Insight

Five steps to developing breakthrough CPG products through Agile processes

Harmen van Os

By Harmen van Os

Organizations have widely adopted Agile development processes for digital solutions. Some 86 percent of software development teams use Agile processes to align the creation of new solutions with business requirements. And many organizations have scaled Agile across business functions, bringing more efficient ways of working and better, faster results to operations, security, and more.

Yet, adoption of Agile processes for physical product development is much lower. Only 10 percent of organizations use Agile for physical product development.

The problem is particularly acute in consumer-packaged goods (CPG). This industry relies on breakthrough innovation and accelerated product releases to drive market share, revenues, and profitability. Despite this reality, cross-functional teams typically use waterfall-style processes, with multiple gates and stages on the pathway from idea to manufacturing, product release, marketing, and more.

Physical product development is ripe for Agile disruption

So, why is the adoption of Agile processes for physical product development so low? CPG teams often feel that their work is too complex for small teams to iterate incrementally. Another reason for Agile’s low penetration in this market includes a lack of lasting commitment by leaders to Agile, such as a failure to scale Agile pilots to wider deployments. In our report, The Breakthrough Brigade, some 76 percent of respondents say they’re more likely to drive incremental innovation, while 73 percent favour efficiency and cost reduction over game-changing new solutions.

Yet, the very uncertainty of physical product development is what makes it ripe for disruption with Agile processes. Across sectors, 42 percent of leaders say their organizations may not survive without breakthrough products.

By adopting Agile processes, CPG companies can develop organizational muscle to innovate, focus on the right priorities, and develop and scale truly innovative solutions. We have observed that CPG companies improve efficiency by an average of 30 to 40 percent and time to market by 30 to 50 percent when they scale Agile processes. That’s essential because being faster to market enables companies to capitalize on consumer demand before tastes change. In addition, full-time staff deliver more ROI for these ideas. Our research reveals that employees working on a breakthrough idea can have a 1.6- to 1.8-greater impact on top line revenue than one working on an incremental innovation project. Achieving these results helps innovation teams create a solid business case for extending these efforts.

How CPG companies can adopt and scale Agile processes

To adopt Agile processes, organizations should:

Build small, multi-functional, highly efficient teams

CPG companies can focus and accelerate innovation by creating small teams of five to six people. Team members typically include the product owner, the delivery lead who continuously directs the team, and representatives from four key functions: product design, packaging, process technology, and consumer insights. Keeping teams small avoids project dilution and scope creep, where too many individuals weigh in on decisions they don’t need to participate in, resulting in rework and delays.

Applied Agile methods in its product development process in their quest to achieve product superiority. Development is focused on full experience beyond the product, continued consumer insights, testing, and feedback, with leadership that is focused on experimentation and learning.

Focus on the urgent and essential

Two- to three-week cycles and small iterations allow for many, small decisions. The work of the team is transparent and highly efficient due to the delivery lead constantly focusing the team to work on urgent and essential tasks, continuously ruling out uncertainties.

In addition, leaders should also define how many projects team members can participate in and how different they can be, constructing teams that run small portfolios. Team members can typically support three to four projects, while still providing great ideas and maintaining an appropriate work cadence.

A US-based multinational consumer products company can trace $3 billion of new annual revenue to its open innovation programs. The company created small, dedicated and stable multifunctional Agile teams, who report that they can work two to three times more efficiently and up to five times faster during certain project processes.

Identify key leadership behaviours

R&D leaders play a critical role in efficiency and time to market for innovation projects, reducing rework and delays. While they often like to save late-cycle projects going awry, their skills are ideally suited for preventing such situations in the first place. This can be accomplished by giving teams the freedom to make more small decisions to incrementally progress projects.

Fitbit is one example of a CPG brand that has successfully scaled its aggressive product delivery schedule thanks to effective leadership. The company’s program management office director’s previous experience with scaled Agile frameworks was instrumental in its deployment within Fitbit. One year after deploying the framework, the company released four new products. The previous year they only released 2 new devices.

Apply digital tools to drive efficiencies

CPG teams develop on multiple horizons: optimizing current processes, innovating incrementally, and creating breakthrough ideas. Organizations can apply lean processes to R&D to bring greater standardization and control to these efforts, especially in incremental innovation. Digital tools, such as the electronic lab notebook (ELN) system to organize research, artificial intelligence (AI) powered search, and predictive algorithms enable organizations to forecast outcomes, consider decision trade-offs and work more efficiently. By so doing, they can free more talent to work on breakthrough ideas.

During the pandemic, a global CPG company had to rapidly redevelop products, as raw materials were not available due to supply chain issues. The company used digital tools to simulate the process of changing ingredients in formulas without retesting them physically, driving throughput for key activities by 50 to 80 percent.

Embed Agile within portfolio management

CPG companies don’t adopt Agile at the project level alone. They also apply it to portfolio management processes: continuously deciding which initiatives to fund, kill, and scale. In addition, organizations can use Agile portfolio management processes to identify and act on early trends, set up teams, balance resources between incremental and breakthrough innovation, develop and apply metrics across projects to allow fact-based decision making, and orchestrate innovation efforts.

The engineering team of a large UK based organization created an innovation program to develop new ideas into workable solutions at pace. Employees uncovered 100 potential innovations and are using Agile processes to accelerate the development of 46 different ideas.

Drive better results for CPG product innovation with Agile

Organizations are now operating in an economic environment where capital is more constrained. Yet, consumers and shareholders expect faster innovation cycles, with more disruptive ideas taken to market.

Organizations can meet these demands by adopting Agile processes. They can become leading innovators by creating multi-functional teams, setting up projects for success, identifying key leadership behaviours, applying digital tools to create efficiencies, and embedding Agile processes in portfolio management cycles. By doing so, they can create innovation engines that improve efficiency by up to 40 percent and reduce time to market by up to 50 percent.

About the authors

Harmen van Os
Harmen van Os PA innovation excellence expert

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