Collaboration key to R&D

25 March 2011

NEW YORK: Major brand owners like Procter & Gamble, General Electric and Best Buy are tapping external expertise to enhance innovation programmes.

Consumer goods group Unilever is one organisation that has been augmenting its substantial in-house capacity with third party specialists.

An example of such practices in action covers the Lipton fruit tea range, which customers perceived as falling short in terms of taste strength.

In response, Unilever partnered with Ohki, based in Japan and making thin tea bags allowing for improved visibility and circulation, and added new flavours including Morocco Mint & Spice, in 2009.

"Being able to see the pieces of fruit in the bag made a big difference to what people tasted," Roger Leech, Unilever's open innovation and portfolio scouting director, told the Financial Times.

Unilever now boasts a formal budget covering this area, letting it move at speed, or else provide potential allies with interim funds when further evaluation is required.

The company also runs a platform enabling entrepreneurs and businesses to upload proposals via the web, which is an increasingly popular tactic.

It plans to replace the existing set-up, heavy on "legal jargon" and waivers, with an "airlock-style" approach, where an independent source will assess suggestions and flag up attractive opportunities.

"People have to feel confident there is protection on both sides of the submission process," said Leech.

Procter & Gamble, another FMCG manufacturer, has established a "continuum" detailing the various ways it can join forces with firms, said Jeff Weedman, its vp, global business development.

These include committing time to assisting start-ups progress, pursuing shared ventures and purchasing promising technologies.

Weedman argued it was vital that large corporations ensure the operators they work with fully understand the complexities generally witnessed by big players.

"Regulatory agencies don't tend to go after real small mom-and-pop stores that are only selling on the internet," he said.

"But if we don't follow the rules religiously and rigorously, they will come after [us]."

General Electric, the conglomerate, proved a pioneer when it comes to adapting R&D procedures, as shown by the Ecomagination initiative launched in 2005.

GE has since acquired stakes in young companies like A123 Systems, which makes lithium ion batteries and could advance its capabilities for green cars and the electric grid.

"[We can] access to technologies that we might not be able to develop on our own," Beth Comstock, GE's chief marketing officer.

Elsewhere, IBM has yielded advantages from offering fledgling firms its tools, software and services at a cheaper rate than is typically the case.

"By partnering, we can offer our clients a more complete solution portfolio," Mike Riegel, vice-president of IBM, said.

"Many of those smaller companies will adopt our technologies and as they mature and become good business for IBM."

Electronics retailer Best Buy is also moving forward in this field, leveraging assets from its brand, stores, staff and online experience to drive growth.

"We need to move beyond our current lines of businesses and bring the things we are great ... to new industries and spaces like health and wellness, home and energy management and transportation," said Christine Webster Moore at Best Buy's new business solutions arm.

"We will be successful only if we tap into outside networks, ways of thinking and business models to help us chart the course."

Data sourced from Financial Times, Marcus Evans; additional content by Warc staff