Taste can be a fickle thing. When a finicky public is constantly demanding the newest, best, and latest of your enterprise, it puts an insane amount of pressure on you to meet their changing demands. Companies often respond to this challenge by launching new products or services. This solution should be carefully considered, and prepared for.
I once came onto a business that literally had “taste” at its core. This food company followed the winds of change by launching an exotic new flavor every year, and they found that the brand topline was growing. But a funny thing happened on the way to contemporary consumer acceptance. As we dug into results, we discovered that the company was gaining little incremental sales from the new flavors and, in fact, this ever-evolving lineup of nouveau flavors was eroding their core offerings.
As a result, the business found itself on a shaky foundation. And because launching new flavors brings with it a raft of incremental costs to impact awareness and trial, profitability had taken a downturn.
What this company was experiencing is all too common in the drive to stay competitive. Often, companies see adding new products or services as a quick way to drive short-term growth. This can be a response to stagnant or declining revenue, eroding pricing and profitability, changes in the marketplace, and/or competitor inroads. Sometimes we assume new products are the answer.
But, given that up to 95 percent of new consumer products ultimately fail, a measure of care and preparation would be advised. For smart companies, the following four questions hold the key to understanding whether it’s time to develop new products or services – or whether you need to get your base product lineup in order first. And, if new products are the best solution, it behooves the company to ensure decisions are made and processes implemented to position new offerings for success and incremental, profitable growth.
Here are 4 questions to ask before you launch new products:
- Do I have a verified, aligned vision on where the company wants to go? It’s critical to bear in mind that innovation, for most companies, represents a strategy to reach revenue and growth goals – not a self-realizing goal. I am reminded of a quote I once heard that observed, “If you don’t know where you’re going, any road will take you there.” Innovation, indeed, can be a powerful building block to move a company forward toward its vision – but it can also distract you from your focus and dilute resources. That’s why it’s important to have innovation activities led by Marketing (versus your research and development group) to ensure the work is vision-led, and focused on what your consumer and customer wants – not just on what the company can build or offer.
- Have I exhausted how I can achieve these goals with my current offerings? It’s a time-honored truism – new products and services are much less efficient at building revenue than simply maximizing your existing offerings. If you feel that you have maxed out the potential for growth with your current offerings, only then may it be time to introduce new products. When doing your due diligence, be sure to consider whether the volume and revenue from the new products and services will offer enough of an incremental bump to company revenues and profits.
- Do I have a deep understanding of my core consumer/customer and of our secondary consumer/customer, and their relationship with our brand or company? What drives their choice? Consider whether there’s an opportunity to simply increase purchases with your current customers, as well as whether you can easily add to your customer base for the core offerings.
- Do we have a process set up to assure regular updates, alignment and approval for senior leadership of innovation process? Having a regular review of innovation projects, at every stage, with your senior leadership team is absolutely critical in terms of keeping priorities clear. Ensure resource allocation for any new offering is strongly considered as part of the broader picture. To that end, make sure you have accounting in place to accurately apply costs and revenues to each product or service, to ensure you are gaining an accurate financial picture of the new offering.
With the company I mentioned at the beginning of this blog, we discovered that they hadn’t answered these questions before jumping into the new products. As a result, we paused the innovation pipeline, and restored the company’s focus on its core business to get it to a much healthier place while reinforcing the business foundation. Only then did we restart innovation in a more focused way.
In another case, I had a colleague who was working with a manufacturer of food processing equipment. They were looking at developing a modified line to go after a new market -- craft brewers. However, before they jumped in, they answered the four questions posed above. As a result, they identified hundreds of food processing companies in the state, and focused on better penetrating the food companies.
So make sure you are maximizing the return on your assets first, and prepare your organization to excel at innovation! If this resonated with you, let’s schedule a call together to discuss what you’d like innovation to do for your business. Reach me at firstname.lastname@example.org.