Transcript Wiet - Stevens Institute of Technology

Innovation as a Growth Driver in
OTC Pharmaceuticals
Stephan Wiet, Ph.D.
Director – R&D Consumer Sciences
McNeil Consumer & Specialty Pharmaceuticals
Agenda
• The Need For Innovation - Signs, Signals, and
Reality
• Organizing for Strategic Growth
– Goals, Structure, and Managing Risk
• Sustaining an Innovative R&D Organization
– Innovation Audits & Critical Enablers
• Leveraging Consumer Knowledge
–
–
–
–
Defining Product Development
Uncovering & Building Product Benefits
Healthcare Trends & Implications for New Growth
Methods & Examples
OTC Pharmaceutical Arm of J&J
Current Annual OTC Sales: $1.35B
We Live in Interesting Times…
• Markets are generally well segmented and
stagnant.
• Power retailers have gained enormous market
leverage.
• Consumers are increasingly pro-active,
educated, and demanding.
• Cost effectiveness activities have been fruitful
but are reaching points of diminishing returns.
• Technology rarely leads to sustainable
advantages.
The Need for OTC Innovation
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
US Prescription Market
US OTC Market
($ Billions)
($ Billions)
$160
$140
$120
$100
$80
$60
$40
$20
$0
2000
2002
2004
2000
2002
2004
The Net Result
Most CPG/OTC companies are having
difficulty achieving sustainable volume
driven profit growth……..
BUT
How are they innovating?
Breakdown of Package Goods Launches
Avg. 1995-2004
2004
Substantially
New Products
Line & brand
extensions
0
Source: Information Resources Inc.
20
40
60
80
100
%
% Package Goods Launches Hitting
$7.5 M Year 1 Sales
Avg. 1995-2004
2004
Substantially
New Products
Line & brand
extensions
0
Source: Information Resources Inc.
5
10
15
20
25
30
%
The Attraction of Line Extensions
Package Goods
Annual Sales
Line
Extensions
$24M
Substantially
New Products
$53M
Average Cost
$10M
$25M
Success Rate
51%
26%
Avg. Time To
Market
10 mos.
15 mos.
Avg. Time To Payback
Investment
12 mos.
20 mos.
Source: Deutsche Bank, McKinsey
Structuring For Innovation
Company-Level
It Starts With Clear Growth Goals!
8 Year OTC Growth Strategy
• Grow Base Brands
– Minimize erosion of current OTC products
– Enhance base brands through incremental
innovations (line extensions)
– Strengthen adjacency areas
• Invest in New White Space Opportunities
– New healthcare solutions
– New disease states
– New technology platforms
Structuring for Innovation
Focus: New to
Company, New to
World
Goals: Explore White
Space, Business
Acceleration
Strategic
Marketing
Focus: New Product
Ideas, White Space
Partners, Technology
Goals:Technology
Brokering, Product
Optimization
Base
Brands
R&D
Focus: Sustaining
Core Business
Goal: Maintenance
of Short- and
Mid-Term
Pipeline
Structuring for Innovation
•Manages portfolio
•Unclear business
models
•Venture capital
funding approach
•Much ambiguity
•Manages risk
Company Board
•Well-understood
business models
•Standard financial
assessment
•Follows NPD
process
•Little ambiguity
Growth
Board
OTC
Board
Strategic
Marketing
Base Brands
Idea Mining
Idea Mining
•
•
•
•
•
•
•
•
Jobs-Based Consumer Research
Trend Analysis & Market Segmentation
Existing Ideas
Expert Panels
Emerging Technologies
Technology Brokering
Internal Brainstorming
Fallen Angels
Trends in Healthcare
% health care spending
Today - Primarily Disease Treatment Focused
Prevention
Early Detection
Management
Emergencies
Trends in Healthcare
% health care spending
Tomorrow - Trend from “After-the-Fact Treatment” to “Before Onset Care”
Prevention
Early Detection
Management
Emergencies
Scenario Planning
Aging Population
Increased Affluence
Buying Back Health
Disease Prevention
Remote Monitoring
Home Exercise Equipment
Home Diagnostics
Nutritional Supplements
Vanity Products / Services
Evaluating Opportunities
NPD vs. Growth Board Process
Concept
Feasibility
Development
Brand Growth
Ideas
Projected
Profitability
Mkt. Research &
Prelim. Financials
Opportunity
Complete Bus. Plan
Initial
Refined
Learn
Learn
Assessment Assessment Development Execution
New Business
High-level screen
Base vs. New
Pattern
Recognition
Early Opportunity Generation
Business Concept
Pitch
Opportunity Evaluation & Development
Structuring For Innovation
In R&D
Assessing the Climate
2004 Credo Results
The Innovation System
Research & Development - Innovation - Descending by Favorable
Employee Innovation
Company Innovation
Climate for Innovation
0
J&J Worldw ide Norm
J&J Worldwide Norm
10
20
30
Research & Development
R&D
40
50
60
70
80
90
100
J&J Worldw ide Goal
J&J Worldwide Benchmark
Research & Development
2004 Credo Results
Key Takeaways
• R&D Is Seeking Innovative Solutions
• Difficulty Moving Big Ideas Forward
• Our Current Culture and Processes Limit our
Ability to Create a High Performance Company
Capable of Unleashing Breakthrough
Innovations
R&D Innovation Steering Committee
Mission: Create sustainable connections that drive
innovation at all levels of R&D
• Cross Functional – Includes Key Business
Partners
• Creates “R&D Innovation Captains”
• Provides Focus & Direction For Hunting
Grounds
• Improves Collaboration
• Identifies Idea Champions
R&D Innovation Steering Committee
Getting to the heart of the matter!
R&D Innovation Audit
3 Areas of Focus (Leadership, Culture, Process)
3 Functional R&D Groups
117 Respondents (62% response rate)
R&D Focus Groups
3 Functional R&D Groups
20 Respondents
Leadership Category Results
Percent Agree
Encourages and Supports Ideas
Honors Creative Thinking
Shared Ownership of Ideas
Properly Resourced
Functionally Organized
Clear Vision
Perception of Drivers of Innovation
0
Avg. “Don’t Know” = 7.8%
10
20 30
40
50
60 70
80
Cultural Category Results
Percent Agree
Can Collaborate Openly
Not Afraid Of Failure
R&D Is Driver of Innovation
Empowered to Initiate Ideas
Know How to Move Ideas Forward
Fair Reward & Recognition
0
Avg. “Don’t Know” = 4.5%
10
20 30
40
50
60 70
80
Process Category Results
Percent Agree
Easy Access To Information
Studies Projects For Lessons Learned
Process To Stay Current On Trends
Process To Transfer Ideas
Process To Capture & Catalog Ideas
0
Avg. “Don’t Know” = 20.2%
10 20 30 40 50 60 70 80
R&D Innovation Team
6 Point Action Plan
• Establish Clear Innovation Definition
• Establish Robust Communications Program
• Establish R&D Collaborative Innovation
Forums & Activities
• Develop Idea Transfer Process
• Implement Idea Cataloging System
• Improve Reward and Recognition Program
S
o
u
r
c
e
s
Individual
Teams
R&D Forums
R
&
D
Product IDEA
i
n
p
u
t
R&D Innovation
Captain
R&D Innovation Steering Committee
O
u
t
p
u
t
R&D
Innovation
Coordinator
E
GO
No-GO
OTC Science
Board
Marketing
Innovation
Captains
OTC Board
I
N
N
O
V
A
T
I
O
N
Business development/L&A
Rx Board POC
Innovation Captain
Pharma
Pipeline
Development
Board
Management board
R
o
o
m
2
The Role of Consumers in
Product Development & Design
Product Development
Creating a Relationship Between a Product
and a Consumer using Technology,
Psychology, and Art.
2
Why This??
Is it the Shuffle?
“Sell the Emotion”
- Coco Chanel
Truly successful products
satisfy our emotional needs
as much as our functional
needs
Product Benefit Hierarchy
OTC Pharmaceuticals
Greater
Product
Power
Comfort
Me
Make It For Me
Let Me Know It’s Working
Make It Safe, Effective, & Reliable
The Power of Ethnography
• Emerging Trends
• Unmet Needs
• Unarticulated
Needs
• Triggers of Use
• Environmental
Interactions
• Compensatory
Behaviors
• Customizations
• Intangible Product
Attributes
Infant Tylenol® Dropper
• Improved dosing
accuracy
• Non-spill feature
• Design addressed
secondary benefit:
– “Dropper prop”
Evolution of Gel Caps
Real Value-Added Benefit
Real Value-Added Benefit
EZ Open Cap
Projective Research
Insights For Clear Aesthetic Direction
Validating With Consumers
TEXTURE PREFERENCE
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80%
60%
40%
20%
0%
hy
nc
ru
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ar
H
wy
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ft
So th
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Sm
• Great Sweet
Fruity Flavor
• Soft, Smooth
Chewy Textures
• Non-Sticky, NonTooth Packing
• Quick Breakdown
and Easy to
Swallow
Incremental Evolution of
Children’s Chewables
Children’s
Tylenol
Chewable Tablets
1992
1998
Softer
&
Smoother
2004
PipeLGP11-98:29
Selling the Senses
Vanilla Coated
Minty Menthol Coated
A Matter of Indulgence
Calcium Supplements
2
Key Takeaways
• Strategic Innovation Requires
Maintaining a Healthy Balance Between
Continuity and New Business Growth.
• Parameters of Managing Base Business
and New Growth Are Different
• Innovation Requires Collaboration and
Connection
• Create Deeper Consumer Knowledge To
Drive Business Growth