inQB8 team increases new-product throughput by 10x
Executive Summary: 3 Key Differences and Benefits of Agile CPG Innovation
3 Key differences from traditional CPG:
- Cross-functional groups work as full-time dedicated teams.
- Rapid test and learn cycles.
- Focus on individual & team development.
3 Key benefits:
- Time from idea to market is significantly decreased.
- More vetted, successful products to market.
- Increased employee engagement, retention, and growth.
Pharmavite is a leading producer of vitamins and food supplements. Their brands include Nature Made®, Equelle® and MegaFood®. Pharmavite competes directly with broadline brand Nature’s Valley and private label products from Spring Valley, as well as numerous “focus brands” that target specific needs like sleep.
When Pharmavite started more than 45 years ago, it helped create the category. Today it’s the market leader with a mere 11 percent market share.
“It’s very unusual to be a market leader with only an 11 percent share,” says Pharmavite’s Divisional Vice President of Innovation Vivian Rhoads. “It’s a very fragmented category with new entrants every single day, so the pace of change is incredible and we need to be able to keep up with it.”
Stage-Gate development model
Pharmavite, like most other consumer packaged goods (CPG) companies, has used the Stage-Gate® development model. This waterfall approach to innovation uses pre-set stages:
- Business plan concept
- Testing and validation
- Launch and implementation
Between each stage is a gate, at which a decision is made to continue the project or not. This approach is proven, but it’s linear, hard to adjust mid-project, and can take a long time. It’s not unusual for a new-product cycle to take three years. As a result, the finished products can be out of touch with consumer needs.
Consider an imaginary sleep supplement. In a typical CPG business you’d collect data about the number of people who have trouble with sleep. Big surprise: Lots of people have trouble sleeping. You conclude that because there are lots of people with poor sleep, there’s a market for billions of dollars for improving sleep. And therefore there must be a market for billions of dollars for your new sleep product.
“But you don’t do any actual testing about how the value proposition lands, or that people will actually buy and use the thing you’re proposing to sell,” says Richard Lawrence of Humanizing Work. “In the traditional approach you don’t get that data until you actually go to market. So you’re seeing all kinds of things that feed your confirmation bias through the entire process. Only at the end do you find disconfirmation information, but you’re so committed to your belief at that point that you just tell stories about how ‘We were right anyway’ or ‘Consumers don’t know what they need.’”
Adds Peter Green, also of Humanizing Work: “A lot of times it devolves into finger pointing within the company. Like ‘We built the right product, but marketing couldn’t talk about it right,’ or marketing saying ‘If they just made a better product we’d be able to write about it more effectively.’ When things aren’t successful they don’t go to the root cause of that, which is ‘We didn’t find an actual value proposition that mattered.’
“The most important kind of data is ‘Will consumers buy this thing?’” says Peter. “That’s the piece of data they wait until the end (at product launch) to test.” And, of course, that can be too late.
When Vivian joined Pharmavite in July 2018, the innovation cycle from idea to product was 27 months. “There’s no way you can survive by taking 27 months to bring something to market,” she says. “By the time you get there you’re already obsolete. In 2016 and 2017 there were a few launches that were discontinued within weeks of launch. That’s absolutely not a sustainable model.”
Agile development philosophy
In contrast with Stage-Gate, Agile is dynamic, adaptive and … well … agile.
The four values of Agile development are:
- Individuals and interactions over processes and tools
- Working software over comprehensive documentation
- Customer collaboration over contract negotiation
- Responding to change over following a plan
The 12 Principles of Agile development are:
- Customer satisfaction through early and continuous software delivery
- Accommodate changing requirements throughout the development process
- Frequent delivery of working software
- Collaboration between the business stakeholders and developers throughout the project
- Supporting, trusting and motivating the people involved
- Face-to-face interactions whenever possible
- Working software is the primary measure of progress
- Agile processes support a consistent development pace
- Attention to technical detail and design enhances agility
- Self-organizing teams outperform individuals
- Regular cadence of team reflection and continuous improvement
As you can see from the language, Agile was created in the software development world, where it is the dominant approach. However, Agile methods can aid all sorts of innovation — including CPG. Just replace the word “software” with “product.”
Agile methodologies promise to make new-product development faster and more on target with consumer needs.
“Part of the benefit of Agile is shortening time to market,” says Richard, “but I think the real win is being able to kill bad ideas faster so that you can try more ideas and have the real winners come to the top.”
Says Mike, “Increased speed to market and higher chance of in-market success are really byproducts of the Agile process. Agile requires disciplined adherence to a set of principles, and by following those principles we see things like:
- Higher engagement from teams.
- Better understanding of our consumers because we focus on empathizing with them and living their pains, gains and aspirations.
- Better communication and performance from teams.
- Increased levels of output over time due to focus on continuous improvement.”
Pharmavite chooses Agile
According to Vivian, the two biggest drivers in Pharmavite’s industry are 1) shelf space and 2) innovation. Pharmavite already has more shelf space in brick and mortar than any other brand.
“I was hired as a product owner and manager to transform innovation,” says Vivian. “I pretty much had a blank slate and the charter to really develop from scratch how we’re going to turn around innovation within the organization.”
Vivian continues: “We didn’t have anyone working in innovation when I started with the company, so I made the recommendation from the start on having a dedicated cross-functional team and using Scrum (one of several Agile frameworks) as the method, because I had hands on experience working with entrepreneurs.”
In contrast with the Stage-Gate process she found at big companies, Vivian liked the entrepreneurs’ hands-on way of doing things without lengthy processes, but “rather focusing on the next hypothesis that we have to tackle and the next thing that you’re going to invest your time and money against. And placing small bets rather than making the decision to launch something before you learn along the way. I found that to be a very effective way to get a lot of things done in a short period of time by few people.”
In September 2018, soon after Vivian started reading about Agile, she found Peter and Richard and took their Certified Agile Leadership course. She had never used Agile before she decided to apply Agile in her team. “I really took the leap of faith.”
As part of her recruiting process, Vivian found Mike Wang, who did not have previous ScrumMaster experience, but had a great product management background in both large and small companies. Within a few days of Mike starting, he joined Peter’s two-day ScrumMaster training workshop. This was January 2019.
At the end of February, Richard and Peter brought their two-day Agile Value Innovation Kickoff Workshop in-house to Pharmavite This included the whole “inQB8” [pronounced incubate] team Vivian had recruited. People didn’t know each other yet — and some were still weeks out from beginning their jobs. “This was a way to start everyone on the same page because no one had any experience working with Agile,” Vivian says.
The kickoff introduced everyone (including top leadership) to the core Agile principles. For the next two weeks, Peter and Richard led inQB8 through the Team Launch Sequence. Every day is a miniature sprint. The team collaborates and builds something every day. Then they reflect on it and do it better tomorrow. By the end of the two weeks, the team has done that 10 times.
“By the end of the Team Launch Sequence you’ve gotten 10 cycles of a thing you would have previously done over a year or more,” says Richard. “It’s really about learning cycles, not time. By the end of that process, the group has bonded and become a team.”
“From then on we had no other choice,” says Vivian. “We were a Scrum team and that’s the only way we knew to operate.”
One of the great things about the kickoff, says Peter, is that inQB8 had buy-in and participation from top leadership. “From the beginning, Vivian has had all the executive support you could possibly dream of — and not all of our clients have that.”
Organization support is critical to the long-term success of Agile adoption. “Since the kickoff and team launch we’ve had many training sessions with Richard and Peter,” Vivian says. “To this day they serve as coaches both for me as the product owner, Mike as the ScrumMaster and also to the overall team. It’s very critical for us to continuously have training with them for the entire team because they really truly know the people, and they can help train new members that come on board.”
Agile in a CPG company
In software development, there are Agile recipes. Developers can pull from thousands of successful examples. In a non-software context, there are no recipes, but the same Agile principles apply.
“At the root it’s humans solving complex problems with other humans and collaborating to do it,” says Richard. “When it comes to innovation it means getting a diverse group of people together to collaborate and experiment.”
Agile teams in the CPG world function much like other Agile teams. They are cross functional. They prioritize. They focus on a small number of things at a time. They iterate. They run short cycles. They learn from those cycles.
So what’s different?
”The process differs from making software in that it is more difficult for us to launch ‘working solutions’ piece by piece,” Mike says. “With software, we can launch a video player that has a start/stop button only, and then send out an update that allows fast forward/rewind. With CPG, we cannot ship out a bottle, then a label for the bottle, then the product that goes into the bottle.”
“We use Scrum as what I would call a ‘process container,’ Mike continues. “On one end, we have Sprint Planning; on the other, we have Sprint Review and Sprint Retrospective; and in the middle we have our Daily Standups. Each of these ceremonies works together to enhance transparency of work that’s been done and reveal any barriers to progress that the team encounters.
“Outside the bounds of those ceremonies,” Mike continues, “there is freedom and flexibility to utilize different tools, techniques and methodologies to get work done and make progress against our Sprint Goals. We use Design Thinking, Lean Startup methodology, and Testing Business Ideas techniques to understand our consumers, map out their jobs to be done/pains/gains/aspirations, ideate and brainstorm, then test and refine ideas until they are either killed or become solutions that are launched in the market.”
An Agile CPG innovation team focuses on building understanding of the market and testing ideas about possible solutions. “What’s important is value innovation, not technology innovation,” Richard says.
Pharmavite’s inQB8 innovation team takes a new product through a Discovery process. They “de-risk” the project by answering these questions:
- Do people want it?
- Can we make it?
- Can we earn a profit at the price people are willing to pay?
When the product is ready for the transition from Discovery to Commercialization, inQB8 briefs the Commercialization team with the following information:
- Competitive context
- Consumers’ value proposition
- How the product is formulated
- Where the product will be made
- Product specifications (packaging, how many pills per bottle, etc.)
- Consumer research
- Projected margins (based on cost of goods sold and selling price)
After Commercialization takes over, the inQB8 leads stick with the project for a set period of time to help answer questions and manage tradeoffs between the core value proposition and practical constraints like manufacturing, supply and cost. For simple projects the overlap is about a month. For complex projects, inQB8 stays plugged in all the way through launch.
Key aha moments
“Agile helped us unlock the true power of cross-functional teams,” says Mike. “CPG in general already believes in cross-functional teams, but they are utilized within a matrixed organization structure. This leads to competing priorities, misaligned incentives and miscommunication, all of which together create ineffective teams.”
“Scrum provides additional tools (e.g. dedicated teams and Scrum ceremonies) to inspect our work regularly, adapt quickly to changes, and continuously improve our efficiency and effectiveness,” Mike says. “The dedicated team comes together on a daily basis and at the beginning and end of each Sprint to iteratively plan, inspect and adapt as projects progress.”
Adds Vivian: “With Scrum the team does not have competing priorities outside of what is captured in the Sprint backlog. Therefore, they are truly dedicated. The advantage is that they are able to make progress rapidly and, most importantly, adjust to new findings rapidly too.”
Agile has been a driving force behind creating a team culture of openness, curiosity, and continuous learning. “We not only focus on change that affects what we work on; we also focus on change that affects how HOW we work together,” says Mike.
Vivian says, “We were coached by Richard and Peter in the development of a Vision for the team and also a working agreement, which is where we as a team defined how we want to work together — what that is like, what it feels like, and what it sounds like. We often discuss our working agreement, and we hold ourselves and others accountable to it.”
“Using the Leadership Circle profile, we invested to understand the reactive and creative tendencies of each team member, as well as the dynamics between team members,” Mike says. “While I have used leadership tools before, the Circle is clear to understand while also capturing the complexity of an individual as well as that individual’s interactions within the team and to the broader organization.”
“In order to launch products faster in the highly competitive CPG world, we need to rewire our brains on what it takes to create a new innovation,” says Vivian. “I had to realize that the old ways of doing work were not going to take us to the new place we wanted to be.”
One key rewiring was on the need for a comprehensive situational assessment (size of prize, size of market, consumer insights, competitive landscape, and so on). “What we learned is that a situational assessment is IRRELEVANT AND A WASTE OF TIME AND MONEY if the highest risk, for example, is that you won’t be able to find a contract manufacturer that can run a formula at a price that a consumer is willing to pay,” says Vivian. “So, in that case, we start by creating a paper formula on a hypothesized solution to get COGS, and then we define the SRP.”
Agile enables focus on the highest value and highest risk hypotheses, and it is non-sequential. “Innovation is typically very messy up front before things become linear,” says Vivian. “With this in mind, Agile is a better fit for the type of work we are doing.”
“We deliver solutions that are high quality because we have mechanisms in place to capture feedback and incorporate it into design throughout the process,” Mike says.
Continuous coaching is built in. “We have a dedicated Scrum Master to probe with questions and support the team from end to end,” Mike says. “Peter and Richard also provide us with regular coaching that enables us to get additional perspective and feedback.”
Scrum synergizes well with techniques like Lean Startup, Design Thinking and Testing Business Ideas. “Together, these things help us get through the squiggles in the innovation process,” Vivian says. “It is not Agile, or Design Thinking or Lean Startup alone that brought our transformation. Design Thinking allows us to be human centric in our thinking and co-creating with consumers and customers. Lean Startup allowed us to think about validating the highest risk hypothesis early on. Strategyzer gave us the Value Proposition model, and finally, Agile gave us Scrum and the working agreement. While this is complex, we are, as the Agile Manifesto says, ‘uncovering new ways of working.’”
The proof is in the product
Mike says a great example of a successful innovation is Pharmavite’s Sleep & Recover Gummies.
“The biggest way that Richard and Peter supported this innovation was by helping us cultivate a mindset of iterative learning and adaptation,” Mike says. “We were conducting work to shore up our vitamin D portfolio, and one of the ideas that came up during an ideation session was ‘Overnight Recovery.’ It tapped into insights we had from both a vitamin D perspective and a Sleep perspective. The concept resonated off the charts with consumers in initial testing, and we were really excited about it”
“Unfortunately, we couldn’t make it work for a variety of reasons, so we didn’t launch it with our vitamin D products,” Mike continues. “However, we kept the idea and continued working on it under our Sleep line of exploration. As we continued to refine the idea over the course of several successive sprints, we eventually honed in on a product formulation that met our criteria for consumer desirability, technical feasibility, and financial viability.”
“In-market performance of Sleep & Recover Gummies is trending to surpass our expectations for year one,” Mike says. “This is really exciting for us — we had high hopes for this item from the earliest stages of ideation.”
Vivian says: “We’re currently launching a lot of innovation in the marketplace. Retailers are really impressed by the change we’ve made in the organization. Our board of directors are impressed. And we’re starting to see the inmarket results.”
“Two years ago there was a national sales meeting at which no innovation was announced. Pharmavite did not have any innovation,” Vivian says. “In less than two years our inQB8 team has launched more than 30 pieces of innovation, and that’s very exciting for us, and there’s a lot more to come.”
Not only is inQB8 churning out more innovation, it’s doing it much faster than before. The 27-month innovation cycle has been pared to six to nine months, with some products — such as ImmuneMax — going from idea to market in four to five months.
How did the innovation cycle get so much faster? Richard says there are two major factors:
1) “They’ve leaned out the process to make it more focused on real experiments instead of building up lots of data and doing lots of tasks. So they’re doing less to build higher confidence because they’re doing better things.”
2) “They built this cross functional team that brings all the critical skills into the group. Traditionally, a lot of the time is waiting time. One group does a little bit of work then waits for another group to do a little bit of work. In a two- to three-year cycle half of that time isn’t actually active movement on the initiative.”
A faster innovation cycle leads to higher throughput. According to Mike, before inQB8 there were minimal product launches each year — either none at all or just minor line extensions. In 2020, inQB8 was directly involved in 13+ innovation items. In 2021 that number will be 17+.
The proof is in the people
A huge increase in throughput is a big win. But there’s even more upside to adopting an Agile approach.
“Peter and Richard have provided us with a lot of help when it comes to balancing the dual nature of our (Vivian’s and Mike’s) roles as manager/product owner and development team member/ScumMaster,” Mike says. “Striking a balance between being part of a team and also providing coaching to the team has been a big area of focus.
“Peter and Richard ask really good questions that help us break down issues and get to root causes. They are especially good at breaking down team interactions and suggesting tools and frameworks that can be used to address any issues.”
Says Peter: “Throughout this process, the biggest change I noticed in Mike and Vivian was a human centric one, not a product focused one. They’re really trying to humanize their workplace, and that’s been a force multiplier on everything they’re trying to do there.”
Adds Richard, “You get into Agile for all these process and business outcome reasons, and you discover that getting better at being a human with other humans gets you those things and more.”
“My hope is we discover a new way or working in which people have much more autonomy to exercise their mastery but also to learn and grow and challenge the status quo,” Vivian says. “Part of my objective is to develop some familiarity within the org of what we’re doing with inQB8 so Agile is not seen as something that’s only applicable to my group. I want to find people in the org who can take a leap of faith and go experiment with Agile.”
Beyond Pharmavite, Vivian wants to show the entire world of consumer packaged goods that there’s a different way of doing innovation and a better way of meeting consumers’ needs. “Our goal here at Pharmavite is to bring the gift of health to life, and I don’t believe we are the only ones to do it.”