The 101 of How Product Innovation works?

With this piece, we take a look at how Product innovation works. Only a few years back, you would not have imagined food to be delivered at your doorstep. Yet today, Swiggy and Zomato are making that happen for you. You wouldn’t have thought about booking a taxi on your phone, yet, today, UBER and OLA are making that happen for you. So, how do these innovative ideas come about? That is what we discuss in this piece today.

For this piece, we’re hosting Mr Saurabh Bajaj, he is an industry veteran and is currently working as the Head of Marketing, Dairy, at Britannia Industries. We’ve hosted him previously for demystifying What is Marketing Strategy, The 101 of how an advertisement is made, both the pieces had received a tremendous response. For the love that we have for him, we’re now going to set up a corner for his posts, so every time you want to read his pieces you can head to that corner and you will see all that you need.

Alright, let’s jump right in the piece!

So, how does Product Innovation work?

Innovation is truly one of the holy grails of marketing.

It often feels like business growth for free! After all, what does one really have to do? Figure out a product that is big globally but perhaps hasn’t found its way to India yet. Maybe a pretty wrapper, maybe some smart Facebook posts, and voila you are bathing in gold! But Innovation is perhaps the most precarious marketing tool. Too many brands and companies have lost their way on the back of an Innovation strategy that ran wild. Where they spent out too much money to support the new kids on the block instead of investing in your core. However, there can really never be anything more gratifying for a business when an Innovation succeeds!

Let’s take a look at the basic framework or pointers, if I may, that lead to an innovative product. There are several concepts of Innovation that are important to understand, as well as a few learnings that can guide your journey. Some of the areas that we will cover with this piece are:

  • Finding those Big Ideas
  • Types of Innovation
  • The process of Innovation – Stage-Gate Process
  • Innovations that work & some of those that don’t
Finding those Big Ideas

The cardinal truth of Innovation is to search for that unmet consumer need. That definitely sounds like jargon! However, remember what Henry Ford said:

If I asked consumers what they wanted, they would have said a Faster Horse

So asking the consumer what she wants you to launch is definitely not a great idea! So what does one do? Where do those breakthrough ideas come from! I learnt in Diageo, that those ideas come from an occasion. Whatever your category, get into the occasion, visualize your consumer, what is he or she doing? Can you think of a simple way to make that task easier?

Some examples of such innovations are the launch of Crown Royal Apple flavoured Whiskey. Marketeers noted that in Canada, a whiskey cocktail with apple juice was becoming popular so they launched a Whiskey liquor with apple flavour! Another such interesting example is Baileys. The occasion that Diageo was trying to crack, was one where women are comfortable drinking some alcohol, and to behold, the dessert occasions, especially during Christmas led to the launch of one of their 6 global giants.

Crown Royal Apple TV commercial. Do you know ads like these are banned in India? Check Surrogate marketing

However, the essence is always to dive deep into the occasion and identify what you will replace as the starting point for most innovations.

Related: Take a look at the story of Ola: How being stranded out of nowhere - led to the birth of OLA.
Types of Innovations

Now there are several ways of categorizing Innovations, however, the framework that I find most consumer-driven is ‘New News’, ‘New Occasions’ & ‘New Behaviors’.

New News Innovations are basically those Innovations that replace an existing occasion, so if you launch a new flavour or variant, say a dark chocolate flavoured milkshake, you are most likely to replace one of your existing milkshake occasions by this one. Recruit innovations bring in some fresh excitement for your Brand but typically cannibalize an existing occasion and only bring limited incremental business. Hence it’s often recommended that Recruit Innovations should come in and replace an existing SKU to manage business efficiencies and avoid that long tail.

Related: Take a look at the story of Paperboat

New Occasions Innovations give your existing consumer New Reasons to consume your Brand. So if your Brand is Cadbury Dairy Milk, launching Cadbury Dairy Milk Shots offers the consumer one new occasion to consume Cadbury Dairy Milk in, say an occasion where he might previously have consumed a sugar boiled candy. I find Re-Recruit Innovations often the most successful as they often need limited investment to support and yet bring reasonable incremental business.

Related: Take a look at the story of Mondelez India

New Behavior Innovations are the most exciting and riskiest. Most marketers should really tread carefully here. Because here you are venturing into the unknown, into a territory where your existing business has limited equity. So in my mind, the most important rule to follow with Disrupt Innovations is to research them adequately and create a war chest that you can afford. Phase them out, perhaps no more than 1 or 2 in a year with adequate money to support them and enough research/ in-market testing that the organization is ready to truly support them. An example of a Disrupt Innovation in recent years would be the launch of Smart TVs by Mi or the iWatch by apple.

Apple Watch commercial
The Process of Innovation

Most companies follow a structured Innovation approach called the Stage Gate Process, it is usually divided into 5 Stages:

  • Idea
  • Concept
  • Full Mix
  • Launch
  • Post Launch

The Stage-Gate Process is basically driven by the right questions to be answered at each Gate and a project is only allowed to pass through if the right answers have been found by the team.

In the Idea Phase, you basically look at the new projects that are introduced. The key question to be answered here is, what’s the unique consumer opportunity that has been identified? The second question is ‘How does this consumer opportunity fit to the Organizations pre-defined strategy? & finally ‘Does the idea hold the promise of making money?’

In the Concept stage, you understand the consumer & the occasion in detail & arrive at the unique concept that you are trying to solve for. At this stage, a Concept Test is often done with industry benchmarks.

The third stage is the most crucial, as you now create a full mix – Concept, Product (Lab Sample), and Pack. The same is put into a Product Concept Test. This test is quite stringent & if you get a reasonable volume estimate from the research, you can ask the organization for money for factories, lines, etc.

Post Gate 3, you get into Launch preparation and your put your lines, etc, and validate that the product off the lines meets the norms prescribed in the lab sample.

And finally in the Post Launch phase you study the business impact basis metrics that were defined & agreed upon!

Innovations that worked and a few that didn’t

I have had a good fortune of witnessing many successful and a few not-so-successful Innovations in my career. However, I can broadly divide them into 2 clear buckets, those that worked & those that didn’t. And there were some fairly intuitive rules that made the difference!

Innovations that Worked: Most of the Innovations that I have seen successful aligned to one simple golden rule, they took the Brand proposition forward and avoided becoming the competition. Some examples are:

  • Cadbury Silk Oreo: New News Innovation, that gives the consumer a reason to try a different Cadbury Silk and offers fresh excitement
  • Cadbury Shots: New Occasions Innovation that helps chocolates enter the candy occasions.
  • Cadbury Celebrations: A New Behavior innovations that made Chocolates from a modern meetha to an actual mithai replacement

Innovations that I am not a fan of: Those Innovations that are too close to a competition offer are innovations that I am not a fan of & I have seen usually struggle.

  • Cadbury Dairy Milk Crispello: Now it’s a recent launch, and the verdict isn’t out yet. But if you ask me, if I want to eat a Kit Kat, I will eat a Kit Kat!
  • Cadbury Fuse, Cadbury 5 Star Nutty: Again the same thing, if I want to eat a Snickers, I will eat a Snickers!
Cadbury Fuse ad
In Summary

Running a robust Innovation funnel is one of the most critical tasks for any Marketing Manager. However, the crucial principles are important:

1. Ensure that your Innovations/ideas start from the Consumer or the Occasion, rather than directly a product idea, so you know that you are solving for a genuine gap in the market!

2. Build a healthy mix of all 3 types of innovations. The New Innovations are similar to activations & keep your Brand fresh. New Occasions usually are the most successful. New Behavior Innovations need Investment & Timing.

3. The Stage Gate process is an important tool to ensure clear decisions are made & timelines are tracked.

4. Finally, Innovations that work start from the core of the Brand and extend the Brands usage into new occasions or behaviours. Innovations that don’t work, usually try and take on the competition, in the competitor’s turf!

All, in all, a journey full of excitement & perils to be navigated thoughtfully!

Author

The author of this piece is Saurabh Bajaj, if the piece adds value, head on to LinkedIn, and drop a thank you. You can also share the piece with your best friend on WhatsApp.

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