Bill Read of Accenture on an Innovation-Driven Market

Sustainable, profitable innovation is critical to the ability of companies to achieve high performance in today's bid for tightening consumer dollars.  According to Accenture research, high-performance businesses introduce more new products and bring them to market much faster than their peers.

Recent research from AMR Research reflects Accenture's findings linking innovation and high performance, and found that the top quartile performing companies launch more than 25 times the number of products compared to the bottom quartile performers, and they generate 20 percent more revenue from new product introductions.  Moreover, the top quartile high performers' speed to market is nearly five times faster than their peers.

To achieve a return on innovation investments and effectively compete in the marketplace, consumer packaged goods companies must develop innovation processes that will continually satisfy and evolve with consumer needs. Accenture recommends three techniques that can help companies succeed at innovation and enjoy significant returns on investment. They include:

• Developing  actionable insights to inform product development ideas and investment
  
  
• Adopting  a repeatable process and capabilities to increase speed- and scale-to-market
  
  
• Mastering the right product mix to improve top-line profitability

Actionable Insights

High-performance businesses show that gathering and synthesizing consumer insights from a variety of sources, and applying them to new product development efforts, can quickly drive margin and profit improvement.  Accenture calls this approach "actionable insights," where multiple forms of commercial intelligence and consumer insight are synthesized using standard processes and tools to present a comprehensive view of a market.

Accenture research found that 15 percent of high-growth companies possess these analytical capabilities, compared to only 3 percent of low-growth companies -- illustrating that the ability to conduct deep, sophisticated analytics is a key factor in achieving high performance.  This skill will become increasingly  valuable to companies expanding into emerging markets, where reconciling global scale with local insight -- the new reality Accenture defines as the multi-polar world -- can fuel further growth.

Consumer products companies that fail to use insights to apply innovation, which consistently gives consumers the products they want, will find it increasingly difficult to compete -- particularly as buying preferences become more selective in a weakening economy.


Repeat, repeat, repeat

Once the right products are determined, a predictable process is needed to keep on-target products moving toward store shelves, while delivering bigger and better ideas to the portfolio that will repeatedly hit the mark. While having such a process does not guarantee success, Accenture believes it's crucial, and the key is adopting what it calls a "fast innovation" framework that is  comprised of three components tied directly to creating value. These components, which can have a positive impact on growth, future value creation, innovation levels and pace, and the return on innovation investment, include foundation, conversion and execution. 

Companies must build a foundation on quality insights that flow from various sources to ensure  their innovation strategy is truly based on customer needs. In addition to market intelligence, companies should employ "open innovation," getting different opinions and perspectives on customer needs from people outside of the company. This includes tapping into core business support, such as design networks, which seek to capture and evaluate product ideas from suppliers, partners and other external sources.

Conversion involves companies having the ability to balance short- and long-term innovation bets, taking ideas from inception to reality, incorporating the voice of the customer in the pipeline, and differentiating products to convince consumers their items are the ones to buy.

And, executing consistently requires standard processes, supported by identifiable, accessible tools, resource and performance management, and an organizational structure that includes partners and networks. This practice will help to ensure getting the right product out the door on time and
on budget.


The Right Product Mix

Finally, having a portfolio with the right product mix is essential to sustaining profitable innovation.  The proper mix can reduce the company's portfolio cost base, make its supply chain leaner, its manufacturing more efficient, increase retailer sales and boost overall company profitability.

Understanding incrementality relative to the right product mix is important too. For instance, a small volume product can help sell a related item on the shelf as part of incremental sales. The right incremental product contributes to reduced cost, wider profit margins and goes to the heart of developing a product mix that will cement customer loyalty short- and long-term.


Achieving High Performance 

The capabilities required for successful product innovation can be mastered, as high-performance businesses have demonstrated. Despite a challenging market, companies that develop deep, actionable analytics, a repeatable process and maintain the right product mix can succeed in today's market and  the emerging multi-polar world. For more information, visit www.accenture.com/Global/Research_and_Insights/By_Industry/Consumer_Goods_and_Services.



By Bill Read, Client Partner and Overall Supply Chain Strategy Leader in Accenture's Consumer Goods & Services practice