Unilever Innovation Acquisitions - Case Study Example

UNILEVER Table of Contents Introduction/ Background 2. Pentathlon Framework Innovation strategy (2) Ideas (3) Prioritization (4) Implementation (5) People & organization 3. Related issues: (1) Innovation drivers (2) Individual vs. team creativity (3) Managing knowledge (4) Innovation Acquisitions (5) Innovation Deployment Process (6) Technology 4. Conclusions/ impressions/ recommendations 5. Reference page 6. Appendix: Introduction/ Background Unilever is a Netherland-British company operating in the fast moving consumer goods industry (FMGG). The company has a long history of its business development that took its rise in 1885 (Unilever.com, n.d.). The company is headquartered in the UK, London. Geographically, company’s operations cover practically the whole world: North America and South America, Europe, Africa and Asia (MarketLine 2012). Unilever has four major product segments, which include: foods, personal care, refreshment, and home care (MarketLine 2012). These four categories of brands in total have more than 400 different brands. Some of the most popular of the Unilever’s brands include: personal care - Dove, Sunsilk, Lifebuoy, Rexona, Lux, Close up, etc; foods – Knorr, Helmann’s, Blue Band, Amora; refreshment – Lipton, Flora, Heartbrand, Slim-Fast; home care – Comfort, Domestos, Surf, Cif, Sunlight, etc (MarketLine 2012). The wide portfolio of the company indicates that Unilever has strong focus on innovation as a way of developing and rolling out new products to the market (MarketLine 2012). The company spends a significant share of its budget on the R&D activities. Thus, for example, in 2012 Unilever spent more than $1, 3 billion on R&D (MarketLine 2012). Due to this investment and strong orientation on innovation the company launched many new products and relaunched some old products in FY 2012 (MarketLine 2012). Pentathlon Framework Below is provided analysis of the Unilever’s innovation strategy based on the Pentathlon Framework, comprised of five major aspects: innovation strategy, ideas, prioritization, implementation, and people and organization. Innovation strategy As it is mentioned on the official website of the company: “Brands and innovation are at the heart of everything we do… In Unilever, research and development (R&D) is the home of breakthrough technology for bigger, better, faster innovations” (Unilever.com). This statement goes in line with the overall company’s vision of creating a better future, not only for its own business but also for consumers and for the environment (Unilever.com 2014). The company is pursuing a goal of doubling the size of its business and on the same time reducing its environmental footprint. To make its vision and goals a reality, Unilever has no other choice but to create new products and to improve the existing ones through innovation with a focus on sustainability. In other words, in words of Paul Paulman, the CEO on Unilver, the company’s innovation strategy is “green innovation” (Bell 2013). The company also develops the direction of science and technology capability in the following areas: human health (non-animal approaches for consumer safety risk assessment, microbiological and toxicological risk assessment); environment (environmental sustainability and ecotoxicology risk assessment); and process technology (sustainable and safe process technology) (Unilever.com). Ideas The research of ideas is performed in the Unilever’s R&D laboratories, were professionals create “proven breakthrough innovations which can be developed further into fully formulated products” (Unilever.com 2014, n.p.). Researchers in laboratories have close communication and cooperation with project team members from different locations but who are recognized experts in a given scientific area. This partnership is supported with the best academics and specialized companies (Unilever.com 2014, n.p.). However, the outstanding innovative ideas often are generated with the company’s suppliers as well. In addition to internal partnership, the company is also continuously looking for the partnership with external sources. Thus, for example, Unilever has adopted an approach of “open innovation” in the company where the best ideas from across the whole world are gathered and afterwards contribute towards more than half of the value of the company’s innovation activity (MarketLine 2012, 24). Another share of innovation ideas come as a result of the Genesis Program that applies the breakthrough technology across different segments. Due to this R&D process introduced in 2009 the company has launched its PG Tips pyramid-shaped tea-bags and Rexona for Women deodorant “equipped” with the Motionsense technology (MarketLine 2012). One more source of ideas’ generation is “innovation eco-systems” where R&D professionals together with small and medium sized enterprises and start-up companies work together on an innovative solution In addition to the “open innovation” approach, the company has launched recently a platform – The Unilever Foundry that also should generate new ideas and opportunities for innovation. According to the official information, this platform will enable Unilever’s global brands to experiment with and pilot new technologies more effectively, efficiently, and speedily (Unilever.com 2014). The idea by itself is new on the market and can be labeled as “innovative”. One of the three opportunities offered directly relates to innovation development and partnership. The company engages external parties to be involved in the development of innovative technology solutions. These should be companies with proven technology that will seek a solution for Unilever brands and these projects if approved will be piloted with Unilever (Unilever.com 2014). Prioritization Based on the previously discussed sections it is possible to suggest that Unilever prioritizes sustainable innovation as the category of innovation that can support the company’s business needs and is aligned with its strategy. Practically every word on the company’s website is impregnated with a Unilever’s strong focus on sustainability. However, the company differentiates its R&D activities by allocating specific priorities to each of the 6 R&D Centres. Thus, for example, the priority activity for the R&D in India relates to the skin care products (lotions and creams with photo-protection. The R&D centre in Colworth, UK is focused on research of the themes of health and wellness, sustainability, processing and biosciences (Unilever.com 2014). The other UK’s R&D centre in Port Sunlight is home to the global innovation for both Laundry and Hair (Unilever.com 2014). The R&D facility in Shanghai, China deals with pilot plants, consumer insight capability and labs; the R&D facility in North America is focused on the discovery and application of new technologies that either improve product functionality or address unmet consumer needs (Unilver.com 2014). The R&D centre in the Netherlands has three major areas of work: product development, research, and implementation (Unilver.com 2014). While there was not clearly stated the prioritization of the ideas, it is possible to suggest that the R&D centres together with the global innovation team that generate ideas for strategic needs of the organization is the number one priority for Unilever. Second priority is the ideas, generated by external parties (suppliers, ideas generated through the Unilever Foundry and other programs). The third priority is the category of ideas that emerge as a result of research. Implementation When innovative ideas are generated and prioritized by Unilever’s R&D specialists, they are further developed into the products and after launched to the market. The development stage takes place at 31 Global Development Centres and in more than 90 Regional Development Centres of the company (Unilever.com 2014). In these Centres, the researched breakthrough technologies undergo optimization processes for the launch. Implementation stage is comprised of several major activities, including: perfecting a formulation; development of fragrances; exploration of nutritional content; testing of products with consumers; packaging development; ensuring that the product is ready for large scale production (Unilever.com). When the product is ready for launch, the regional teams who are responsible for their specific product in the region implement a launch strategy that has been previously developed based on such critical external aspects as: cultural and social factors, legal and regulatory framework, and competitors’ activity. It is important to mention that the company has set up a very effective communication between both R&D teams and other specialists in marketing, supply chain and other administration services. Close collaboration of both groups enables the company to ensure successful manufacturing, marketing, and distribution of the new products (Unilever.com). People & organization As it has been mentioned before already, the company utilizes all its human resources by sharing it globally. There are six teams that drive company’s innovation: The Safety and Environmental Assurance Centre; Patents builds, IT management, Regulatory Affairs, Clinicals, and Open Innovation (Unilever.com). Unilever has 6 strategic R&D laboratories (in the US, UK, Netherlands, India and China) and employs there more than 6, 000 professionals (Unilever.com). On the first glance these efforts might seem a bit redundant, however 20,000 registered patents and patent applications worldwide prove the contrary (MarketLine 2012). Unilever has a strong team of research scientists specialized in various areas: bioscience, advanced measurement and data modeling, structured materials and processing, nutrition and health, consumer perception and behavior (Unilever.com 2014). Also, the company has strong development team with experts in formulation, nutrition, flavor and fragrance, processing and packaging (Unilever.com 2014). Open innovation team also contributes to the process of generating ideas for the company and Unilever is continuously searching for new partners with brilliant ideas (Unilever.com 2014). All together these experts enable the company to succeed in innovation and be a leader on the market of FMGG products. Related issues Innovation drivers One of the major drivers of the Unilever’s innovation activity is considered to be the necessity to maintain market position during a recession in 2002. During a recession at the beginning of the 21st century, the company “began to see innovation as a mechanism for fundamental renewal and a path to growth,” even in bad times (Reinmoeller & Nicole 2005, 63). One more important innovation driver that made Unilever to change its concept was the changing customers’ behavior and therefore, their needs. The company believes that its success depends on its ability to create products “that keep pace with changes in consumer lifestyles and that appeal to people at all income levels” (Unilver.com 2014, n.p.). Thus, for example, growing customer’s awareness about healthy eating and shift to healthy lifestyle in the developed countries forced the company to produce innovative solutions (for example, products with reduced cholesterol, fat, salt, etc.) (Smith 2009). In addition to health concerns, the overall consumer’s awareness about sustainability and environmental issues also has increased significantly. In order to meet the new “sustainable” needs of the customers, the company has created a new concept “Vitality” (Smith 2009). Also, as it has been mentioned above, the company’s strategy is to offer products affordable to people of all income levels. This is a significant innovation driver as the company has to develop new formulas that are at lower cost and lower the manufacturing process through innovation (less energy used, etc.). Another important driver to innovation was intensified competition on behalf of the global leaders such as Procter & Gamble and others. Many businesses have adjusted their strategies towards sustainability and corporate social responsibility, increasing competition on this value. Unilever had to be “fit to compete” through increased productivity and also sustainable business activity (Smith 2009). Individual vs. team creativity Since 2005 Unilever has changed its approach to team building within the organization. The structure became de-layered, simplified with a faster decision making process. But what is important to mention here is that the company has encouraged team creativity within the organization. The experts from different fields and categories are brought together under one global management (Smith 2009, 38). This team is responsible not only for innovation but also for other activities. As it has been already discussed the R&D experts closely cooperate with the experts from different fields globally. For more than 20 years, the Unilever product strategy teams regularly meet to compare notes on research, discuss market trends and advertising, and development issues (Reinmoeller & Nicole 2005). There are no doubts that during such meetings new innovative ideas are created. However, individual ideas are also welcomed and positively perceived by the company (Unilever.com 2014). Managing knowledge The concept of knowledge management suggests that the company uses and leverages the existing knowledge in its organization for achieving its goals (Reinmoeller & Nicole 2005). As discussed previously, Unilever is managing its corporate knowledge through maximized use of the expertise and skills of its professionals in R&D sphere. The company ensures the availability of information technology systems that enable professionals from all over the world work together in the most efficient and productive manner (Unilever.com 2014). Unilever manages its corporate knowledge by creating cross functional teams that both support and challenge each other. Innovation acquisitions Innovation acquisition is one of the innovation strategies that many companies use in order to reduce the high risks in technology development (Reinmoeller & Nicole 2005). In other words, innovation acquisition enables the company to obtain a product, technology, or brand from outside (Anirudha et al 2010). Unilever is one of many companies that has implemented this innovation acquisition strategy when acquired Ben & Jerry’s, Slim-Fast and Bestfoods in 2000 (Reinmoeller & Nicole 2005). It is important to clarify here that by acquiring a product or technology, the company created a series of new products. This was in case when Unilever has acquired “Slim-Fast” and in 2006 developed a process that resulted in even greater effect and created weight-reduction potential than the initial product (Anirudha et al 2010, 30). This approach enabled the company to combine successfully acquired technology with its R&D resources and launch the product more quickly comparing with the time it would take to develop substitute or similar product from nothing. Therefore, this strategy is effectively used for leveraging company’s innovation (Anirudha et al 2010). Unilevers Innovation Deployment Process Unilever’s innovation process particularly it relates to Unilever Europe has adjusted its innovation deployment strategy in order to improve speed of market penetration. Thus, in 2012 and 2013 the company has launched bigger but fewer projects in the European market (Hultink et al 2014).These were 50 priority projects performance of which was tracked on a monthly basis. This approach enabled the company to measure the attractiveness of its innovative products and to investigate further of the failures and successes (Hultink et al 2014).This knowledge will help the company to move forward in its innovation activity by filling gaps if the problem is with the product not marketing. Such an innovation deployment process also serves a good prioritization tool for the company’ R&D team as they know what innovations have greater demand. On the other hand, products that have failed to meet the company’s expectations or sales targets can be discarded on the early stage, thus economizing Unilever’s efforts of redundant innovation (Hultink et al 2014). Technology Innovation also focuses on developing new technologies, which deal with such critical business areas, as: brands, the value chain, market capability, and work processes (Gallant, 2012). Unilever’s transition from a regionally-focused strategy to a global application portfolio requires the company to be on the edge of technology, be mobile and thus to ensure efficient information flows and communication (Gallant, 2012). The company recognizes this need as a mandatory condition for effective innovation process and is investing money to the IT systems (Unilever.com). Conclusions/ impressions/ recommendations Unilever is a global company that has placed innovation in the core of its business. Company’s vision and strategic goals are closely interrelated with innovation and the company’s budget for R&D is huge. In the context of the Pentathlon framework, innovation ideas at Unilever are coming not only from the R&D specialists but also from other experts as the company encourages external parties to participate in this process by developing special platforms and programs. Open innovation strategy is one of those approaches. Unilever prioritizes sustainable innovation as the category of innovation that can support the company’s business needs and is aligned with its strategy. When the ideas have undergone prioritization stage they are moved to the implementation stage, which is comprised of several major activities, including: perfecting a formulation; development of fragrances; exploration of nutritional content; testing of products with consumers; packaging development; and ensuring that the product is ready for large scale production. There company has six teams that drive company’s innovation and 6 strategic R&D laboratories (in the US, UK, Netherlands, India and China) and employs there more than 6, 000 professionals (Unilever.com). Unilever has a strong team of research scientists specialized in various areas: All together these experts and knowledge management strategy enable the company to succeed in innovation and be a leader on the market of FMGG products. The other related issues covered in the research included: innovation drivers, individual vs. team creativity, knowledge management, innovation acquisition strategy, innovation deployment process, and technology. Based on the results of the research it is possible to state that Unilever is truly innovation-oriented organization. Its focus and commitment to sustainability is impressive and is perceived by authors as users of its products as a competitive advantage. Based on the logic of sustainable business the company is focused on reducing its environmental footprint and contribution to society and communities. However, on the other hand, the concept of sustainability assumes less consumption. Unilever’s goal is to double its sales and therefore production, and therefore consumption. This conflict should be addressed if the company is truly focused on sustainable business. In order to address this issue, Unilever has to focus its innovation more on recyclable and eco-friendly projects and initiatives rather than on development of big number of new products. References Anirudha D, Shambhu K, Abhay, S. (2010). Innovation Strategies for creating competitive advantage. Research Technology Management, 53(3), 19. Bell G. (2013). Doing well by doing good. Strategic Direction, 29(4), 38-40 Hultink E, Cankurtaran P, Tillemans R, Bruins L., Why do launched projects (fail to) meet set targets? An analysis of Unilevers Innovation Deployment Process. (2014). Gallant, J. (2012). IDG Enterprise » Unilever CIO: Innovation and Mobility are Empowering. Idgenterprise.com. Retrieved 15 June 2014, from http://www.idgenterprise.com/unilever-cio-innovation-and-mobility-are-empowering Innovation: The key to economic recovery. (2012). Strategic Direction, 28(2), 9-11. MarketLine, (2012). Unilever: Proving that sustainability and profitability can coexist. MarketLine. Reinmoeller, P., & Nicole, v. B. (2005). The link between diversity and resilience. MIT Sloan Management Review, 46(4), 61. Smith S, (2009) "Vitality in business: executing a new strategy at Unilever", Journal of Business Strategy, Vol. 30 Iss: 4, pp.31 – 41 Unilever.com,. (2014). Expertise in Unilever | Innovation | Unilever Global. Retrieved 15 June 2014, from http://www.unilever.com/innovation/innovationinunilever/Expertiseinunilever/default.aspx Unilever.com,. (2014). Open Innovation | Innovation | Unilever Global. Retrieved 15 June 2014, from http://www.unilever.com/innovation/collaborating-with-unilever/open-innovation/index.aspx Unilever.com,. (2014). Overview of research & development in Unilever | Innovation | Unilever Global. Retrieved 15 June 2014, from http://www.unilever.com/innovation/innovationinunilever/Overviewofresearchanddevelopmentinunilever/default.aspx Unilever.com,. (2014). Our R&D locations | Innovation | Unilever Global. Retrieved 15 June 2014, from http://www.unilever.com/innovation/centres/ Unilever.com,. (2014). Science & technology | Innovation | Unilever Global. Retrieved 15 June 2014, from http://www.unilever.com/innovation/safetyandenvironment/scienceandtechnology/ Unilever.com,. (2014). Unilever launches global platform to engage with start-ups | Media centre | Unilever Global. Retrieved 15 June 2014, from http://www.unilever.com/mediacentre/pressreleases/2014/Unileverlaunchesglobalplatformtoengagewithstartups.aspx Unilevers vital shift in direction: New mission transforms lumbering giant. (2012). Strategic Direction, 28(2), 6-8. (Unilevers vital shift in direction: New mission transforms lumbering giant, 2012) Unilever.com,. (n.d.). Our history - About us, Unilever Global. Retrieved 15 June 2014, from http://www.unilever.com/aboutus/ourhistory/ Appendix: Appendix A: The list of group member’s contribution to the report Student Name: Section on … Student Name: Section on … Student Name: Section on … Student Name: Section on … Student Name: Research and gathering data Becoming a “disruptive innovator” The authors suggest that what they term “disruptive innovators” use five key skills. These are: questioning, observing, networking, experimenting and using “associational thinking”. By questioning what, why and how things are done, the status quo is challenged and both products and processes can be viewed in a new light. Observation encourages attention to detail in activities of the firm, its customers and its competitors. This may enable small but significant changes to be made to traditional methods of working. Networking is seen as consciousness expanding when it promotes dialogue with external colleagues who may come from very diverse backgrounds and have differing world-views. Experimentation enables firms to try new things and test new processes without the fear of failure, while associated thinking draws all of the previous skills together, acting as a catalyst for creativity. However, for a company to become an innovation leader, senior managers must themselves embrace the five key skills of the disruptive innovator, to develop an authentic culture of innovation. Dyer et al. (2011) call this the “3P framework” where innovation is deeply embedded in the people, the processes and the philosophy of an organization. Some high-profile firms embracing this “3P framework” include Amazon.com, Apple, Hindustan Unilever, Nintendo, Google, Starbucks, LOréal and Procter & Gamble. (Innovation: The key to economic recovery, 2012) Read More