, Harvard Business Review, March 2006, 58–66

7. CEO Legacies: A.G. Lafley vs. Bob Nardelli, http://www.businessweek.com/innovate/

NussbaumOnDesign/archives/2009/06/ceo_legacies_ag.html

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driven by strategy and supported by culture. P&G was ahead of the curve inmany ways compared with its competition, yet its culture and strategy were stilllacking and, as it turned out, they were not able to adjust to rapid consumerchange in behavior.

INNOVATION IN THE FACE OF CONSUMER CHANGE

Lessons from the 2008–2009 Recession

The recession of 2008–2009 shook the world economy to its core. Greatinnovation companies such as P&G felt the impact of consumer change. Theissue was not so much that consumers changed, but that companies could notreact fast enough.

For the first time in years, P&G saw its growth rate fall below double digits.Consumer reactions were demonstrated clearly with Tide, P&G’s flagshipbrand. Tide consumers talked with their pocketbooks:

l 19% reported trading down to value brands because of recession.l 81% indicated they were likely to keep buying value brands after the

economy improves.l Tide’s market share in liquid detergent dropped to 42.7%, a 2.4 percentage

point loss in the twelve weeks that ended April 18, 2009 in food, drug andnon-Wal-Mart mass outlets.8

Yet, the recession was only a symptom of a much bigger and more impactfultrend. The speed and severity of the economic impact on the consumer pack-aged goods industry was directly related to the emergence of a much moreengaged, demanding and emotionally-driven population. Peer-to-peernetworking spread the bad financial news. As more and more bad news built,consumer confidence dropped at a speed never before observed. Not only werebillions of dollars lost from property investments, but trillions of dollars werelost through the change in consumer behavior.

The food and other consumer product industries suffered greatly throughoutthe recession because they did not understand the dramatic impact socialnetworking was having on consumer behavior. The culture, strategy andprocesses of the food industry moved like a dinosaur in the face of a dramaticacceleration in consumer behavior change. Their innovation process wasconsumer-driven, but it was not behavior-driven.

Human Nature

Human nature had a lot to do with the unprecedented speed of consumer changein response to the events that triggered the 2008 recession. People were

8. Why We Will Remember Tide Thursday, http://consumeredgeresearch.com/news/item/why_

we_will_remember_tide_thursday/

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attracted to social networking because it fit with their true nature – a deep desireto interact with other human beings. The development of social networkingmedia in the mid-2000s enabled people to act out their true nature en masse,and so emerged a much more reactive society.

The year before the recession, Mark Earls published a book entitled Herd:How to Change Mass Behavior by Harnessing our True Nature.9 Earls char-acterizes the true nature of humans as “herding creatures,” and stresses theimportance of applying an understanding of consumer mass behavior in termsof peer-to-peer interaction. He suggests that we should redefine the concept ofa market from a classical definition of individuals and their attitudes andbehaviors to a more contemporary definition of peer-to-peer interactions andhow they impact market behavior. He stresses that it is only through theunderstanding of peer-to-peer interactions that we can start to understand howrelationships influence consumer behavior.

A number of other thought leaders are beginning to add voice to how torethink innovation in this new world. Important contributions are emergingfrom the field of social psychology. If markets are to be defined in terms ofpeer-to-peer interactions, then the traditional model of mass marketing nolonger applies. If influence is now in the hands of consumer peers, then how docompanies dialogue effectively to discover how to focus innovation? If thepower has now shifted to the prosumer – that consumer specifically focused onseeking and sharing information on products with others – then how mustinnovation change to effectively inspire consumers to behave in ways that havelong-term positive economic impact for food companies?

Additional thought leadership is also emerging from the field of behavioraleconomics. This field of study is being applied to gain new insights into howconsumer perceptions, emotions and social dynamics interrelate to drivemarket economics. Its economic theories are being touted as a replacement forneo-classical supply and demand economics. The coalescing of this knowledgeinto a framework empowers the innovation team with new theories that can beapplied to solve the innovation problem in the face of change. The capability toidentify emotional drivers is a huge step for companies on their path tobecoming more behavior-driven. By applying perceptual and behavioralpsychology, companies are better able to link the sensory qualities – perceivedconsciously or unconsciously – to their innovation decisions, enabling inno-vation to be focused on delivering experiences that drive behaviors.

These new thoughts are contributing to change in innovation strategy. Foodcompanies now have to align corporate behavior with the values of theirconsumers; they have to embrace the new world order of consumer behavior. Todo this, companies must demonstrate social responsibility and global citizen-ship to align with consumer expectations as to how companies should behave.

9. M. Earls, Herd: How to Change Mass Behaviour by Harnessing Our True Nature. John Wiley

& Sons, Chichester, 2007, pp. 339

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The application of these fields of psychology provides business strategistsand managers with a better understanding of how to achieve sustainablebusiness practices in spite of change. Of utmost importance is the building andmaintaining of consumer trust. Companies must therefore not only focus theirinnovation on messaging that leads to initial trial behavior, but also on howconsumers’ experiences align with their expectations. This requires that theinnovation and development processes take a much more holistic approach.

Innovation in the face of consumer change also requires a new approach toresearch, starting with the capability to ask the right questions and to deliverbetter insights. Perceptual and behavioral psychology are also enabling a newera in the delivery of better insights – insights that are behavior-oriented –deepening understanding into the “whys” of consumer behavior. This includesa number of new ways to listen to peer-to-peer dialogues between consumersand to engage consumers in dialogue. These research methods and techniquesare beginning to uncover new ways to identify which emotions are tugging atthe hearts of people and how to react to those emotions. Companies thatembrace these new techniques and methods gain advantage by being able toimagine how to create a world of brands and products that calms consumerfears and delivers what is hoped for.

Behavioral Insight

It is through the application of these two fields of psychology that innovatorsachieve behavioral insights – knowledge into how to focus innovation to makeit truly behavior-driven. Behavioral insight applies the right science to answerthe right questions.

As an example, if you are a manufacturer of jelly beans and seeking insightsinto how to achieve better quality – then you need to apply the science ofperception to understand how to produce jelly beans of more consistent quality.If, however, you are seeking to develop a new type of candy, the science ofpleasure might be applied to dictate how much sugar is optimal to dial up theemotive connection. However, these insights are not behavioral insights. Theseinsights are more focused on consumer perceptions than behaviors. They areexamples of insights into measures of product affect, i.e. intrinsic properties ofproducts. These are measures of quality and pleasure. Quality and pleasure maynot always translate directly into behaviors.

Since all candy with high sugar content is fundamentally pleasurable,more sugar will not necessarily differentiate your product. This alone will notnecessarily create emotional connections to a brand. What you need isa framework that goes beyond just making a product pleasurable andconsistent in quality. You need a framework that helps you understand how todifferentiate your product in ways that achieve emotional connections withconsumers. This framework uses the science of psychology to understandpeople on an emotional level. It helps innovators understand how to

20 Breakthrough Food Product Innovation Through Emotions Research

differentiate products in ways beyond functionality, sensory qualities andhedonics (i.e. pleasure). It helps innovators also differentiate products ona social and emotional basis.

Pop Rocks� are a great example of a strategy for development that tappedinto more than just sensory pleasure. The candy contains tiny air pockets ofcarbonation that are released as it melts in your mouth, creating a mild“crackling” sensation and “popping” noise. This product provides more thansensory pleasure. It impacts consumers emotionally. The product can elicitsurprise at the unexpected first time consumption experience. The product canelicit enjoyment during repeat consumption experiences. The product canprovide for a social experience – eliciting intrigue when the product is firstintroduced by a friend.

The importance of understanding how a product impacts consumers on anemotional basis is essential to the innovation and development process. Why?Emotions are the basis for most consumer behaviors. Having a usable frame-work that links the product decisions to emotions enables innovators –marketers, designers and developers – to rapidly focus innovation in ways thatincrease the chance for success. Insights from research become behavioralinsights when they link product decision to the elicitation of emotions that driveconsumer behaviors.

THE INNOVATION REVOLUTION

The points made in this chapter about how innovation has been changing overthe past 20 years can be summarized as an evolutionary process. Companiessuch as Frito-Lay and P&G have evolved from a technology-driven (i.e. “buildit and they will come”) to a consumer-driven innovation company. They havebeen leaders in the development of innovation – using the voice of theconsumer to focus innovation and to use innovation as a key pillar of businessstrategy. However, the emergence of new means of peer-to-peer socialnetworking has changed everything. Being consumer-driven in your approachto innovation is no longer enough. In a short time period, people have funda-mentally changed how they interact socially, what sources of information theytrust, and how they behave as consumers. These changes require that compa-nies undergo more than just an evolution; they must undergo a revolution.

Industry change is not an easy task – especially when it comes to changingculture. A.G. Lafley believed his efforts to change P&G innovation culture wereonly 10% realized. To make innovation a key pillar of business culture, inno-vation must become embedded into the whole business model, i.e. impactinga business’s strategy, its operating structures and infrastructure, such as infor-mation systems.

The starting point to making this change is raising the bar in how behavioralinsights through research are attained. Once this bar has been raised, researcherswill find new vistas for applying those behavioral insights – converting them

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into knowledge and applying that knowledge throughout the innovation anddevelopment process.

Behavior-Driven Innovation

If Pop Rocks were invented today, what behavioral insights might be generatedand used by marketers, designers, and developers to achieve rapid, successfulinnovation? A more behavioral approach to innovation starts with research thathelps innovators imagine what consumer experiences might lead to productdifferentiation on an emotional basis. Perhaps consumers are seeking exciting,new candy experiences that will surprise them. Perhaps consumers are seekingsocial experiences that elicit intrigue from peer-to-peer interactions. Startingwith an identified set of emotions and behavioral outcomes as a target, you canstart to see the possibilities for a fundamental shift in innovation. The result ofthis shift is a new focus on achieving behavioral outcomes through innovation.This focus enables innovators to become inspired in a new way, opening upmore degrees of freedom for how to create emotions such as surprise orintrigue. This focus also leads to new thinking about how to guide decisionmaking throughout the innovation and development process.

Behavior-Driven Innovation (BDI) is an approach that starts with thebehavioral outcome in mind and maintains that focus throughout the innovationand development process. It has the capability to impact whole organizations,due to the breadth of different disciplines that are typically involved in productinnovation and development. In this way, BDI is a platform that can be used tocreate a culture of innovation – as envisioned by Lafley.

Raising the Bar

Consider the traditional usage and attitudinal research study. According toESOMAR, $318 million was spent in 2008 on traditional online survey usageand attitudinal (U&A) studies within the United States. These studies have nomeans to provide behavioral insights. They can help track what consumers aredoing, yet are dependent on rational-based survey responses to identifyconsumer attitudes. By interrelating attitudinal information with self-reportedbehavioral claims, companies hope to achieve behavioral insights into whyconsumers are behaving as they do. According to behavioral psychologists, thisapproach to achieving behavioral insights simply does not work. Something isfundamentally missing in the richness of information generated from a typicalU&A study.

A behavioral approach to innovation begins to raise the bar by generatingnew information through research that can be processed into behavioralinsights. This new information fills a knowledge gap for how current orenvisioned experiences lead to emotional impact – motivating consumerbehavior. It fills knowledge gaps for what kind of brand relationships

22 Breakthrough Food Product Innovation Through Emotions Research

consumers are seeking. And, it fills knowledge gaps for why qualities ofa brand and/or product elicit specific emotions – positive and/or negative –about an experience. It goes beyond the learning from a traditional U&Astudy.

Advancing research methods to generate behavioral insights will start youon the pathway to the innovation revolution. However, the journey will still beincomplete. Your organization must be able to utilize behavioral insights. Thecapability to generate behavioral insights leads naturally to a shift from a linear,inflexible process to a more flexible and adaptable one. It requires that inno-vation teams work more collaboratively, using their different vantage points togenerate insights by actively participating in research that engages with theconsumer. These shifts in process finally lead to a change in culture – a culturethat blurs the traditional roles of domain experts working in silos of specificaspects of the consumer experience. It leads to a cultural shift where innovationand development is holistic.

An Evolving Path Forward

Once the first step is taken to becoming behavior-driven in the way researchinformation is generated and processed into knowledge that informs innova-tion, the path forward leads to a cultural paradigm shift. This shift will impacta company’s infrastructure for information processing, strategy developmentfor business units and brands, and structural organization of how people worktogether. Fully implemented, BDI has the capability to complete the remaining90% of the process (as envisioned by Lafley) in transforming companies fromthe “build it and they will come” mentality of the 20th century into thebehavior-driven company of the 21st century.

Key Points

l Unfounded, undirected, or undifferentiated innovations are the three primary

reasons for product failure in the marketplace.

l The research shift from off-line to on-line in the early 2000s has weakened the

ability of companies to listen to the true voice of the consumer.

l The P&G success story in the early 2000s was driven by the vision of A.G.

Lafley to focus the organization on being an “innovation company.” Their

success was attributed to innovations that were founded (i.e. strategic choices

were made to play in markets with higher margins), directed (i.e. driven by the

consumer), and differentiated (i.e. applying an open, simple four-step disrup-

tive innovation process).

l The pace of consumer change has accelerated in the 2000s, requiring that even

successful companies rethink their approach to innovation.

l Innovation based upon behavioral economic theory can be achieved by

applying the science of perceptual, behavioral, and social psychology to

generate behavioral insights. These types of insights enable the inspiration of

divergent thought and the guiding of convergent thought throughout the inno-

vation process.

l Behavior-driven innovation (BDI) is a business framework for sustained busi-

ness growth through innovation. It involves the generation of behavioral

insights that inspire and guide innovation, impacting the DNA of business

culture and the development of corporate strategy, business processes, and

information systems.

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