BATAVIA, Ohio (AdAge.com) -- The key to new-product success for package-goods companies may boil down to something very simple: Keep the boss out of the process.
A study by Nielsen Co. of practices at 30 unnamed package-goods marketers found those with the greatest new-product success rates, as measured by percent of revenue coming from new products, were those with the least senior-management involvement in the creative process.
Companies with less senior-management involvement in the new-product process generate 80% more revenue from new products than those with the highest levels of senior-management involvement, according to Nielsen.
The study bases this finding on the proximity of "blue sky" innovation teams, also called skunk works in some cases, to the corporate headquarters.
Nielsen found companies with off-site blue-sky teams got 5.7% of their revenue from new products, while those with blue-sky teams on the site of their corporate headquarters got just 2.7% of revenue from new products. Companies were better off having no blue-sky teams at all than having them at their corporate headquarters, as companies with no such teams got 4.8% of their revenue from new products.
"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," Tom Agan, senior VP-managing director of Nielsen, said in a statement.
Peter Klein,* a new-products consultant who worked with Kraft Foods and was an executive of Gillette Co. when both made major leaps in new-product development, sees several reasons why senior management and new-product development are a bad mix. For one thing, very few senior managers have much new-product development experience themselves, he said. Few are from research-and-development backgrounds, and seldom do their careers veer into marketing-focused new-product specialty roles at CPG companies. That's because success on established brands is more often a path that leads to management.
Mr. Klein has seen new-product programs work best when they're led by new-product specialists with years of experience in what can be a frustrating, hard-to-learn area. When senior managers get involved, it often means more meetings, frequent delays scheduling time with busy executives, and more time spent by new-product specialists writing presentations instead of actually developing products.
When senior managers do get involved, he said, there's a "tendency to hip shoot. They come in, throw a grenade, and it slows things down."
Ultimately, senior management does have to get involved, he said, but they need to do so at specific points in a stage-gate development process when key decisions are needed, not in the day-to-day process of developing ideas and products.
But Doug Hall, founder of new-product consultancy Richard Saunders International, said he finds the notion that senior-management involvement hurts new product success "absurd," and said the proximity of the team to headquarters doesn't necessarily mean anything.
"That's definitely wrong," he said, "unless management is incompetent. ... Now most management is incompetent today, and that's the fundamental problem in America is bad management."
Steve Jobs and Apple, he said, are glaring contradictions to the theory.
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CORRECTION: A previous version of the story said Peter Klein was an executive of Kraft Foods. He was actually a consultant for Kraft and later an executive of Nabisco Foods prior to its acquisition by Kraft's former parent, Philip Morris.
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