The 5 Mistakes CPG Companies Make When Building Innovation

Working with both large CPG companies and emerging brands, we’ve seen the best—and worst—of both worlds. Startups are often vaunted for their scrappiness and agility, but large organizations have their own set of strengths: deep resources, vast experience, and established processes. So why is it that large CPGs struggle to create true innovation, and why do they so often fail?

Whether they call it an “innovation hub,” “venture arm” or any other variation on the theme, many large food & beverage companies have a separate-but-related faction dedicated to developing new products and brands outside their core—and many have created and retooled their innovation practices many times over. That’s not because there’s something intrinsically wrong with these companies. It’s because innovation is hard to get it right. With insights from Glenn Pappalardo and Arwen Kimmell, both of whom worked in innovation at major CPG brands before bringing their experience to JPG Resources, about the most common roadblocks to successful innovation. 

1. They treat innovation like a slimmed-down version of the company.

“The same but with less meetings” is not an innovation model. Often companies fall victim to innovation window dressing: things may look different from the outside, but those changes (a different logo, a microsite!) are superficial, while the culture of the behemoth looms large. Thus the innovation team is expected to create something entirely different with essentially the same raw materials (just with less help). Pappalardo suggests putting the innovation practice in a different physical building, or even a different city, with just the lightest tether to the mothership. Now that many more employees are permanently remote, this separation can be achieved more easily than ever. It also means the executive team has less line of sight into the daily goings-on of the innovation team, which can feel risky—but as any true entrepreneur will tell you, nothing ventured, nothing gained. 

And speaking of true entrepreneurs: the paradox of building an innovation practice is that a big company is not a startup, and salaried employees are not entrepreneurs. It’s tough to recreate the “back-against-the-wall” atmosphere of a new business when you’re making a steady biweekly paycheck. Companies may want to consider alternative hiring models, like bringing in entrepreneurially minded people on a part-time or contracting basis to develop fresh ideas—maybe even with a stake in their success, similar to a sales person working on a base salary with commission. 

2. They sit and talk about it for too long. 
If there’s something we all know about big companies, it’s that they love to talk about an idea until everyone forgets what they liked about it in the first place. Lest your innovation conversation turn into a Dilbert cartoon, keep the vetting process short. Assess the market and have thoughtful conversations about how the new venture fits into your strategy. Then, go forward. Or don’t. Decisiveness is key. “Stop talking about it after eight weeks,” advises Pappalardo. “You’re losing time at that rate.”

3. They aren’t ready to make real changes. 
“We can’t do that because” is the best way to kill a potentially brilliant idea. (As creatives, we would know.) Many companies are so entrenched in their existing modes of behavior—and even their hyper-efficient supply chains—that they are literally unable to do things differently. “I have experienced the challenge of trying to be ‘breakthrough’ on existing lines, with existing manufacturing capabilities, with existing ingredients,” says Kimmel. “There’s only so much breakthrough you can do without thinking differently about one of those components.”     That’s because those current ways of doing work well for the company. They’re able to churn out potato chips or candy bars or cans of beer with great efficiency. But organizations can’t always have their (super-streamlined) cake and eat it too. They may have to sacrifice some of that efficiency, or else face the fact that they’re not willing to make the investment (of money, time and resources) required. 

“Companies always say they want to take a new approach to marketing strategy and product design. Most of them don’t stick to it,” Pappalardo observes. “If you want to see a big change, you have to make a big change.”

4. They don’t take the long view. 
It’s ironic that large companies, which are often slow to act on trends, are often the ones short on the long view. The pressure of being a public company means that investor expectations have to be addressed quarter to quarter, or even week to week. That can make it difficult for anyone to lift their head up and see where the future is. But companies must have eyes on the next frontier if they are to survive, says Pappalardo, as “just doubling up on the mature won’t deliver in terms of growth.”

5. They’re uncomfortable with failure.
In too many corporate environments, someone’s waiting to say “‘I told you so” when a new project doesn’t pan out. It’s understandable, in a way—the sheer pain of getting something approved by legal creates an atmosphere conducive to doubters. “The [large company] model breaks down when you have to be agile,” says Kimmel. “It makes it difficult to make small bets.”

But the reality is that most things won’t be banner successes. Put your success rate at around 10% and you’ll be dwelling much closer to reality. Part of that may also mean changing your definition of success to a brand that will thrive for the next, say, five years instead of the next fifty. In aggregate, these small wins could add up to bigger revenue than is realistically possible if you kept holding out for “the big one.”

What we see from these five common mistakes is that the success of a CPG innovation practice—or an innovation practice in any type of company, for that matter—hinges on that organization’s ability to embrace real change, recognize their true strengths and weaknesses, and be willing to ask for (and listen to) an honest, informed, outside opinion. Is it easy? No. But neither is seeing another great idea get lost to its own potential.