1 Jun 2022
running in desert

Why you need innovation excellence to win in-market – and avoid losing out

Authors
Thomas Pyschny

EY Client Service Partner | EY Global PLM/Innovation Excellence Leader | Switzerland

Thomas is a former professional esports athlete supporting organizations to step up their innovation game.

Salil Bhatnagar

Director Business Consulting | Switzerland

Supporting clients in maximizing value of their innovations and resolving challenges from idea to launch

1 Jun 2022

Apply innovation excellence at four key stages of the product lifecycle to deliver superior products that are profitable quicker and longer.

In brief
  • Many organizations are missing out on their full innovative potential due to complex internal setups and unstructured data
  • Organizations should focus innovation excellence on four key stages: consumer-product fit, speed to market, resource productivity and increased in-market profitability
  • Innovation excellence can elevate your in-market success and ensure your positioning ahead of the competition

Business leaders agree that the ability to innovate has become a survival, not just a success, factor. In our experience, it’s not just what you do but how you do it that matters. Innovation should be about generating great ideas, using them to solve strategic consumer needs and executing them brilliantly to deliver superior quality and value for the consumer. This process can be supported by innovation excellence: a science-led, data and model-enabled system that is fueled by proven organization capability, processes and tools to deliver superior product and package innovations. 

This article, the first in our series on innovation excellence, explores the four key phases of the profitability trajectory. The right focus at each phase enables you to maximize results across your product lifecycle and embody the true spirit of innovation excellence.

1. Consumer-product fit

Innovation should always be about addressing a need, unsolved problem or inadequate solution. How well a product meets the requirements and expectations of the target consumer is the starting point for any innovation project.

To understand the persona’s pain points, price expectations and preferences, it’s important to collect real data from every stage of the customer experience.
Thomas Pyschny
Client Service Partner | Global Innovation Excellence/Product Lifecycle Management Leader

A strong consumer-product fit, at the right price, enables a leading market share and prevents development budgets going into products the consumer isn’t even looking for. To get it right, you need to first identify your target consumer segment, i.e., who will benefit from the ideal consumer experience by buying your product. It is often helpful to create a buyer persona to give you an end-to-end understanding of the features to be considered. To understand the persona’s pain points, price expectations and preferences, it’s important to collect real data from end users, including consumer complaints and feedback at every stage of the customer experience. Besides considering your typical persona, you should determine the total addressable market (TAM), which will give you an extensive idea about what features should be included and also excluded.

There are various approaches available to measure consumer-product fit, including the after-use weighted purchase intent (WPI). Securing a leading market share comes from delivering a product portfolio with significant WPI wins compared to the next best competitor product.

2. Speed to market

To be a pioneer, by definition, you must be first. Speed is your competitive advantage, enabling you to react faster to changing consumer needs. Fast movers can position themselves as innovators in the market. Improved time to market accelerates growth from innovations, while reducing (development) time – and money – spent on projects.

A rapid ascent helps maximize returns during peak interest in your product.  Shortening your innovation cycle while maintaining the net present value (NPV) per initiative means that you can generate more NPV per year for the business.

3. Resource productivity

Resource productivity is about embracing intelligent ways to reduce and avoid waste. As your product matures on the market, this helps you maintain profit levels. Improving the way you use resources translates into higher organization capacity to handle a larger or more complex initiative portfolio, which has a positive knock-on effect on your increased portfolio NPV and value creation.

Two main approaches to measure resource productivity are:

  • Quantify process times in each step of your stage-gate process. We would approach this by performing a value stream map, to visualize with numbers the process steps and the total process duration time.
  • Analyze current project portfolio in terms of resource allocation, average project completion time, number of times projects were extended and reasons for delays. Also consider projects completed ahead of schedule and seek to understand the contributing factors.

4. Improved in-market profitability

By implementing innovation excellence from day one, products are more competitive and promise improved in-market profitability over time.

Hit and miss

50%

Only half of products launched actually meet profitability targets.

Even though R&D investments are increasing year-over-year, we observe that only about 50% of products launched actually meet profitability ratio targets. This is a concern given how important it is to maintain and increase in-market profitability in order to secure and retain a competitive advantage. During the initiative development and delivery, several assumptions and key projections are made with regard to incremental volume, product performance/quality, consumer purchase (and re-purchase) intent, sampling/trial product, distribution, etc.

Once the product has launched, the first three to six months offer a great opportunity to learn which of these components of the initiative are over- or under-delivering compared to projections, and why.

Innovation excellence – to win, and not lose out

Many organizations focus their innovation strategies on what they stand to gain. But it’s important to also consider how you could lose out if you neglect innovation excellence. This case study illustrates why innovation excellence is as much about not losing out as it is about winning.

  • Racing ahead through consumer-product fit

    One of the top five athletic running footwear brands was losing share in the US to the market leader. The company had not deeply understood the consumer experience through observation and surveys with consumers trying on shoes in stores, had not designed the right products (e.g., sole hardness, toe shape) to deliver consumer-product fit and was not delivering consumer-critical quality parameters (CCQP) with excellence.  When these aspects of innovation excellence were implemented in 2016 and 2017, sales on running models jumped by 30% to 70% and after three years (2018 to 2019), the brand had climbed to number two in the market. Without any change in marketing promotions, sales of one running model increased by 160,000 pairs, which brought in USD 11m/year in incremental sales.  The quality on CCQPs improved by ~ 80% thanks to better process and quality control on production lines.  Applied across the whole running shoes portfolio, the insights led to a ~ USD 100m/year increase in sales – all driven by innovation.

Innovation excellence programs span the entire lifecycle of a product, from idea to phase-out. Focusing on the four key phases enables a strategic approach to product development, design and launch and promotes intelligent products and processes in line with your specific level of maturity.

An innovation excellence program can help get you where you want to be and maintain your position ahead of the competition, for longer. But how do you define success in product innovation? In our next article, we’ll dive deeper into this question and explore what product innovation means and how you know you’ve achieved it.

Summary

Customers’ needs and expectations are constantly evolving, and brands need to keep up. While speed to market is important, other factors also influence the success of innovation efforts. A tech-enabled innovation excellence program provides insights along the value chain to inform decisions, inspire innovation and enhance execution at every stage of the product lifecycle. Ultimately, your innovation excellence program should enable a superior consumer experience while fueling business growth and value creation.

Acknowledgments

We thank Christian Plesca, Jonas Müller, James Lonnen, Durgamadhaba Rath, Rene Hammel, Cecilia Razzetti and Fenja Scheu for their valuable contributions to this article.

About this article

Authors
Thomas Pyschny

EY Client Service Partner | EY Global PLM/Innovation Excellence Leader | Switzerland

Thomas is a former professional esports athlete supporting organizations to step up their innovation game.

Salil Bhatnagar

Director Business Consulting | Switzerland

Supporting clients in maximizing value of their innovations and resolving challenges from idea to launch