Heavy management stifles innovation

Companies that employ this and other best innovation practices derive on average 650% more revenue from new products compared to companies that do not. The study looked at 30 FMCG companies in the US, documenting more than 50 dimensions of new product development and comparing them to actual in-market success from new products.

"New product innovation is a top priority of every major company CEO, yet success varies so widely that it's absolutely critical to understand what drives successful innovation and what undermines it," said Tom Agan, senior vice president and managing director, The Nielsen Company. "Once you understand it, then you need to ask yourselves, are we living it?"

Nielsen's research shows that simply being physically near corporate headquarters can stifle new idea generation. According to Nielsen, companies with an off-site Blue Sky innovation team report 5.7% of revenues coming from new products, compared to 4.8% from companies with no Blue Sky team at all. Companies with Blue Sky teams on site report just 2.7% of revenues coming from new products.

Manage new ideas lightly

"One of the keys to successful new product innovation is to manage new ideas lightly," said Agan. "While we don't dispute senior management's strengths and good intentions, they are often too quick to get involved in the creative process, especially when things are not going well, and their mere presence can stifle free-thinking and boundary-free ideas - which can doom the new product development process to failure.

An important key to success is for senior management to precisely manage the new product development process, not the ideas themselves. FMCG companies with rigid stage gates - decision points in the process where a new product idea must pass certain criteria to proceed forward - average 130% more new product revenue than companies with loose processes.

"New product development success comes down to two important principles - managing ideas lightly while managing the process precisely," said Agan.