Nielsen: Hands-off Approach Spurs Innovation


Micro-management doesn't pay, at least when it comes to the new consumer product goods creative process, according to new research from The Nielsen Company.

Nielsen's research on the innovation processes at 360 large, U.S. CPG companies found that those with less senior management involvement in the idea-generation stage of the new product development process generate 80% more new product revenue than those with heavy senior management involvement.

Overall, Nielsen found that companies that take a hands-off approach with product development incubation and also employ other innovation best practices, on average derive 650% more revenue from new products than companies that do not follow these practices.

Putting physical distance between senior management and "blue sky" innovation teams to avoid stifling new-idea generation is also critical to success, according to the results presented Wednesday at Nielsen's Consumer 360 Conference.



In fact, the data show that companies would actually be better off having no such innovation teams than locating them at corporate headquarters. Those with on-site innovation teams report that 5.7% of revenues come from new products, compared to 4.8% for those that do not have such teams and just 2.7% for those who house their innovators on site.

The bottom line: Senior management's focus within the innovation arena should be on precisely managing the new-product development process after ideas are on the table.

Companies with rigid development stage gates that require that a new product pass specific criteria before proceeding to the next stage average 30% more new product revenue than companies with "loose" processes, according to the study.

Those with the strongest records of new product success tend to have two to three stage gates that are strictly followed across the organization. The first stage gate is typically designed to identify ideas that will then be developed into a concept and prototype, while the last is usually designed to determine whether a product should be committed to production and market.

Other key innovation best practices among the two dozen identified include: a focus on growing brands, rather than acquiring them or having senior management "designate" them; a focus on product development two to three years out; a formal scorecard to provide structure to organizational learning; a standardized, mandatory post-mortem on all new product development efforts; and a knowledge management system to retain learnings from previous product launches.

Far from being serendipitous, successful innovation track records are achieved by companies that "go to great lengths to create an ideal creative environment and the right behaviors, supporting policies and procedures," summed up Nielsen SVP and Managing Director Tom Agan. "When they execute well, the best ideas rise to the surface and into consumers' homes."

The Nielsen study documented more than 50 dimensions of new product development. Objective survey results were compared to actual in-market success and the percent of revenue from new UPC's in fourth-quarter 2009.

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