Optimize Your Product Portfolio to Appeal to Customer Preferences -- Full Text

Executive Summary
It prompts consumers to think, “Finally—just what I needed!”... entrepreneurs to mutter, “Why didn’t I think of that?”...and competitors to sigh with a mixture of envy and despair. It is the "forehead-slap" moment when a new product hits the market at the precise intersection of demand and perfect timing. You know them when you see them: Crest Whitening Strips from P&G, Lysol wipes from Reckitt Benckiser. Great new products—innovations that find immediate uptake in the market and increase returns from R&D.

Efficient, profitable innovation is critical to the ability of consumer packaged goods companies to achieve high performance. On average, top-quartile performers generate 20 percent more revenue from new product introductions than companies in the bottom quartile. In Accenture's research, high-performance businesses are also distinguished because they introduce more new products than competitors do, and they bring them to market five times faster. Clearly, some companies have found the keys to successful innovation. And those keys are critical to achieving high performance in consumer products. Yet most companies still struggle, spending a lot of time and effort with not much to show in results.

According to a 2008 study by AMR Research on innovation in the consumer goods industry, only one in two product ideas actually moved from development to launch, and only two-thirds generate the revenues anticipated once the products hit the market. See Figure 1. Clearly, not enough is known or done upfront to identify "winners." The corollary also seems to be true—development of new products or ideas that most likely will not perform is not stopped soon enough to preserve resources that would be better deployed elsewhere.

Why is it so difficult to get new products into the hands of consumers? And why are so many new products (more than 50 percent) brand extensions rather than breakthroughs? The answers, Accenture believes, have to do with the difficulty of getting an accurate read on consumer needs and gleaning insights from all the right data, as well as identifying and mastering the complex capabilities and processes required for innovation.

Happily, solutions to these gaps are within a company's control. Accenture's research has found companies can succeed at innovation and enjoy significant returns on their investment if they commit to the following actions:

• Developing deep, actionable consumer insight through better analytics, both to uncover unmet needs in mature and emerging markets—and to derive real insight from readily available commercial intelligence.

• Adopting a more open, robust and repeatable model for customer- insight gathering, idea generation and new product development that imposes process while increasing speed to market and speed to scale. 

• Using product life cycle management  and portfolio optimization strategies more rigorously to maximize top-line profitability.

• Accenture believes that a company that commits to these actions can dramatically increase its chances of becoming a high-performance business.

Section 1
Grounding Innovation in Actionable Insight
Companies invest a lot in new products and expect them to generate worthwhile returns. According to AMR Research, the average company is working to bring 39 percent more new products to market in 2008 than in the two previous years, and also is increasing its R&D budget as a percentage of revenue from 6 percent to 8 percent. One cannot deny new products play a crucial role in a company's market position. On average, AMR Research found that 25 percent of revenue is generated by products introduced in the last three years, a figure that is consistent with findings from Accenture's research linking innovation and high performance.

Yet, all this investment doesn't necessarily translate into market success. There are many reasons new products fail to get to market, or fail to have the impact expected once there. The most frequent explanation cited by consumer packaged goods respondents was both ironic and disturbing: products fail because they do not meet a specific (unmet) need of the customer. See Figure 3. This was followed by lack of true product differentiation and problems with the commercialization process

How is it possible that so many products miss the mark? Accenture believes one problem is the quantity and quality of research conducted. Companies may not be capturing all the business intelligence they need to make good decisions regarding product development, while at the same time they generate tons of structured and unstructured data in early stage assessments that is never used. Simply put, with some notable exceptions, most companies do not or cannot perform in-depth market analytics on the right factual data to glean good ideas and draw worthwhile consumer insights. Under these circumstances, new product introductions become more of a gamble.

Arming R&D with Business Intelligence and Consumer Insight
Several high-performance businesses show that gathering and synthesizing consumer insights from a variety of sources and applying those insights to new products quickly can drive margin and profit improvement. It's not that these companies spend more on R&D, but they spend it in a more focused, disciplined way to understand consumer needs.

Consumer packaged goods companies must develop what Accenture calls "actionable insights" to determine what new products are needed. Actionable insights synthesize multiple forms of commercial intelligence and consumer insight using standardized processes and tools to present a comprehensive view of a market. Commercial intelligence includes a thorough analysis of macro market trends and competitor activity. Together with deep consumer, shopper and customer intelligence about product attributes and preferences, behaviors and demographics, sharing insights gleaned from this exercise inform key functions like R&D, marketing and sales to make product innovation more efficient.

Accenture's actionable insight capability goes far beyond the "demand insight" typically relied upon by companies to make decisions about new products. It is a capability that is a key differentiator between high-performance businesses and those in the rest of the pack. Actionable insights leverage and mine a multitude of factual, verifiable data to allow a company to make informed, high-quality "bets" on new products.

While data on purchases and volume combined with consumer feedback in panels or interviews is helpful, it is typically not complete or even factual, and does not add up to actionable insight. AMR Research found that 69 percent of companies still rely on focus groups as the predominant mode of attaining feedback on new product concepts.

How do you distinguish data from actionable insight? For example, an enterprise resource planning system can track order fulfillment rates and third-party data can show what is selling in the store. In addition, a distributor can provide a data feed on shipments. However, manufacturers need to see how these pieces of data relate. The sum of the information needs to be greater than its parts or manufacturers are left with a black hole in business knowledge. Tying all of that information together could reveal a lag between orders and fulfillment because of an issue with the distributor. If addressing that problem results in an increase in repeat business, a valuable insight about consumers' values has been gained that can potentially help increase sales.

Several high-performance businesses show that gathering and synthesizing consumer insights from a variety of sources and applying those insights to new products quickly can drive margin and profit improvement. It's not that these companies spend more on R&D, but they spend it in a more focused, disciplined way to understand consumer needs.

Consumer packaged goods companies must develop what Accenture calls "actionable insights" to determine what new products are needed. Actionable insights synthesize multiple forms of commercial intelligence and consumer insight using standardized processes and tools to present a comprehensive view of a market. Commercial intelligence includes a thorough analysis of macro market trends and competitor activity. Together with deep consumer, shopper and customer intelligence about product attributes and preferences, behaviors and demographics, sharing insights gleaned from this exercise inform key functions like R&D, marketing and sales to make product innovation more efficient.

Accenture's actionable insight capability goes far beyond the "demand insight" typically relied upon by companies to make decisions about new products. It is a capability that is a key differentiator between high-performance businesses and those in the rest of the pack. Actionable insights leverage and mine a multitude of factual, verifiable data to allow a company to make informed, high-quality "bets" on new products.

While data on purchases and volume combined with consumer feedback in panels or interviews is helpful, it is typically not complete or even factual, and does not add up to actionable insight. AMR Research found that 69 percent of companies still rely on focus groups as the predominant mode of attaining feedback on new product concepts.

How do you distinguish data from actionable insight? For example, an enterprise resource planning system can track order fulfillment rates and third-party data can show what is selling in the store. In addition, a distributor can provide a data feed on shipments. However, manufacturers need to see how these pieces of data relate. The sum of the information needs to be greater than its parts or manufacturers are left with a black hole in business knowledge. Tying all of that information together could reveal a lag between orders and fulfillment because of an issue with the distributor. If addressing that problem results in an increase in repeat business, a valuable insight about consumers' values has been gained that can potentially help increase sales.

Accenture found that 15 percent of high-growth companies indicate possessing analytical capabilities of this sort is a key factor in their strategy (compared to only 3 percent for low-growth companies), underscoring that the ability to conduct sophisticated analytics is a factor in their success. There are other factors also, of course.

Actionable insights enable companies to move from a reactive and scattered approach to new product development to a more proactive and targeted approach. High-performance businesses do a better job of tying together the granular data to drive more insight through analytic techniques, which reflects their commitment to leveraging IT infrastructure and availing themselves of standardized external data.

Generating Better Insights, Direct from Local Markets
Obtaining actionable insight not only requires vigilance or "fascination" with understanding consumer behavior and great analytics, it requires casting a broad net across the globe to uncover unmet needs in emerging markets. Reconciling global scale with local flexibility and insight—the new reality Accenture defines as the “multi-polar world”—can fuel top-line growth for companies that previously have focused on developed markets.

Many multinational companies realize their future growth and scale depends on gaining market share in emerging economies. The projected increase in per capita spending in the six leading emerging markets makes it impossible for a global company to ignore those markets. But in these unique markets, multinationals must adapt their globalization programs and business models to take on non-Western characteristics. Accenture believes that companies must adopt a "super global-super local" networked business model that looks very different from the functional model driven from headquarters.

For example, most multinationals are investing heavily in developing R&D capabilities in China and other emerging markets, and many of these make heavy use of external sources to generate ideas for new products:

• P&G's innovation model includes 9,000 researchers in 11 research centers around the world, and 75 technology scouts who travel the globe in search of new ideas.¹

• Colgate's nine-category global innovation centers develop concepts and ideas while its global innovation fund allocates seed money to employees who recommend innovative ideas in any area of the business. At the same time, Colgate establishes partnerships with outside experts, suppliers, academics and leading research firms.²

• The change to a super-global, super-local structure already has borne fruit for manufacturers who are adept at identifying and satisfying the needs and income constraints of consumers in new markets.

• Clorox's International R&D and Latin America marketing teams saw the aversion to strong bleach scents as an opportunity to develop a fragranced product. Aires de Bosque was launched in 2007 with a clean eucalyptus scent that stays on the surface of the product but still has enough bleach strength to ensure efficacy.³

• Similarly, P&G created low-cost developing-market products at price points for rural, low-income consumers, offering cheaper diapers and items priced to mirror the coins typically carried by citizens. This target pricing strategy is why it promotes its twin-bladed Gillette Trac II, not the more expensive five-bladed Gillette Fusion in these markets. In the same vein, by reverse engineering and adjusting features to meet pricing targets, single-use fabric softeners and shampoos are targeted for geographies with water constraints and are more affordable than bottles without cutting P&G's margins.⁴

What's clear is that high-performance businesses in the consumer goods industry systematize insight management, not just information management or data warehousing. They gather commercial intelligence and consumer insight continuously, around the globe, to ensure innovation is rooted firmly in consumer needs and that products reflect national customs or pleasing attributes, as well as income levels. By going directly to the target market and being aggressive in understanding their needs, they develop the kind of breakthrough, differentiated products that generate revenue and customer loyalty.

Section 2
The Power of a Repeatable Process
In addition to actionable, deep insight, another key to profitable innovation is adopting an efficient, predictable process that imposes discipline to keep the right products moving toward store shelves while delivering bigger and better ideas to the portfolio over and over again. While more than 60 percent of large companies (>$5 billion in sales) have had such processes in place for more than two years (up from 34 percent in 2005), the processes are still new, in development or nonexistent in 40 percent of companies. Smaller companies are even less likely to have a defined new product development process.

Of course, merely having a process is no guarantee of success. Accenture believes the key is adopting what it calls a "fast innovation" framework comprised of three components that are tied directly to value creation: foundation idea-generation capabilities, conversion processes to move ideas and concepts to product, and execution to get the product out the door on time and on budget.

Foundation Must Be Built on Understanding Customers
As stated previously, most new products fail because they don't respond to a known or latent customer need. It's difficult, if not impossible, to offer a differentiated product if the customers' needs are not understood. Failing to conduct deep customer segmentation or analysis or trying to copy a competitor's offering without understanding the rationale behind it are both avenues to product misplacement. Some companies do take the deep dive into customer information. P&G invests a tremendous amount of resources in observing and questioning how buyers use their products. Watching how women dye their hair or how parents use diapering products has given the company specific insights to evolve its products.5

Unfortunately, those intensive efforts may be the exception, rather than the rule. "Managing the Challenge of Product Proliferation," a 2007 EIU survey of 186 senior executives found that only one-third of products are launched in response to documented customer needs. And 49 percent of companies have an "adequate," "limited" or "very limited" understanding of customer buying behavior and preferences.

Open Innovation and Design Networks.
One way to understand customers better is to get different opinions and perspectives of what customers need from people outside the company. Design networks, which seek to capture and evaluate product ideas from suppliers, partners and other external sources, are one vehicle for opening up the innovation process beyond the four walls of the manufacturer and overcoming the tyranny of the focus group. Most commonly used in the high-tech and auto sectors where component manufacturers and captive dealer networks play a critical role in a product’s success, design networks are gaining currency in a handful of consumer goods companies.

Through its “connect and develop” program, P&G aims to acquire 50 percent of innovations externally through a global network program.6 In addition to global research centers and technology scouts, P&G built an extensive external network of entrepreneurs, academics, alumni, suppliers, technical and consumer communities, creative agencies, bankers and venture capitalists to generate ideas and complete deals. It even partnered with competitors (for example, Clorox, to produce the Glad Press 'n Seal)1. After the innovation process was substantially opened up in 2001, the results speak for themselves:

• After five years, 50 percent of P&G's inventions do come from outside⁷

• Innovation-driven value creation and sales growth doubled⁶

• P&G was awarded The Economist's "Corporate Use of Innovation Award 2007" for its pioneering Connect and Develop program

Inviting others to participate in the innovation process can dramatically increase both the pool of ideas and the percentage of products actually launched, which in turn improves the return on R&D expenditures. Companies that throw off the shackles of the "not invented here" mentality find there is a smorgasbord of ideas out there to sample. Manufacturers now can shop for innovation in various stages of development—from raw ideas to market-ready products—that carry different levels of risk, reach, speed and investment. Other companies have taken this idea a step further and turned innovation challenges into contests. In the last few years, online innovation forums such as InnoCentive and Cambrian House have turned innovation and problem solving into stand-alone businesses from which manufacturers can buy or bid on innovative products developed by freelance inventors.

Wisdom of Crowds
The network doesn't always need to extend very far, but it does need to bring together ideas from different sources, ideally both internal and external. The idea of "crowdsourcing"—gaining and synthesizing the collective insights of a large number of people—can unleash the innovation in an organization. Better internal collaboration among employees in critical functions such as research, marketing, sales, supply chain and finance can help achieve corporate goals faster. For example, Clorox formed a cross-functional team to overhaul its Kingsford charcoal brand. A new product assortment, promotional plan and overall presence positioned Kingsford as an in-store "beacon for grilling." It's a win-win for Clorox and its retailers.⁸

In another example many companies, including such diverse organizations as Kraft Foods and Kohler, have collaborative online communities made up of employees, customers and other interested parties that have become fruitful sources of feedback and innovation. Kraft's community encourages cooks to trade recipes and entertainment ideas as well as contribute healthy eating tips, while Kohler's site provides a host of information and tools for both customers and designers. Several collaboration tools such as Accenture Innovation Grapevine (an Accenture proprietary tool) exist that can capture, group and evaluate ideas, whether they are generated in response to a narrow product specification or more open-ended dialogues that engage employees.

It pays to use the tools available to broaden the foundation of product ideas. Many companies excel at conversion and execution in the product development process, but are weaker in idea generation, particularly breakthrough innovation. The genetic predisposition of many companies favors incremental innovation and brand extensions. Opening up the innovation process for new customer insights and new ideas to outsiders is becoming an increasingly popular and effective way of improving the odds of getting at the next big idea before someone else does so.

Converting Good Ideas into Winning Products
Conversion is the process of taking an idea and translating that concept into product. It is also about balancing incremental versus breakthrough products, and placing bets on products that can generate short-term sales (usually brand extensions) versus those that constitute longer-term bets.

Reckitt Benckiser's recent product introductions reflect this bifurcated approach. Its Lysol Ready Brush leverages a well-known brand into a multipurpose tool that can be used in the home, car or office and requires minimal educational effort for consumers, supply chain partners and retailers. It also grew its Air Wick brand into the second-largest brand in the air-care category by adding Air Wick Freshmatic, Air Wick electrical oils, and Air Wick Xpress products. The company balances these innovative extensions with developing or acquiring health care products, which usually have higher margins and generate strong brand loyalty.⁹

Successful conversion relies on a number of capabilities, including a leadership perspective that can balance these short- and long-term innovation bets. It also depends upon a company's ability to prepare its supply chain and the market for a successful launch, particularly if a new market is being targeted. Many executives realize that they don't have the capabilities necessary to do this alone. AMR Research found that companies anticipate collaborating more with partners for new product introductions over the next few years, in part to fulfill a common ambition of becoming global players in new markets. See Figure 9. These findings may suggest that embracing open innovation, developing a venturing strategy or building partnering skills and idea generation capabilities internally to complement conversion and execution, would be worth considering.

Consistent Execution
If you asked employees in most consumer goods companies if an innovation process existed, most would answer "yes"—and they would be right. There usually is some semblance of a process, but you would probably get different descriptions of that process. That's a problem, because without recognizable, standard process discipline, supported by identifiable and accessible tools, techniques and organizational structure, new product innovation can get very expensive, very quickly.

The lack of a repeatable process may explain the limited returns most companies experience on R&D efforts. New product development is just too cumbersome and attenuated, and many product ideas are axed midway through the development process or their "newness" is undercut by a competitor's offering or changing consumer tastes.

What's needed to achieve consistency of execution is a defined, understandable process that is communicated to all who are involved in new product development. This process is also designed for speed to market, making sure the right (usually fewer) number of projects is being worked, and sourcing these initiatives properly to account for the variability that is inherent in innovation-type work. Running a leaner pipeline that has some slack built into employee and production schedules can avoid delays, as can cross-training employees so they can be redeployed to break bottlenecks that occur.

Adopting a new product development process that draws insights from a network of individuals within and outside the company and then supports development of those ideas in a deliberate, structured method known to all involved can minimize the inefficiencies now found in the development process. It may also give companies access to ideas that can help rebalance their innovations between incremental and breakthrough products. As the importance of mature markets fades and emerging markets grows, companies need an idea-generation pipeline that figuratively circles the globe and a predictable development process that can serve both as an organizational building block and a common language for new product development.

Section 3
Fueling Top-Line Growth with Portfolio Optimization and Product Lifecycle Management
Generating more and more targeted product ideas and putting in place a repeatable process to develop them are not the only issues that vex consumer products companies. As the AMR Research results revealed, one of the most persistent problems in commercialization of new products is lengthy time to market—an average of three years from idea to shelf. While more than 70 percent of companies say that “on time to market” is of great importance for new product success, only 45 percent rated their performance on this metric adequate.

Accenture sees suboptimal portfolio management and lengthy time- or speed to market, and the related metric of speed to scale, as symptoms of a more pervasive problem. A problem that is most easily defined as complexity: portfolio complexity caused by the unchecked proliferation of products that confront and at times confound consumers (and wreak havoc on manufacturing production), as well as the complexity of product life cycle management that requires consistent collaboration among varied internal functions and external resources that influence production efficiency. Our recommendation is that more systematic and aggressive use of consumer and customer insights and buying behaviors to fuel portfolio optimization and product life cycle management strategies can ensure the products developed will actually make money for the company and it will be produced in the most efficient manner.

Optimizing the Portfolio for Maximum Profitability
Many products are launched to great fanfare and support, but then see sales and revenue contribution dwindle after a sizable initial lift. Whether it is the novelty of the new wearing off or sales of similar offerings cannibalizing the new product's sales, the result is the same—disappointing. While most consumer packaged goods companies conduct an annual review of their portfolios to discontinue or add products, they may not make deep enough reductions in the number of SKUs offered to retailer customers, or they may target the wrong products for elimination. The reasons may range from internal politics (every product has a brand team to champion it and a sales team to sell it) to the very real dilemma of how to maintain hard-won shelf space at a retailer with fewer products.

Further, many companies do not have sufficient demand-driven analytic tools that would allow them to confidently identify products that optimize the entire portfolio. The overall profitability of an item or product line should factor in when deciding whether it continues to be produced, yet AMR Research found that sales, not profits, was the metric most often used to determine a new product's success.

And that’s unfortunate, because if the ever expanding time to market is an indication of the complications of product proliferation, most product portfolios are too complex, and refocusing the portfolio to emphasize winners or subtracting a few products or lines might actually add to the bottom line. A global consumer products company found that to be true. Faced with more than 40,000 SKUs being offered to consumers across the globe and significant strains on both manufacturing capacity and inventory levels, the leadership team realized that something needed to be done. Past efforts to “chop the tail” off the product portfolio had been ineffective and met by resistance from the sales and marketing organizations. Accenture’s suggestion to take a more consumer-centric approach was pursued.  After analysis of all 40,000 products and identification of the unique attributes that consumers value in products, a large percentage of products appeared to have limited impact on consumers’ preferences and the company's bottom-line profitability.  Furthermore new products were not in all cases viewed by shoppers as unique, which caused inventory turns to drop and write offs to build up.

The analyses performed by Accenture recommended a 28 percent reduction in the portfolio of products, while estimating up to $200 million in improved margin through focusing marketing and sales efforts on profitable and unique products.  And the first wave of results in one of the major markets has been very promising, exceeding the margin targets set by the company and leading to very positive feedback by consumers.

The company’s experience underscores an important point: leveraging the supply chain earlier and continuously to understand true costs can support good decisions about when to refresh and when to pull the plug on a product. Also, conducting a truly end-to-end portfolio optimization can yield significant savings especially if sponsored by executives who can look across the whole organization and have no "turf" to protect.

Make the Right Mix of Products More Profitable with Attribute-based Analytics
The Accenture Portfolio Optimization solution offers a unique approach to helping manufacturers and retailers increase profitability by keeping the right products in their portfolio. Using product attributes that are valued by consumers, it is possible to refine the mix and size of product lines to improve sales. By combining the customer preferences on product attributes, in-depth analytics on portfolio optimization, retailer insight, supply chain and industry cost-to-serve data, and product life cycle management, Accenture provides an end-to-end solution to simplify product and process complexity

The recognition of the consumers' desire for "cosmeceuticals" is a good example of how synthesizing a variety of data can identify desirable product offerings and their attributes. Manufacturers combined market and demographic data with information about consumers' preference for gentler, less invasive, environmentally friendly products, and married it to information on increasing global wealth and purchasing power. This led several companies to expand product offerings that reflect those attributes and discontinue products that do not. For instance:

• Johnson & Johnson has expanded its cosmeceuticals line with RoC and Neutrogena brands.

• P&G purchased Doctor's Dermatologic Formula.

• Tesco launched a private label organic beauty line.

Developing products that incorporate attributes specifically identified as attractive by consumers increases each new item's incrementality that is its overall potential value, thus strengthening the business case for each new product, and making it easier to spot products that add little differentiation to the portfolio. Using an end-to-end approach also leads to  overall growth with a more sustainable optimized portfolio at local and global levels, facilitating development of a more manageable, transparent and repeatable process.

Ensuring the Right Product in the Right Place at the Right Time
Another conundrum that manufacturers struggle with is whether every new product needs to be in every market, which can substantially add production and distribution costs. Yet, market research probably could reveal that launching certain products in some markets will not be successful. A better approach—one that reduces cost and responds to customers' true needs—is to target channels and geographies where success is most likely.

Building a consumer-driven demand network represents an evolution of the standard "one-size-fits-all" supply chain and focuses on retailer needs. This kind of targeted demand network is rooted in deep consumer segmentation that allows retailers to maximize the business potential of each location and allows the manufacturer to both increase sales and avoid the costs of buybacks or transfers of products that are not purchased. Finding new ways to more closely and quickly match supply with demand in various locations is a hallmark of a high-performance business. By creating a custom approach that relieves pressure on production and rationalizes distribution to hundreds of retail outlets, a manufacturer is responding to the new "multi-polar" world, where even multinationals can target and serve micromarkets.

Consumers and manufacturers both win when retailers take an aggressive, consumer-centric stance. After all, even in big box retailers, shelf space is finite. Consumers—unlike manufacturers and retailers—do not necessarily subscribe to the "more products are better" theory. They like new products that are truly different, but more "look-alikes" can also confuse consumers and lead some to abandon branded products for private label goods that have a clear, stable value proposition at a lower price point.

Making Product Life Cycle Management More Efficient
The issues at the front end of new product development—what products should we make and why?—are rooted in strategy, organization dynamics and decision making. Not so at the back end, where the problems come down to basic physics. The demand for new offerings vastly outstrips most companies' capabilities of supplying them—manufacturing capacity is hard to expand quickly. It is Little's Law in action: the more items put into a production system, the longer the completion rate. New product development adds a special twist, however, because with new products it is generally not clear if a new task (the set up required to screw on a new cap, for example) will take five hours or five days. So overloading the manufacturing system becomes exponentially more problematic.

The complexity of manufacturing also increases with each new regulation, asset management requirement and product or packaging specification. Accenture's experience is that companies get bogged down under the weight of the following types of demands:

• While companies recognize that value exists in addressing product life cycle issues, most adopt “point” fixes rather than an overarching solution, thus maintaining silos of organizations, functions, processes and applications.

• Organizations typically are not aligned on governance and processes, causing latency and errors.

• Significant manual energy and resources are used to ensure collaboration of overly complex activities, many of which could be handled more efficiently and with fewer errors if automated.

AMR Research found most companies still rely on home-grown internal processes and programs to manage products from conception to retirement, as opposed to the more comprehensive product lifecycle management (PLM) tools now available. The result is that opportunities to coordinate activities and make the process more efficient are missed.

Many functions contribute to the success of a new product—R&D, marketing, manufacturing, sales, suppliers and retailers. Yet those contributions frequently are fragmented, proceed in fits and starts, or simply come too late. AMR Research found that sales, supply chain and manufacturing experts are frequently not involved upfront in the development process, which is traditionally run by marketing and R&D until the prototype stage is reached.

The lack of ongoing coordination and collaboration among functions creates a number of problems:

• First, if the development process is linear (that is, there are hand-offs between functions, leaving some functions uninvolved), the insights from various functions are not aggregated at a time when they can shape the product to most accurately respond to a consumer need.

• Second, with no clear accountability  to make decisions about a product, no one person feels like he or she can change course, even if serious concerns arise.

• Third, every hand-off between functions (that is, marketing to R&D, then back to marketing, which then connects with manufacturing) has the potential to inject wait time into the process. It's no wonder time to market is a chief concern.

• Finally, the failure of no collaboration leads to manufacturing bottlenecks, one created by the increasing number of products that manufacturing and distribution channels have to handle.

While companies do get new products to the shelves, all too often it is because of the heroic efforts of individuals or a small team that knows how to get things done. The issue is that these individual efforts, as stellar as they may be, are largely not replicable and reside in the minds of those involved as opposed to a documented process. What if the new product superhero leaves the company?

Accenture believes automating cross-functional collaboration throughout the product life cycle would limit the need for heroics and “fire fighting” and enhance overall organizational performance. The good news is many companies are also now recognizing the need for an overarching approach to product life cycle management, one that addresses performance management, partner integration, workforce performance and application and IT infrastructure in service to the broader product strategy. See Figure 15. While it may seem like a mere appendage to other aspects of the innovation process, product life cycle management is a critical capability that can directly impact new product revenues, and returns on R&D investment and profitability. Like many other capabilities, it can be improved and strengthened with concerted effort.

Summary
New product development and innovation are the lifelines of consumer goods companies, albeit fraught with complexity and anxiety, not to mention considerable expense. While there will always be a level of art in picking which products to commercialize, Accenture and other industry experts believe there is much more science that can be applied to a selection of products that will resonate with consumers and help manufacturers and retailers move down the path toward high performance.

A roadmap for successful innovation relies on three initiatives:

• Developing the analytic skills and investing in tools that can yield actionable insights from synthesizing a wide range of factual consumer and commercial data.

• Adopting a streamlined, replicable "fast-innovation" process that both imposes internal discipline and utilizes external networks to identify and commercialize the best ideas faster.

• Employing consumer-centric portfolio optimization and product life cycle management strategies more aggressively to develop truly differentiated, profitable products that make their way to consumers quickly without taxing the capacity of manufacturers and their retailing customers and partners.

The capabilities required for successful product innovation, from idea generation to product retirement, can be developed and honed, as several high-performance businesses in the consumer goods sector have shown. By following the roadmap discussed here, many more companies can join their ranks.

_{¹Will She or Won’t She?, The Economist, 8/9/07 issue, page 4 (online version), http://www.economist.com/business story id=9619074
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³Building Lifetime Loyalty Through the Three D’s, page 10, http://files.shareholder.com/downloads/CLX/0x0x135221/ff4236db-7a7f-4726-96fc-6789-d5e0c982/2007_editorial_section.pdf
⁴Driving Organic Growth: P&G’s Global Target: Shelves of Tiny Stores, Market Driven Growth Blog, 8/13/07, http://marketdrivengrowth.blogspot.com/2007/08/p-global-target-shelves-of-tiny-stores.html ⁵Customer Listening Pays at P&G, 360 Degree View Blog, 8/30/06, http://360degreeview.blogspot.com/2005/10/customer-listening-pays-at-pg.html; and Innovation Machine P&G: 1 Billion $ for Consumer Insights, http://www.the-innovation-machine.com/?p=73
⁶P&G’s New Innovation Model, Harvard Business School Working Knowledge, http://hbswk.hbs.edu/archive/5258
⁷P&G Connect & Develop Website, A.G. Lafley message, https://secure3.verticali.net/pg-connection-portal/ctx/noauth/PortalHome.do
⁸Building Lifetime Loyalty Through the Three D’s, page 8, http://files.shareholder.com/downloads/CLX/0x0x135221/ff4236db-7a7f-4726-96fc-6789-d5e0c982/2007_editorial_section.pdf
⁹Our Focus is the Key to Our Success, http://www.highbeam.com/doc/1P2-15012596.html}