Product Innovation Best Practices Series Foodservice New Product Benchmarks Reference Paper #48 Scott J. Edgett and Devon Gerchar Compliments of: Stage-Gate International and Product Development Institute Inc. For information call +1-905-304-8797 This article appeared in Prepared Foods November 2012, pp. 39-42 www.stage-gate.com © Product Development Institute Inc. 2000-2014 Stage-Gate® is a registered trademark of Stage-Gate Inc.. Logo for Product Development Institute Inc. used under license by Stage-Gate International. Logo for Stage-Gate used under license where appropriate. r&d manufacturing insights Foodservice New Product Benchmarks Top Four Metrics Used to Measure Innovation Program Performance Net sales of new products Overall profits (annual) generated by new products Net incremental sales Dr. Scott Edgett and Devon Gerchar, Contributing Editors T 67% Percentage of business’ net sales generated by new products 46% 30% 28% he foodservice industry’s best perform0% 20% 40% 60% 80% ers achieve 22% more sales and 20% Percentage of Respondents more profits from their new products than their average performing counterparts. Source: Stage-Gate International, International Foodservice Manufacturers Assn. They also are seven times more likely to launch commercial successes than poor performers. These aren’t just pie-in-the-sky numbers; these The benchmarking research, which is the second phase are real performance results realized by real companies. These, of work launched through CIE, uncovers a great deal about plus many other innovation performance realities, are revealed foodservice new product innovation and provides underin IFMA’s newest research publication, “Foodservice New standing of what separates high performers from low Product Development Process: Performance Benchmarks,” a performers. Researchers learned that a purpose-built process ground-breaking research initiative. is key to successful innovation, especially a process that The Center of Innovation Excellence for Foodservice includes the “voice of the customer.” (CIE) is a collaboration involving the International Refer to Success Metrics, a “Playbook” Foodservice Manufacturers Association; product innovation To be successful in product innovation, processors need to experts Stage-Gate International; and numerous founding understand what success looks like. Most businesses use member companies that are providing funds, time and talent multiple metrics (the average company uses 2.5 different ones). (see founding members list). Center of Innovation Excellence: Founding Members* Aryzta (Otis Spunkmeyer) Barilla Basic American Foods The Bama Companies Inc. Bunge Oils CH Guenther Coca-Cola Foodservice & On Premise ConAgra / Lamb Weston CSM Bakery Products Dannon FoodHandler (BarrierSafe Solutions Intl.) General Mills Foodservice Hobart (ITW) Insight Beverages International Paper JM Smucker Company JR Simplot Kellogg’s Food Away From Home Kerry Foodservice Kraft Foodservice Land O’Lakes Inc. Lyons Magnus McCain Foods Nestlé Professional PepsiCo Foodservice Proctor & Gamble Co. Rich Products Corp. Sara Lee Foodservice Sargento SCA Tissue Schwan’s Foodservice Inc. Starbucks Surlean Foods Sweet Street Desserts Unilever Food Solutions *Companies contributing funding, committee personnel www.PreparedFoods.com ● November 2012 39 r&d manufacturing insights However, a purpose-built process–one containing certain practices—indeed separates the best from the 3.3 worst performers. These 3.7 Use formal NPD process 3.8 companies employ … 2.9 3.6 Clearly defined stages … C l e a r l y d e fi n e d 3.8 2.9 stages: a set of predefined 3.3 With identified activities 3.5 activities that are per3.0 3.4 Defined “Go/No Go” decision points formed in each stage; 3.6 2.6 …Clearly defined “go” 3.1 “Go/No Go” criteria defined 3.1 and “no go” decisions: Gates 3.0 3.2 Flexible, scalable process where decisions are made 3.7 3.0 whether or not to continue. 3.5 Process used and understood 3.4 This requires management 2.8 3.4 Enabling process for teams to meet with the project 3.2 team to review the project Very Not at 2 3 4 and evaluate it on its merits; much so all To what extent each NPD process element exists …A process that is flexible and scalable: An innoWorst performers Middle performers Best performers vation process must be able Significant differences between worst and best performers to change based on the size, Source: Stage-Gate International, International Foodservice Manufacturers Assn. type, complexity and risk of the project. Sales-related metrics are the most popular, combined with a It’s here that readers might say, “English please!” This profit metric, as seen in the chart, “Top Four Metrics Used translates to a process that is documented with clear metto Measure Innovation Program Performance.” rics; is used and modified over time; and is best for the So, a “commercial success” is defined as meeting or entire organization. exceeding the sales/profit objectives during a three-year Stages, Gates and Flexibility period. As mentioned earlier in this article, the best-performMost foodservice organizations employ a more rigorous pro­­ ing companies had seven-times-higher success rates comcess for high-risk products than for low-risk items. These pared to their lower-performing counterparts. This means processes include stages and gates; stages are where specific more profit and sales, and fewer wasted resources. information is collected and tested, and gates are where the execNow that the basic metrics are understood, it’s important utive team makes decisions whether to “go,” “hold,” “recycle” to talk about the practices top performers employ to drive or “kill.” (See chart “Typical Five-stage Innovation Process.”) better success rates. This often is employed for top-line innovations that are “new Of specific importance is the process used to take intanto the world” or “new to the company.” The rigors and resources gible, creative ideas and develop successful and profitable used in this process yield a more thoughtful output and also will new products. (See chart “Impact of Having a Systematic provide the largest return of investment over time. Product Innovation Process in Place.”) Foodservice organizations also employ a three- or twoHaving an innovation process in place is a good start, stage process with some projects, where stages and gates are but not significant enough to truly impact performance. Impact of Having a Systematic Product Innovation Process in Place Typical Five-stage Innovation Process Exploration Business Feasibility Generation and assessment of an idea Detailed design and feasibility of the product concept Development Development of the product, imaging and packaging “Decision Points” or “Gates” Source: Stage-Gate International, International Foodservice Manufacturers Assn. 40 November 2012 ● www.PreparedFoods.com Validation Launch Customer acceptance testing; final product validation; supply chain and forecast accuracy Launch of the product r&d manufacturing insights High Degree of Collaboration Achieved Higher Success Levels 60% 50.6% Percentage of Respondents 50% 40% 36.0% 28.7% 30% 28.0% 24.0% 20% 14.9% 10% 4.0% 8.0% 5.8% 0.0% 0% Innovation is a big buzz word. In a mature or struggling environment, it is the difference between product life or death, and possibly company sustainability. The quality of execution—from start to finish—matters. Moreover, those companies that are flexible and diligent in the new product process will reap huge benefits, not only for their organizations, but also for customers and end-user consumers. Visit ifmaworld.com for more CIE information and details about upcoming work that will engage IFMA’s members, industry suppliers and customers. Dr. Scott J. Edgett is internationally recognized as one of the Projects with a high degree of collaboration with customers achieved world’s top experts in product higher success levels than projects without collaboration (past two years). innovation and is the pioneer of portfolio management for prodManufacturer Operator uct innovation. Edgett is chief Source: Stage-Gate International, International Foodservice Manufacturers Assn. executive officer and co-founder of Product Development Institute Inc. and Stage-Gate International. consolidated for low-risk projects, such as product enhanceHe is a former professor of the Michael G. DeGroote School ments, modifications and line extensions. of Business, McMaster University in Ontario, and is a facThis flexible approach enables the organization to more ulty scholar at the Institute for the Study of Business Markets effectively adapt to the needs of their various types of proj(ISBM) at Penn State University. ects. Close to half of the manufacturers in the benchmarking study (46%) said they flexibly tailored their processes to Devon Gerchar is a foodservice professional with more manage project risk and complexity. than 20 years of industry experience in market research, marketing, strategy and database analysis. She has worked Collaboration as a Success Component for branded foodservice companies such as Unilever Food Foodservice innovation is different from retail models. Not Solutions and Reynolds Packaging Group. In 2010, Gerchar only does foodservice often drive new flavor trends and joined IFMA as director, Member Value. preparation techniques, it also has a level of complexity regarding the customer. In foodservice, the manufacturer makes a product that is Research Methodology distributed to the operator—then prepared, presented and eaten IFMA sent an electronic, 60-question quantitative research survey by the consumer. Thus, there is a whole other element to creatto U.S. foodservice manufacturers. A total of 128 businesses ing a successful product in foodservice, one which has its own responded. However, further refinement of the data led to a useable brand identify, limitations and ideas regarding menu offerings. sample of 106 respondents. Although these companies represented Forward-thinking innovators realize effective collaboraa variety of categories (including foods, beverages, disposables, tion is important in new product development. As seen in the sanitation, equipment and other), 70% were in the food sector. chart, “High Degree of Collaboration Achieved Higher Success A majority of respondents (63%) reported sales in excess of $500 Levels,” top-performing manufacturers not only are more sucmillion, and 70% had 100 or more employees. In terms of title, 78% cessful at collaborating with operators, but their innovation of respondents were director-level, vice-president or higher. Another projects are more successful as a result. Collaboration in this quantitative survey of operator respondents also was sent during the study concentrated on operators. But overall, communication, same time period. These results are not highlighted in this article. ideation, and collaboration with suppliers and trading partners are beneficial for all parties, as long as good governance is employed. 42 November 2012 Not at all ● www.PreparedFoods.com 2 3 4 Very much so Stage-Gate International is the world's leading full-service provider of solutions which enable organizations to improve their Product Innovation and Portfolio Management capabilities and performance. Our clients include 5000+ organizations of all sizes across all industries. +1-905-304-8797 www.stage-gate.com Visit our website and subscribe to receive the latest research, information and complimentary articles to keep you current in product innovation!