Innovation in Cosmetic Industry
ABSTRACT : Innovation is one of the most important issues in business research today. It has been studied in many independent research traditions. Our understanding and study of innovation can benefit from an integrative review of these research traditions. In so doing, various topics of consideration have been identified and studied.
Consumer response to innovation, Organizations and innovation, which are increasingly important as product development becomes more complex and tools more effective but demanding; techniques for product development processes, which have been transformed through global pressures, increasingly accurate customer input. Innovation is the core business competency of the 21st century. In order to not only compete and grow but to survive in a global economy, businesses must innovate.
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To date innovation has been approached in a piecemeal fashion often linked solely to the New Product Development (NPD) process. There has been a remarkable increase in R&D investment by industries at global level over a number of years. The area of R&D in industry with the highest rate of growth over the past six years has been in directed basic research. Innovation and the effective management of technology have become a top priority for nations as well as companies, to stimulate economic development and strengthen their competitiveness.
Allocation of R&D for the development of new businesses is seen as a key growth strategy by firms in most parts of the world. New products are engines to growth and prosperity for all companies in the manufacturing sector or the service sector. In this article, an attempt has been made to explore the drivers of new product performance, with a particular focus on cosmetic industry. P&G is considered to be one of the companies dealing with cosmetics with the best innovation strategies, and hence it has been taken as an example for the study.
The Innovation Diamond is introduced by P&G as an integrative and guiding framework to help management focus on what’s important to success: innovation strategy, a solid idea-to-launch process, portfolio management and the right climate and leadership. (Keywords : Innovation, R&D, Cosmetic industry, P&G, success, Product Development. ) INTRODUCTION : Innovation, the process of bringing new products and services to market, is one of the most important issues in business research today.
Innovation is responsible for raising the quality and lowering the prices of products and services that have dramatically improved consumers’ lives. By finding new solutions to problems, innovation destroys existing markets, transforms old ones, or creates new ones. It can bring down giant incumbents while propelling small outsiders into dominant positions. Without innovation, incumbents slowly lose both sales and profitability as competitors innovate past them. Innovation provides an important basis by which world economies compete in the global marketplace.
Innovation is a broad topic, and a variety of disciplines address various aspects of innovation, including marketing, quality management, operations management, technology management, organizational behaviour, product development, strategic management, and economics. Research on innovation has proceeded in many academic fields with incomplete links across those fields. For example, research on market pioneering typically does not connect with that on diffusion of innovations or the creative design of new products.
Overall, marketing is well positioned to participate in the understanding and management of innovation within firms and markets, because a primary goal of innovation is to develop new or modified products for enhanced profitability. A necessary component of profitability is revenue, and revenue depends on satisfying customer needs better (or more efficiently) than competitors can satisfy those needs. Research in marketing is intrinsically customer and competitor focused, and thus well situated to study how a firm might better guide innovation to meet its profitability goals successfully.
To encourage and facilitate further research on innovation in marketing, we seek to collect, explore, and evaluate research on innovation. Key goals of this paper will be to provide a structure for thinking about innovation across the fields, highlight important streams of research on innovation, suggest interrelationships, and provide taxonomy of related topics. Successful innovation rests on first understanding customer needs and then developing products that meet those needs. Our review of the literature, therefore, starts with our understanding of customers and their response to and acceptance of innovation.
Because we are interested in how firms profit from innovation, the article will then review organizational issues associated with successfully innovating and with how organizations adopt innovations. Customer understanding and the organizational context are underpinnings to innovating successfully. They must be in place before proceeding. Then the flow of innovation will be discussed. SUCCESS FACTORS IN AN ORGANISATION: Success factors for an organisation predominantly identified in the research papers are : • Product innovation • R&D investment • Leadership commitment, Clear understanding of the company’s capabilities, • Strong connection to the customer and a deep understanding of major customer problems, • Willingness to take big but well-understood risks. PRODUCT DEVELOPMENT : Once consumer needs are understood and organizations for innovating and strategies are in place, then begins the execution part of innovation—moving from having a strategy to conceiving a concept to delivering against that strategy, to designing the final product and its manufacturing process, to finally having a (hopefully successful) commercial product.
This section examines research that has sought to improve this process of product development (PD), which is predominantly prescriptive in nature. We begin with a brief review of product development processes, then will discuss about the research applicable to each of various stages of product development. PRODUCT DEVELOPMENT PROCESSES : The emerging view in industry is of product development as an end-to-end process that draws on marketing, engineering, manufacturing, and organizational development. The core of this process is the product development funnel of opportunity identification, design and engineering, testing, and launch.
Previous researches recognizes that, for a single successful product launch, failures will be many, although some may be recycled, reworked, and improved to become successful products. Even when a product has been in the marketplace, innovation continues as the firm continually searches for new opportunities and ideas. Researches also recognize the current hypothesis that firms are most successful if they have multiple product concepts in the pipeline at any given time, forming a portfolio of projects.
These projects might relate to independent products but increasingly are based on coordinated platforms to take advantage of common components and/or economies of scope. Risk is inherent in product development; few of the many concepts in a portfolio are likely to be successful. Information to evaluate alternative concepts is often imperfect, difficult to obtain, and hard to integrate into the organization. For each success, the process begins with 6 to 10 concepts that are evaluated and either rejected or improved as they move from opportunity identification to launch.
RESEARCH CHALLENGES : PD processes are only as good as the people who use them. Structured processes force evaluation, but evaluation imposes both monetary and time costs. Teams can be tempted to skip evaluations or, worse, justify advancement with faulty or incomplete data. There are substantial research opportunities to understand the optimal trade-offs among evaluation costs, the motivations of teams for accuracy, and the motivations of teams for career advancement. For example, advancing a concept to the next stage in either a sequential or spiral process requires a hand-off.
New team members must have sufficient data to accept the hand-off. In some instances, the old team members are now required to look for new projects—a disincentive to advancing a concept through the gate. Marketing, with its tradition of research on people, whether they are customers or product developers, have many research streams that can inform and advance the theory and practice of PD processes. Despite this, we have seen little formal investigation of the link between marketing capabilities and PD processes.
The most critical research challenges in this area include, Improving the effectiveness of non sequential PD processes; Understanding which process is best in which situations; Understanding when it is appropriate to modify processes; Linking marketing capabilities and PD processes; Understanding the explicit and implicit rewards and incentives that encourage PD teams to either abide by or circumvent formal processes. Both market orientation and innovation have been identified as crucial success factors in companies.
A positive impact of market orientation and innovation on company performance has been found in many industries and under a wide range of market characteristics. Research on market orientation is focused in particular on large companies. However, market orientation is expected to be important for small companies as well as large companies. Research in this field for small firms is relevant because small companies are widely represented in important industries like retailing, services and agriculture.
Research has shown the importance of market orientation for the success of product innovations. A market orientation may stimulate innovations and increase the performance of innovations. In this paper we will focus on innovations in small independent companies that do not have the capacity for R&D as opposed to innovations in medium sized and large companies. Various models about the relationship between market orientation and innovation have been proposed examined the impact of market orientation on innovation characteristics using measure for market orientation.
Many studies that focus on factors discriminating between successful and unsuccessful innovations conclude that market orientation is one of the main contributing factors to innovation success. INNOVATION Innovation is the creation of better or more effective products, processes, services, technologies, or ideas that are accepted by markets, governments, and society. Innovation differs from invention in that innovation refers to the use of a new idea or method, whereas invention refers more directly to the creation of the idea or method itself.
The word innovation derives from the Latin word innovatus, which is the noun form of innovare “to renew or change,” stemming from in—”into” + novus—”new”. Diffusion of innovation research was first started in 1903 by seminal researcher Gabriel Tarde, who first plotted the S-shaped diffusion curve. Tarde (1903) defined the innovation-decision process as a series of steps that includes: First knowledge, Forming an attitude, A decision to adopt or reject, Implementation and use, Confirmation of the decision, Innovation.
Innovation is the process by which an idea or invention is translated into a good or service for which people will pay, or something that results from this process. To be called an innovation, an idea must be replicable at an economical cost and must satisfy a specific need. Innovation involves deliberate application of information, imagination, and initiative in deriving greater or different value from resources, and encompasses all processes by which new ideas are generated and converted into useful products.
In business, innovation often results from the application of a scientific or technical idea in decreasing the gap between the needs or expectations of the customers and the performance of a company’s products. In a social context, innovation is equally important in devising new collaborative methods such as alliance creation, joint venturing, flexible working hours, and in creating buyers’ purchasing power through methods such as layaway plans. INNOVATIONS ARE DIVIDED INTO TWO BROAD CATEGORIES: (1) Evolutionary innovations are brought about by numerous incremental advances in technology or processes and are of two types a) Continuous evolutionary innovations result in an alteration in product characteristics instead of in a new product, and do not require any user-learning or changes in his or her routine. Examples are the multiblade shaving razor, fluoride toothpaste, and laptop computers. (b) Dynamic continuous evolutionary innovations require some user-learning but do not disrupts his or her routine. Examples are fax machines, instant photography, and handheld computers. (2) Revolutionary innovations (also called discontinuous innovations) require a good deal of user-learning, often disrupt his or her routine, and may even require new behaviour patterns.
Examples are photocopier (xerography) machines, personal computers, and the Internet. Innovation is synonymous with risk-taking and organizations that introduce revolutionary products or technologies take on the greatest risk because they have to create new markets. A less risky innovation strategy is that of the imitator who starts with a new product (usually created by a revolutionary-innovator) having a large and growing demand. The imitator then proceeds to satisfy that demand better with a more effective approach.
Examples are IBM with its PC against Apple Computer, Compaq with its cheaper PCs against IBM, and Dell with its still-cheaper clones (sold directly to the customer) against Compaq. Although many innovations are created from inventions, it is possible to innovate without inventing, and to invent without innovating. NECESSITY FOR INNOVATION “Innovation will be the necessity for social and economical growth of the nation in future. We live and die through relative innovation. The world has changed because of innovation only. Science is responsible for all the innovations we feel around,” remarked Srinivasan K.
Swamy, President, All India Management Association (AIMA), New Delhi A light bulb overhead may signal a bright idea in cartoons and comic books, but in today’s business world companies can’t sit around waiting for creative bolts of inspiration. Long-lasting success requires a process of innovation that is predictable and consistent. Today innovation is necessary to survive. The global market has become so competitive that innovation is now as valuable an investment as sales and marketing. Markets are becoming more global, not less, so the value of innovation will continue to increase.
Here’s why: a) The best ideas and technologies spread rapidly around the world now. A company with a new product may make a one-time splash, but before long everyone else will have adopted it. A consistent, predictable innovation process enables companies to overcome this. b) Brands aren’t as powerful as they used to be. Experience is now more important than brand name as the basis for a person’s purchasing decision. The Internet allows people to share experiences about a company with millions of others. People now choose the products that give them the highest value, not just the best-known brands.
Relying on a strong brand name is no longer enough. Consistent, predictable innovation is the answer. The Society of Management Accountants calls “innovation…fundamental to the quest for profitable, sustainable growth. ”3 Peter Drucker, probably the most insightful management guru ever, deems it the one business competence needed for the future. Fortune magazine’s advice to companies who want to be named to its Most Admired List? Innovate, innovate, innovate. Innovation currently accounts for more than half of all growth. And it is enormously profitable.
A study done on the rate of return for 17 successful innovations showed a mean return of 56% compared with an average ROI of 16%. Companies are catching on to this sea change. In an Ernst & Young study, European and North American companies called innovation the most important criterion for success in the future. Even technology firms who presumably are leading this charge consider “making innovation happen” the industry’s single biggest problem. COSMETIC INDUSTRY Indian cosmetics industry has witnessed strong growth during the past few years and has emerged as one of the industries holding immense future growth potential.
The cosmetics industry registered impressive sales worth Rs 288. 7 Billion (US$ 5. 8 Billion) in 2010. The sector has mainly been driven by improving purchasing power and rising fashion consciousness of the Indian population. Moreover, the industry players are readily spending on the promotional activities to increase consumer awareness. According to our new research report “Indian Cosmetic Sector Analysis (2009-2012)”, Indian cosmetics sector is expected to witness noteworthy growth rate in near future, owing to the rising beauty concerns of both men and women.
The industry holds promising growth prospects for both existing and new players. The baseline for the optimistic future outlook of the Indian cosmetics industry is that, there has been a rise in variety of products offered by the industry players. Moreover, the companies have started opting for online retailing and are offering specialized products to generate revenue from all the corners. Rising usage of Cosmeceuticals and Nutricosmetics by the Indian consumers will also pave way for the Indian cosmetics market during the forecast period.
Our research report incorporates an innovation of the cosmetics industry in India. It provides segment level analysis of the industry along with the emerging trends and innovation that happened in the previous years. INNOVATION IN COSMETIC INDUSTRY The cosmetics industry is a lucrative, innovative, and fast-paced industry. It is also a key market segment in the retail industry. In it they highlight the following products as examples of what cosmetic companies are doing to create “innovative” products. 1. Soap from a lingerie company 2. Men’s cologne in a bottle shaped like a #1 3.
Nanotechnology skin care cream 4. 3D anti-ageing skin mask. The only product that could have some technological innovation is the one based on nanotechnology. Unfortunately, there are no claims given and you could easily make the product by creating a standard skin lotion with added, non-functional nanotechnology. If cosmetic companies really wanted to set their products apart from the competition, they need to create formulas that solve consumer problems in some superior way. Consumers don’t care about how their products work (say nanotechnology), they care about the end results.
The major sections of cosmetics in this industry are : sun care, skin care, hair care, body care and perfumes and decorative cosmetics. SUN CARE The World Health Organisation (WHO) recommends regular sun screen use to help protect skin against UV radiation• Significant industry investment has helped develop increasingly effective and appealing sunscreens that – Offer broad UV (both UVA and UVB) protection – Contain a combination of nano-sized mineraln (e. g. titanium dioxide) and organic UV filters to offer high levels of protection – Have applications that suit all lifestyles and consumer needs
SKIN CARE : Skin maintenance is important because skin is the largest organ in the body, serving as a vital defence barrier. This also makes it particularly vulnerable to damage . Regular cleansing and caring improves hygiene, prevents pores from becoming clogged, removes dead skin cells and protects against external elements Dermatological research continually leads to more effective and gentle applications that address different skin types such as dry or aged skin. • Dec 30, 2011 – Euromonitor Reports Growth in Skin Care Market in Africa & the Middle East Between 2005 & 2010.
As new opportunities for skin care in key developed markets slowly dry up, much stronger growth forecasts for the category in many markets in Africa • Dec 28, 2011 – R Highlight – Angle-dependent Interference Pigments Multilayer pigments alternately coated with layers having high and low refractive index are known in the art. The optical effect of the pigments • Dec 14, 2011 – Editorial – Future-Touch Translates Future Trends into Innovation • Dec 14, 2011 – Article – UK spa company Elemis has established itself as a leading professional spa company as well as a strong contender in the retail cosmetics market.
HAIR CARE : Products: Shampoos, conditioners, hair colourants, texturisers, serums, hair sprays, growth stimulators, anti-dandruff shampoos, lotions. Improved personal hygiene via treatment of dandruff, itchy scalp, greasiness Enables self-expression, helping consumers have confidence in their appearance and greater self-esteem Meeting specific consumer needs such as controlling fly-away hair, taming unruly hair with relaxants, adding texture to limp hair, repairing damaged hair and restoring colour to aged hair BODY CARE :
Products: Soaps, antiperspirants, deodorants, body washes, shower gels, body lotions, scrubs, oils. Benefits: Soap represents a significant historical public health advance, helping break down grease and dirt Antiperspirants and deodorants enhance comfort and hygiene by helping avoid excessive perspiration and resulting body odour Non-soap detergent bars enable mild cleansing for consumers with skin conditions (eczema, rosacea, mild atopic dermatitis, etc. ) PERFUME : Products: Perfumes, colognes, salves, scented oils Benefits:
Fragrances play a significant role in enhancing personal well-being Aromatherapy research reveals that smells influence our emotions, inspire creativity and are the fastest memory triggers The sense of smell is proven to be an important factor in the process through which we form relationships. DECORATIVE COSMETICS : Products: Foundations, blushes, powders, eye Benefits : Make-up enables self-expression, helping consumers have confidence in their appearance and greater selfesteem Clinical research confirms that the ability to take care of your appearance during illness increases confidence and can aid the healing process
Science is at the heart of every cosmetic product. R programmes generate new patents every year and in 2009, over 2600 (an estimated 10% of all patents granted in the EU) were awarded to the cosmetics industry. Scientists from a wide range of disciplines such as physics, microbiology, biology, toxicology, rheology, analytical chemistry and genetics apply their skills in the European cosmetics industry. In total, the European cosmetics industry employs approximately 17,000 scientists.
R programmes investigate consumer behaviour and beauty aspirations, the biology of skin and hair, new innovative technologies and sustainable development; this helps to select the best ingredients which are the most respectful of human health and the environment, and to create new formulations which respond to both expectations and challenges Innovation is vital for the European cosmetics and personal care products industry. It can take over 5 years of innovative research and formulation to bring a new product to the market Every year, a quarter of all cosmetic products on the market are improved or are completely new.
Europe is the flagship producer and mass consumer market of cosmetics and personal care products in the world. Ongoing changes in the environment and in consumer lifestyles require new innovations that meet increasing needs, such as caring for and protecting skin from sun and weather damage SUSTAINABILITY The cosmetics industry is committed to sustainability and aims to: Reduce the environmental impact of the sector and its supply chain, from ingredient sourcing through to packaging. Ensure a balance between the economic, environmental and social pillars of sustainability
WHY INNOVATION IS REQUIRED IN COSMETIC INDUSTRY : Cosmetic products are important consumer products with an essential role in everyone’s life: apart from “traditional” cosmetic products, such as make-up and perfumes, it also includes products for personal hygiene, for example tooth-care products, shampoos and soaps. Today’s cosmetic market is driven by innovation including new colour pallets, treatments targeted to specific skin types and unique formulas concentrating on different needs. Most cosmetics products have a lifespan of less than five years and manufacturers reformulate 25% of their products every year.
They need to improve products constantly in order to stay ahead in a highly competitive market where more choice and ever greater efficacy are expected by the consumer. The European cosmetics industry is a world leader and dominant cosmetics exporter, a highly innovative sector and a significant employer in Europe. The EU’s involvement concerns mainly the regulatory framework for market access, international trade relations and regulatory convergence, all aiming to ensure the highest level of consumer safety while promoting the innovation and the competitiveness of this sector.
Innovation is important for any business but for cosmetic industry it is a necessity. Recently Several hundreds of key representatives from the European cosmetics industry have gathered in Brussels to discuss the importance of industry on the European economy and how it can build for a sustainable future. Discussion at the General Assembly focused on “Science, Beauty and Care : Innovating for a Sustainable Future”. Fabio Franchina, President of Colipa mentioned “Today’s cosmetic industry, is more dynamic and innovative than ever, and we are committed to ensuring that we contribute fully to a truly sustainable uture. ” He also mentioned that “innovation is the life-blood of the cosmetic industry” This product innovation strategy guides the business’s New Product Development direction and helps to steer resource allocation and project selection. In the mid-1990s, P&G’s Cosmetics business lacked a business and product innovation strategy, the result being that Product Development efforts were scattered; many different initiatives were launched in many different product categories and segments in a futile attempt to win. There was no focus. The first element was a product innovation strategy.
Indeed, the real breakthrough occurred in the Cosmetics business turnaround when the business leadership team began a rigorous business planning process leading to clearly defined objectives, goals, strategies, and measures. A much more concentrated innovation strategy was elected, focusing on lips, face and eyes, rather than the entire body. Next important facet of strategy meant getting the supply chain under control: end-to-end supply network management. Management streamlined the supply network so that production and shipments were tied to market demand.
As a result, they were able to reduce the time in the supply network, thereby eliminating much of the product obsolescence generated with each new product launch. By focusing first on an innovation strategy for the business, the stage was set for effective Product Development. The message is that if your business lacks a product innovation and technology strategy, you are missing a key element of successful product innovation. This strategy should include the goals for the business’s product innovation effort and how these goals tie into the broader business goals.
This strategy is more than just a list of this year’s development projects. It has a much longer-term commitment. The innovation strategy also includes defining strategic arenas or areas of focus, much like the Cosmetics business did. That is, you need to define the product, market, and technology areas in which the business will focus its Product Development efforts. The key here is focus. Innovation is important on different levels and is also important for different reasons. Innovation is an important driver of Economic growth and improvement. For Cosmetic Industry it is for – • Survival Growth • Shareholder return Individual perspective every industry constantly needs to innovate. Industry changes their route to work to become more efficient. They change how they do something (process innovation). They train to broaden their skills (to gain competitive advantage). Virtually all of the economic growth that has occurred since the eighteenth century is ultimately attributable to innovation. The Economist Intelligence Unit undertook a survey in 2007 which noted that “long–? run economic growth depends on the creation and fostering of an environment that encourages innovation.
Innovation is considered an important driver of long-term productivity and economic growth. Innovation is required to raise productivity, meet the challenges of globalization and to live within our environmental and Demographic limits. Some major reasons for innovation are : ? To survive adverse changes in operating circumstances; ? To make life easier for the customers; ? To gain competitive advantages; ? To protect market share; ? To reposition an organization and raise its profile ? To lead the market and reinforce a reputation as market leader ?
To open new horizons so as to get out of a rut or avenues with limited potential ? To attract extra funding ? To raise margins and profitability ? To drive total shareholder returns. FACTORS FOR DEVELOPING AN R&D COSMETIC STRATEGY In this week’s cosmetics and skin care industry post, the New logic portfolio team write about six factors to consider when developing your R&D cosmetics strategy. To research the post we reviewed our cosmetics posts over the last few months, and conducted ancillary research. 1. The Combination of Groundbreaking Formula and User-friendly Packaging
In the cosmetics and personal care industry, breakthrough innovations on formulas and packaging are still keys to success as they directly relate to product performance. Cosmetic and skin care chemists search for the ingredients and technology to advance product efficacy, while they also contribute to design innovative package that improve product applications. This is obvious, but it’s the formula, delivery systems and packaging that make all the difference when it comes to developing innovative cosmetics projects. Your R&D cosmetics strategy has to consider what these fundamentals. . Concentrated Product Development A successful cosmetics R&D strategy is efficient in solving two problems: shorten product development times and improve innovation initiatives. In the cosmetics and personal care industry, the diversity of product lines (face, body, lips, and eyes) creates a barrier that prevents the easy innovation across all categories. Experienced leaders use R&D project portfolio optimization to pinpoint innovation projects that align with current resources and leverage the development of existing expertise in a technology.
The Maybeline “Great Lash” Mascara collection has a history of 40 years, during which period its product profile has continued to expand. Maybelline has focused on enhancing the “Great Lash” product line through conducting consumer insight research, selecting pilot productions and adjusting the R&D process. 3. Consumer-oriented Strategy Any R&D innovations begin with the goal to improve consumer experience. R&D leaders conduct market research to discover problems and collect consumer insights, which if executed correctly can turn into new treatment solutions and product upgrades.
As increasing numbers of cosmetics companies expand worldwide, consumer-oriented strategy also includes outsourcing or moving R&D centers overseas to enhance local R&D capability. For example, L’Oreal China has improved its shampoo formula in order to cater to Asian hair care needs. Overseas R&D centers help facilitate regional research and local talent recruitment. It may also benefit the R&D process in the host country as such outsourcing enables the exploitation of local technology and resources for company-wide projects. 4. The Challenge of Product Diversification
While expanding a brand’s product profile is more of a business strategy, cosmetics and skin care R&D departments need a comprehensive technology development strategy to help anticipate risks and structure conceptualization. For example, when a successful skin care company is trying to launch cosmetics lines, the company needs to decide which products to start developing pilot engineering programs. A product development plan that’s been optimized for project selection can allow a company to lay a solid foundation and avoid failures at different stages by understanding what’s possible from the projects to select and implement. . Mergers and Acquisitions Mergers and acquisitions allow merged companies to realize the optimal allocation of R&D resources, such as facilities and capital investments. In this way, R&D departments have the chance to share information and develop better products. In the cosmetics and personal care industry, company mergers and acquisitions may not necessarily lead to the merger of R&D departments. However, a well-established parent company can provide its brands with R&D guidelines that improve innovation capabilities and optimize the product development process. 6.
Cross-Industry Development Another future R&D trend are cross-industry solutions, where tighter partnerships with other industries as well as the knowledge of other sciences, such as food and biochemistry enhance R&D knowledge. For example, nutricosmetics was first developed by the Swedish biochemist and scientist Ake Dahlgren, who later founded the first nutricosmetic company Imedeen in the late 1980s. In recent years, L’Oreal and Shiseido have started R&D projects in nutricosmetics, applying what was originally developed from pure science to personal care products. P&G AND INNOVATION
Let us now take an example of a leading company P&G and how they improved in cosmetic industry with its Innovation. P&G’s cosmetics business is a case in point where a dramatic turnaround was achieved via a disciplined, holistic approach to new product management. The story begins when P&G acquired the Cover Girl and Clarion cosmetics brands in 1989. Two years later Max Factor was acquired. P&G then applied its tried-and-true approach of leveraging scale and an innovation strategy with a few, big new products. But there was no real business strategy, and efforts were scattered and unfocused.
And so, by 1994, management was forced to retreat and retrench. They dropped the Clarion line; and through much of the 90s, senior management at P&G wondered if they should be in the cosmetics business at all! A new line, under the Oil of Olay banner, was attempted but failed, and the entire cosmetics business continued to decline. The turnaround of P&G’s Cosmetics business started in the late 90s when business unit management turned to P&G’s Initiatives, Diamond philosophy. Today, P&G’s Cosmetics business is a healthy, growing, and profitable enterprise.
Performance results have significantly improved since the late 90s, and the business is seen as a key growth contributor for P&G. The major factors that drive a business’s new project performance, illustrated in the Innovation Diamond are: Having a product innovation and technology strategy in place for the business; Having an effective and efficient ideato- launch process; Resource commitment, which focuses on the right projects— portfolio management; and People; that is, having the right climate and culture, effective cross-functional teams, and senior management commitment to New Product Development. aha” was that there is no one key to success in product innovation, and thus management stepped back from a focus on individual initiatives and looked at the broader picture. For example, having a great idea-to-launch process is not sufficient; it’s not a stand alone driver of positive performance. P&G’s Initiatives Diamond serves as a guide for each business’s product innovation effort, and helps to focus management’s attention on what is important to success.
According to Bob McDonald, P&G’s Vice Chairman of Global Operations, “The Initiative Diamond played a significant role in improving the business results in P&G’s Household Care global business unit. This work brought us a new discipline to manage our innovation programs and yielded a major increase in the in-market success of our initiatives. They aligned their organization on how to use Stage-Gate® success criteria, and portfolio and resource management to deliver better innovations for the consumers they serve. [pic] [pic]
The top half of P&G’s diamond in Exhibit 2 is strategic in nature, and captures the business’s product innovation strategy: goals, the mix of new products required to meet those goals, and the required resources. Portfolio management (or project selection) is thus closely connected to strategy. The bottom half of the diamond is more operational and focuses on delivering specific new product projects or initiatives: what resources must be put in place for each project; and how individual new product projects are managed so they succeed, using P&G’s idea-to-launch SIMPL™ methodology.
Coincidentally, the two diamonds—P&G’s Initiatives Diamond in Exhibit 2 on this page and the research-based Innovation Diamond in Exhibit 1—are almost the same. Each one or both can be used to guide your business’s new product efforts. Here is a quick look at the four drivers of performance and how they work at P&G. Driver #1—A product innovation and technology strategy for the business Best performing businesses put a product innovation and technology strategy in place, driven by the business leadership team and a strategic vision of the business.
This product innovation strategy guides the business’s New Product Development direction and helps to steer resource allocation and project selection. In the mid-1990s, P&G’s Cosmetics business lacked a business and product innovation strategy, the result being that Product Development efforts were scattered; many different initiatives were launched in many different product categories and segments in a futile attempt to win. There was no focus. The first element of the diamond is a product innovation strategy.
Indeed, the real breakthrough occurred in the Cosmetics business turnaround when the business leadership team began a rigorous business planning process leading to clearly defined objectives, goals, strategies, and measures. A much more concentrated innovation strategy was elected, focusing on lips, face and eyes, rather than the entire body. A second facet of strategy meant getting the supply chain under control: end-to-end supply network management. Management streamlined the supply network so that production and shipments were tied to market demand.
As a result, they were able to reduce the time in the supply network, thereby eliminating much of the product obsolescence generated with each new product launch. By focusing first on an innovation strategy for the business, the stage was set for effective Product Development. The message is that if your business lacks a product innovation and technology strategy, you are missing a key element of successful product innovation. This strategy should include the goals for the business’s product innovation effort and how these goals tie into the broader business goals. This strategy is more than just a list of this year’s development projects.
It has a much longer-term commitment. The innovation strategy also includes defining strategic arenas or areas of focus, much like the Cosmetics business did. That is, you need to define the product, market, and technology areas in which the business will focus its Product Development efforts. The key here is focus. Driver #2—An effective and efficient idea to- launch system Studies show that an effective new product process, such as Stage-Gate®, exists in top performing businesses, a system that drives new product projects from the idea phase through to launch and beyond. In P&G’s Cosmetics business, developing an innovation strategy was a solid first step, but the means of implementing strategy must be in place too. So management turned to a second element of the diamond, namely P&G’s SIMPL™—the Successful Initiative Management and Product Launch model. SIMPL™ is a stage-and-gate new product process, a methodology for driving new product projects from the idea phase through to launch and into post-launch The SIMPL™ model forced project teams to do their homework early in the project.
For example, much consumer research work was undertaken, and consumer insights gained led to winning new product concepts. One big success is Outlast™ by Cover- Girl. This ten-hour lipstick—a kiss-proof, long-lasting lipstick—uses a unique two-part application system (first a color and then a gloss) to produce an enduring lip color and gloss. A second winner—Lipfinity™ by Max Factor—was also introduced, again using the SIMPL™ model. Both new products have been huge successes not only in the U. S. , but around the world.
The turnaround of the cosmetics business was underway! Most companies claim to have a new product process or stage-and-gate system in place, according to a recent PDMA study. 7 Further investigation reveals, however, that most firms’ processes are deficient. They are poorly designed, they miss the mark when it comes to best practices, and they are badly implemented. 2,3 P&G is an exception. Their idea-to-launch process, SIMPL™, is a rigorous process that uses stage-and-gate decision-making complete with clear go/kill criteria and timing requirements.
The SIMPL™ model, shown in Exhibit 3, consists of four main stages, with each stage building in a set of current best practices in the form of key activities, and also clearly defined expectations for project team in the form of end-points. There are also four gates or go/kill decision-points in the model; each gate is comprised of a team recommendation and a management decision. The SIMPL™ Model P&G’s approach is different from that of most firms’, however. Instead of focusing on the process per se (like so many companies do), management stepped back and identified the basic principles that the model is founded on.
These principles are constants across many and varied businesses and geographies. But the constancy of these principles has helped the company adapt the model to many different types of businesses and different types of projects leading to a standardized and globally applied Stage-Gate® process. The principles which underlie the SIMPL™ model are shown in the box on this page and explained here in more detail: Winning in the marketplace is the goal. In many firms, too much emphasis is on getting through the process; that is, getting one’s project approved or preparing deliverables for the next gate. In the past, P&G was no different.
By contrast, this principle emphasizes winning in the marketplace as the goal, not merely going through the process. Specific success criteria for each project are defined and agreed to by the project team and management at the gates; these success criteria are then used to evaluate the project at the post-launch review. And the project team is held accountable for achieving results when measured against these success criteria. (By contrast, the great majority of businesses still do not conduct post-launch reviews on projects; and even fewer hold their project teams accountable for achieving agreed-to project results).
Use criteria for making Go/Kill decisions. Specific success criteria for each gate relevant to that stage are defined for each project. Examples include: expected profitability, launch date, expected sales, and even interim metrics, such as test results expected in a subsequent stage. These criteria, and targets to be achieved in them, are agreed to by the project team and management at each gate. These success criteria are then used to evaluate the project at successive gates. Risk and rigor must be balanced. Project teams employ appropriate e rigor in learning, planning, and decision- making in order to mitigate risk.
They build in a strong consumer focus and rely heavily on voice of customer research; they front end-load their projects, undertaking appropriate, often extensive up-front homework prior to development; and they focus on developing differentiated, superior products that meet customer needs better than competitors. Note that SIMPL™ is also scalable and is tailored for specific projects based on level of risk and size of investment. Not every project requires the same degree of rigor, front-end work, and market research. Use a common language.
Throughout the 1990s, each P&G business unit had developed its own version of a stage-and-gate new product process. Integration, cooperation, and measurement across businesses thus proved difficult with each business using a different system and different terminology. A GLOBAL PROCESS The current SIMPL™ process is a corporate global process—the same stages, gates, principles and measures—and is universal across geographies and business units. Each business, however, is free to adjust and adapt the process to suit its own business requirements.
SIMPL™ is not stand alone. The idea to- launch process is only one ingredient of successful innovation, a single element of a much larger whole, the Diamond. Individual projects cannot be managed independently of other projects, their priorities, resource constraints, and changing business conditions. Thus the Diamond represents the relationship between these elements: innovation strategy,resource planning, project selection, and the SIMPL™ new product process SIMPL™ Driver #3—Resource commitment, focusing on the right projects and portfolio management
In P&G’s Cosmetics business, portfolio management, a third element of the Initiatives Diamond, was next employed to enable management to look at its entire portfolio of new product initiatives, and secure the right balance and mix. Through portfolio management, the business built a pipeline of new and improved products that established the needed initiative rhythm for each product line (face, lips, eyes). New products and upgrades in each product line created news and excitement in the market. This “launch and sustain” portfolio approach was a key part of winning in the marketplace.
Best performers like P&G have an efficient portfolio management system that helps the business leadership team effectively allocate resources to the right areas and projects. P&G splits this resource commitment facet of the diamond into two parts: project selection and resource planning. The company relies primarily on success criteria as part of the SIMPL™ process to help make better go/kill decisions on projects, as noted above. In addition, a number of P&G businesses have developed screening tools using scorecard methods for early decisions and for the selection of ideas to enter the SIMPL™ process.
When it comes to resource planning for projects in the portfolio, P&G’s methods vary depending on the nature of the business. Many P&G businesses utilize a resource profiling approach to resource planning. The resource profiling method helps to assess future project resource needs based on learning from past projects, and it anticipates peak resource periods of time. This approach enables businesses, such as Fabric Care, to improve the overall portfolio decision process by allocating scarce resources to the highest priority projects globally.
The most technically complex, resource-intensive businesses use purchased resource management software. These software tools look at people available versus requirements for specific tasks on individual projects to focus on near-term resource constraints. P&G’s deliberate approach to portfolio management and resource planning (the resource facet of the diamond) has had a strong positive impact, according to Martin Riant, President of P&G Global Baby and Adult Care and formerly President of P&G’s Global Feminine Care and Antiperspirants/ Deodorants business. Using the diamond has had a remarkable effect on our business results. It has forced a much higher level of discipline in how we allocate our resources, how and when we make investment decisions and in accountability of projects to deliver what they promise,” he says. Driver #4—A positive climate and environment for innovation People, culture, and leadership make up the fourth driver of performance of the diamond (Exhibit 1). First, senior management must lead the innovation effort and be strongly committed to New Product Development.
This senior commitment is most evident at P&G where Chairman, President, and Chief Executive A. G.. Lafley, makes it clear, “Innovation is a prerequisite for sustained growth. No other path to profitable growth can be sustained over time. Without continual innovation, markets stagnate, products become commodities, and margins shrink,” he explains. A positive climate and culture for innovation and entrepreneurship, combined with effective cross-functional teams backed by strong management support and empowerment are fundamental to success. P&G has focused much effort here in recent years, which has helped it generate a step level improvement in results. The entire innovation effort, together with the Initiatives Diamond and SIMPL™ process, is sponsored and owned by both the commercial (sales and marketing) and technical (R&D and engineering) communities. An important step was the creation of Initiative Success Managers who report to each of the company’s business unit presidents. These Initiative Success Managers make the diamond and SIMPL™ work. QUESTIONNAIRE:
A small survey was carried out to find out the behaviour of cosmetic users. The survey was primarily designed to check on behavioural aspects of the users towards new innovative cosmetic products. The questionnaire is given below, followed by findings : NAME: GENDER: AGE: OCCUPATION: 1. Do you use cosmetics? • Yes • No 2. How much is your income per month? • Dependent • 35,000 3. How much do you spend on cosmetics per month? _______________ ( Do you agree with the following statements? Q4 –Q8 1-strongly agree 2-agree 3-neutral 4-disagree 5-strongly disagree ) 4.
I try new products 5. I switch brands if some other brand comes up with a better product 6. I often find gaps in my current product 7. I wait till I finish my current product till I buy another similar purpose product 8. I would rather reuse a good produce than try a new similar purpose product 9. Why do you switch products (tick all that are applicable) • Price • Packaging • Availability • Fragrance • Utility • Reviews 10. What kind of products do you use? • Herbal • Ayurvedic • Scientific • Any 11. On an average how long do you use a product before changing it? 8 weeks 12. How many times a year do you try a new product? • 10 13. How many times do you reuse a product before trying a new product? • 0-1 • 2-3 • 4-6 • >6 14. Does the range of products available in the market match your requirements? • Yes • No 15. When a new product with a new feature is launched , how soon do you try it? • Within 1st month • 2-3 months • 4-7 months • 8-12 months • >1 year 16. Compared to your current expenditure on cosmetics how much extra are you willing to spend on a new product with better feature/results? No extra money • 1-10% • 11-25% • 26-50% • >50% 17. On a scale of 1-5 , how important is the following feature in a cosmetic product, for you to buy it? Rank the options from 1-5 where : 1-Most important & 5- least important • Packaging • Fragrance • Reviews • New feature • Brand ambassador FINDINGS OF THE QUESTIONNAIRE: • The questionnaire was answered by 25 females and 10 males. • There were 20 from the age group of 30-35 years, 5 from age group 20-25 years and 10 from age group 25-30 years. About 70% of the respondents spend around 3% of their income on cosmetics per month. • 67% of the respondents try new products. [pic] • 63% of the respondents switch brands if some other brand comes up with a better product. • 80% of the respondents often find gaps in their current product inspite of the huge range of cosmetics available. [pic] • 34% of the respondents wait till they finish their current product till they buy another similar purpose product. • 27% of the respondents would rather reuse a good product than try a new similar purpose product. 87% of the respondents switch products due to better utility, 64% on the basis of reviews, 39% depending on availability, 30% depending on price, 12% depending on fragrance and 6% depending on fragrance. [pic] • 58% of the respondents use a product for 6-8 weeks before changing it. • 42% of the respondents try a new product 3-6 times a year. • 60% of the respondents reuse the same product only 2-3 times a year before trying a similar new product. • Despite the wide variety of products available in the market, 66% of the respondents feel that the products in the market do not match their requirements.
Maximum percentage of the respondents buys a new product with 2-6 months of its launch. • 6% of the respondents are willing to pay no extra money for a new product with better features, 15% of the respondents are willing to pay 1-10% extra money for a new product with better features, 33% of the respondents are willing to pay 11-25% extra money for a new product with better features, 25% of the respondents are willing to pay 26-50% extra money for a new product with better features & 21% of the respondents are willing to pay more than 50% extra money for a new product with better features. pic] • For 56% of the respondents a new feature in a cosmetic product motivates them into buying. All the above responses indicate towards the fact that customers are tempted to buy new, innovative, better products. REFERENCES : R. G. Cooper, S. J. Edgett & E. J. Kleinschmidt, New Product Development Best Practices Study: What Distinguishes the Top Performers, Houston: APQC (American Productivity & Quality Center), 2002; Robert G. Cooper, Michael S. Mills, Succeeding at New Products the P&G Way: Work the Innovation Diamond™,working paper no. 1, 2005 R. G. Cooper, S. J. Edgett & E. J. Kleinschmidt, Best Practices in Product Innovation: What Distinguishes Top Performers, Product Development Institute, 2003. R. G. Cooper, Product Leadership: Pathways to Profitable Innovation, 2nd edition. Reading, MA: Perseus Books, 2005. R. G. Cooper & E. J. Kleinschmidt, “Benchmarking firms’ new product performance and practices”, Engineering Management, 1995. John Hauser, Gerard J. Tellis, Abbie Griffin, Research on Innovation: A Review and Agenda for Marketing Science, 2006 M.
Mills, “Implementing a Stage-GateTM process at Procter & Gamble”, Association for Manufacturing Excellence International Conference, “Competing on the Global Stage”, Cincinnati, Ohio, October 2004. R. G. Cooper, Winning at New Products: Accelerating the Process from Idea to Launch, 3rd edition. Reading, Mass: Perseus Books, 2001. R. G. Cooper and S. J. Edgett, Product Innovation and Technology Strategy (Hamilton, ON: Product Development Institute, 2009). PDMA’s quarterly magazine for Product Development professionals, How P&G achieves such stellar NPD results, Insights into Innovation™, October 2005 Vol. XXIX No. 4,