Transformative, innovative and inspiring. Talk to any major corporation about how the winds of technologies, changing demographics, shortage of resources and shifts in consumer behaviours will affect them in the future, and all will endorse those three attributes as the route to success.
The core idea? Bring in innovation as part of a brand’s "DNA" to create sources of growth. The tired methods of pricing-up big, established brands to pay for new launches or aggressive geographic expansion to tap into potential new revenue streams are no longer fit for purpose. Instead, there appears to be a rush to outsource tech and R&D to the start-up world. This injects an entrepreneurial mindset to legacy businesses, driven by an irrepressible urge to experiment and take risks.
Tesco is the latest in a long line of established companies to view collaborating with start-ups as a shortcut to driving innovation. The supermarket is working with Founders Forum, a community of global entrepreneurs set up by the co-founder of Lastminute.com, Brent Hoberman. Tesco will partner its Founders Intelligence arm, a consultancy that helps solve digital problems for big organisations.
Serial entrepreneur Hoberman has been very public about his ambitions. He has pledged to create 200 British tech start-ups over the next five years. Founders Factory is aimed at both building businesses from scratch through an "incubator" and helping start-ups to scale through its "accelerator". Aviva and L’Oréal are among those to have already invested in the venture in search of innovation power; Aviva backing start-ups in financial services and L’Oréal financing health and wellness start-ups.
This alliance between start-ups and big organisations is nothing new; examples include the Unilever Foundry, Lego Future Lab and Diageo Technology Ventures. Businesses are not using these initiatives solely as ideas laboratories, but are making serious attempts to employ external sources of knowledge for testing innovative concepts.
With the shift from an agrarian economy to a motor-powered industrial economy to what we now know as an information economy, businesses have realised it is no longer just about labour, land and capital, but instead new ideas that create value, says Mark Lund, the chief executive of McCann Worldgroup UK. (McCann Enterprise was recently appointed by Nestlé to create and launch its global open innovation platform brand, Henri@Nestlé.)
Lund cites economist Paul Romer’s "endogenous growth theory" as key to igniting innovation. It states that investments in innovation, human capital and knowledge form the most significant contributors to economic growth. Lund argues that this is why multinational corporations offering venture-capital finance to entrepreneurial companies as a way to access new ideas will occupy a pivotal place in the modern economy.
L’Oréal chief digital officer Lubomira Rochet echoes Lund’s view. She adds: "To create the future, we must capture the opportunities from a changing world and then become the disrupter. An innovation culture thrives on learning."
"Value-driven innovation is not just born out of ground-breaking ideas or shiny new technologies."
Liz Wilson, chief operating officer at Karmarama, which helped launch Unilever Foundry, an in-house programme that nurtures new businesses, explains the logic behind the collaborative relationship between corporations and start-ups. First, it keeps innovation and new market trends at the forefront. Second, it helps key business problems to be solved more quickly and efficiently. Third, it fosters a sense of entrepreneurship and encourages risk-taking.
"It is bloody hard to do these things when you are running a big established business with several brands," Wilson adds. "If you bring in some of the thinking and the ability to do something different externally, you can find different expressions for your brand, new audiences are opened to you and you create more value not just for the business but also your consumers."
However an ongoing survey conducted by the World Federation of Advertisers on the success of start-up collaboration presents a somewhat mixed picture. According to the survey, 22% have a formal set-up in place for working with start-ups; and 28% say they plan to do this in the next six to nine months, although there appears to be an appetite to do more of this. Despite this, 86% of respondents aren’t quite sure where, how and what the start-up engagement will look like and it remains early days for many.
In terms of the enablers considered to have the greatest impact on the future success of start-up collaboration, the WFA found the following:
- Culture Encouraging a sense of adventure and entrepreneurship.
- Budget Improved budget allocation for test and learn when potential for no ROI.
- Risk Encouraging risk-taking within the company, making failing acceptable or celebrating failure.
The lesson here perhaps is that in pursuit of inspiration and growth, businesses are having to spread their bets. Innovation does not come only in the form of start-up collaboration. For disruptive endeavours, success typically requires different processes and mechanisms. Emma de la Fosse, chief creative officer at Ogilvy & Mather Group UK, explains that for something to be innovative, it has to be action-able, produce a new revenue stream and sometimes create unintended consequences. She questions whether the Tesco/Founders Intelligence initiative is just a "gimmick" because it is following what others are already doing.
"Could it not have invested instead in Tesco pop-ups – allowing it to test new ideas and products, develop a series of incremental innovations and learn from entrepreneurs?" she asks.
Fosse cites what she believes is a breakthrough innovation showing the potential of connected cars. Volvo’s Roam Delivery, a service developed in partnership with Ogilvy PR, allows consumers to have their shopping delivered to their car.
Volvo car-owners will be able to choose their vehicle as a delivery location when ordering goods online. The car manufacturer is teaming up with Argos and PostNord; it will provide them with the location of the shopper’s Volvo and a one-time digital key to open the car.
Zaid Al-Zaidy, the chief executive of ad agency Above+Beyond and an ex-Unilever marketer, adds innovation can happen only when corporations become serious about investing in the future. He says that they must put it at the heart of their businesses, rather than "creating labs or setting up incubators that end up acting like another department within the organisation".
According to him, there has to be a "match-up" between brand and corporate ambition and human ambition if "real innovation" is to occur, which is not just about having ideas but about solving real-life problems. "Otherwise, we might just all end up selling sand," he warns.
Innovation with humanity
Purpose-driven innovation sticks, says Wilson. "You cannot just have the what and not the why. Value-driven innovation is not just born out of groundbreaking ideas or shiny new technologies, it is created out of the necessity of solving problems," she adds.
Christian Ward, head of media and marketing at innovation research and advisory company Stylus, argues that brands and businesses have to start behaving like their customers. "Only once the human element of innovation is cultivated – doing well to do good – will the process of innovation benefit all those involved."
L’Oréal and Founders Factory
Earlier this year, L’Oréal invested in tech start-up incubator Founders Factory."It’s not enough just to have an entrepreneur with a good idea; there are innumerable examples of start-up failures. What we are trying to do is bring together a huge network of corporates and entrepreneurs with a dedicated operating team who are specialists in building businesses and technology," George Northcott, head of business development at Founders Factory, says.
Its partnership with L’Oréal is evidence of this strategy. The cosmetics company has become Founders Factory’s exclusive partner for investments in beauty tech start-ups worldwide, to allow it to connect itself to a global ecosystem of futuristic start-ups and entrepreneurs.
As part of the agreement, L’Oréal and Founders Factory will invest and scale five early-stage start-ups and co-create two companies from scratch every year. The in-house team of experts at Founders Factory will provide hands-on support and advice to participating start-ups, as well as work with L’Oréal to jointly build and launch products and services. L’Oréal will be part of the Founders Factory board of directors, represented by Lubomira Rochet (below), chief digital officer and member of L’Oréal’s executive committee. Three L’Oréal executives will also hold seats on the beauty sector committee of Founders Factory.
Lubomira Rochet (left), chief digital officer at L’Oréal, explains the company’s innovation strategy.
Different companies are using different models to drive seismic changes in culture and the industry – do you have a roadmap for the next decade? Is there a proven path to innovation success?
At L’Oréal, our culture of creativity and entrepreneurialism has kept us successfully innovating for over a century. Our passion for beauty has been a constant source of inspiration and a key ingredient in our success as the world’s number one beauty company.
Over the next decade, digital will become increasingly integrated into our communications, marketing and sales. The partnership with Founders Factory is one example of this. It will allow L’Oréal to deeply connect itself to world-class start-ups and entrepreneurs operating in the field of beauty.
How do you make sure innovation is part of the whole and not a separate silo?
The history of L’Oréal is one of successive innovation, delivered by passionate people. Our chief executive is absolutely convinced that digital is going to change our operating model. He’s been absolutely behind it and all the digital transformation we’re driving.
Founders Factory is therefore just one facet of our digital innovation strategy. Our technology incubator located in San Francisco has spearheaded several game-changing digital services, such as Makeup Genius, a virtual make-up coach downloaded 20 million times across the world, which has changed consumers’ make-up experience.
Earlier this year, we launched My UV Patch, the first stretchable skin sensor designed to monitor UV exposure and help consumers educate themselves about sun protection.
For companies attempting to create innovative-growth businesses, it is about investing in ideas and new ways of interacting with the consumers of the future. So this means investing not just in tech transformation but also cultural transformation. How does L’Oréal do that?
We work hard to understand our consumers and develop the products that match and inspire their passions and aspirations. We know that we are evolving from a society of products to a society of products and services.
"Being plugged into an ecosystem of start-ups will give us agility and speed to market."
For example, we know from the success of our My UV Patch and Makeup Genius innovations that our consumers demand new services, so we will continue to develop these services.
Our investment in Founders Factory will allow us to develop amazing products complemented by these services for our consumers. They will help our consumers be inspired and get advice. This is really the direction we want to go, and being plugged into an ecosystem of start-ups will give us agility and speed to market.
The partnership with Founders Factory allows us to drive forward cultural transformation by combining our knowledge of the beauty industry, the beauty consumer and our marketing and innovation expertise in all beauty categories, while harnessing the skills and ideas of start-ups and innovative technologies at their earliest stage. The combination of this knowledge, and these fresh, digitally innovative ideas will allow us to better serve consumers’ aspirations.
Procter & Gamble’s Connect + Develop
By setting up partnerships with entrepreneurs and scientists and sometimes its suppliers, P&G has brought several unique products to market, including Olay Regenerist, Swiffer, Crest Whitestrips and Pulsonic toothbrushes.
Unlike several of its competitors, Connect + Develop was not a matter of outsourcing the FMCG company’s research and development capability. Instead it was about finding good ideas and embracing them to enhance its research and development capability.
According to P&G, the initiative helps it engage with innovators and patent-holders to meet needs across the P&G business: for products, technology, in-store, ecommerce and the supply chain.
Connect + Develop invites innovators worldwide to submit their ideas directly to P&G’s business development team, which then reviews submissions and provides feedback. The focus of Connect + Develop is directed toward IP-protected ideas, rather than simple ideation/crowdsourcing.
Dr David Jakubovic (left), director open innovation Europe, Middle East and Africa at P&G, explains the company’s innovation model.
Businesses often talk about investing in ideas and new ways of interacting with the consumers of the future, bringing about not just tech transformation but also cultural transformation. Do you think P&G’s Connect + Develop does that?
Innovation is the lifeblood of our company. We connect across business units through our centres of excellence; our senior technologists transfer their knowledge across categories, which creates transferable technologies. From this, we often see unexpected connections. For example, the principles of care and condition may be applied across categories, from protecting the fibres in our clothing to the fibre of hair.
"We share science and technology from one brand to another and between our innovation partners."
One of the ways we innovate is Connect + Develop. About 11 years ago, P&G coined the term "Connect + Develop" because we wanted to drive our innovation capability and outputs by better connecting to people and companies outside P&G whom we could partner, to develop better innovation for our consumers, our business and the partners themselves – consistent with "open innovation".
P&G’s Connect + Develop is all about creating partnerships and a culture of innovation to meet today’s consumer and business needs across research and development, the supply chain and commercial/go-to-market innovation.
Game- changing innovation comes from the perfect marriage of need and possibility. When we understand the people who buy our products better than anyone else and discover the right products and science to meet these real and pressing needs, we can bring this together to create something really powerful.
Does P&G have a model that it uses to drive seismic changes, not just in the way it does business, but also culture and industry of the future?
We are stepping up our innovation game. We’re increasing our investment in disruptive technologies and our innovation process is now a faster-cycle, multi-disciplinary approach that allows us to learn quickly.
Connect + Develop supports P&G’s growth strategy by leveraging external resources to drive discontinuous, sustainable innovation and productivity. By linking the world’s most innovating minds to P&G’s most challenging opportunities,we can build the unexpected to create more value together than we ever could alone. For example, we are sponsors of the MassChallenge, which is all about catalysing a start-up renaissance, helping early stage entrepreneurs to "win".
Since 2006, our strategic partnership with the Engineering & Physical Sciences Research Council (EPSRC) has helped us access crucial expertise in academia and catalysed new upstream work dovetailing with our own nearer-market research.
This helps us to develop real-world solutions to tough industrial problems, such as washing at 30 degrees. This creates outstanding training and career opportunities for some of the UK’s brightest scientists and, importantly, a path to impact for the research.
How difficult is it for a major, multi-brand company such as P&G to align its innovation strategy with its innovation culture?
We have a long history of innovation, beginning with candle-making in 1837. That tradition continues today with Pampers, Ariel, Febreze and more. Our innovation starts with the science of understanding people and their needs. We have 7,500 research scientists and engineers; 1,000 PhDs working across categories and countries to discover and create innovation. Our culture means we share science and technology from one brand to another and between our innovation partners to create innovative new ideas, which creates meaningful products that drive growth.