Wednesday, August 23, 2006

Innovation? There was no reply at all

How important is innovation to a consumer product company. It is very important given Wall Street's new found ability to factor innovation into the determination of corporate valuation using measures such as patents and power of patents. But if innovation was stirring such a buzz, why isn't anyone listening at consumer product companies? What are we talking about?

We phoned CEOs at the top 100 consumer product companies asking, "who is the leader in charge of innovation driving the growth of the company." In 97% of the phone calls no one was quite sure. I guess no one got the memo on that one. Responses ranged from a disinterested, "He has 17 direct reports - which one do you want to talk to," to "You want Al in product design." Oh, I see...Al in product design is responsible for the innovation driving the growth of a multi-billion dollar consumer products organization. This is true grist for the Michael Moore, Roger & Me or Oliver Stone antagonist documentory film engine. Next.

No wonder the US$ 2 trillion consumer packaged goods industry is losing much of its glow despite solid balance sheets and healthy profit margins. Revenues and market values are going flat, and executives are wondering where the growth is going to come from according to top business consultatant McKinsey & Company and remember, let's not confuse motion with progress. Replacing the old with the new, turning a mop into a Swiffer, is not an "innovation." The update has failed to sell an incrementally greater number of "mops" or caused people to clean their floors more often. Just like old fashioned Lysol, cleaning implements tend to stay in cupboards and closets, out of sight and out of mind, and often purchased only when on sale.

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