“Innovation takes birth in sync with the evolution of customer’s expectations and demands or vice versa”
The Fast-moving consumer goods or FMCG industry is one of the ever-expanding and innovating industries to exist in the 21st century. This consumer demand-driven industry is the 4th largest industry in India and is predicted to grow at a CAGR of 14.9 by 2025. Innovation is a key for several industries including technology, healthcare, agriculture, and automobile to name a few. FMCG is no different than others, however, our definition of ‘innovation’ might be. There are different forms of innovation that exist to cater to fulfilling different industrial and organizational objectives.
- Incremental innovation- Small changes are done in the context of existing products, technology, or business model. An average of 5 to 25% improvement in cost, performance, or customer value. It is marketed as cheaper, faster, better with no improvement in revenue growth.
- Breakthrough innovation- Significant changes to existing products, technology, or business model. Built on an entirely new technology or business model, there would be a 25%+ improvement in performance and give a competitive advantage leading to higher than average revenue growth.
- Radical innovation- A notable change in technology and business model, creating new consumer value, new players, and new technologies. This innovation leads to a new competition basis in the market or may create a new market providing consumers with value. It may further lead to generating very high revenue growth rates.
Now that we have understood the nuances of what innovation means in the FMCG industry, let us discuss how innovation takes place in the industry.
Innovation is a broader and deeper process that is not limited to simply creating, launching, and marketing products. There are several checkboxes that a projected successful innovation needs to tick off.
Will it improve customer experience? Will it be economically viable? Will it be a short term or long term innovation? Will it be accepted by the Indian audiences? (In case the products are inspired by western consumer demand.)
The Research and Development wing plays a big and integral role in the whole process of innovation of products, from the inception to the after-sales. The Consumer Goods Technology and Sopheon Corporation’s survey stated that obstacles are found at the early stages of the successful development and launch of new products. As per the companies participating in the survey, product idea generation was a no-brainer. However, only 20% of those ideas could be actually considered of high innovation. One in four professionals working in the FMCG industry said that more than 25 per cent of their ideas get launched.
So, what are the key points which can lead to product innovation?
According to Nielsen, 45% of FMCG organizations’ innovation process is triggered by improving R and D capabilities or product up-gradation. In 2020, between April-September, FMCG companies launched 9,700 new products as compared to 7,200 launches in April-September 2019.
Product development is significant because it can assist you with making new spaces in a packed market. By distinguishing the holes and forcing yourself into another space, you can discover a group of people and fulfill customer needs in a manner that is new and reviving.
Note that product innovation doesn't generally include the formation of a new item that addresses a new issue. Innovation might happen when you work on a current item or you add another element to a current item.
When we talk about innovation, we don't allude just to items, yet additionally to administrations, cycles, or plans of action. Those are somewhat more subtle; however, they can be simply tremendously rewarding and fruitful.
Let us see some of the path-breaking FMCG innovative products which were launched and were successful.
The Indian market is a boon to FMCG players, especially if they want to capture the market with a new innovation. Notable FMCG heads believe that long-term demands and growth are significant to Indian markets. FMCG products have a great opportunity given that India’s per capita consumption is lower than other markets.
Some of the features which give India an advantage include-
What are the biggest barriers to product innovation in an organization?
There is no doubt that product innovation is a tedious, complex, and draining process which takes time. According to Nielsen report, it takes one to two years for one-half of companies (and two-thirds of FMCG companies) to bring innovation from concept to launch.
The four biggest disablers to the product innovation process are-
Conflicting priorities across internal teams