In recent weeks we have been doing a deep dive into those businesses that have really got it right when it comes to open innovation. In many of my other posts on the Old St Labs Blog I have highlighted what is necessary to carry out successful supplier innovation, such as the allocation of resources and the need to incorporate innovation into the DNA of a company. But who is succeeding at open innovation?
Open innovation was developed by Henry Chesborough and this is his definition of the process:
Open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation and expand the markets for external use of innovation, respectively
It encourages companies to acquire outside sources of innovation in order to improve product lines and shorten the time it takes to bring products to market. In many instances open innovation has become a portal for the flow of these ideas. However, as the below Unilever example shows, for open innovation to be a success much more is needed then just portals. Unilever Quote –
By recognizing the might of employee feedback and encouraging everyone’s participation in the innovation process HUL had opened the floodgates of every employee’s imagination and generated a stream of ideas and potential innovations across functions.
Quotes from story: Project Bushfire – Focusing the Might of an Entire Organisation on the Consumer and Customer – This story is all about Unilever’s bold attempt to change one of their businesses and find out what could be done better. It is a true business approach to innovation. They were looking for a cultural change within the business on a scale never before imagined.
Senior management led from the front and stood strong against those individuals who had bad mouthed the entire scheme. They felt it was imperative that 100% of their aims were carried out. A hard line was taken.
Under instructions from the leadership, no exceptions were to be made
The reason why Unilever was so determined to drive innovation within this particular company, was that over the last decade the business had struggled with growth causing its stock price to flatline.
A fixation with margins and price increases ahead of the market without any real innovation triggered a loss of market share, and as a result HUL also lost some bargaining power with retailers. Clearly, there was a need to do things differently going forward.
By not fixating on margins and instead concentrating on innovation, the Unilever team came up with a large number of business ideas. Here are a few of them:
- Better fills at retail outlets
- Use of analytics in the selling process
- Bringing new outlets under coverage
- Communication of a trade helpline number
- Changing case configurations of a hygroscopic product
The CEO Nitin Paranjpe has not only transformed the share price, which gained more than 34% in 2012, but he has revitalized the entire HUL business. An incredible 60% of HUL’s portfolio experienced innovation in FY12. This innovation drive has been so successful that Forbes ranked HUL as the number 1 FMCG company in the world.
Hindustan Unilever Limited has had tremendous success. It has shown the world that even big businesses can change their direction and their culture, as long as they truly believe in the scheme and promote it from the front.