Want to Focus Your NPD efforts? Identify Strategic Growth Opportunity Areas

This content relates to : NEW PRODUCT & SERVICE DEVELOPMENT

HIGHLIGHTS

Identifying Strategic Growth Opportunity Areas (SGOAs) facilitates a disciplined approach to new product development.

SGOAs help drive Incremental as well as Big Bang innovations.

The best SGOAs deliver new or improved customer benefits.

Peter Klein ‘68 and Harvard Business School (MBA, ‘71). He founded PK Associates, a consumer products focused growth management consultancy after serving as Corporate Officer at The Gillette Company and at Nabisco Holdings Corp. He co-authored the book THINK TO WIN — Unleashing the Power of Strategic Thinking, published by McGraw-Hill He holds two patents and Advertising Age recognized him as one of “10 Innovators” in 2005 and described his contributions to marketing as having “a pivotal role in reshaping package-goods marketing over the past quarter century.”

Hello. I’m Peter Klein.   

I’ve been leading and managing growth management for over four decades. Actually, over five, including new product and service development and growth from acquisition. I’m a big believer in avoiding new products and acquisitions as a tactic in search of an enduring strategy. Companies that focus solely or mostly on opportunistic, tactical new products fall into what I call the graveyard of new products trap. And that is 70 to 80 percent of all new products and services fail to be a marketing and financial success. The same is true about acquisitions by the way. About 80% of all acquisitions fail to meet their financial valuation plan. So I practice and preach a growth process I call strategic growth opportunity areas. I refer to them as SGOAs.   

A strategic growth opportunity area is like an oilwell well site. It identifies and quantifies where to hunt, why and how to hunt for new product or services, or even acquisitions and big platform based ideas that can be built over time. Focusing about 30 to 40 percent of internal new product or service development against agreed upon SGOAs will identify and drive Incremental and Big Bang idea innovations. And that’s what I’m going to discuss in my second blog today. Identifying SGOAs is also a disciplined approach to new product development and it’s what I refer to as a strategic imperative or necessity since it allows you and senior management to agree where to focus research and development and technology and marketing resources and spending. There are many left and right brain ways to generate SGOAs and all of them, are market and consumer or customer driven. And they leverage a company’s core skills. Remember, a core skill is a strength but all strengths  are not core skills. And most companies, small, medium, large, public, or private, in my experience, have only two to five core skills that can be leveraged in new product development and acquisition.   

Although they may have as many as 50 or a 100 strengths, the best SGOAs deliver one or more, preferably more than one of the following five things. Number 1, a new or improved consumer or customer benefit, 2, a new segmentation opportunity, 3, a capability leverage opportunity, 4, an economic restructuring, and, 5, a feasible idea that is both relevant and differentiated through the eyes of the target consumers or customers. One example I want to mention, bring it to life, is Frito-Lay’s entry into the US cookie category. They were looking to grow by expanding into adjacent like snacking categories beyond salty snack. In salty snack, Frito-Lay was and remains known as the King of salty snacks in the United States. And a number of years ago, they had about a 55% retail market share of all salty snacks and the share was holding steady plus or minus one percentage point a year for the prior two to three years. And they thought they were, maybe, peaking out on what their max share will be in the category so they completed a cookie category assessment and concluded that they needed a highly relevant and highly differentiated way to enter cookies given the presence of large competitors in cookies like Nabisco and Keebler. 

Frito-Lay’s strategic growth opportunity area that was qualified and quantified successfully delivered way back in the 1980s against all five of the areas I mentioned. Their new or in this case even improved benefit was “good for you” cookies, healthier cookies, but leveraged a new segmentation opportunity, namely single serve cookies, which believe it or not, was basically almost a new form in packaging back in the mid-80s. They also leveraged economic restructuring because their single serve packaging allowed for a higher per ounce pricing. Frito-Lay’s  SGOA also called for distributing the single serve cookies only in small to medium-size accounts, and not in large mass grocery store outlets. What Frito-Lay called “up and down the street” accounts, convenience stores, kiosks, small grocery stores. This avoided competing directly with Nabisco and Keebler on their own turf, and allowed Frito to compete where they could leverage a very unique core skill capability, namely, their number one direct store door distribution, selling, and delivery system. They served back in the eighties, and I wouldn’t be surprised if they still don’t, weekly almost ten thousand more small stores than competition.   

So identifying SGOAs is a strategic approach to managing and executing profitable and sustainable growth. By the way, as an outcome of the Frito-Lay example, in Kansas City, where they test marketed Grandma’s cookies, they looked at and assessed their own capabilities and they knew they had to acquire some baking experience. So while they were king of salty snack, they needed a sweet baked goods cookie bakery. They acquired a Northwest Bakery called Grandma’s. They named their single serve cookies, Grandma’s.  They introduced [it in] the Kansas City market. And they excluded all large grocery stores. In four to six months in Kansas City, Frito-Lay and Grandma’s cookies had a almost 25 percent share of the entire Kansas City Market, including in that definition, large grocery stores where Nabisco and Keebler were that Frito-Lay wasn’t even competing in.   

That to me folks, led to a marketing and financial success. For other reasons, it also led to the infamous 1980s cookie wars. Another story for another day. Strategic growth opportunity areas, critically important if you ever want to develop Incremental ideas and Big Bang ideas.   

Thank you.   

Peter Klein, ’68 

Founder, PK Associates 

http://www.pkassoc.com/