The trouble with innovation

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The trouble with innovation

  1. 1. Innovation & Product Development © TNS The Trouble with Innovation Presented by: David Soulsby June 2013
  2. 2. Innovation & Product Development © TNS Innovation is the ‘go to’ strategy to deliver against stretch financial expectations Today’s Base Business Tomorrow’s Target Today’s Base Business Tomorrow’s Identified Opportunities (incremental) Growth GapTomorrow’s Identified Risks to Base ? 2
  3. 3. Innovation & Product Development © TNS But generally failure rates for innovation are unacceptable….
  4. 4. 1 Delivering successful innovation
  5. 5. ©TNS 2012 What is the definition of a successful innovation? 5 To understand what drives successful innovation TNS have undertaken R&D across a range of categories based on Kantar WorldPanel data, ie household purchase panel. We looked at the importance of: • Total sales for the new product • Incrementality = 100% - Cannibalisation %
  6. 6. ©TNS 2012 What is the definition of a successful innovation? 6 • Survival Is the product still available (in distribution) after 2 years?
  7. 7. ©TNS 2012 Sales volume for the new product is a strong predictor of survival 7 ….but is survival really success?
  8. 8. ©TNS 2012 What is the definition of a successful innovation? 8 • Survival? • Providing growth to the business that is stronger than the category development = “successful growth”
  9. 9. ©TNS 2012 9 0% 20% 40% 60% 80% High volume High incrementality Medium volume High incrementality High volume Low incrementality Medium volume Low incrementality Low volumes Probability of successful growth If you are looking for growth, biggest is not always best Incrementality is the key to success Example: Laundry category Note: Incrementality = 100% - Cannibalisation %Source: Kantar WorldPanel
  10. 10. ©TNS 2012 10 Source: Kantar WorldPanel …and this applies across a range of categories
  11. 11. ©TNS 2012 But the news get’s worse for the ‘cannibals’ ….. ….they often lead to an overall decline in business! Profile of launches with high volume but low incrementality 0% 20% 40% 60% 80% 100% Laundry Savoury snacks Soft drinks Skin care Failure Survival but decline Limited Success Full success
  12. 12. Innovation & Product Development © TNS So TNS believe incrementality must be built into the way we assess new products throughout the process Which of these new products offer the best growth opportunity? Product A Product B Product C Product DProduct A Product B Product C Product D Sales six months after launch (€m) 12
  13. 13. Innovation & Product Development © TNS So TNS believe incrementality must be built into the way we assess new products throughout the process Biggest is not always the best Overall potential doesn’t necessarily measure the growth potential of an idea Product A Product B Product C Product DProduct A Product B Product C Product D Sales six months after launch (€m) CannibalisationIncremental volume 13
  14. 14. Innovation & Product Development © TNS Once the decision has been made to invest in product development it is difficult to ‘put the brakes on’ a project Source: Cooper & Kleinschmidt 29% Prelim market assess Idea screening Prelim tech assess Market study Financial analysis Product development In-house prod test Customer prod test Test market Pilot production Business analysis Production Market launch Average % of innovation spend 14 And, you need to know you are backing growth ideas early in the process
  15. 15. 2 Identifying the innovations which can deliver growth
  16. 16. Innovation & Product Development © TNS The current norm – biggest is best ….but trial potential is only part of the story 16 Trial potential HighLow STOP REWORK PROGRESS
  17. 17. Innovation & Product Development © TNS % Incremental Low Our database shows considering incremental growth potential provides a better perspective Concepts that could grow the business, but would be traditionally screened out High Low Should we progress these cannibalistic concepts? High Trial potential 17
  18. 18. Innovation & Product Development © TNS Understanding incremental growth potential provides better advice Traditional categorisation based on highest trial potential Progress StopRework 18
  19. 19. Innovation & Product Development © TNS Understanding incremental growth potential provides better advice When we build in incrementality, in 40% of cases you would make a different screening decision Progress StopRework 19
  20. 20. Innovation & Product Development © TNS Winning cannibal? Initiatives with broad appeal that will cannibalise the existing franchise. Incremental winner Initiatives with strong growth potential De-prioritise Initiatives with narrow appeal and limited growth potential Investigate Initiatives with moderate growth potential which have stronger appeal among Early Adopters 20 Concept eValuate identifies the new product ideas that will drive growth early in the innovation process Cannibalisation isn’t always bad: • Better margin (but rare) • Defensive when you have a weak parent
  21. 21. Innovation & Product Development © TNS Understanding incremental growth potential means better advice New categorisation taking account of growth potential Incremental winners Investigate De-prioritiseWinning cannibals? 21
  22. 22. Innovation & Product Development © TNS Uniqueness does not guarantee incrementality In fact, you cannot predict incrementality from other traditional measures Correlation (R) with: Purchase intent -0.32 Uniqueness 0.21 Liking -0.24 Value for money -0.02 Believability -0.05 22
  23. 23. Innovation & Product Development © TNS “Definitely would” buyers are more important than “probably would” buyers To predict incremental growth accurately you need to understand people as individuals Aggregate analysis treats all respondents as equals - but Heavy buyers of the new product are more important than light buyers 23
  24. 24. Innovation & Product Development © TNS Proof that individual modelling doubles the accuracy of the incremental growth estimate More accurate Less accurate Salad dressing Toothpaste Dishwasher tablets Snacks CSD Shower gel Traditional aggregate model TNS individual model Accuracy of cannibalisation estimate 24
  25. 25. Innovation & Product Development © TNS Individual modelling isn’t easy. TNS has 20 years experience and validation that our models are predictive In-markettrialrate Trial index weighted by marketing plans 25
  26. 26. 3 Example
  27. 27. TNS © 1.24.2013 Test project Assuming 100% awareness and distribution. Based on Total Category Buyers % Trial Bottom 50% 50 - 25% Top 25% Bottom 50% benchmark Top 25% benchmark Trial 50 0 37 Concept 1 32 Concept 2 21 Concept 3 21 Concept 4 30 36 Identifying the concepts with strong trial potential is only part of the story
  28. 28. TNS © 1.24.2013 Test project Assuming 100% awareness and distribution. Based on Total Category Buyers Incremental Non-incremental Bottom 50% 50 - 25% Top 25% Bottom 50% benchmark Top 25% benchmark Trial 50 0 26 Concept 2 21 Concept 3 19 Concept 1 18 Concept 4 20 25 Winning cannibal? Incremental winner Investigate De-prioritise To maximise your chance of success you need an understanding of incremental potential
  29. 29. TNS © 1.24.2013 Test project Concept 2 Incremental winner Development guide Product expectations: Natural ingredients Spicy flavour Price point: €2 Target Brand X buyers Watch out Weak credibility Growth 6 26 32 Topspin 45 Uniqueness 35 Early Adopter trial 42 Excitement Based on Total Category Buyers Incremental growth Brand cannibalization Bottom 50% 50 - 25% Top 25% Precise development plans aid speed to market
  30. 30. 4 Successful growth through innovation
  31. 31. Innovation & Product Development © TNS TNS identifies winning ideas for growth  Biggest isn’t always best. Incrementality provides the key to growth potential  Individual-based modelling provides more accurate screening and prioritisation based on incremental growth potential  Back the right projects early in the innovation process to optimise speed and efficiency 31

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