Affinnova, Evolver of Consumer Products, Evolves Itself

8/4/08Follow @wroush

Creating a new diet soda, deodorant, or dish soap is a notoriously chancy business: consumers are unpredictable, and experience and intuition can only get a product designer so far. But what if you could apply the power of evolution to product development—subjecting various ideas to generation after generation of Darwinian competition, with consumers themselves as the agents of selection, picking which attributes of each product survive into the next generation?

This exact idea was one of the hottest trends in product development—in the year 2000. That was when a group of entrepreneurs and researchers from MIT, with backing from Cambridge, MA-based Flagship Ventures, founded a startup called Affinnova with the goal of applying a new form of mathematics called evolutionary algorithms to the traditionally expensive and time-consuming process of market-testing of new products. The company grabbed a few big clients such as Procter & Gamble, and even attracted imitators like Cambridge’s Icosystem. But eight years on, the field of evolutionary algorithms still hasn’t produced a smash-hit startup; after three rounds of venture financing totaling some $25 million, Affinova is only now approaching profitability.

But the company’s roughest years may be over. While Affinnova (pronounced ” AFF-i-NO-va”) doesn’t release actual sales figures, it says sales in the first half of 2008 were up by more than 60 percent compared to the first half of 2007. Its client base grew by one-third in the same period, and the company is in position to bring in $25 million in revenues next year, according to chief marketing officer Steve Lamoureux.

This growth can be attributed largely to changes made since the arrival of CEO Waleed Al-Atraqchi in 2005, Lamoureux says. (Al-Atraqchi replaced David Andonian, who went on to found Dace Ventures.) “Waleed is a turnaround guy,” he says. “There was an underlying asset that was being underleveraged in the business world. We were top-loaded with PhDs making advances in evolutionary algorithms, but we were putting fewer resources into making that technology understandable and adoptable. One of the things Waleed has done is to balance that out. We’ve taken the technology and made it really streamlined and sticky, and as a result we get a lot of repeat business.”

So, what exactly has Affinnova been doing to evolve its own strategy? Lamoureux and Al-Atraqchi filled me in about two of the company’s initiatives last week when I visited their offices in Waltham. The first, it turned out, was to stop helping companies come up with new product ideas, and start helping them pick between the ones they already had.

When I first became aware of Affinnova around 2002, the company was already a couple of years old, and had been focusing largely on helping designers dream up new product ideas that stood out from the crowd. In one example, the company’s Web-based software created thousands of variations on an old standby–the plastic water bottle—and asked participants in online focus groups to pick the ones with the most exciting combination of shapes, contours, and label colors. The process had the potential to arrive at radical combinations that no human designer would have bothered (or dared) to try, but that tested well with consumers anyway.

But Al-Atraqchi says that when he arrived at Affinnova, “I said, in a sense, let’s not confuse ideation with optimization. Most studies say that companies don’t lack for ideas. Which ones are the best, and what to do with them, are really the big issues, and that’s the problem we should try to solve.”

The company has found a niche, according to Lamoureux, by helping consumer manufacturers bringing out new products find the sweetest spot within a fairly narrow range of pre-determined options. Dannon, for example, came to Affinnova a few years ago for advice on the best way exploit the low-carb craze then sweeping the nation. The company knew it wanted to bring out a new brand of low-carb yogurt; the only question was how to package it. Should the label be teal, as Dannon’s experts thought, or some other color? Should the package hold 6 ounces of yogurt or 8? Should the product be called “Carb Control” or “Carb Smart” or “Carb Oh”?

Affinnova tested combinations of all of these options and more, and was able to determine not only which overall product concept was most appealing to consumers, but which elements were most important to their choices. The winner: a red package branded Carb Control, which went on to become one of the year’s top new food products, earning Dannon $75 million in its first year on shelves. A competing product, Yoplait Ultra, came out in a teal package and failed within a year.

Affinnova has refined its evolutionary process to the point that it can create competitive concepts even for products no one has heard of. As an exercise, Lamoureux paid a design firm to come up with three concepts for the packaging for a hypothetical new product—a cleaner for stainless steel kitchen appliances. The three designs ranged from bright and cheery (targeted at general consumers) to elegant and understated (targeted at older, more affluent consumers). In Affinnova’s tests on real consumers, participants gravitated to … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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