Essentials of development
From consumer goods (CG) companies' Web sites to the pages and blogs of leading business magazines and the halls of academia, the majority agrees: Innovation is the critical driving force in business today. Globalization, increased competition and the fickle whim of the consumer have spawned companies, think tanks, idea banks, consulting firms, forums and so on, all dedicated to and focused on innovation in product development, packaging and design, business process and reaching consumers.
The most successful CG companies make innovation part of their corporate culture and realize that ideas can come from anywhere. Open innovation is no longer a trend, but an integral part of innovation strategy. CGT asked executives who are leading the charge to share their strategies and thoughts on innovation. We posed questions to Todd Abraham, vice president global research & technology strategy, Kraft Foods; Cheryl Perkins, chief innovation officer, Kimberly-Clark; and Mike Salzberg, senior vice president, Campbell USA and president, Campbell Sales Company.
Each has their own take on what innovation is, but the essence is similar and they certainly agree that innovation can't simply be an idea, there has to be tangible and positive benefits.
Innovation is "commercialized creativity" -- the ability to bring a creative solution to market, with business relevance, driving meaningful competitive advantage.
Innovation is a process of taking insights and new ideas, leveraging knowledge and capabilities, and converting them into solutions and services to satisfy customer needs. Innovation is about creating value, improving efficiency and growing the business. Taking innovation to the next level means making changes in the way Kimberly-Clark (K-C) identifies and acts on customer, shopper, chooser and user insights. We are infusing these insights and mega trends to accelerate the innovation process. It's all part of our "Global Business Plan" and the focus on strengthening our capabilities and improving the way we work in order to deliver greater value. Our focus on open innovation, design, total solutions, cycle time and cost is really starting to yield tangible results. Innovation is the process of creating new ideas that add value in ways not previously expected. Innovative companies are fueled by a passion to be leaders in their industry and to meet the needs of their consumers faster and better than anyone else. Innovators tend to be inquisitive; they challenge the status quo and ask "what if" questions to identify value added benefits before consumers can even verbalize their new product needs and wants. We believe that innovation is critical to create new products that add value and to maintain brand relevance.
Given that innovation across functions is key to ensuring successful new product development, prioritizing can sometimes be daunting. Yet, these CG executives have clear ideas on how this should work.
Innovation happens in many different ways and many different areas. All types of innovation are important to companies. Innovation should be thought of as both "doing innovative things" and "doing things innovatively." If there is a culture of innovation, everyone is trying to be creative across all aspects of the enterprise and no one area becomes more important than any other.
At K-C, we're building brands and relationships that last a lifetime. Every day, one in four people around the world look to our brands to enhance their health, hygiene and well-being. By transforming consumer and customer insights into innovation, we make our brands an indispensable part of life for consumers around the world. Innovation remains the lifeblood behind all of our brands. Our history of product and process innovation and our expertise in supply-chain and category management appeal to retailers and customers worldwide who look to Kimberly-Clark to meet their needs.
At K-C we've learned that cost leadership alone does not sustain competitive advantage; continuous technology, product and process innovations do. Shorter product lifecycles require a greater number of successful product introductions and the shrinking amount of time-to-market makes it necessary to streamline the product development and introduction processes. Improved processes drive value for the consumer by exploiting the capabilities brought about by new technology to deliver innovative new solutions. We developed a plan to create end-to-end business processes that enable us to "act on insights when they're hot," capitalizing on growth opportunities as quickly as possible.
At Campbell, we take a consumer-centric approach to innovation. Our first step in the process is to immerse ourselves in the world of our consumers and their multiple roles of shopper, preparer, and eater. We need to understand what they think about our categories and brands in order to identify potential opportunities and gaps, and to deliver our mission of "nourishing people's lives everywhere, everyday." Product development, packaging and in-store solutions all flow from these critical consumer and shopper insights.
As mentioned prior, open innovation has integrated with internal innovation to become one seamless strategy. All seem to agree on this point; open innovation is critical for success.
Innovation can (and should) come from everywhere. We are very open in our receptivity to ideas, solutions and products from external as well as internal sources. We expect our business partners to enlist the innovative spirit in their organization to the mutual advantage of them and us. We search for solutions to key need areas, as well as look for innovative applications of technologies.
K-C seeks out innovation, capabilities and value wherever it can, both internally and externally. We have more than 30 external partnerships and we cannot meet our corporate objectives to drive growth and innovation without them. We outsource in a variety of areas and to varying degrees, from innovation in product and package design, to assistance with competitive intelligence, regulatory requirements or technical training. Anything from contract manufacturing and materials development for new products to engineering design and equipment sourcing is also outsourced.
For open innovation, we are leveraging a broad range of partners and suppliers. Currently, we are transforming K-C's support functions by exploiting global sourcing and process improvements to allow K-C to focus resources on creating value for customers, shoppers, choosers and users. We are looking at global consulting and services companies that offer an array of solutions, including project services, design and engineering support, procurement assistance, information technology management and procurement. We are also partnering with companies, like NineSigma, which facilitate open innovation strategies.
We work with a range of external partners in our quest for continuous improvement because they help us challenge our perspective. We look at all aspects of our business; products, packaging and merchandising solutions, as well as process and service, to identify value added innovation. Consumers are always changing and as consumer behavior changes, we find opportunities to redefine our business and our competitive set. For example, we fielded extensive research on consumer attitudes and behaviors regarding food eaten at meal times. We learned that soup was part of a much broader category of simple meals, which had significant implications for our business.
In another instance, we worked closely with an external partner to develop our iQ Maximizer gravity-fed shelving solution to reverse the declining trend in condensed soups. Now almost 16,000 stores have this innovative fixture and more than 80 percent of shoppers say this shelving innovation improves their shopping experience. Shoppers say "I can clearly see everything, even from a distance. I can get what I want without the hassle."
Retailers obtain multiple benefits from the fixtures which have made it easier for them to stock, rotate and maintain their shelves. Stores with fixtures have enjoyed sales gains, and profits have also increased as sales of other condensed soup varieties with higher margins have grown. This is a triple win -- a win for consumers, a win for retailers and a win for the category.
Speaking of the "shelf" -- how do these theories and strategies translate for Kraft, K-C and Campbell into real-life and actual product? Here are some examples of the very latest from each company.
After conducting consumer research and gathering other stakeholder input, we are taking a variety of steps to give consumers a broad range of portion-size options and improve the labeling of smaller packages. The nutrition information we provide on all U.S. packages that contain fewer than two servings will continue to be expressed for the entire contents of the package as a single serving, as required by the U.S. Food and Drug Administration (FDA). Taking into account guidance issued by the FDA in March 2004 for labeling of nutrition information for U.S. snacks and beverages that contain two to four servings, we now voluntarily provide labels that communicate the nutrition content of an entire package so consumers don't have to "do the math" themselves. For example, 100 Calorie Packs (pictured) are a great "grab and go" option for people who want to snack and still stay on track with their sensible eating habits. Kraft capitalized on the popularity of its existing and popular brands and created these lower calorie snacks. They come in varieties such as Oreo Thin Crisps, Chips Ahoy Thin Crisps and Kraft Cheese Nips Thin Crisps to name a few.
We have had several successes leveraging our open innovation model. Recently through Axela, we out licensed 150 technology patents in exchange for equity position and royalties in the future. We also developed an agreement with Sun Health Solutions for UV detectors that are now co-marketed with our Huggies Little Swimmers (pictured). This free, value-added feature, provided by Florida-based SunHealth Solutions LLC, comes in the form of a self-adhesive sticker on display packages of LITTLE SWIMMERS swimpants -- a strategy intended to boost and strengthen equity of the LITTLE SWIMMERS brand. SunSignals UV Sensors, which are small, patches that parents can apply to their child's skin or clothing, change color - from yellow to deep orange - as a child's exposure to the sun increases to potentially harmful levels. The color change, enhanced by disappearing sun designs, provides a "signal" to parents when it's time to apply more sunscreen, put on protective clothing or seek shade for their child.
Campbell's recent innovation efforts have been focused on developing great tasting products that meet consumers' growing demand for wellness options/solutions.
We brought this to the shelf stable juice category in January 2006, by launching V8 V.Fusion, a 100 percent juice that provides a full serving of both fruit and vegetables in each eight-ounce serving. This was timely as the government's "MyPyramid" guidelines had built awareness of the importance of a diet that includes more fruit and vegetables. Research has shown that 85 percent of consumers say vegetables are important to them and they want to eat more, yet only one-third are eating the recommended amount. Taste and time constraints were driving a gap between consumer attitudes and behavior, which signaled opportunity for the beverage category.
By leveraging the powerful brand equity of the V8 brand, we developed a truly unique and innovative product. Made with 100 percent juice and no added sugar, V8 V.Fusion juice has a light, sweet taste and texture, and appeals to health-conscious consumers who traditionally don't like the taste of vegetable juice. People who drink this juice will be surprised to see an ingredient label that includes sweet potatoes, beets, carrots and yellow tomatoes, because the product tastes like a fruit juice, not a vegetable juice.
The product development team worked closely with field sales and its retail customers to collaborate on the development of the V8 V.Fusion product and the introductory program. As a result, 99 percent of the grocery customers put the product on the shelf within seven weeks.