This is the first in a three-part commentary addressing how consumer firms can leverage a new approach to “Agile” innovation to reduce their cycle time from consumer insight to market launch, and create a steadier stream of higher-value new products. In this post, I'll describe how the current state of consumer goods innovation compares to Agile principles from the world of software development. In Part Two and Part Three of the series, and in this webinar, I discuss how these principles can be adapted to the unique context of consumer firms, in combination with emerging practices from the world of Product Portfolio Management (PPM).
Today's food, beverage and CPG manufacturers face a turbulent and daunting market environment. Dramatically shifting consumer preferences, demographic changes, new paths to distribution, and new technologies mean consumer firms are more challenged than ever to keep up. However, one principle endures: those companies whose pace of innovation matches the pace of change will successfully ride the wave. Those that don't will be washed on the rocks.
For small, up-and-coming consumer firms, making fast changes in response to a dynamic environment comes with the territory. But is it really possible for large enterprises to achieve a similar level of agility? This theme of enterprise agility—that is, how can large enterprises innovate with the pace of small companies, while leveraging the scale advantages of a larger organization?—is age-old in the business world. But for the past few years, lessons learned in the world of software development are offering some new answers to this question.
The core principles of “Agile” software development– sometimes referred to as “Scrum” – have been around since 2001. But the application of these principles to non-software innovation processes has been slower coming, perhaps because of fundamental differences between developing a new app and, say, bringing a new cereal brand extension to the market. Increasingly, however, consumer firms are finding these principles have significant value when viewed through the right lens.
One of the best translations I've seen in this regard is this Forbes article by Steve Denning in which he lays out core Agile principles without using the “esoteric vocabulary” of software developers. With apologies to Mr. Denning in advance, I've summarized these into five themes just to illustrate how radically different they are, and how they might apply to consumer firms seeking to quicken their pace of innovation.
Organize Work in Short Iterative Cycles
Perhaps the most commonly-known principle of Agile is that work should be organized in shorter, iterative cycles, known as “sprints.” This enables teams to fully engage in a short and focused burst of activity and, at the end of this work, come up for air to get feedback and make a decision about what is the right set of work to be done next.
Think for a moment about how different this mindset is from the innovation model in most major consumer firms today. At the highest level, major decisions about “what to do”—i.e. innovation investments—are only made once per year in the context of the annual operating planning process. True, a good Stage-Gate process can help by breaking up the work into shorter stages, punctuated by iterative “gate” decisions. However, these stages are still typically quite long, with many months of work in a single stage. The result: these teams—and the companies themselves—run for extremely long periods of time without the chance to receive feedback, reconsider their environment, and determine if this is still the right work to be doing.
Stay Obsessively Close to the Customer/Consumer
According to Denning, Agile means that “the team reports to the client, not the manager,” and that work goals are defined via user stories. Typically, this also means that customers are engaged in providing feedback and direction throughout the entire product development process, not just at the beginning.
This is an area in which consumer firms have actually made significant progress in the past few years, with the renewed focus on generating insights via a variety of consumer research methods. And, at least for large new development projects, these assumptions are often validated later in the cycle via consumer trials and home-use tests. However, there is still an assumption by most innovation teams that the insights are defined and “locked” in the early stages of the product development process. At the end of a project, it is still easy for teams to slip into the mindset of “did we deliver on the specifications?” as opposed to “did we provide real value to the customers/consumer?”
The Whole Team Defines Its Work
Denning says that agile teams “define work goals before each cycle starts” and then “they decide how to do the work in the iteration.” Similarly, Agile guru Martin Fowler writes:
“When you want to hire and retain good people, you have to recognize that they are competent professionals. As such they are the best people to decide how to conduct their technical work.”
Think about how different this notion is from the real world of many companies, in which a Stage-Gate process prescribes a “one size fits all” method by which innovation should be executed. In one regard, R&D scientists, supply chain professionals and CPG marketers have one thing in common with software developers, and this is that they are typically highly-skilled (and highly-compensated) professionals. And yet, too often, these intelligent, motivated people are constrained by rigid innovation processes, not enabled by them. This may explain why Stage-Gate processes are often poorly adopted—with the most recent research indicating that only 54% of companies have a Stage-Gate process that is “really used.”
Teams Control Their Time - No Interruptions
Denning also notes that Agile teams are the ones that “estimate how much time work will take,” “decide how much work it can do in an iteration,” and then “management doesn't interrupt the team during the work cycle.”
Again – consider how radically different this principle is from the experience of most innovation teams in consumer firms. To be fair, this may be one area in which software development is truly different from consumer goods product development. After all, determining how much work can be done by a small team of programmers in a two-week sprint is relatively straightforward; in contrast, the development team for a new consumer product is typically larger, more cross-functional, and the nature of the work may inherently require longer iterations. However, even with these broader brackets, it is rare that consumer firms practice the kind of resource planning that would enable a reliable estimate of the time required to deliver a portion of product development work in a particular time frame (iteration).
When you combine this lack of resource planning with the lack of prioritization in many firms, the result is often that most CPG teams are simply told to “do everything” on a long list of projects, which results in the low-value projects constantly interrupting the work on more important, higher-value ones.
Teams Measure Their Own Performance
This principle is linked to the principle of iteration listed above, since one reason for short iterations is to allow for assessment, feedback, and adjustment before moving on to the next iteration. Teams require a means by which to measure their work—and learn—or else they won't know how to get better the next time around.
Sadly, if you consider this principle now in the context of the innovation process for a typical consumer firm, it again may seem like a foreign concept. To be sure, there are many measures of a new consumer product after it goes to market, as evidenced by mountains of sales, pricing, and distribution data. However, too often there are few meaningful metrics available to teams during the product development process. For example, it is rare that they can tell whether they are getting faster, if their forecasts are accurate, or if the work they are doing is on track to deliver on the growth goals of the business.
A similar measurement problem exists, by the way, in senior leadership teams that are also trying to assess their work—embodied in a portfolio of innovation investments—and whether it is creating the desired positive effect. Like NPD teams, senior leadership teams also require more regular, iterative feedback than they currently receive. Too often, they also can't complete this learning cycle due to a lack of systematic measurement and missing data.
Implications: Accelerating the Pace of High-Value Innovation
Obviously, the principles of Agile development outlined above differ sharply from today's reality for many consumer firms. And although there may never be a one-to-one correspondence between the two, at a high level these principles offer important guideposts for improvement to which consumer firms should pay attention.
In the world of software development, Denning says:
“Teams using the practices…have been unexpectedly productive. These were not just improvements where the teams were just slightly better than the norm. The best teams routinely obtain productivity increases of 200 to 400 percent, changes that are potentially industry-disruptive improvements.”
If consumer firms can find ways to adapt these principles to their unique business context, similar improvements in speed and productivity are possible. And given the scale of the challenges such firms face today, this ability to become more agile—and more quickly adapt to a changing market—is simply not optional.
Lastly, perhaps the most interesting development in this area is how we are beginning to see large- and medium-sized enterprises also implement these principles of agile development in a way that also adapt to the scale of their businesses. To do this, they are tying Agile to a new set of capabilities, practices and technologies that come from the arena of product portfolio management (PPM). I address these concepts in the webinar Achieving Agility in Enterprise Innovation: New Leading Practices for Consumer Goods Firms. I encourage you to join me to learn more!
Photo used courtesy of tableatny on flickr.
