A couple months ago, this column explored how food and beverage (F&B) companies can corral complexity through product, raw material, and supplier rationalization. (See Complexity Reduction: Cleaning House Without Sacrificing Innovation). This month we will look at another effort central to any strategic initiative aimed at reducing complexity and its associated costs: platform-based product development.
This approach to product development does not come without controversy. The great F&B industry debate about art versus science has been an ongoing argument for decades; food scientists approach product development challenges much differently than chefs. Not surprisingly then, some businesses feel that platform-based product development focuses too much on the science and stifles the creative process. However, companies that have embraced this practice say there has been no pinch on creativity; what they have seen instead are annual savings of tens of millions of dollars from reducing rework and complexity.
What It Is
Platform-based product development is a practical strategy at the front end of the pipeline and portfolio management process that can set the foundation for innovation while helping to reduce complexity. It effectively is the F&B equivalent of design reuse in other industries—taking past designs and repurposing them for new designs. This is an area in which F&B companies can learn from industries such as automotive and even high-tech, which use platforms to build new products, streamline product lines, and ease the challenges of product complexity.
For the F&B industry, platform-based product development means building products from a common set of ingredients and raw materials. As we previously explored, raw material proliferation is difficult to manage and is a major source of complexity throughout the entire supply chain. Working from a common platform to develop a new product reduces the number of raw materials, increases reuse, and limits supply chain complexity.
The key to a platform approach in F&B is not only creating a common base across multiple product categories, but allowing for modular design with the flexibility to cater to consumer needs, such as varying regional tastes. Certain product platforms bring about a particular sensory, tactile or fragrance experience to the consumer, and depending on location, the flavor must be adjusted to achieve that desired sensory outcome.
How it Works
For example, national quick service restaurants (QSRs) often have a platform product such as a sauce that they adjust to meet diners’ different regional taste preferences. Building on the core platform of sauce ingredients, they modify the formulation using an allowable set of ingredients to create distinct regional variations.
A food company we worked with took a similar approach. To contain the raw material proliferation it previously faced, the business developed product platforms that optimized operational efficiencies while facilitating customized products through modular designs. As a result, the company reduced raw materials by 40 percent, and in one platform alone it sliced the number of ingredients from 10,000 to 1,000. The reduced product complexity and inventory allows them to achieve $40 million in annual savings.
Balancing Art and Science
There will always be an art to innovating new food and beverage products. However, history has shown that art should and can work hand-in-hand with science. In fact, some F&B companies have been engaging in platform-based product development since the 1950’s and are now world-class at it. They are now role models for other businesses seeking an effective innovation process that can significantly impact the bottom-line.
Here are just some of the benefits for F&B companies that adopt platform-based product development:
- Faster product development due to easier re-application of existing materials and existing groupings of materials (sub-formulas).
- Reduced data management work (data entry, maintenance, reporting, etc.).
- Reduced complexity in the storage, management and tracking of items (ingredients, sub-formulas, etc.).
- Reduced costs and complexity due to the reduced procurement of redundant ingredients.
- Economies of scale on the procurement of existing ingredients.
- Improved manufacturing productivity due to increased commonality of products.
- Improved open innovation opportunities through a better understanding of product value and an alignment with external opportunities to improve this value.
Despite the debate, it’s clear that any F&B company seeking to formulate a strategy for growing market share and profitability needs to include platform-based product development in the mix.
This month, we’ve looked at eliminating complexity at front end of the product innovation process. Next month we will explore best practices in pipeline and portfolio management to reduce the complexity of managing existing F&B product lines.
George Young is a founding partner of management consulting firm Kalypso (www.kalypso.com), which specializes in innovation, and he leads Kalypso’s Consumer Packaged Goods practice. He has more than 20 years of industry experience in executive management consulting roles. He holds four US patents and was named the 1994 Northeast Ohio Inventor of the Year.