August 23, 2005
Innovation Doesn't Come Cheap - It's All About Risk vs. Reward
Published in Brand Packaging
Getting it Right | Aug 2005
By Peter Clarke, Product Ventures CEO & Founder
In the emerging “creative economy”, innovation is the key to the kingdom. But unless they’re lucky to be working at a company with a true legacy of innovation, packaging professionals still face an uphill battle selling in breakthrough ideas. And this despite numerous examples of companies that have achieved market leadership by taking a risk and putting up the ante.
Who am I to write this article? Well, as an innovation partner, I’ve been frustrated to watch companies jump in and “innovate” without a plan. The result has either been compromised design or project abandonment, often after many hours, resources and dollars have been spent.
So why do we bother? When we engage this way, all we’re doing is opening the opportunity for a competitor to leapfrog our efforts and do it right. Instead, visionary companies set their sights on creating meaningful consumer experiences through innovation, with a strategy of how to pay for it in advance.
Strategy 1: Increase sales volume and market share.
Innovations that create a unique selling proposition through meaningful features and benefits have a higher likelihood of marketplace success. Inviting consumers (from the project start) to identify and validate ways to improve their experiences will set the initiative up for success. When Folgers innovated its packaging, the brand enjoyed increased sales in a previously flat category, and moved into the market share lead over its main competitor.
Strategy 2: Pass the cost onto consumers.
That’s the die Domino Sugar seems to have rolled with its new plastic canister. According to media reports, retailers in test markets have had trouble keeping shelves stocked, even though consumers are paying more for a package that contains less sugar! Again, to achieve success with a more “educated risk”, strategic innovators should leverage a methodology that includes the consumer early and often throughout the design process. This ensures a consumer-validated solution with features that create the “delight” consumers will pay for.
Strategy 3: Improve stock value for investors.
Innovation is proof that your company is a pacesetter in the creative economy—making it that much more attractive for investors. According to Jim MacDonald, package engineer at Sherwin Williams, on the day the company announced plans to develop the Twist & Pour paint canister, its stock price rose, instantly increasing the company’s net worth. This was before the product had even hit the store shelves. What a way to raise more than enough innovation funding!
Strategy 4: Cost optimize over time.
Packaging pioneers accept that innovation won’t be cost effective for a while. Anything done to change an industry archetype will be at a cost premium. But they hedge their bet in the knowledge that a consumer- embraced, value-added innovation will be imitated and destined to become the industry standard. Their reward comes from having been there first, both in terms of cost optimization, economies of scale and bragging rights. Remember, canned goods didn’t start out as the cheapest option. A more recent example is Capri Sun’s early adoption of pouching technology that set them on the course to platform ownership.
A call to arms
These real life examples might persuade some of the risk averse. But they don’t change the fact that those involved in packaging innovation must make inroads to measure return on investment. The financial stewards of most companies will continue to demand hard evidence of bang for the buck. Our challenge is not dissimilar to the one ad agencies faced years ago. Yet over time they were able to create and track metrics that prove advertising effectiveness and value.
The tricky part is most clients want to quantify these ideas ahead of time. Unfortunately, there really are no clear tools to do this. That’s the Achilles’ heel of 3D design—traditional advertising and on-shelf communication measures don’t translate for items like packaging, which require multi-sensory and functional evaluation. Unless consumers have the article in hand, they can’t make accurate assessments of use, ergonomics and proportions. We need to measure the combination of factors that engage and create appeal and delight for the consumer.
Perhaps a simple place to start is in gathering marketplace results tied to packaging innovation. Of course, that would mean we need corporations to release data they have traditionally kept under wraps in the highly competitive CPG market. But disclosure benefits everyone in the long run. A few cases of documented packaging-innovation business gains would loosen the purse strings of even the most cautious company.
This way we can demonstrate that, although innovation will always come at a price, the risk can be worth the reward. Otherwise companies will continue to spend a lot of time talking about innovation instead of blazing the path for others to follow. BP
The author, Peter Clarke is president and founder of Product Ventures Ltd., a packaging and product design and development agency. Contact Peter at 203.319.1119 or firstname.lastname@example.org.