Billions of dollars are spent on developing and launching new consumer packaged goods (CPG) products each year, and some companies see tremendous success while others – don’t. Why? One secret appears to lie in the degree of senior management involvement in the creative process, according to a first-of-its-kind study unveiled today by The Nielsen Company at its Consumer 360 Conference, the global intersection of what consumers watch and buy.
Nielsen’s research of the innovation processes at 30 large CPG companies operating in the U.S. reveals that companies with less senior management involvement in the new product development process generate 80 percent more new product revenue than those with heavy senior management involvement. Companies that employ this and other best innovation practices derive on average 650 percent more revenue from new products compared to companies that do not.
“New product innovation is a top priority of every major company CEO, yet success varies so widely that it’s absolutely critical to understand what drives successful innovation and what undermines it,” said Tom Agan, senior vice president and managing director, The Nielsen Company. “Once you understand it, then you need to ask yourselves, are we living it?”
Nielsen’s research shows that simply being physically near corporate headquarters can stifle new idea generation. In fact, it turns out that having no Blue Sky innovation team at all is better than having a team on-site at corporate headquarters. The best place for your breakthrough innovators? Far, far away.
According to Nielsen, companies with an off-site Blue Sky innovation team report 5.7 percent of revenues coming from new products, compared to 4.8 percent from companies with no Blue Sky team at all.
Companies with Blue Sky teams on site report just 2.7 percent of revenues coming from new products.
“One of the keys to successful new product innovation is to manage new ideas lightly,” said Agan. “While we don’t dispute senior management’s strengths and good intentions, they are often too quick to get involved in the creative process, especially when things are not going well, and their mere presence can stifle free-thinking and boundary-less ideas – which can doom the new product development process to failure.”
Senior management needs to play a different, more important role in new product development. Nielsen’s research shows that another important key to success is for senior management to precisely manage the new product development process, not the ideas themselves. According to Nielsen, CPG companies with rigid stage gates - - decision points in the process where a new product idea must pass certain criteria to proceed forward - - average 130 percent more new product revenue than companies with loose processes.
“New product development success comes down to two important principles - - managing ideas lightly while managing the process precisely,” said Agan.