Knowledge Bank Blog, New Product Launches

Near In Innovation

Is the big idea, closer and smaller, than you think?

Last week we talked about ‘small details’.  How small things can have a disproportionate impact on what people think about a product or experience.  And which often allow you to charge more for it.

We think something similar applies to innovation.  Yes, there are breakthrough innovations – Henry Ford didn’t come up with a faster horse.  However, if you look at many industries, progress is often based on small, incremental improvements.  Things that, together, add up to significant change.

A great example of this recently has been in cycling. UK Cycling & Performance Director, Dave Brailsford developed a concept called ‘marginal gains’.  His belief was that if you improve every area related to cycling by just 1%, then these small gains would add up to big overall improvements.  So, the UK cycling team searched for 1% improvements everywhere – the most effective massage gel, getting riders to wash their hands properly to avoid infection, even taking the pillow that offered the best sleep to every hotel.

Did it work?  Well, in 2009 no British cyclist had every won the Tour de France.  Brailsford believed the marginal gains approach could deliver a Tour win in 5 years.  He was wrong.  They did it in 3 years – with Bradley Wiggins.  The next year they won it again, with a different rider – Chris Froome.  In between the UK cycling team won 70% of available gold medals at the London 2012 Olympics.

Was it all down to the pillows?  Probably not.  But when all the riders and equipment are of a similar quality, then it is often the small things that can make a difference – the difference between winning and losing.

Why is this important to us?  Over time the playing field in many FMCG categories has levelled.  Having an ownable quality advantage is hard.  Many categories are mature, with high penetration and frequency.  Growing categories is often about getting shoppers to pay more.  But getting them to pay more can be hard.

We think one of the keys to do it is making relatively small tweaks to familiar products.  What we call ‘near in innovation’.  It gives shoppers the comfort of the familiar with a twist of the new.  The change is small, but the incremental value can be big.

So, what do we specifically mean and how can you deliver this?

Find your +1 benefit.  The thing that you can add to an existing product that makes it different and potentially more valuable.  For example, the bathroom spray that is anti bacterial, the turkey steaks with BBQ marinade, the Heinz Tomato Soup with a Kick of Chilli.

How much can the +1 benefit be worth?  Well, the bathroom spray is at a 33% price premium, the turkey steaks are a 40% premium, and a ‘kick of chilli’ is a 58% premium.  So, not bad.

Optimise Format & Size.  More and more innovation will be, or certainly should be, about product and pack format.  Less about the next flavour or variant to add to the 7 or 8 that already exist.  And more about putting winning products (flavours or variants) in ultra relevant and convenient formats and sizes.  The larger, lock in pack, for E-Commerce.  The single serve, on the go pack, for Convenience stores.  The differentiated pack size at a specific price point for Discounters.

Why take all the risk of bringing a completely new product to market when you have a winner already and you only need to tweak the format or size?

Signpost the Occasion.  Have different products that meet different usage needs and occasions.  For instance, this is the product for the fridge.  This is the one for the lunchbox.  This is the one to use as an ingredient.  A great example of this is Cathedral City.  They used to sell big blocks of cheddar cheese.  They still sell blocks of cheese, but they now come in a variety of shapes and sizes.  Nibbles for Salads.  Sliced for sandwiches.  Chedds for Kids’ lunchboxes.  Minis for Adult lunchboxes.

Minor product tweaks, that give them access to a range of consumption occasions. At a significant price premium that many shoppers will pay.

We are not saying forget about big ideas.  The big, breakthrough innovation is still worth its weight in gold.  However, big ideas cost a lot of money and come with a lot of risk.  Smaller ideas cost much less and often come with a reliable production and demand base.

Small incremental improvements, or marginal gains, can add up to very big wins.  Will you win an innovation award as a result? Doubtful.  Will you significantly grow sales?  There is every chance.

Is the real innovation win a lot closer than you think?

On a separate note, our article for The Grocer goes out tomorrow.  You can find it in the ‘Comment & Opinion’ section.  We also have a link to it on our website ‎

Have a great weekend and speak to you next week.