Innovation in consumer goods

Related to our previous article on new business models for innovation, McKinsey has a piece on reinventing innovation in consumer goods companies (subscription required) which challenges companies to reconsider the assumption that innovation starts with existing business models.

Four orthodoxies are particularly ingrained in the consumer goods industry:

  • Innovation starts with existing business models and categories.
  • Focus groups are at the heart of efforts to generate the insights companies need.
  • Companies should rely on internal resources first for innovation.
  • Companies should come up with as many ideas as possible and “let a thousand flowers bloom.”

The first point is that new business models can mean new levels of returns. The second says that there is more to life than focus groups reveals and to really understand your customers, their lives, and how you can possibly add value to their lives, you need a wider array of techniques and tools.

The third point is not the self-serving consultants argument that you should hire more of us, but that you need to build an innovation network of partners and acquisition targets. The last point suggests that companies should be more aggressive in pruning their innovation pipeline and product lines, and it pulls in the usual Clayton Christensen-inspired insight that “rather than treating all projects equally, consumer goods companies should recognize that they can’t develop incremental innovations and breakthrough ideas in the same way.”

The business structures, process and organizational requirements for innovation appears to be on the minds of many people at the moment. As globalization forces high-cost Western companies to move up the value chain or die, this is natural.