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Innovation Best Practices
The People Ready Business Whitepaper, Roadmap for Innovation Success Report
Should we consider fielding our own internal Pulmuone study to see where we are?
Senior Leadership communication across the organizationabout the importance and emphasis of innovation is critical
A recognition that ideas can come from everywhere not just Marketing
The three platform areas of Taste & Variety, Health & Wellness and Convenience continue to be what consumers desire
Having a Vision and Roadmap for Innovation Strategy is important
Innovation Vision
Need States
Opportunity
Platforms
Consumer Targets
Development
Platforms
Concepts
Source: P&G Internal Documentation; BCG analysis
Truly delivering on Consumer Needs/Wants is importantFirst & Second Moment of Truth
UK Pringles learned that brand recognition tied to package shape• 69% recognize Pringles with
packaging shown in picture• 67% recognize Pringles without
Pringles man• 9% recognize Pringles without
carton-shaped package
First Moment of Truth: "Packaging That Sells" is keyFirst Moment of Truth: "Packaging That Sells" is key
In 2002, P&G decided to launch Pringles chips with jokes, pictures and trivia printed on them
In 2003, Pringles did in-store promotions, online co-branding and POP displays together with G4
Second Moment of Truth: Experience drives re-buySecond Moment of Truth: Experience drives re-buy
P&G invited heavy Pringles users to a computer and online gaming event to understand their specific product needs• Product tests while gaming
They learned that Pringles consumption tied to product handling and grease slid from fingers to console• Chips should not grease fingers• Chips should be accessed without moving the
eyes from the screen
After the study, P&G has announced an agreement that teams Pringles with G4, the Comcast-owned cable TV network dedicated to video games and the video game lifestyle
• Three-year deal worth more than $2 million• Launch of "Cheat! Pringles Gamers Guide," a half-hour
weekly show offering viewers tips on how to get through challenges in video games
Project portfolio analysis provides health check of existing pipeline
Build portfolio of current projects• Determine financial attractiveness and feasibility as
detailed in Idea Management • Represent planned PD expenses as bubble sizes
(excluding past expenses/sunk costs)
Review "health" of current portfolio – address key questions in management dialogue:
• Are we investing enough in our most important projects?
• Do we fragment our resources across to many projects in parallel?
• Do we face "congestion" in our project pipeline?• Is our average time-to-market acceptable or do we
miss windows of opportunity?
Guidelines from top-management for portfolio prioritization and resource planning
ApproachApproach
Very low Low Medium High Very high
Projects not to pursue further
Projects to pursueif resources are available and overall targets not met without them
C1
C2
C3
C4
C5
Feasibility
Very Low
Very high
Low
Medium
High
Financial attractiveness
Projects to pursuewith high priority
Current projects
Innovation Best Practice Resources, January 2011 BCG
Attractiveness Summary Tool
NorthEastern University ModelCompetes in an Attractive Market
Has compelling value proposition
Strategically – financially attractive
Integrated portfolio strategy in place
Category is large enough to realize good growth
Specific segment exists with unfulfilled demand
Compelling for the consumer
&
Different consumers
Compelling for the trade
Scale Opportunity
Leverages Pulmuone Strengths
Strategy is sustainable
Portfolio vision developed
We cannot be afraid to start building external innovation networks…Our own internal capabilities
should not limit innovative ideas.
Sources: Symphony IRI, Accenture, GMA report, CPG Innovation & Growth and Mastering Innovation, The Desai Group
Execution Commercialization
Innovation managementKey lessons from BCG experience
Systematic process
Systematic process
Outsource to accelerate
Outsource to accelerate
ClearMilestones
ClearMilestones
Tight feedbackloops
Tight feedbackloops
Nurture and refine
Nurture and refine
Nextgeneration
Nextgeneration
Ideation
Leadership science inselect areas
Leadership science inselect areas
Senior engage-ment
Senior engage-ment
InnovationP&L’s
InnovationP&L’s
Early cross-functional input
Early cross-functional input
Meaningfuladvances
Meaningfuladvances
Driven by consumer needs
Driven by consumer needs
Widefunnel
Widefunnel
Cross-functional guidance
Cross-functional guidance
Manage the critical path
Manage the critical path
Focus resources
Focus resources
Communi-cationmechanism
Communi-cationmechanism
Manage theportfolio
Manage theportfolio
Mix of inside/ outsideexperts
Mix of inside/ outsideexperts
Breakthrough ideas require breakthrough process
Innovation Best Practice Resources, January 2011 BCG
Invention
How do you judge yourself with respect to innovation management?
Disagreement within the organizationDisagreement within the organizationKey strengthsKey strengths WeaknessesWeaknesses
Clear and defined innovation strategy
Enough ideas to support your innovation strategy
Regular and adequate top management involvement in innovation process
Major milestones (4/5) in innovation process to review status of project
Organization/culture that rewards entrepreneurial freedom and allows mistakes
11
22
33
44
55
Transparency/overview of the innovation pipiline and the status of each project?
Prioritization of projects is determined by transparent criteria in a formalized way across all brands?
Quantification of "business potential" of each idea?
Standardized documents accompany the process to exchange key information among team members?
Project champion with adequate power to control and manage a project across all functions?
11
22
33
44
55
Innovation process too long
High level of local developments for local needs (too high?)
Lack of transparency of innovation process
Organizational structure seems to inhibit the marketing strategy
Inefficient/low usage of external sources to generate ideas
Low reliability towards trade concerning launch dates of new product
11
22
33
44
55
66
Innovation Best Practice Resources, January 2011 BCG
Following a clear and simple stage gate process is also helpful
Idea generation Preparation Decision Implementation
• Purchasing simulations in own locations and core regions
• Annual category studies, focus groups
• Consumers accompanied 12 hrs./day for 1 mo.
• Regular meetings with "idea generating companies"
• Cross-category and cross-country innovation meetings
Brand manager/ director for new products
• One- and multidimen-sional concept tests at POS
• International concept and market tests
• Feasibility studies• Estimation of market
potential• Preview tests of new
products by retailers• Supplier involvement
in development of new materials and ingredients
Category Planning Team(3 FTE: brand manager, market researcher, engineer)
• Internal benchmarking of new products relative to existing portfolio, corporate targets and strategy fit (own database)
• Quality and product use tests by consumers in their homes
• Financial business case (NPV)
Decision Team(GBU Leadership Team, R&D Functional Leadership Team)
• Supply concept and production
• Marketing concept, “go-to-market” strategy, advertising readiness
• Clear milestone and action plans for all kind of contingencies when product is launched
• Regulatory application• Training and deploy-
ment of sales force.
Program Team(several FTE from market research, production, supply chain, sales, marketing, law, finance)
Actions
Res-sources
Source: Expert interviews; BCG analysis
“It was clear that we did not know how to do it. There were lots of evidences of teams doing the right things... the right market studies, superb product development and testing, and so on. The issue was one of consistency. We did some plays well, some projects, some of the time. But that is not how you win the Championship year after year” - Senior P&G executive
Execution is Critical!
Consistentproject leadership
Challenge focus to tollgate review (Stage gate decisions)
Project reviews elevated to BU leadership
Consistently updated view of portfolio
Early line involvement in market launch plan
Project leader follows project from conception past launch• Accountable for project success, launch• Authority to ensure proper plan execution • Ability/experience to manage multi-functional team (R&D, Trade, Brand, Finance)• Should be our best people, and a career-making move
Tollgate reviews focus on finding the holes in the business case • Tollgate presentation limited to 10% of review, remaining 90% questioning, challenging
plan assumptions and progress• Ongoing scorecard distributed beforehand to highlight progress since last review• Projects do not advance unless committed deliverables are achieved
NPD Organization category, functional leaders chair regular pipeline reviews• Play devils advocate role in challenge meetings for projects• Add credibility to process – share responsibility for killing or altering project• Provide category and portfolio perspective
Brands/Finance maintain “big picture” perspective of projects• Works with all constituents (R&D, Trade) to communicate available capital and
marketing resources• Maintains master schedule of when, how launches will be sequenced
Brand, Trade involved early to develop budgets plan• When dollars are being discussed, brand/trade becomes involved• Market realities, trade capability realities reflected through line involvement• R&D, Brand, Trade organizations all sign-off and commit to delivering plan by market launch
- Each individual held accountable to plans
Innovation Best Practice Resources, January 2011 BCG
Understanding the Customer key planogram windows can help improve innovation execution
• Top customers (i.e. top 10/15) typically introduce or cut in new items at planogram timing. Planogram timing over the years has reduced at many customers to once a year due to the resources involved with changing the sets.
• Mars Foods has two primary launch windows a year:First half of the year launches:– April – Decisions are made at leadership team level of go/no go launches for first half of the following
year.– June/July – Samples to sales force for January launches (6 months advance sell in)Second half of the year launches:– October/November – Decisions made at leadership team level of go/no go launches for back half of
the following year.– January/February – Samples to the sales force for July launches (6 months advance sell in)
Reinforce transparent, disciplined payback metrics
Peers measure innovation success primarily by revenue growth...Peers measure innovation success primarily by revenue growth...
...and only half measure performance of innovation process...and only half measure performance of innovation process
11
20
30
30
47
50
56
0 20 40 60
Higher prices
Respondents (%)
New-product success ratio
Overall revenue growth
Number of new products/services
Return on investment in innovation
Customer satisfaction
% of sales from new products/services
“How does your company measure its success with innovation?”
0
20
40
60
80 78
Agree
Strongly agree
52
Innovation process performance
Innovation inputs
Innovation outputs
% Agree
60
“My company collects and uses metrics to assess the following:”
Source: BCG analysis
• Initial launch reviews take place 12 weeks, 6 months, 9 months and one year after launch– Later reviews happen every 6-12 months
• Results are reviewed by cross-functional teams and include senior management involvement to highlight relevance of process
– A number of indicators are tracked• market share and consumer behavior• sales both for the product and for the category as a whole (consider cannibalization
and/or real category growth)• EBIT performance• return on investment (ROI)
– Performance is evaluated vis-à-vis business plan and supporting materials used during decision-making phase
• Under performing launches are put under close watch (“kill or cure”) – Usually given a defined period of time to design and implement turnaround measures– The decision to withdraw new products can be taken from as early as 6 months after
launch• usually “kill” decision is followed by an orderly withdrawal plan to avoid channel
conflict
Active monitoring determines product innovation success
Enables transparent risk management for everybody
Reviewsequence
KPIs
Sanctions
Source: BCG interviews; public information about P&G; BCG analysis
The Innovation Path
Paving the Road To Success For Pulmuone Foods USA, Inc.
Pulmuone US Situation Analysis SummaryConsumer Trends: The Boomer generation is getting older Asian & Hispanic populations are on the rise Households are decreasing in size Generation Y is coming into prominence Ethnic foods are quickly emerging into the mainstream Convenience factor is still important given busy lifestyles Consumers have defined that they want ‘wholesome’
foods, not foods to treat specific disease states With global obesity crisis, focus on healthy eating is more
important than ever.
Competitive Trends: Leverage Mega Brands Consolidation of brands into top 15 food companies Acquisitions have led to new segment opportunities and
capabilities Pasta competitors are crossing over into different
temperature states Restaurant/Chef inspired brands translating to Retail
Customer Trends: Focus on own label Increased pressure by retailers becoming their own
marketers and creating mega brands that cross categories and temperature classes
New alternative retailers filling needs of consumers desire for fresh, prepared, healthy products
Competencies: Needs Gap Largest Pesto manufacturer in the U.S. Tofu expertise – U.S. and Korea History and Track record in understanding Fresh Certified Organic positioning Fresh pasta/sauce manufacturing Open to alliances and partnerships Pulmuone does not have core competency in Frozen or
Ambient Pulmuone weaker in the area of branding/Marketing
Implications
Consumers:
Change is implicit, identify and react quickly
Build competence in convenient, portion controlled items
Focus on how to win in ethnic – Asian and Hispanic targeted offerings
Significant economic pressure leads consumers to look and challenge their definition of value by brands
Competitive
Increase partnership competencies to leverage brands into new temperature classes and increase presence across categories
Need to have broader appeal to Generation Y and early adopters to build cache and awareness for a lifecycle
Customer
Be nimble and flexible to take advantage of customer private label opportunities where appropriate.
Competencies
Identify ways to increase usage of Pesto
Identify ways to introduce innovation to Tofu to help it become more widely accepted by US consumers
Leverage the right partnerships/alliances to extend capabilities in the proper adjencies.
Vision
Authentic Wholesome Foods
Pulmuone will make healthy, delicious food that our consumers will be proud to serve their families.
Mission
Create products that consumers and customers regard as their partner in leading fuller, healthier lives
Consumers will consider our products as combinations of great taste, health and convenience that enable them to feel good about their purchase as they nourish their mind, body, soul, and values
Key Strategies
Create new value for existing brands via Renovation & Partial Innovation
Develop and leverage borrowed technologies/capabilities from Pulmuone corporate in Korea
Creation of expanded market space with breakthrough ideas and entry into larger categories
Expansion of target consumers with focus on emerging growth areas (Kids, Gen Y, Asians, Hispanics and Aging Baby Boomers)
Enhance internal capabilities - Gilroy
Enhance brand building and marketing competencies
Pulmuone Foods USA, Inc.
Innovation Vision & Mission
Strategic Innovation Plan
Circle Size = Market Size
Stuffed Dough / Sauces
Health• White WW flour• Ancient Grains• To your health• Sauce Plus
Flavors of the world• Empanadas• Calzones• Asian dumplings• Korean Rav
Kids• Shapes• Crunchy Rav• PBJ Rav• Grilled Cheese Rav• Burger Rav
Snacks• Pan fried desserts• Dessert Sauces
Culinary• Sauce cubes• Pasta bites
Convenience• microwavable
Authentic Wholesome Foods
Health & Well Being Simplify My Life Taste Experience
Vision
Pulmuone Foods USA, Inc. Innovation Roadmap
Need State
Platforms
Opportunity Platforms
Consumer Targets
MGF Wildwood
Adults Kids
Kids
Adults
Convenient Product Forms,Convenient Cook
More convenient,Disruptive packaging
Bolder, EthnicFlavors
New eating occasions
Platform areas: Ready When I’m ready, Distinctive Purity, Full Flavor Savor the Moment,Instant Enhancement, Next Gen quick meals, No-Fuss Quick bites, Light meal parter,Functional Health Selections, Carefull creations, top chef transformations, impressive dinner experience, self drivenHealth and wellness, experiential eating, Absence of negatives, light and simple, fast favorites, fresh prep quality
Last spring, we initiated a stage gate process with a cross-functional leadership team to review the gates. Since Gilroy start up, we moved away from this. We need to get back to original process.
Ideation• Idea in the
shower• Framed ideation• Idea screening • Idea Approval
(GATE #1)
• Target timeline: 1-2 weeks
Concept• Idea qualification• Market study• Concept
development• Concept testing• Concept
approval (GATE #2)
• Target timeline: 1-2 months
Development• Culinary recipe• Bench top• Pilot test• Production test• Sensory• Shelf life test• Mfg location• Go or No Go
(GATE #3, #4)• Package • Specification• Training
• Target timeline: 4-6 months
Launch• Item setup• Procurement• Production run• Sampling
• Target timeline: 1 -3 months
Tracking(Post Launch)• Quality• Sales
performance• Profitability
• Target timeline: assessment 6 months post launch
•SKIP for club itemsonly if flavor extension
Top Channel Trends
Top 50 Grocery Categories
Top GrowthCategories &
Top Kroger Categories
Pricing & Price ElasticityTrends of Different
Categories
Tasks & Sub Process by STEPId
eati
on ☑ Idea in the shower
☑ Thinking frame: 1) Strategic fit
2) Company core direction 3) Market fit 4) Consumer target 5) Estimated size of prize 6) Margin target set 7) Estimated resources 8) Estimated timeline
☑ Idea Brief☑ Product Brief
☑ GATE1: Idea Screening
Con
cep
t ☑ Idea qualification☑ Market study☑ Concept development☑ Concept board☑ Concept testing☑ Concept brief
☑ GATE2: Go or No Go Decision
Develo
pm
en
t
Lau
nch
Trackin
g
Deliverables
Idea or Product Brief
Deliverables
Concept Brief
☞ SKIP for club itemsOnly if flavor extension
Tasks & Sub Process by STEPId
eati
on
Con
cep
t
Develo
pm
en
t☑ Formula/Process development ▼ Primary recipe ▼ Bench top formula ▼ Cutting (☞CLUB: 1-2-3) ▼ Internal panel huddle ▼ Pilot scale test or PTR ▼ Consumer panel huddle (☞CLUB: Optional internal sensory & Buyer’s approval) ☑ Equipment assessment☑ Initial product info(cost,nutrition, ingredients)
☑ GATE3: Go or No Go
Develo
pm
ent
cont’
d ▼ Scale up production run▼ Consumer panel huddle (☞CULB: Skip this step)▼ Shelf life test – 70 days target▼ Product/Process spec
☑ GATE 4: Go or No Go
☑ Package development☑ Label development☑ Source identification Q/A
Lau
nch
Trackin
g
DeliverablesSensory Report, CAPEX
Assess.
Deliverables
Sensory report, IPS
The basic process architecture established a commonset of stages and stage decisions
SD2 SD3 SD4 SD5SD1 Assessment Development Preparation Launch Evaluation
AR signed First launch
Dedicated programteam formed
Learning loop
Creation
Audit reviewProgram charter
Idea brief
Researchcharter
Source: BCG interviews; public information about P&G; BCG analysis
These are defined by key decisions
SD2 SD3 SD4 SD5SD1 Assessment Development Preparation Launch Evaluation
AR signed First launchDedicated programteam formed
Learning loop
Creation
Audit review
Stage decisions• Creation of
Program Team, given prioritization
• Approval of contract fornext stage
• Business caseis proven
• Commitment to target launch timing
• Approval of contract and resources for next stage
• Product definition is frozen
• Commitment to launch volumes
• Approval of AR submission
• Approval of contract and resources for next stage
• Agreement to start production
• Commitment to launch plan
• Approval of contract and resources for next stage
• Approval of rollout plan for future markets
• Decision on scope and timing of evaluation
• Define when Programteam ends
Source: BCG interviews; public information about P&G; BCG analysis
Three teams are responsible for executing the process
SD2 SD3 SD4 SD5SD1 Assessment Development Preparation Launch Evaluation
AR signed
Learning loop
Creation
Audit reviewFirst launch
Program charter
Decision team–Senior Mgt Team
Program team
Categoryplanning team
Source: BCG interviews; public information about P&G; BCG analysis
The category planning team owns stage 1
SD2 SD3 SD4 SD5SD1 Assessment Development Preparation Launch Evaluation
AR signed
Learning loop
Creation
Audit reviewFirst launch
Decision team
Program team
Categoryplanningteam Program
charter
Source: BCG interviews; public information about P&G; BCG analysis
The CPT is responsible for generating and prioritizing ideas within their category
• Populate new-product grid and technology grid– Underlying technical
principles demonstrated– Economically attractive
Ideas
Iterative process of evaluatingand prioritizing ideas
• Complete program charter and stage contract for most attractive ideas
82004 SGP Key Issues / Opportunities - March 3,2004
Blades & Razors – 2004 New Product Requests
EB/ER 265 - Q4
Renovation
MarketPenetration
Innovation 2005 2006
EB/ER- 290 - Q1
2004EB/ER 246 - Q1
EB/ER-307 - Q2
S. Excel 3 - Q1
Elastomer Flanker - Q1
M3TurboBro3 - Q1
ER- 283 Flanker-Q1
ER-246 Fashion 2 - Q1
Custom Plus 3
Vector Plus- Ph I ILHOB Plus - Q1
Disposables
Systems
ER-309 - Q3
Vector Enhancement- Q1
Vector Plus - China - Q3
EB/ER- 313- Q4
M3 Champion (GLA) - Q1
EB/ER-320- Q2
2007EB/ER- 260- Q1
NOTE: M3 Disposable - TBD
SD1
Source: BCG interviews; public information about P&G; BCG analysis
The program team/extended team is responsible for executing on the program
SD2 SD3 SD4 SD5SD1 Assessment Development Preparation Launch Evaluation
AR signed
Learning loop
Creation
Audit reviewFirst launch
Decision team
Program team
Categoryplanningteam
Program charter
Source: BCG interviews; public information about P&G; BCG analysis
Role of the program team/extended team
PE&I
Product development
Mechanicaldevelopment
Fragrance development
Tech supportservices
ComOps(sales)
Package andgraphics design
Designservices
Package development planning
Mfg engineeringservices
Factories
Contract fill
New productscoordinator
MRD (consumerresearch, forecasting)
GBM
Finance (costestimating)
Finance(financial analysis)
Legal
GEHS
Manufacturingtechnologymanagement
Package development
Value chain
Finished goodsplanning
ComOps(planning)
Purchasing
New productsplanning
Product analysis
Product evaluation(sensory, microbiology,analytical, statistics,claims, consumerservice)Program
Team LeaderEngineeringor procure-ment
R&D
Business management
Value chain
Source: BCG interviews; public information about P&G; BCG analysis
Low complexity programs follow a simplified 'FastTrack'
SD2 SD3 SD4 SD5SD1 Development Preparation LaunchAssessment Evaluation
AR signed
Learning loop
Creation
Audit reviewFirst launch
Decision team
Program team
SD1Creation Assessment, development, production, launch, evaluation
Source: BCG interviews; public information about P&G; BCG analysis
There is a common prioritization tool and process
SD2 SD3 SD4 SD5SD1 Development Preparation LaunchAssessment Evaluation
AR signed
Learning loop
Creation
Audit reviewFirst launch
Decision team
Program team
Categoryplanningteam
Program charter
Portfolio
Source: BCG interviews; public information about P&G; BCG analysis