Innovation ain’t what it used to be. These days, being an incumbent brand with a well-established R&D department and a proven NPD process may not be enough to retain market share, when start-ups run by digital natives are snapping at your heels. In North America, about $22 billion in consumer goods industry sales shifted from large to smaller companies from 2011 to 2016, and Europe has experienced a similar shift. Challenger brands such as Halo Top ice cream and Fever-Tree tonic have come, seemingly from nowhere, to entirely disrupt their respective categories.
A widely read article back in 2013 explained why lean start-ups were set to “change everything” by favoring experimentation over elaborate planning, customer feedback over intuition, and iterative design over traditional “big design up front” development.
The lean innovation method has three key principles:
1. Instead of engaging in months of planning, entrepreneurs start with a series of untested hypotheses – good guesses – instead of an intricate business plan. As the boxer Mike Tyson once said about his opponents’ pre-fight strategies: “Everybody has a plan until they get punched in the mouth.”
2. Lean start-ups get “out of the building” to test their hypotheses amongst potential users, purchasers, and partners. They conduct research on all elements of the business model, including product features, pricing, distribution channels, and affordable customer acquisition strategies. The emphasis is on nimbleness and speed.
3. Lean start-ups practice agile development, rapidly assembling minimum viable products and immediately eliciting customer feedback. Then, using customers’ input to revise their assumptions, they start the cycle over again, testing redesigned offerings and making further small adjustments. Unlike typical yearlong product development cycles that presuppose knowledge of customers’ problems and product needs, agile development eliminates wasted time and resources by developing and testing the product iteratively and incrementally.
Fast forward to 2019 and big brands across all sectors are starting to recognize that a lean approach to innovation can help them get new products into the market faster and more effectively, in the face of relentless competition from small, agile market entrants.
Some innovation teams have started to move towards a lean approach, often as part of a wider digital transformation initiative across the wider company. However change isn’t easy, and teams can find themselves held back by the status quo: existing innovation processes that are strictly sequenced, and require senior sign-off at each gateway; a corporate organization structure that puts functions such as R&D, engineering and marketing in silos, with a precise division of labor and responsibility; a hierarchical approach to innovation that privileges the instinctively derived pet projects of senior employees over ideas that have been generated and rigorously tested through consumer research.
An ability to conduct fast and frequent consumer research, to test and learn and make fact-based decisions is one of the key components of this lean start-up approach, and can even act as a prescription to fix these ills. For example, Jeff Bezos said “The great thing about fact-based decisions is that they overrule the hierarchy. The most junior person in the company can win an argument with the most senior person with regard to a fact-based decision.”
Today, there are any number of tools available to support product development teams in conducting fast, inexpensive and effective customer research, so they can make fact-based decisions. Statistical tools and techniques such as MaxDiff, TURF analysis, and conjoint have always been used throughout the product development life cycle, from early-stage concept and design, to packaging, price, and validation, to test elements such as features, flavours, colours, messaging or product names.
Until recently, these tools could only be deployed as part of a traditional market research project, which could be time consuming and costly. However, companies aiming to conduct research as part of a lean approach to innovation can now look to modern, digital platform-based suppliers for tools that deliver actionable insights in a fraction of the time, at a fraction of the cost of traditional methods. Our latest additions, Optimize Rank and Optimize Reach, complete our end-to-end innovation solution, which is used by some of the most innovative research clients in the business, as they support their organizations to transform to using leaner development methodologies.
The more we test and learn the smarter we get – and I don’t think this was even possible 18 months ago. The technology wasn’t there. But now, we can think “platform” … We want to create a platform that enables all our commercial leaders, marketeers, insights people, every category, every market, to get insights much earlier in the process, to be more iterative, and to have a connection between insights and creativity, not to “mark their work” but to inspire, and get to better innovation, much quicker.Tim Warner, PepsiCo