From lab to leader: How consumer companies can drive growth at scale with disruptive innovation
In the era of “fast products” and digital disruption, delivering growth requires putting in place new predictive consumer-growth capabilities, including innovation, based on speed, agility, and scale.
Innovation is central to the mission, values, and agenda of most consumer-packaged-goods (CPG) companies. However, in the last several years, incumbent CPGs have struggled to keep pace with start-ups, which have reinvigorated and reinvented categories ranging from ice cream to diapers.
Our analysis of the food and beverage market from 2013–17 reveals that the top 25 manufacturers are responsible for 59 percent of sales but only 2 percent of category growth. Conversely, 44 percent of category growth has come from the next 400 manufacturers.1 Our experience in working with large consumer companies suggests that they don’t suffer from a lack of ideas; where they struggle is in knowing where to make bets, moving products quickly to launch, and then nurturing them to scale. Effectively driving growth through innovation requires CPG companies to evolve many of the assets and capabilities already in place and adopt significantly different and new ways of working.
This change will not be easy. Many of the innovation systems that need to evolve are deeply entrenched. They have their own brand names, dedicated IT systems, firmly established management routines, and more. However, our work with CPG organizations has convinced us that these changes are necessary and can return significant value. Our analysis of ~350 CPG companies across 21 subcategories found that growth leaders excelled at harnessing commercial capabilities, including innovation. Additional McKinsey analysis has shown that CPG “Creator” companies—those that consistently develop new products or services—grow more than their peers. These winning Creators have adopted a formula that borrows the best from progressive new players while fully leveraging existing advantages in scope and scale. McKinsey – Read more…