Article Courtesy of EXCEEDRA PTY LTD

Innovation can take many forms, and successful new product introductions require a healthy dose of commercial innovation underneath them. A term coined in the 1930s by Austrian political economist Joseph Schumpeter, ‘commercial innovation’ has only recently become recognised as a discipline essential for business survival and the delivery of value. As a young discipline its definitions are still broad, but it has multiple applications for FMCG and retail environments, including for new product development innovation.

Let’s take a process for managing and executing new product introductions from a commercial innovation perspective.

An example commercial innovation process for a new product launch might look like this:

Pre event/launch analysis > In flight monitoring > Post event/launch analysis > Ongoing monitoring.

Pre event/launch analysis: for the new product this includes modelling of revenue, profit, volume and ROI taking into account variables such as cannibalisation, seasonality, pricing and price elasticity. A number of scenarios are planned for, including which of the new products are likely to be the best contributors to revenue and profit based on a number of the executional variables. TPM/O (trade promotions management and optimisation) systems may be used to model the impacts of new ingredients, new pack sizes etc, tailored by channel. A good revenue management system then converts the pre-plan into final confirmed plan with ROI metrics set in place, linked to ROI efficiency and effectiveness.

In Flight Monitoring: once the new product has launched, in flight monitoring enables course correction if the launch isn’t working out. E.g. if the new product isn’t hitting its store distribution goals on time, or the agreed shelf velocity hurdle rates. Real-time dashboards and inflight management enable the ability to use multiple data sources and calculate different variable impacts on the fly, changing SKUs, product groupings, customer buying groups, promotional frequency and depth, volume, phasing, impacts of cannibalization and sort term seasonality or external key event impacts. As well as real time changes to the forecast and any event that may cause out-of-stocks.

Post event/launch analysis: a few months after launch of the new product, to allow achievement of distribution goals, a post analysis is conducted against the metrics and scenarios from the pre-launch analysis and a review of any course corrections made as a result of in-flight monitoring. Impacts on future pricing and promotions activities are suggested, as well as full overlays of value-based costings where the right data is available for analysis, and the first stage of the dissemination of learnings via embedded S&OP planning process.