Collaboration is a topic that generates quite a bit of positive discussion in the innovation world. In fact, many of Nielsen’s Breakthrough Innovation winners say successful cross-functional collaboration is critical when it comes to in-market success.
But they’re not alone. According to Nielsen’s 2014 Consumer Packaged Goods Innovation report, two in three consumer product professionals rank collaboration among the top three most critical factors for innovation success, outpacing strong leadership and access to financial resources. Even so, 74% of CPG professionals believe their company is not collaborating effectively at all.
What are companies sacrificing by not investing in and encouraging better cross-functional collaboration? To answer this question, a recent Nielsen study examined the impact of collaboration in the concept development stage of innovation, when a new product can still take a variety of different directions in terms of formulation and positioning. For example, should a new energy drink be sugar free? All natural? Should it provide a pre-workout boost, or should it increase productivity as an afternoon pick-me-up? What should the product name be? These are just a few of the many elements that may go into a new product concept. As a result, having a diverse range of ideas can drastically affect how a new product comes to life.
The results of the study shed some light on handful of key findings.
Involving more collaborators leads to a larger pool of ideas, which creates more opportunities to identify a single idea that consumers truly love. According to the data, teams of six or more people generated concepts that performed 58% better with consumers in pre-market testing than the brands’ initial, “starting point” concepts. Those starting point concepts were developed by teams of two people and performed only 16% better than baseline results with consumers.
Involving collaborators from different functional roles (e.g., marketing, consumer insights, sales, R&D, etc.) has a positive effect on concept performance. Teams with representatives from four or more functions generated concepts that performed 46% better than baseline results with consumers relative to teams with fewer functional roles represented.
Based on Nielsen’s data, 54% of projects involve only one or two people with a direct role in concept development.
Not surprisingly, teams with only one or two functional roles represented develop the vast majority of product concepts. Many companies struggle to include collaborators from teams outside of the marketing and consumer insights realms. In fact, 70% of the collaborators in Nielsen’s study hailed from these functions—despite the fact that product concepts generated by teams that included other functions (such as R&D and sales) performed 18% better than those that were limited to marketing and consumer insights.
Why is collaboration so difficult? CPG professionals cite a few key barriers:
These barriers are very real for many companies. While there may not be an ideal solution, companies can make two key improvements to facilitate collaboration—and, as a result, generate more preferred products. First, senior management can help to enable cross-functional collaboration by setting a certain expectation and making the necessary organizational changes. Secondly, companies can adopt collaboration software that allows project owners to manage a large number of ideas and feedback from many parties. Some research methodologies also enable more objective decision-making when it comes to narrowing down the best ideas.
Collaboration certainly isn't easy, but data suggests that it can have a tangible impact on innovation outcomes. With the right tools and support, companies can begin taking steps to improve their current processes.
To learn more about the research, download the “How Collaboration Drives Innovation Success” report.