Shelf Space – a hard KPI for Innovation Management
Updated: Apr 6, 2021
A while ago I was in the process of understanding the challenges of business people with the innovation process. Business people: I mean the Sales teams and their leaders. In fact colleagues of Adam, the person in my previous Blog. Adam had difficulties with his role as a decision maker for investments. The person I will discuss here, Christine, has different challenges with innovation.
Christine is the VP Commercials in a large country of a global consumer goods company. She has been in the business since about 20 years and knows her market, her retailers, very well. She told me: “Our biggest challenge is timing. It is my job to meet with our customers far before the seasonal sales periods. In these meetings we present our new Sales Catalog and help them to understand our new products. The most important point is “when” the new products can be in their shops, at which exact date. Well Huub, we are not confident to give these dates, because our experience tells us that we can’t trust the dates we get from Marketing and Product Management. Too often the dates are shifted, the launches are postponed. I ask “Why is that?” “Well, in fact the only date we can trust is the serial production date that we get from Production. But that date we know very late, just before the shipment. Long before that the artwork should be in the hands of the customer, and the order should be placed as well. The customer has to organize in advance too, you know. And then, when the serial production date is later because technically we did not make the Launch date, we have to cancel the order. It is a nightmare”.
“So what are the consequences business wise?” Christine: “That I lose shelf space! The customer does not like empty shelf space so orders from a more trustworthy supplier, our competitor, to fill that space. I can tell you, it is very difficult to win shelf space back. It takes years to recover from a bad launch in my business. The Volume of Shelf Space, in meters, has a direct impact on our bottom line revenues. And I don’t think that my colleagues of Product Management and R&D understand really the impact of not sticking to delivery dates. They think that they miss perhaps 6 months of sales with a later launch of a new product, but the fact is that you lose a lot more! You also lose revenue for other products during several years. Against your competitor! The direct loss of cash is multiplied a lot. It is a big pain for the company, and for me and my team”.
After this discussion I understood that not only postponed launches is a problem but even more the unpredictability of launches and the lack of confidence of the business people in the field. So I proposed my customer, the CEO, to use Shelf Space as a major measurable Innovation KPI: if we lose shelf space our innovation does bad, if we win shelf space against our competition we are in good shape. The measurement is in meters space, in certain shops, in certain countries, for each of the product lines. We measure the starting situation and set the targets for the KPI for 3 years.
From a Governance perspective it makes perfectly sense to have this KPI, but how can we make the whole company understand this and in the end own this KPI. You cannot make only one party responsible for the predictability and robustness of dates. Here you talk about a “network of many dates” that have dependencies to each other. If design is later than agreed and expected, it will cause Marketing to be later with assets, it will also influence when we finish system testing and assembly preparation and trials. For example, if an engineering team like a Scrum team decides to postpone a feature, a small detail, it can cause a big negative business impact if it causes launch uncertainty. I know that these teams are not aware of the business impact as described above, so this needs to be managed by mandated decision makers who do understand.
In my Governance Framework the accountability for predictable delivery dates is with mandated decision makers, named persons, not with teams. Individuals are responsible, not groups. The mandated decision makers own the resources and use mutual internal agreements, traceable agreements, that they sign up for, and that help them to prioritize on a day to day basis. Proactive planning. In case of conflicts of interest they know that they are held accountable and that they cannot send the bill of their failing to the sales people in the field and to the company. They are educated to know the real and full impact of postponements and of being not predictable.