In the past, product innovation process, particularly for consumer products, was relatively straightforward and standardized across all companies. At that time, companies developed first-of-their-kind products. As a result, innovation was centered around simply what the product did and did not emphasize how it functioned. Companies identified a need, generated a manufacturing plan, rolled it out with little fanfare and consumers were expected to be dazzled by the mere fact that it was “the first to do X”. As it was typically the only option available on the market, sales growth was essentially guaranteed. Although the product was designed for the consumer, product developers never considered the opinions of the consumer. It was the “build it and they will buy” era of CPG.
Fast forward to today. We live in an era in which the product innovation process is changing rapidly. Here in 2018, product innovation is inclusive of the consumer from product inception to market adoption. New market research technologies are designed to tap into this collective consumer mindset and are focused on emphasizing the “how” of a new product. These changes in the product innovation process are critical given today’s competitive market where copycat products can be developed and consumers are more demanding than ever.
Does Data Trump Creativity in Innovation?
Innovation sparks creativity, new-to-world ideas, mind-blowing concepts, colorful sources of inspiration, unicorns and the like. Innovation is hardly synonymous with bits and bytes, ones and zeroes, spreadsheets, statistics and data points. However, this is precisely how the product innovation process is changing. Today, companies are data-driven. In a global marketplace, companies may be selling their products and services to millions of consumers, and in the case of the tech giants, billions of consumers. Tapping into their collective mindset, finding patterns in their thinking and behaviors and trying to identify trends before they become mainstream is paramount to spark product innovation.
Today’s product innovation process has customer-centricity as the most critical element. All innovators recognize the essential need for customer input. Adopting a customer-centric philosophy can be a company’s hallmark or its Achilles’ heel. Successful innovators tend to front-load their efforts so that product innovation loops repeatedly through the concept-presented-to-consumer stage until they get it right. Getting it right requires a stringent stage-gate process where consumer input is collected, interpreted, acted upon then presented back to the consumer to secure approval to move the product along to the next stage. Doing so requires hitting defined metrics, turnaround time, favored majority, differentiating buyer personas by fully understanding their geographic, demographic, psychographic and other nuances detected through market segmentation analysis. Measuring effectiveness, efficiency at each stage, calculating risk and other data-driven efforts have been shown to lead to greater success in developing intellectual property and generating corporate growth versus companies who do not apply marketing science.
The product innovation process has shifted from the waterfall model, where a new concept is proposed and the sequential series of steps of scoping out the requirements, identifying the technical challenges and solutions, progressing the product through development to launch. Now, the product innovation process is dependent on digital transformation. Specifically, to enable consumer engagement from the very beginning, to track and monitor the product innovation process along the way and allow flexibility within the system to refine the direction when the insights collected suggest the developers do so.
Real-World Examples of Product Innovation in 2018
The simple process of collecting “likes” versus “dislikes” from consumers exposed to variations of a concept, and diving in to understand the reactions, is important to understand how the product should work. Facebook, a near trillion-dollar company, launched on that simple premise alone – who liked or disliked whom – and grew the concept into a global standard for nearly everything. Consumers vote with their thumbs up, or down, to indicate their preference and influence everything from politics to product innovation.
For example, in 2012, Wendy’s, the fast-food burger retailer, was in a slump. They conducted extensive market research, worked collaboratively with their customers and suppliers, and focused on a data-driven, shared product innovation process to spark change. Researchers identified the need for quick service pricing, faster check-outs, more “grab-and-go” options and more interesting taste combinations. Within a year, they were recognized as the fast-food restaurant of the year, they received numerous trophies and accolades and, most importantly, their shareholders were duly rewarded.
IHOP took a slightly different approach earlier in 2018. Data-driven, yes, they studied their revenues and noted that their lunch and dinner burger sales were below the industry benchmark. FYI, burgers are the #1 restaurant item ordered in the USA. Was this a true customer-driven decision that incorporated collaborative consumer feedback? Apparently not. On June 4, 2018, they took what they claim to be a calculated and deliberate risk by changing their name to IHOB to emphasize “burgers” and de-emphasize their association with pancakes. The consumer backlash was swift: there was no need for a super-computer to count the “likes” – there were none. The move generated 30 billion impressions and 20,000 news stories. Nearly two months later, they returned to their iconic IHOP brand logo.
Product Innovation: Collaborate with Your Customers
Each company is approaching the product innovation process slightly differently, but there are a few common threads between each example of product innovation.
1) Adopting customer-centricity from Day 1
2) Achieving a data-driven focus through digital solutions
3) Focusing more on the how (the experience with the product versus on the what it does)
At its core, the concept of collaborating with your customers, from the beginning stages of product development through the product’s end-of-life, is the primary change in product innovation that we are seeing in 2018.