Thousands of new product launches fail in their first year, costing businesses millions of pounds, yet manufacturers can reverse these outcomes by changing their approach to innovation - according to the Nielsen Breakthrough Innovation Report for Europe, 2014.
The report - based on an analysis of 12,000 FMCG product launches across western Europe since 2011 - shows that two-thirds of new products never even achieve a mere 10,000 unit sales, and three-in-four fail to retain a retailer listing beyond their first year. But marketers can predictably and consistently overturn historical high failure rates to achieve 85% success, by changing their approach to innovation and building a passionate culture around innovation.
Through the study process, we found proof that innovation success is never just a remarkable coincidence. It’s about deliberate attempts to disrupt all aspects of the innovation process and challenge everyday norms, such as consumer attitudes, long-standing beliefs, launch mechanics, organisational behaviour and disciplines.
Our study identifies four principles that are common to every breakthrough innovation success:
1. Choice: get the right innovation – make the right choice of innovation to pursue, by walking in the shoes of the consumer to uncover key demand-driven insights. Ask questions like, why don’t people use a category? What causes them stress, confusion, inconvenience or compromise?
2. Process: get the innovation right – have the right organisational framework and processes to shape the chosen innovation into a market-ready offer that has relevance, differentiation and superiority; organisational culture must also allow weak innovation ideas to be filtered out before launch
3. Marketing: get the activation strategy right – creative marketing has to be original and has to tell the story of the innovation
4. Togetherness: get everyone right behind you – breakthrough success is the product of organisational togetherness, from top to bottom.
The absence of any one of these four components – no matter how good the other three – severely limits the possibility of breakthrough success.
In the report, we also spotlight real-life examples which have recently achieved breakthrough innovation success. Setting the bar high, for a product launch to earn the title of Breakthrough Innovation Winner, three criteria had to be met: distinctiveness (delivering a new proposition, not just a refinement); relevance (generating a minimum of £10million in year-one sales); and endurance (maintaining at least 85% of year-one sales in year two).
From the 12,000 product launches analysed, just seven met these testing criteria and are declared European Breakthrough Innovation Winners for 2014 by Nielsen:
In addition, three further launches are well on the way to becoming Breakthrough Innovation Winners next year:
While breakthrough innovation is not the product of luck, nothing in our analysis suggests innovation success is out of the reach of any marketer - regardless of whether the brand is large or small, local or multi-national, or even if the category is in decline.