The Trouble with Innovation - TNS Sifo seminarium 2013

Innovation & Product Development
© TNS
The Trouble with Innovation
Presented by: David Soulsby
April 2013

© TNS
Innovation is the ‘go to’ strategy to deliver against
stretch financial expectations
Today’s Base
Business
Tomorrow’s
Target
Today’s Base
Business
Tomorrow’s
Identified
Opportunities
(incremental)
Growth GapTomorrow’s
Identified Risks
to Base
?
2

© TNS
What do the Best Innovators Do?
The TNS view
“If you’re not failing every now and again, it’s a sign
you’re not doing anything very innovative”
Woody Allen
1. They create a culture which accepts honest risk and failure
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Entrepreneurs help big brands hatch new models of innovation
Pharmaceutical giant GlaxoSmithKline (GSK) signed a deal with the McLaren
Formula 1 team last September to try to learn from a company known for its
world-class racing and super quick tyre changes.
“The idea is to work with McLaren and learn how it operates such a leading-edge,
fast-paced innovative company” says Kerry O’Callaghan head of GSK’s global
brand communications team.
“There’s a culture at McLaren about being open about mistakes – a philosophy of
constant innovation and learning. From a cultural point of view, that’s a great
thing to bring into the business”
Marketing Week 22 March 2012
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The TNS view
1. They create a culture which accepts honest risk and
failure
2. They create a consistent flow of good ideas
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© TNS
They create a consistent flow of good ideas
“The best way to have a good idea is to have lots of ideas”
Linus Pauling: Chemist and multiple Nobel prize winner
TNS think he was only half right
Having lots of ideas is a great start, but it won’t get
you very far unless you can recognise which are the
good ones
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The TNS view
1. They create a culture which accepts honest risk and
failure
3. They ruthlessly screen and prioritise
“Do the right projects, not just do projects right”
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The TNS view
4. They are first to get it right in the market
Developed at Hendry Corporation
Normal Order-of-Entry Shares are:
First 70% 57% 50%
Second 30% 25% 22%
Third 18% 16%
Fourth 12%
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What do the Best Companies Do?
The TNS view
5. They overplan and overmanage launches
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© TNS
What do the Best Companies Do?
The TNS view
5. They overplan and overmanage launches
6. They embrace systematic learning to create best practice throughout the
innovation process
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But generally failure rates for innovation are
unacceptable….

1
Delivering successful innovation

©TNS 2012
What is the definition of a successful innovation?
13
• Survival?
• Providing growth to the business that is stronger than the category
development = “successful growth”
• To understand what drives successful growth TNS have
undertaken R&D across a range of categories based on Kantar
WorldPanel data, ie household purchase panel.
• We looked at the importance of:
• Total sales for the new product
• Incrementality = 100% - Cannibalisation %

©TNS 2012
Incrementality has a strong impact on the chance of
successful growth - Savoury snacks category
14
0%
20%
40%
60%
80%
Hi VOL - Hi INC Med VOL - Hi INC Hi VOL - Low INC Med VOL - Low INC Low volume
Probability of successful growth
Source: Kantar WorldPanel

© TNS
So TNS believe incrementality must be built into the
way we assess new products throughout the process
Biggest is not always the best
Overall potential doesn’t necessarily measure the growth potential of an idea
Product A Product B Product C Product DProduct A Product B Product C Product D
Sales six months after launch (€m)
CannibalisationIncremental volume
15

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Once the decision has been made to invest in product development it is difficult
to ‘put the brakes on’ a project
Source: Cooper & Kleinschmidt
29%
Prelim market assess
Idea screening
Prelim tech assess
Market study
Financial analysis
Product development
In-house prod test
Customer prod test
Test market
Pilot production
Business analysis
Production
Market launch
Average % of innovation spend
16
And, you need to know you are backing growth ideas
early in the process

© TNS
At TNS, we don’t think it’s good enough to keep getting
innovation wrong, so we do things differently
17
The research industry needs to look at its track
record and reject the status quo

© TNS
An innovation process that ensures you take the best
growth opportunities to market
Corporate goals
& capabilities
IdeationMarket opportunities Concept prioritisation Concept /product
development and
refinement
Volume
estimation/launch
18
Matrix
NeedScope
U&A
Concept
eValuate
Product
eValuate
Launch
eValuate
SuperGroup
Workshop

2
Identifying the innovations which can deliver growth

© TNS
The current norm – biggest is best
….but trial potential is only part of the story
20
Trial potential HighLow
STOP REWORK PROGRESS

© TNS
% Incremental
Low
Our database shows considering incremental growth
potential provides a better perspective
Concepts that could grow the business, but
would be traditionally screened out
High
Low
Should we progress these
cannibalistic concepts?
High
Trial potential
21

© TNS
Understanding incremental growth potential
provides better advice
Traditional categorisation based on highest trial potential
Progress StopRework
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provides better advice
When we build in incrementality, in 40% of cases
you would make a different screening decision
Progress StopRework
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Winning cannibal?
Initiatives with broad
appeal that will cannibalise
the existing franchise.
Incremental winner
Initiatives with strong
growth potential
De-prioritise
Initiatives with narrow
appeal and limited growth
potential
Investigate
Initiatives with moderate
growth potential which
have stronger appeal
among Early Adopters
24
Concept eValuate identifies the new product ideas that
will drive growth early in the innovation process
Cannibalisation isn’t always bad:
• Better margin (but rare)
• Defensive when you have a weak
parent

© TNS
means better advice
New categorisation taking account of growth potential
Incremental winners
Investigate
De-prioritiseWinning cannibals?
25

© TNS
Uniqueness does not guarantee incrementality
In fact, you cannot predict incrementality from other traditional
measures
Correlation (R) with:
Purchase intent -0.32
Uniqueness 0.21
Liking -0.24
Value for money -0.02
Believability -0.05
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© TNS
“Definitely would” buyers are more important than “probably would” buyers
To predict incremental growth accurately you need to
understand people as individuals
Aggregate analysis treats all respondents as equals - but
Heavy buyers of the new product are more important than light buyers
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© TNS
Proof that individual modelling doubles the accuracy
of the incremental growth estimate
More
accurate
Less
accurate
Salad dressing Toothpaste Dishwasher
tablets
Snacks CSD Shower gel
Traditional aggregate model TNS individual model
Accuracy of cannibalisation estimate
28

© TNS
Individual modelling isn’t easy.
TNS has 20 years experience and validation that our models are
predictive
In-markettrialrate
Trial index weighted by marketing plans
29

3
Reducing the time to being market-ready

© TNS
Diagnostics support fast decision-making to get the
right products to market faster
SHOP
31

© TNS
It is important not to test products in a vacuum
To get the concept-product fit right you need to test the product
versus expectations
Repeatpotential
Synergy
High
Low
Product weak
vs. concept
expectations
Product strong
vs. concept
expectations
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© TNS
To check we have met consumer expectations we
calculate a Synergy Index by comparing individual
concept and product purchase probabilities
33
100% asked at
product stage
100% asked at
concept stage
25
45
30Other
Probably buy
Definitely buy
11
8
6
17
24
4
2
8
20
30
40
30

© TNS
We know what good looks like….
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Database analysis for key measures: concept, product, synergy
Summarised by the Launch Health Check score
HealthyUnhealthy
50-25% Top 25%Concept Bottom 50%SynergyProduct

TNS © 1.24.2013
Test project
The purpose of this research was to:
 Assess consumer acceptance and growth potential for each of these
concepts
 Prioritize and provide guidance as to which to take forward to the
next stage of development
N=200 category buyers per concept
Questionnaire covered key dimensions:
 Purchase intention, Source of Trial, Value for Money, Uniqueness,
Relevance, Excitement, Liking, Credibility, Clarity
Context
Four new Snacks ideas were tested in a standard Concept eValuate

4.1
Key screening and prioritization criteria

TNS © 1.24.2013
Test project
Assuming 100% awareness and distribution. Based on Total Category Buyers
% Trial Bottom 50% 50 - 25% Top 25% Bottom 50% benchmark Top 25% benchmark
Trial
50
0
37
Concept 1
32
Concept 2
21
Concept 3
21
Concept 4
30
36
Identifying the concepts with strong trial potential is
only part of the story

TNS © 1.24.2013
Test project
Assuming 100% awareness and distribution. Based on Total Category Buyers
Incremental Non-incremental Bottom 50% 50 - 25% Top 25% Bottom 50% benchmark Top 25% benchmark
Trial
50
0
26
Concept 2
21
Concept 3
19
Concept 1
18
Concept 4
20
25
Winning
cannibal?
Incremental
winner
Investigate De-prioritise
To maximise your chance of success you need an
understanding of incremental potential

TNS © 1.24.2013
Test project
Concept 2
Incremental winner
Development guide
Product expectations:
Natural ingredients
Spicy flavour
Price point:
€2
Target
Brand X buyers
Watch out
Weak credibility
Growth
6
26
32
Topspin
45
Uniqueness
35
Early Adopter
trial
42
Excitement
Based on Total Category Buyers
Incremental growth Brand cannibalization Bottom 50% 50 - 25% Top 25%
Precise development plans aid speed to
market

TNS © 1.24.2013
Test project
Concept 1
Winning Cannibal?
Growth
19
19
38
Development guide
Product expectations:
Strong flavour , crispy texture
Price point:
€1.50
Target
Watch out
Topspin
56
Uniqueness
35
Early Adopter
trial
55
Excitement
Incremental growth Brand cannibalization Bottom 50% 50 - 25% Top 25%
Low excitement
Households with children under 10

TNS © 1.24.2013
Test project
Growth potential
De-prioritize Investigate Winning Cannibals? Incremental Winners
Concept 4
I T
Concept 3
I T
Concept 1
I T
Concept 2
I T
I Incrementality T Trial Bottom 50% 50 - 25% Top 25%

TNS © 1.24.2013
Test project
Recommendations
Fast track
Fast Track Diagnosis Rationale
Concept 2 Incremental winner Strong trial and high growth potential
Product must deliver against expectation of
natural ingredients

TNS © 1.24.2013
Test project
Recommendations
Proceed
Proceed Diagnosis Rationale
Concept 1 Winning
Cannibal?
Concerns over cannibalisation
Product development must focus on at least
retaining margin versus existing product
Concept 3 Investigate Strong interest among Early Adopters plus high
incrementality suggest this idea should be
nurtured

TNS © 1.24.2013
Test project
Recommendations
Stop
Stop Diagnosis Rationale
Concept 4 De-prioritize Weak incrementality. Resource can be better
focussed on ‘winners’

5
Successful growth through innovation

© TNS
TNS identifies winning ideas and products for growth
 Biggest isn’t always best. Incrementality provides the key to growth
potential
 Individual-based modelling provides more accurate screening and
prioritisation based on incremental growth potential
 Back the right projects early in the innovation process
 Concept Product Synergy is vital for in-market success
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© TNS
TNS-Sifo Consumer & Retail Contact Information
50
Astrid van den Brink Erlandsson
+46 70 184 23 85
astrid.brink@tns-sifo.se
Maria Rönnberg
+46 73 358 63 12
maria.ronnberg@tns-sifo.se
Petra Laru
+46 701 84 21 85
petra.laru@tns-sifo.se

The Trouble with Innovation - TNS Sifo seminarium 2013

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The Trouble with Innovation - TNS Sifo seminarium 2013