Point: Open innovation can accelerate new product development

Story: When Irene Rosenfeld took over as CEO of Kraft, she saw an anemic innovation pipeline. The company had 2000 corporate R&D staff — scientists, engineers and chemists — but new products weren’t flowing rapidly enough.   Her solution to encourage innovation?  To get everyone to “Think of Kraft as a $40 billion start-up,” she said at the World Business Forum on October 7, 2009.  One way to emulate start-up thinking is to be open to new ideas from anywhere and quickly turn them into something valuable. Kraft reached out beyond its corporate R&D to enlist the help of employees across the whole company, as well as suppliers and partners, to spur innovation.

For example, Kraft runs an online “Innovate with Kraft” program whereby anyone can submit product ideas.  Although skeptics call such programs gimmicks or fads, Rosenfeld maintains that they’re not gimmicks if the programs and the ideas generated from them are being used.

Kraft’s recent new product introduction, Bagel-fuls (frozen bagels pre-filled with Philadelphia brand Cream Cheese), for example, came from an unsolicited idea from a third-generation bagel maker in a niche market. The idea was a win-win for both companies: it solved some technical challenges that Kraft had faced in delivering a bagel and cheese combo, and it expanded the bagel-makers product beyond his niche.

Rosenfeld also mentioned the value of platform-based innovation (ideas that span multiple brands and geographies) in the innovation process.  Now, “Our innovation pipeline is quite full,” Rosenfeld remarked, with new products coming out in four core areas: Snacking, Quick Meals, Premium and Health & Wellness.

Action

• Look for ideas in the corners: reach out to employees and suppliers, especially niche people, to uncover obscure ideas that merit more widespread use
• Celebrate the use of submitted ideas to show the value of participation in innovation submission programs.

For more information:
Irene Rosenfeld at the World Business Forum on Oct 6, 2009 #wbf09

http://www.usatoday.com/money/companies/management/profile/2008-12-10-ceo-forum-kraft-irene-rosenfeld_N.htm

Staggs, Sandy. Foster Innovation at Kraft Foods, Oct 27, 2008.

New York Times, Sept. 9, 2009

Point: Consider the role and value of outsiders in innovation

Story: George Lucas, legendary producer, director and screenwriter of the Star Wars and Indiana Jones blockbuster hits, shared these thoughts at the World Business Forum. Lucas described how he got his start making movies by going outside the insular Hollywood system.  When he graduated from film school, Hollywood was not receptive to new ideas and Lucas didn’t want to go there.  He and Francis Coppola moved to San Francisco to start American Zoetrope in 1969.  Befitting their 1960’s cultural background, Lucas and Coppola “didn’t trust anyone over 30.”

The choice of San Francisco had paradoxical properties for young Lucas and the new film company.  The bad news was that San Francisco had little of the movie making ecosystem of supporting companies and infrastructure that make Hollywood the mecca for film making.  The good news is that San Fransisco therefore had little of the movie making ecosystem that constrained the industry to the prevailing ways of doing things.  As a result, Lucas had to invent his own ways of making movies, which led him to develop a long string of innovations in camera handling, special effects, sound, and editing.

Lucas also benefited from the corporate buyouts of Hollywood.  As mega corporations bought Hollywood studios, the new outside owners of the movie industry realized they didn’t know how to make movies.  These new owners decided to hire  people fresh from film schools, like Lucas, to bring in new blood.  The ownership change also created a tumult that allowed people like Lucas freer reign.  Sometimes innovation benefits from benign outsiders.

Action:

• Consider how the prevailing ecosystem of suppliers and partners could be hindering innovation
• Take innovation outside of the existing company and industry boundaries to start true greenfield ventures
• Look for times when outsiders take over an industry (e.g,, foreign investors, industry transformation) — the tumult of ownership changes combined with owners who don’t know “tradition” provide opportunity.

Source:

George Lucas at the World Business Forum October 6, 2009 #wbf09

Point: Tough economic times call for different brand messaging

Story: We’re in a time of new frugality, said Kevin Roberts, CEO of Saachi & Saachi, at a recent HSM webinar. People are evaluating their purchases more closely. They’re comparing more products and contemplating switching brands more often. They will still buy luxuries, but they’ll buy fewer luxuries; and, they’re redefining what luxuries are. They’re separating true value from false economies. Roberts suggested three strategies that companies can use to keep their products and services on a customer’s “buy” list in an era of less buying.

First, companies can reframe the competition and the category.  In the era of new frugality, many people are eating out at restaurants less and eating at home instead.  Some companies see parallels in this inside/outside phenomenon to redefine their place in the market.  For example, P&G compares its premium-priced Tide Total Care with the cost of dry-cleaning, not with other cheaper detergents. P&G is reframing the category, positioning its detergent as a frugal way to achieve clean clothes in the home without the high-cost of dry-cleaning outside the home.

Second, companies can help consumers use products in a more cost-effective way.  For example, in a similar spirit of saving its customers money, Tylenol’s new ad campaign offers advice that helps customers ease the pain of a headache — without taking a Tylenol product.  Tylenol suggests that if you have a headache, drink a glass of water and wait 20 minutes. If you still have a headache, then take Tylenol.  Although the campaign may lose Tylenol some sales, the ultimate goal is to side with the customer and win in the long run. Empathsizing with the need to save money, Tylenol suggests a solution that can save customers money while remaining the brand of choice for tougher headaches.

Third, be honest and highlight the value if you can’t decrease the cost. If your product truly is a premium-priced luxury, don’t pretend that it’s a cut-rate necessity. Be honest. Customers still want joy in their lives, and they’ll still treat themselves to an occasional luxury. Rather then make a luxury seem cheap, highlight what makes it more special and more meaningful. The product may not cost less, but the emotional bonus makes it more valuable.

Action

1. Reframe your product’s category (e.g., detergents competing with dry cleaners)
2. Offer useful advice on cost-effective use of your product
3. Enhance the emotional value of your product

For More Information:

Kevin Roberts will be presenting at the World Business Forum in New York City on October 6-7, 2009.

Kevin Roberts is the author of Lovemarks: The Future Beyond Brands
and The Lovemarks Effect: Winning in the Consumer Revolution