Market View: Disruptive Innovation in New Product Development Equals Having Faith

Sept. 20, 2016
Deciding between the status quo and the risks – and potential windfalls – of company-changing innovation.

Most of us agree that consumers are fickle. They bounce from one trend to another as quickly as the media can change the spotlight from one issue to another. Put the spotlight on organic, and organic is the most important thing in the world. However, change the spotlight to local foods, and consumers can’t live without local foods.

The same can be said for food marketing management. One year it’s “six sigma management” or now it is leadership not management etc. I’m not implying that change in management philosophy is as “willy-nilly” as consumers bouncing around because clearly management styles have to take into account new generations of young managers entering the business world and how they need to be treated and motivated.

One approach to management that appears to be overlooked by many of the food companies is that of disruptive management or disruptive innovation. As many of you know, I am a strong proponent of the belief that the lifeblood of the food industry is in fact innovation. But disruptive innovation is not the same as the more traditional innovation models.

A disruptive innovation is an innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market leading firms, products, and alliances.

Innovation and disruption are similar in that they both focus on developing new products and building new business. Disruption differs from innovation in that it is “literally uprooting and changing how we think, behave, do business, learn and go about our day-to-day,” according to Harvard professor Clayton Christensen. Disruption significantly changes existing markets and creates something very new.

Most of what we read about disruptive growth strategy comes from the high tech area. However, there are numerous examples of true disruptive innovation in the food industry. The problem is that by disrupting, the disruptor often has a negative effect on other aspects of the business, such as the P&L's of other brand managers who work with more traditional products.

Here are a few examples.

When Walmart began selling food, the traditional food industry, including FMI, never really recognized this incredibly disrupting force. When data was presented it would always have an asterisk that would say “does not include Walmart sales.” It wasn’t until Walmart became the largest food retailer in the U.S. that FMI and food companies finally recognized that Walmart was a food store.

Another example is focusing disruptive innovation in a totally different product utilizing the same brand. You might think with consumers demanding greater convenience and skipping breakfast that everyone in Kellogg would be celebrating the breakfast bar innovation with its Nutri-grain bar. Yet, if you are the brand manager for Kellogg Cornflakes, you don’t want to see your market disappear because your company is selling breakfast bars to your customers.

One more example that I personally witnessed was at a major meeting at Campbell Soup Co. many years ago. A VP in its consumer insights group suggested that Campbell should move into the healthy food business and should look at any delivery method that would make healthy food more readily available and cheaper. I might add this was a few years before the Healthy Choice brand was introduced into the market. An individual stood up and gave an impassioned speech about how Campbell Soup was a canned company and the largest manufacturer of cans in the world. That they should be thinking of nothing else but how to put food in cans. We cannot disrupt a very successful business model he claimed. The company more or less followed this strategy for years.

The food industry is full of examples of companies fighting disruptive innovation, for the simple reason that it’s disruptive. It is my opinion that most companies would be willing to sacrifice profit and sales in order to avoid disruptions to the systems they have currently in place.
So as usual a company must take into account the advantages of future growth with a disruptive strategy versus the “stick with the current plan” strategy, which may not have long term promise.

There are some clues that companies can follow that will help them be more appreciative and accepting of disruptive innovation:

Clue No. 1. Money has to be made available for researchers who wish to pursue and investigate products and distribution channels that may be contrary to existing business. It may not be just primary research but it may be closely following businesses that have the potential to disrupt your existing business.

Clue No, 2. The highest level of management has to be encouraging of disruptive innovation. Being neutral will have the same effect as being against it.

Clue No. 3. You can’t wait until you’re absolutely certain that this new product or new channel of distribution will be successful in the future before you “pull the trigger.” You'll have to rely on faith, because no one knows for sure what will happen in the future. Faith is a strong or unshakeable belief in something, especially without proof or evidence.

'Cause I gotta have faith … George Michael.

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