Day / November 13, 2006

by Roger Dennis

McKinsey article : Reinventing innovation at consumer goods companies

The latest issue of The McKinsey Quarterly has an article titled “Reinventing innovation at consumer goods companies.” If you’re in this sector, it’s a relevant and insightful read. If you’re in a product design company, it’s old news.

Nevertheless, the highlights are worth digesting :

On predicting the success rate of new products :

“Consumers are notoriously poor at articulating needs or benefits beyond those they have already experienced: when asking them to imagine true innovations, companies get mixed results at best”

On innovation outside the core :

“…a recent analysis across major consumer goods categories demonstrated that the overwhelming majority of US patents arose outside the top seven global consumer goods companies. In the laundry and home care category, for example, 95 percent of the patents filed from 2002 to 2005 did not originate within them. Indeed, the leading companies constitute only a tiny fraction of the world’s consumer goods innovators.”

On sourcing new ideas and the requirement for peripheral vision :

“…our research suggests that few companies look beyond their advertising agencies, to the many alternative external sources of insights: suppliers, venture capital firms, entrepreneurs, and inventors. This oversight may prove costly, since external partners can spot trends, create competition for complacent in-house teams, share technologies and manufacturing processes (in some cases developed for other purposes), and even craft fully developed product concepts. […] Given the power of outside ideas, companies should experiment with various approaches for sourcing, jointly creating, and commercializing intellectual property with external partners.”

The article concludes by saying something that will ring true with many industrial design companies :

Such approaches [to success] might, for example, include iterative rapid prototyping, which uses product concepts to create an ongoing dialogue with consumers whose comments shape the design throughout the development process.

by Roger Dennis

Interview with Tony Ulwick – author of “What Customers Want” (part 3)

(…continued from part two)

5. Since your book came out, what has been the reaction to the idea?

Generally, once people understand the fundamentals of what we are describing here, they love it – it has logical appeal. After all, we are simply saying that companies must uncover and prioritize their customers’ needs and use that knowledge to drive innovation. This has been accepted thinking for decades. Outcome-driven innovation is different in that it incorporates new ideas about just what a “need” is and how they are captured, prioritized and used to drive innovation. It brings needed precision to the process of innovation, transforming it from an art to a rules-based discipline.


6. Is there a particular sector/area where outcome based innovation is best applied?

For a theory to be sound, it must apply in all situations and circumstances. From our experience, outcome-driven innovation theory can be applied in all circumstances and situations as it is focused on the very fundamentals of innovation. We have achieved success in B2B and B2C environments, small medium and larger businesses and in nearly every industry you can image – from heart defibrillators and consumer products to bananas and insurance services – from enterprise software and printers to chemicals and ware washing equipment – the applications are endless. The thinking can be applied to any situation in which a person or a company is trying to figure out the best solution to satisfy a set of customer outcomes.


7. Some people I have talked to about the concept think that it’s Marketing 101
– understanding the customer. How have marketing teams reacted to the process?

Understanding the customer is Marketing 101 – but companies continue to fail to get it right. Why? Because most innovation processes lack standards and precision and instead breed variability – the enemy of predictable innovation. For example, to this day companies unknowingly collect several types of inputs as part of their VOC efforts, e.g., a mix of solutions, product specifications, needs, wants, must haves, exciters, latent needs, delighters, benefit statements, etc. In reality, these are all different types of inputs with different purposes, structure, content and format – and it is this inconsistency in customer inputs that breeds variability and failure throughout the innovation process. As a result, companies are not effectively addressing customer needs as evidenced by the dismal rate of new product successes.

Marketing teams that realize they can get more out of their innovations programs love our model – it addresses many of the challenges they have faced for years. If you look at our client portfolio you will see that it is the more sophisticated companies that realize that the process is broken and precision is the key to success. Many companies, however, still think that any customer input is a good input – this old thinking will change as the more sophisticated companies pull away.