In today's competitive, globalised market-place, most companies are scared to venture into tough terrains and innovate. They fail to realise that consumer preferences are changing at the speed of light.
It would be wrong to say that brands are not innovating but the innovations are most often not in line with consumer needs. They are done just for one-upmanship among competitors.
Companies need to realise that a consumer in Mumbai is no longer similar to on in Hyderabad, even if they are from the same demographic or socio-economic (SEC) background.
Companies seem to follow the rule of one-size-fits-all. Take the simple example of shampoos. Consumers have a wide choice suitable to their hair type. But, do we have a shampoo specific to the type of water - hard or soft? The answer is no.
So, a consumer in Hyderabad where water is much harder compared to Mumbai has no option but to use the same shampoo.
In detergents, though, we have seen some innovation around this.
But if you ask a consumer to choose between a shampoo and a detergent that is specific to the water type, she would go for the shampoo because it is personal care.
Often companies develop new products that are based on their existing capabilities to deliver incremental change to consumers.
Companies forget that it is about the consumers and not internal capabilities. Innovation is more about the ability to bring path-breaking proposals to the right consumers who are only worried about what the brands represents to them. Hence, developing and enhancing products to deliver against the constantly-changing consumer needs is the path to profitability.
If brands are not making a difference to the world, they are not going to be around for too long. Instead of just making a product incrementally better than the competition, they need to create an impact.
Of course, such innovation is not easy. Globally, at least 90 per cent of new product introductions fail in the year they are launched. India is often viewed as a hotbed of innovation, but the truth is that the odds of launching a breakthrough success in this competitive market may not be meaningfully better than elsewhere in the world.
It takes close to one to two years for one half of companies and two-third of FMCG companies to bring about innovation, from concept to launch. And, the cost of creating a new product is daunting. One in three organisations invests less than 5 per cent of its annual revenue in innovation-led R&D. Only three out of 10 organisations invest 10 per cent or more of their revenue on innovation. FMCG organisations tend to invest more heavily on innovations than other sectors.
There are several triggers to innovate but one of the main drivers is also increased consumer-spending. In India, on average, one in every two shoppers changes her mind about deciding to purchase something until actually pulling out her wallet. That means $20 billion of sales are up for grabs every year in urban India alone.
Innovation, in this context, is much broader than just product innovation - it is about how companies and brands interact with their customers, how they run their business processes, and how they manage their operations in order to be successful.