For years, consumer goods companies excelled at innovation: the steady introduction of profitable, convenient, high-quality products—ranging from disposable diapers to frozen dinners—that changed the daily lives of consumers. Recently, however, these companies have become increasingly vocal about the poor returns on their investments in product innovation. More new products are being launched, but fewer of them are truly innovative (Exhibit 1).

Paradoxically, little has changed—and that's the problem for the consumer goods sector. As markets have matured, tried-and-true processes for selecting ideas, determining business models, and making investment decisions have become less productive. Existing methodologies have turned into orthodoxies: established ways of doing business that reinforce the status quo and hinder the adoption of novel, tailored, and flexible approaches to innovation. In defining "the way things are done," these orthodoxies also dictate what a company should not do. And because they represent deeply embedded mind-sets shaped by corporate tradition, culture, and values, they are difficult to unwind.

Clearly, not all orthodoxies are wholly undesirable: many of them facilitate the efficiency and predictability that large companies need. Nonetheless, they inhibit the development of breakthrough innovations, which can...