Johnson & Johnson, Coke look to innovation

07 December 2009

NEW YORK: Major marketers including Johnson & Johnson, Coca-Cola and Whirlpool are placing a heightened emphasis on innovation, as they seek to drive growth both during and after the downturn.

As previously reported, companies like Comcast, Telstra and Verizon are all pursuing "open innovation", and consulting with third parties and consumers regarding potential new products.

Procter & Gamble, the FMCG giant, first adopted such a position in 2000, having missed its forecasts in two successive quarters, said Pramod Reddy, its associate director of global business development.

Its Connect + Develop programme now invites outside stakeholders to suggest "game-changing product, technology, business model, method, trademark, package or design" ideas.

Bob McDonald, its ceo, has argued that this scheme is indicative of P&G's "unrelenting focus" on this area of its operations, which means "we want to partner with the best innovators everywhere."

To broaden the reach of this initiative, the owner of Tide and Gillette has built Chinese and Japanese versions of the Connect + Develop website, and is now working on a portal for Latin America.

Following a similar trajectory, Johnson & Johnson originally launched its Corporate Office of Science and Technology in 1978, with the initial aim of backing academic research.

However, since 2000, it has sought to "harvest innovation" from external sources, according to Robert Zivin, the organisation's senior director.

As many goods never make it past the prototype stage, this can also help insulate manufacturers from the costs associated with R&D, as "early-on innovation is parasitic," Zivin added.

Three years ago, GlaxoSmithKline's consumer arm set itself the target of raising the number of introductions based on out-of-house ideas from 20% to 33%.

In actuality, it has gone on to increase this figure to 50%, with offerings like a new variant of Aquafresh, which turns into foam, being based on technology drawn from four different partners.

Helene Rutledge, director of open innovation for GSK's consumer arm, further posited that "a bad economy is good for innovation," as it leads firms to form alliances, and share risk.

Whirlpool, the consumer electronics specialist, realised that appliances like washing machines were becoming increasingly commoditised, meaning it had to find a way to differentiate its goods.

Alongside providing 3,000 members of staff with training in the new product development process in order to encourage internal contributions, the organisation is also asking consumers for their input in this field.

Affresh, the washing machine cleaner that went on sale two years ago, is one output of this type of collaboration, and is expected to deliver revenues of at least $80 million (€53m; £48m) by 2015.

Coca-Cola, the soft drinks titan, has also introduced 14 ounce and 16 ounce bottles, priced at just 99 cents, to convenience stores, which act as an "entry-level package" for customers.

Ed Coleman, assistant vp, shopper marketing at Coca-Cola North America, said "we believe 99 cents is a powerful price point that can convert more shoppers, driving beverage and in-store sales in our customers' outlets."

"The consumer demands value in today's economic environment, and if you do not give it to them, they will find it someplace else."

Data sourced from Business Week/CSP Daily; additional content by Warc staff