Innovation at a Crossroads?

Retailers and manufacturers thrive on innovation, but there never seems to be enough and economic conditions are challenging. CGT’s Publisher Albert Guffanti asks Trevor Davis, IBM Consumer Products Expert, to share insights on the future of innovation and how technology can help us get closer to the consumer, create more sustainable products and create new sources of growth.


What is the current state of innovation in the industry?

Davis: At NRF 2013 the retail industry demonstrated great creativity with store formats and use of the web. However, innovation in consumer brands is less evident.  During the last decade, new products have relied on packaging innovation and minor extensions; perhaps the consumer goods (CG) industry has lived off incremental product innovation for too long. The current global economic crisis has changed the business landscape and consumer spending with it. If CG companies want to attract consumers, then they need greater emphasis on breakthrough products that are designed to fit with a superior shopping experience across all retail channels. An IBM study in 2010 showed that only 4 percent of products under development in the industry could be considered breakthrough.


How have CG companies responded to this challenge?

Davis: After a slow start, the industry is adopting product lifecycle management (PLM) practices and technologies to improve efficiency in end-to-end new product development and introduction (NPDI) processes. This brings more accurate and timely data for decision-making in the development funnel. However, this hasn’t addressed the underlying challenges of incrementalism and risk-avoidance.

In the early 2000s, academic Henry Chesborough saw competitive advantage in blurring the boundary between an organization and the external environment. He saw breaththroughs flowing from access to a world of widely distributed knowledge, and, starting with Connect & Develop at P&G, this thinking led to more collaborative “open” innovation in the industry. Advocates now include Unilever, Kraft and General Mills. However, retailer collaboration remains an area where more progress is needed.


What does the future hold?

Davis: Over the next few years the NPDI agenda for consumer goods will increasingly be dominated by the search for more sustainable products with high consumer and retailer appeal. This suggests a greater focus on front-end activity, like scouting for ideas and technologies, to provide consumer and market insights. Ideation must be matched with investment in scientific discovery to create new and sustainable platforms — if CG companies don’t take a lead, regulators in mature, developing and emerging markets will. Retailer collaboration is likely too.

Information technologies are starting to have a major impact. For the core design and development process, PLM is widespread in the industry as are 2D and 3D CAD. The next stage is to embrace cloud computing, Big Data, social business and mobile to address some of the key knowledge management and collaboration challenges and get to a new level of effectiveness and agility. Not just open innovation, but “open, social and mobile” across an ecology of innovation players.