Silicon Valley and Consumer Packaged Goods- both revered industries with some of the best marketing tactics- bring very different mental images to mind. Consumer Packaged Goods (CPG) giants like Procter & Gamble and Unilever have deep pockets and a strong existing brand loyalty when they go to market with a new product. A formal, corporate environment with established processes and structures in place (more or less) allows for the seeds of new ideas to be planted… eventually making its way to our grocery baskets. Tech companies, on the other hand, might stir images of wiry-haired young guys pulling all-nighters in company-wide hackathons to come up with the next BIG thing. An all-or-nothing mentality, coupled with a brave eccentricity, is what I associated with Silicon Valley. As you can probably tell, my knowledge of innovation in tech has so far been informed by Netflix shows and dramatized scenes from movies like The Social Network and Jobs. That changed today. I was intrigued by a podcast on innovation in which former Google engineer Alberto Savoia speaks about failing “Ferrari fast” in startups, and how that helps come up with the best ideas. Two points in particular stood out to me, which I’ve paraphrased here:
The question wasn’t whether we could build it; it was whether we were building the RIGHT it.
Alberto was talking about the ability of the brightest minds in Silicon Valley to build new products seamlessly, with perfect execution- only to have them fail horribly in market. Why? As Alberto puts it, a lot of the time the trouble with failed innovations wasn’t execution, it was the lack of integration of customer feedback through the innovation process. Alberto stresses the fact that one has to constantly get customer feedback- at least every 6 months- through the innovation process, instead of getting feedback just at the beginning and then launching something into market X a number of years later, hoping consumer trends haven’t changed.
As a packaged goods company, once a product innovation has been decided on, it is easier said than done to constantly test prototypes with consumers. Even a test product requires investment in product formulation, manufacturing capabilities (sometimes with capital investment), and a rigorous retailer sell-in with high listing fees. The financial payback of launching ‘test products’ in market just doesn’t make sense. What are some ways to create ‘pretotypes’ - a phrase coined by Savoia to describe simple and inexpensive ways to test the product without actually launching it- to make sure the investment is worth it?
This is the second point that stood out to me (again, paraphrasing):
The trouble with focus groups is this- there isn’t any skin in the game. Consumers might tell you they want something, but when you ask them to invest their own money in it vs. something else, that changes things.
Savoia recalls how consumers are very receptive to innovations in focus groups. But arm them with cash and actually put them in a position that forces them to choose how to invest it… and you’d be surprised to see how often they don’t choose your new product.
Simulating the purchase decision as realistically as possible is key in determining an innovation’s future success- and perhaps focus groups and surveys do not accomplish this to the best degree.
For instance, sitting consumers down in a room and asking them to use and rate a product, would miss out several key factors that play into someone’s actual purchase decision. However, arming them with $100 cash and using virtual reality to have them shop around a fictional grocery store (with your new product on the shelf already), and you’ll be able to see whether they pick it of their own accord.
Sadly, such VR consumer research capabilities don’t exist (to my knowledge)… maybe one day.
The best example I came across to using pretotyping outside of tech, is the McDonald’s Innovation Centre. McDonald’s is constantly changing up its menu, and it tests these new meal items out on actual customers during the prototyping process. “Research group participants” enter the McDonald’s Innovation Centre, which looks exactly like a regular chain, and pick what to order off the menu. How frequently a new item is ordered at a price point relative to everything else, as well of course the customer satisfaction after trying the product, are measured in real time. Pretty neat!
Innovation is really important to both tech and packaged goods, but packaged goods has some way to go in identifying feasible ways to continually test the product as it is being developed, in a situation that closely reflects real life. Pushing consumer research agencies to have people invest something when they choose a new product forces them to have skin in the game, which could be effective in determining future success.
I’m excited to see how CPG continues to innovate, and how companies’ unique approaches to innovation emerge as the industry gets more and more competitive.
To see the original published article, click here.