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The value-destroying menace of cannibalisation is the dirty little secret of the innovation industry. Launching a new product that steals a large proportion of market share from a company’s existing portfolio is a bad idea. The problem is that traditional approaches to identifying winning innovation don’t screen out cannibal products until very late in the process, after significant sums have been spent — and when there is great temptation to ignore the findings of research and push on anyway.
The seductive power of cannibal concepts becomes even more of an issue when times are tight and the pressure is on for new products that can deliver a return on investment. If that return is initially measured only in terms of total sales, then cannibals start to look like safe bets — rather than the threat to profitability that they so often are. In most cases, sales of new products command far lower margins than those of established brands — which means that the time and effort expended to launch a cannibal can actively erode value across the portfolio as a whole.
