New product vitality index

30% of total sales of 3M in any year comes from new products that are less than five years old

Here is a quick question. What percentage of sales of your company comes from products [and let me allow you the freedom of including even SKUs] that have been launched by your company in the last five years?
 
You have your answer ready. Well, there is no perfectly correct answer. But 3M, which developed the concept of New Product Vitality Index [NPVI], claims that they average 30 per cent. That is, 30 per cent of the total sales of 3M in any year comes from new products that are less than five years old. Remember, 3M probably has well over 50,000 products in its armoury. And to hit this 30 per cent figure year after year, you can imagine the new product engine they have running.

 
Reports say that NPVI is one of the top three metrices used to measure research and development productivity in large corporations; it follows research and development (R&D) spends and R&D staffing. Almost 62 per cent of the companies measure Vitality Index, says the report.
 

In the book Creative Confidence, Tom Kelly and David Kelly speak about how design thinking can help companies fire up their new product engine. They should know. As the founders of IDEO, one of the world’s most respected new product design consulting firms, they have played midwife to numerous new product concepts over the last two decades.

 
One of the fundamental ideas they speak about is the “Launch to Learn” concept. They suggest that instead of getting into endless debates and mind-numbing market research, companies should consider rapid prototyping, a quick launch and adapt from the learning. And most importantly, be ready for “fast failure”. They say a “fast failure” is often better than a slow, energy-sapping death.
 
I suspect there is a hidden fear in this rapid launch process. A large packaged goods company, which was rated as one of the most successful new product machines, was also loudly criticised by experts for adopting the attitude of “launch it and leave it”. Herein comes the question: If you rapidly launch it, how long should you wait for results? And when is it too early to pull the plug? And when is it too late? The answer is never simple and may not be applicable across industries and product categories.

 
Even the legendary new product behemoth Apple has had failures; the oft quoted example is their first handheld device, the Apple Newton. Did they kill it too fast? Would it have survived with some more love and care?
 
The process of new product development and vitality index measurement is somewhat better documented in the technology space. Does it apply the same way to the packaged goods sector? Or to services?
 
If you look at the phenomenal growth of Ramdev’s Patanjali range of products, you can see the principle of “Launch to Learn” in practice. I am given to understand that Patanjali is capable of launching a new product, from concept to product in the market, in the span of a two months.

 
Compare this with the average time taken by a large multinational packaged goods company, and I suspect large, well-managed Indian companies may not be much faster, barring a few exceptions such as Amul and ITC.
 
R S Sodhi of Amul has gone on record to say that his organisation can hit the market with a new product just weeks after the idea is presented to the management.
 
Why is it so hard to rapidly “Launch and Learn”? First, there are manuals and complex processes laid down by most companies. How a new concept needs to go through various stages of testing and market research [the funnel, the stage-gate process etc]. This process itself could take six to nine months. After this is over, you get into the various product launch phases, design of packaging, marketing communication, sales force training etc. And you are already 12 months into the cycle. Finally, there is the problem of setting budgets for a new product. The give and take. The endless series of meetings. The fear of failure that permeates all departments that deal with new product development and launch.

 
How to change this negative psychology? Is a blind adoption of NPVI the magic wand? My humble submission is that it will backfire. Unless the overall organisational ecosystem is calibrated to encourage rapid launch, you may cause unnecessary mayhem. A few things can help — taking small bets, but many of them. This is one way of de-risking the company. Another idea is to reduce the stages of the new product research process. Why spend three months in doing this, if the end result is anyway subject to real market vagaries? Simplifying the packaging design and marketing communication is yet another step that can take a few months out of the launch cycle. Finally, organisations have to reward new product launches and not just successes. Having worked as a product manager for several years, I have seen how something that can be done in a few days becomes a month-long search. If the reward is for the launch, and not only for the success, you may actually start seeing a lot of new products hitting the shelves in rapid succession.

 
Yes, NPVI is a great measure. But you need to bring in vitality to product development and management first. Then start measuring the index. The writer is an independent brand strategist, author and founder, Brand-Building.com, a brand advisory. The views are personal