Food and beverage innovation is a constant demand, even for the most well-organized enterprises. When it comes to getting innovation right, the stakes are extremely high; failure rates for new food and beverage products have climbed to as high as 80 percent in recent years.
How can food and beverage companies continue to make innovation a priority, while guarding against the vagaries of the industry that can torpedo the smartest strategies and greatest ideas? By digitalizing innovation processes and eliminating roadblocks to alignment, visibility and collaboration.
What We’ve Heard from the Industry
In conversations with senior executives from some of the world’s biggest food and beverage companies, common themes and pain points have emerged:
“It’s difficult to align innovation with constant consumer demand and market changes.”
“We struggle to create significant competitive differentiation.”
“Price competition often hampers our innovation momentum.”
“We often need to adjust strategy and innovation initiatives because of regulatory changes, commodity prices and many other variables we can’t control or predict.”
Product and process innovation are key drivers for revenue growth among the world’s biggest food and beverage companies, which derive more than half of their current revenue from products introduced in the past five years. Recently, more companies are seeing the benefits of using technology to transform their innovation processes.
Bottom line: Enterprise innovation is value creation that expands far beyond product development and touches every aspect of the business. From the board room to the production floor, alignment with and visibility to the organization’s innovation strategy is necessary to create a company-wide culture of agile innovation.
Yesterday’s Food Innovation Process
To understand what’s driving change in food innovation today, we must first examine how food companies themselves are changing. Global food brands are pressured by market competition not only from established, enterprise-sized competitors, but also from well-heeled startups that can be more agile and responsive to market shifts. In this regard, a digitalized innovation process isn’t solely focused on research and development or even the product itself: its value is in making the entire organization more attuned to making strategy real and doing the things that drive the company and its strategy forward.
Global consolidation is also shaking up the innovation process. Historically, even multinational food companies operated as a loose federation of regions or sub-units based on geography. Innovation was siloed within these business units and information about production capacity, commodity prices, etc., was shared infrequently between regions. With multiple processes and systems, varied degrees of adoption and limited visibility across business units, there were many missed opportunities to leverage innovation.
A highly disconnected enterprise is not ideally suited for innovation leadership in today’s business environment. A lack of visibility together with the inability to share information and make objective decisions based on the same trusted data, can easily derail the innovation process. Creative ideation, portfolio management, project oversight and execution responsibilities are often too compartmentalized to achieve enterprise-wide visibility, input and cooperation. Until these processes “trickle down” to the execution level, possible roadblocks (such as ingredient availability, production capacity and more) are left unaddressed, often adding weeks and months to a new product launch timeline.
The process of connecting people, systems and information to speed decision-making must be repeatable, adaptable and scalable. Changing models and best practices, not to mention market shifts, should not limit innovation; rather, with a comprehensive, digital view of the entire innovation ecosystem, companies will need fewer resources and investments to bring profitable new ideas to market.
Unlike digitization, which simply converts analog information to digital, digitalization is a ground-up shift toward using digital technologies to change a business model completely. That’s where technology and innovation can coalesce and create an entirely new paradigm for innovation management.
A digitalized approach to innovation:
- Boosts insight into market trends and changes so companies can adjust their strategies in an agile manner
- Aligns process across all business units, global geographies and cross-functional teams
- Improves ideation by linking the “front end” to strategy and implementation
- Monitors critical success factors — such as commodity pricing — allowing companies to set “guardrails” and alerts when these factors change
- Provides visibility to all levels of management for improved transparency and oversight
- Identifies gaps in product portfolio to allow for better organic and new product growth
- Ties all of these attributes together for a single, enterprise-wide source of truth
Within the enterprise, a digitalized innovation process gives all internal stakeholders a configurable view of each project in the pipeline. This allows both global standards and localized flexibility to become part of the process. Automated processes — such as automatic reports of system-generated data — can then be put in place to save time and money.
Portfolio visibility is perhaps the biggest advantage of a digitalized process, allowing executives to create resource “waterlines,” along with alerts when key resources are diminished. Rich portfolio analysis can then expose optimal investment scenarios, based on available resources.
Today’s Digitalized Food Innovation Process
The benefits of a digitalized innovation process are manifold and universal across all enterprise-level industries. Digitalization creates measurable time savings for teams and team leaders, increasing adoption and visibility across multiple business lines. It also enables cross-functional decision-making for executives by sharing a complete picture of innovation process. This allows executives to create purpose-built gated decision making and execution processes — the most widely used being Stage-Gate or Phase-Gate — while mapping risk to rigor and eliminating silos that hamper communication.
The key to digitalized innovation is knowledge discovery, re-use and configurability. No two enterprises are alike, even if they share some market similarities. Company culture, corporate structure, integration of acquired brands and many other factors impact innovation processes. However, there are standard best practices that can be adapted to each specific organization. Through digitalization, companies can adopt innovation processes that reflect what makes the company unique, resource availability and specific gaps in the product portfolio.
How to Take Action
Innovation is more than a process; it’s the “price of entry” for staying competitive and profitable. Digitalizing all innovation functions can help large food and beverage companies to be highly agile while preserving big-company capability and scale.
By removing the roadblocks of manual process, internal friction and poor collaboration, a digitalized innovation process speeds new ideas to market and ensures these introductions are aligned with company revenue goals throughout the innovation lifecycle.
The largest food and beverage companies can now capture the agility of smaller competitors, improve innovation outcomes, streamline new product development processes and significantly impact both top-line growth and bottom-line profit.
Where are you in the digitalization process? Take a short survey and benchmark your company’s innovation performance against top performers.
Bryan Seyfarth, is director of consumer goods for Sopheon.