The hidden cost of innovation

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I am passionate about innovation. What’s not to love about developing and launching new things that make people's lives better and easier in some small or occasionally big ways. It’s exciting for the organization, it gives Sales good things to talk to buyers about, compelling presentations to the Board and shareholders, it gets everyone feeling like we’re doing things to win.

In Latin America we developed some cracking innovation. One fantastic example was in fabric softeners where we found a way to almost eliminate the need to iron clothes. This was a ripping success, driving premium pricing, category growth and best of all liberating people from the drudgery of ironing.

But unfortunately like a lot of things in life, there was a hidden cost.

Every innovation choice trades off time, money, and focus. Established businesses rely on a large core range. That core delivers most of the sales, covers overheads, pays out profits and funds future growth.

In Latin America Colgate owns an iconic brand Suavitel, or Cuddly as it’s known here in Australia. Latin Americans just love fabric softener, no exaggeration, they love it. The softness is symbolic of mum giving her kids a big hug, while the fragrance is a reminder of her presence and how much she loves them. 

Our innovation brief was to trade up and grow the category. We explored added benefits like making clothes last longer, taking better care of colours, drying faster and so on. Saying good-bye to ironing while delivering all the fragrance and softness of the regular product seemed like a winner. 

Sales were nicely ahead but unwittingly we had left the back door ajar. Out of nowhere a very aggressive regional competitor decided this was their moment to strike. They weren’t even in the category, but saw an opportunity for a frontal assault at the heart of Suavitel. Suavitel closely translates as ‘soft clothes’. Cleverly they named their brand ‘Aromatel’ which approximates to ‘aromatic clothes’, with a promise of even more fragrance, an attribute our research told us we “owned”. 

Cleverly they mass sampled a trial sachet with a double dose of fragrance and claimed “x2 the fragrance of the leading brand”. When people tried it, it did smell noticeably stronger. For us to match that change across a massive brand would have cost a fortune.

All of a sudden our base business was haemorrhaging highly profitable volume that funded innovation and growth across the business. 

Long story short, we clawed the business back with a new improved fragrance, better packaging and sheer commercial muscle. However it was a very expensive and time-consuming battle. 

The Insight: we left the door open and didn’t proactively defend the core category driver. Too much focus went into incremental and breakthrough innovation. Too little went into strengthening the base.

A strong innovation pipeline balances three things. Breakthrough innovation. Incremental innovation. Core innovation that protects what funds the system.

If this story triggers the question “are we exposing our core?”, let’s talk.