Are we in the age of product innovation, or the age of renovation?
Newer. Bigger. Better. Innovation first and foremost, right?
If you’re reading this, you’re likely in the business of product development. You're likely also looking to an answer to the question: Why does every new product feel like something I’ve seen before?
Well, that’s what we’re going to look at today.
Welcome to the background radiation of the Consumer Packaged Goods, CPG, industry — how we got here
If you find yourself clicking through the latest CES and CPG fads, thinking to yourself “There’s nothing new here!!” you’re not alone. The whole old-product-new-bottle routine is enough to make you want to claw your eyes out. What happened? Why is no one coming up with original ideas anymore?
Did we already have all the good ideas? Have we plucked all the low-hanging fruits of inventions?
If you look at the number of discoveries over time, it does seem like we’ve hit peak innovation, and are just throwing more resources at the problem.
Figure 1 From the paper Are Ideas Getting Harder to Find? by Bloom, Jones, van Reenen, and Webb, 2019
The above chart is showing the growth in total-factor productivity, TFP, which is the portion of output not explained by traditionally measured inputs of labor and capital used in production. This roughly translates to, the amount of gain from new inventions.
So does this mean that we are just slowly running out of things to invent?
To quote the classic sci-fi show Battlestar Galactica, all of this has happened before, and all of this will happen again.
Let me remind you that we have been at this place before… The internet is full of quotes, both true and false, about how there is nothing left to discover. Like the famous "Everything that can be invented has already been invented," falsely attributed to Charles Duell, commissioner of the U.S. Patent Office.
Or the hilarious “I think there is a world market for maybe five computers." — Thomas Watson, president of IBM, 1943.
Okay, so we’re bad at predicting the future, but why are we not inventing it?
Innovative ambitions on renovation budgets
We all knew this part was coming — budgets. Every company wants to hit the jackpot and introduce the new iPhone. But let’s be real for a moment. We all want to innovate, yet not a lot of us have the budget to do so.
This is due to several reasons.
One of them is good old budget cuts. You slice your R&D department’s budget so that you can save money. A recent horror example of this, is the Kraft Heinz catastrophe.
After 3G Capital bought Kraft and merged it with the Heinz company in 2015, 3G Capital started its race to the bottom. In less than two years after the merger, it had cut its workforce by 20% and its overhead by 40%. All in the name of growth.
But not surprisingly, slicing and dicing didn’t result in growth. Instead, in February of 2019, the stock dropped 27%, which translates to a loss of $16 billion of its market value. Auch.
That’s what happens when you stop investing in your brand — especially in a time where consumer tastes and behaviors are shifting.
The other reason is that the cost of innovation is going up.
The aforementioned paper Are Ideas Getting Hard to Find? (by Nicholas Bloom, Charles Jones, and Michael Webb of Stanford University, and John Van Reenen of the Massachusetts Institute of Technology) concludes that new ideas are still to be had; they are just getting more expensive to find.
So why is this? Are the microscopes becoming too expensive? Is the academic pay-wall causing innovation casualties?
The Economist had a nice response:
“The accumulation of knowledge is in some ways a burden. The more is known, the more researchers must absorb before they can add to the stock of human knowledge—or the more they must collaborate with other researchers to combine their areas of expertise”- The Economist
So basically we need more smart people, which are expensive, and we need to teach them to play well with other smart people. Believe it or not, facilitation of cross-disciplinary research is both time-consuming and costly.
What does this have to do with the lack of innovation?
If you’re in the business of “newness” and “groundbreaking” developments, you know that fast implementation of new products is key if a company wants to stay ahead of the game. Innovative approaches, however good they are for the quality of the end product, can be time-consuming and unaffordable.
I’m not just drawing on anecdotal references here. Loads of academic papers have documented this. One of them is Estimating the Cost of the New Product in Development Process by Piotr Chwastyka and Mariusz Kołosowskia. As they beautifully put it, “The key to a rising enterprise in the 21st century is product quality, competition cost, fast delivery and flexibility”.
That is a lot of things to do on a dwindling budget.
Product development takes time. It takes resources. We can’t keep masquerading old ideas as new products to meet the “innovation” quota while praising ourselves for being edgy.
That’s the equivalent of getting an A for successfully copying your homework from last week.
But we are in luck. Soon the entire CPG and CES sector will realize what’s happening.
As ironic as Alanis Morissette's misuse of the word ironic, it turns out we have highly innovative tools available to us; and these very tools permit further innovation.
Artificial Intelligence (AI) and advanced data analyses in combination with good old design methods can move us out of the perpetual renovation loop.
So far the fashion industry has been the fastest to pick up this trend. Examples include Clinique’s Clinical Reality app, and Stitch Fix, an e-commerce service that delivers boxes of women’s fashion using a mix of algorithmic and human decision-making.
Besides offering never-before-seen personalization, AI and data analysis save time and money during the research phase while introducing consumers to new and better experiences.
The dawn of new product development
We are standing on the edge of a new era in product development, one that will indeed spark a wave of innovation, allowing us to part with the current era of regurgitated products driven by a continuous pressure to come up with new stuff.
Exciting times are ahead for consumers and companies embracing new technologies.
Oh, and if you’re thinking that AI might be cool and all, but who is ever going to want personalized clothing, skin care, or things we can’t even imagine yet, I’ll leave you with this quote by President Rutherford B. Hayes:
"That's an amazing invention, but who would ever want to use one of them?"
— President Rutherford B. Hayes in 1876, after Alexander Graham Bell demonstrated the telephone to him at the White House.
IIn the hunt for new innovating products, companies end up renovating old models and passing them off as the new big thing. Why? And are we going to accept it, when we have the option to create genuinely innovative projects?
It’s innovate-O’clock …