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Leveraging Analytics to Manage Complexity

2/26/2016
With the continued drive to introduce new products, many companies are realizing that managing a growing set of SKUs is adding complexity and cost to the business. This is especially true in highly creative companies where new products with a relatively short lifecycle constitute a high percentage of the total saleable product portfolio.
 
While some level of complexity (that which serves to meet consumer needs) is welcome, some, such as unneeded product variations with limited appeal, tend to consume resources that otherwise could be directed towards brand-building activities, or game-changing innovation. In light of this, companies are investing in analytics to improve their product development success rates and “permanently” reduce the need to rationalize SKUs at the rate they are doing it today.
 
While a number of products fail due to the fact that they do not meet consumer needs, some are not successful simply because the NPD&I processes do not ensure they make it to market at the right place, and at the right time (missing on-shelf availability targets).  Successful innovation not only requires a well-articulated strategy and a clear understanding of consumer needs, it also demands the flawless execution of operational NPD&I processes.
 
We have observed, however, that mastering these processes can be elusive for companies. Lack of process discipline, inability to recognize process variability due to product complexity, and limited access to reusable information, all contribute to the challenges of successfully executing NPD&I processes. All of it gets compounded when short product lifecycles, high number of yearly seasonal and event-driven product introductions, licensing approvals, and offshore manufacturing are added to the mix.
 
In order to reign in the chaos and provide clarity, we have helped companies analyze their end-to-end NPD&I process data including in-market SKU sales performance. The analysis helped them determine how they could better segment their products, and how product characteristics, as well as process execution performance, drive product development complexity and process variability. The results also provided a set of ‘early KPIs’ that will enable companies to quickly make course-corrections during the product development process, or kill a project that most likely will not deliver a successful market introduction outcome (thereby reducing the proliferation of non-performing SKUs).
 
In a world where consumer tastes, needs and wants are changing in rapid fashion, new product introductions continue to accelerate, while their corresponding product lifecycles continue to shrink. Those that leverage analytics to revamp and continuously optimize their NPD&I processes will have a significantly better chance of winning over their competition, and delivering superior shareholder value.
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