Build, Buy or Partner Innovation: The Benefits of Building

Today, innovation is required for Consumer Goods brands to survive. The companies that drive category growth consistently outperform and do not rely on sporadic breakthrough ideas. They deliver growth based on successful innovation. Structural attractiveness and sustained consumer demand have attracted challenger brands to most categories. Market forces are elevating the importance of innovation:

  • Retailers continue to raise the bar on Private Label product quality and brand recognition to sweeten the mix in many categories.
  • Population growth, which has fueled many categories, has stopped in many markets.
  • Rising costs due to tariffs, diesel, and channel costs-to-serve are pressuring margins.
  • The K-shaped economy, the rise of GLP-1 agonists, and the evaporation of discretionary income for many consumers are changing consumer category demand, value equations, and channel behavior.

Today’s biggest innovation question amongst Simpactful clients is not whether to innovate, but how. Specifically, leaders are questioning whether to “build” innovation in-house, to buy externally developed and/or incubated innovation, or to consider a hybrid strategy. This week, we will focus on the benefits of building.

Over the past 4 years, Simpactful has compiled a team of deeply experienced innovation experts to serve clients facing growth and channel hurdles. Our experts include General Managers, Innovation System Experts, Strategy, Finance, Marketing, Insights, R&D, and Research Practitioners. Together, we have tackled end-to-end transformation work, as well as sprints in tactical innovation areas. Today, we will focus on the benefits of building innovation based on the learnings of some of our experts.

The Case for Building and Honing Your In-House Innovation Engine
Building or optimizing an end-to-end, in-house innovation engine has 6 core benefits enjoyed by category leaders like Procter & Gamble, Kimberly-Clark, L’Oreal, and Apple. Most companies combine this model with selective M&A activity. The “Build Model” delivers the following benefits:

  1. Creates a Repeatable Growth Engine: Effective innovation systems can deliver a cadence of sustaining, transformational, category-expanding, and disruptive innovation that provides predictability for shareholders, owners, and the development of healthy innovation portfolios can provide optionality, agility, and paths for sustainable competitive advantage over time.
  1. Improves Capital Efficiency Over Time: Effective innovation engines are self-optimizing and able to drive greater returns on capital by learning from previous efforts. PLM systems, strategy renewals, financial KPI and goal setting, portfolio management, and post-launch (or “sunset”) analyses help the organization hone the requirements for in-market success.
  1. Strengthens Culture and Talent: Internal innovation systems are a highly effective way to hard-wire the organization to understand the consumer and channel partners, as well as the business model for success. Jennifer James has spent more than a decade consulting on innovation projects after leading Consumer and Market understanding and insights for some of P&G’s well-known categories and critical enterprise innovation efforts. “Our Simpactful innovation team has helped multiple clients shift from being widget-driven to being consumer, equity, and channel-driven. Our approach is not just to set up a system, but to provide the support to get it operational, working with executive and functional leaders to make the change. It’s gratifying to help executive leaders, innovation teams, and even entire enterprises make the change in as little as a year!”
  1. Enhances Strategic Control and Alignment: Well designed and governed innovation and portfolio management systems require upfront, multi-functional alignment on the business model, the requirements from innovation and the innovation OGSM or Objectives, Goals, Strategies, and Metrics for success. Brett Evans has spent his career implementing right-sized innovation portfolios and project management systems to meet the needs of a variety of types of enterprises operating across industries. He has observed, “Having clear multi-functional governance at both the Portfolio and Project levels is critical to ensuring the portfolio mix delivers against your strategic choices. And this in turn forces critical thinking to keep project and portfolio priorities balanced.”
  1. Provides Strategic Optionality and Portfolio Balance: Heather Burgess has launched over 50 successful innovations, led a Beauty portfolio within P&G’s Ventures organization, and gone on to lead multiple innovation system transformations. She notes that, “Building an in-house system gives leaders the optionality of generating innovation from scratch, leveraging Open Innovation partners, or leveraging M&A activity to fill the funnel. This enables leaders and boards to selectively acquire and not out of necessity to fill gaps. Optionality pivots decisions from reactivity to intentionality, and reduces rushed decisions, poor due diligence, or overpayment that results from a weak negotiating position.” The ability to leverage optionality often results in more portfolio strength and balance.
  1. Enables a More Compelling Corporate Narrative: Innovation can also shape channel narratives. Doug Stukenborg founded the Welly brand after a successful Merchandising career at Target. “The ability to showcase in-house innovation creates a powerful narrative for investors, retailers, and employees. The ability to say ‘we are a company that consistently creates the next generation of category disruptors with the potential to delight consumers and reshape category demand or structural economics’ creates a compelling basis for partnership and followership.” As a result, leaders can shift from a financial engineering story to a strategy-focused, capability-driven growth story, which shifts market perception.

Struggling to determine whether or build, buy or partner? Simpactful can help! Simpactful’s team of innovation experts can help with an assessment and recommendation. We offer deep transformation expertise in both end-to-end Innovation Engine Optimization and Mergers and Acquisitions. Our team of skilled practitioners has guided clients through the process of business modeling, innovation strategy development, portfolio sufficiency analyses, and Build / Buy / Partner options analysis. Our teams have implemented and stood up NEW in-house operating models and innovation systems (Front End and Stage Gate) in as little as a year based on decades of practical know-how from leading the actual work. Contact us today at contact@simpactful.com or 925-234-6394. Visit www.simpactful.com.

Today’s biggest innovation question amongst Simpactful clients is not whether to innovate, but how. Specifically, leaders are questioning whether to “build” innovation in-house, to buy externally developed and/or incubated innovation, or to consider a hybrid strategy. This week, we will focus on the benefits of building.

Over the past 4 years, Simpactful has compiled a team of deeply experienced innovation experts to serve clients facing growth and channel hurdles. Our experts include General Managers, Innovation System Experts, Strategy, Finance, Marketing, Insights, R&D, and Research Practitioners. Together, we have tackled end-to-end transformation work, as well as sprints in tactical innovation areas. Today, we will focus on the benefits of building innovation based on the learnings of some of our experts.

The Case for Building and Honing Your In-House Innovation Engine
Building or optimizing an end-to-end, in-house innovation engine has 6 core benefits enjoyed by category leaders like Procter & Gamble, Kimberly-Clark, L’Oreal, and Apple. Most companies combine this model with selective M&A activity. The “Build Model” delivers the following benefits:

  1. Creates a Repeatable Growth Engine: Effective innovation systems can deliver a cadence of sustaining, transformational, category-expanding, and disruptive innovation that provides predictability for shareholders, owners, and the development of healthy innovation portfolios can provide optionality, agility, and paths for sustainable competitive advantage over time.
  1. Improves Capital Efficiency Over Time: Effective innovation engines are self-optimizing and able to drive greater returns on capital by learning from previous efforts. PLM systems, strategy renewals, financial KPI and goal setting, portfolio management, and post-launch (or “sunset”) analyses help the organization hone the requirements for in-market success.
  1. Strengthens Culture and Talent: Internal innovation systems are a highly effective way to hard-wire the organization to understand the consumer and channel partners, as well as the business model for success. Jennifer James has spent more than a decade consulting on innovation projects after leading Consumer and Market understanding and insights for some of P&G’s well-known categories and critical enterprise innovation efforts. “Our Simpactful innovation team has helped multiple clients shift from being widget-driven to being consumer, equity, and channel-driven. Our approach is not just to set up a system, but to provide the support to get it operational, working with executive and functional leaders to make the change. It’s gratifying to help executive leaders, innovation teams, and even entire enterprises make the change in as little as a year!”
  1. Enhances Strategic Control and Alignment: Well designed and governed innovation and portfolio management systems require upfront, multi-functional alignment on the business model, the requirements from innovation and the innovation OGSM or Objectives, Goals, Strategies, and Metrics for success. Brett Evans has spent his career implementing right-sized innovation portfolios and project management systems to meet the needs of a variety of types of enterprises operating across industries. He has observed, “Having clear multi-functional governance at both the Portfolio and Project levels is critical to ensuring the portfolio mix delivers against your strategic choices. And this in turn forces critical thinking to keep project and portfolio priorities balanced.”
  1. Provides Strategic Optionality and Portfolio Balance: Heather Burgess has launched over 50 successful innovations, led a Beauty portfolio within P&G’s Ventures organization, and gone on to lead multiple innovation system transformations. She notes that, “Building an in-house system gives leaders the optionality of generating innovation from scratch, leveraging Open Innovation partners, or leveraging M&A activity to fill the funnel. This enables leaders and boards to selectively acquire and not out of necessity to fill gaps. Optionality pivots decisions from reactivity to intentionality, and reduces rushed decisions, poor due diligence, or overpayment that results from a weak negotiating position.” The ability to leverage optionality often results in more portfolio strength and balance.
  1. Enables a More Compelling Corporate Narrative: Innovation can also shape channel narratives. Doug Stukenborg founded the Welly brand after a successful Merchandising career at Target. “The ability to showcase in-house innovation creates a powerful narrative for investors, retailers, and employees. The ability to say ‘we are a company that consistently creates the next generation of category disruptors with the potential to delight consumers and reshape category demand or structural economics’ creates a compelling basis for partnership and followership.” As a result, leaders can shift from a financial engineering story to a strategy-focused, capability-driven growth story, which shifts market perception.

Struggling to determine whether or build, buy or partner? Simpactful can help! Simpactful’s team of innovation experts can help with an assessment and recommendation. We offer deep transformation expertise in both end-to-end Innovation Engine Optimization and Mergers and Acquisitions. Our team of skilled practitioners has guided clients through the process of business modeling, innovation strategy development, portfolio sufficiency analyses, and Build / Buy / Partner options analysis. Our teams have implemented and stood up NEW in-house operating models and innovation systems (Front End and Stage Gate) in as little as a year based on decades of practical know-how from leading the actual work. Contact us today at contact@simpactful.com or 925-234-6394. Visit www.simpactful.com.