Rapidly emerging consumer demands are putting pressure on the top line trends of large corporations. Big food is losing market share to innovative start-ups that are able to forge unique connections with consumers. Over the last two years, in the US alone, the top ten largest food companies have lost around $20m in revenue.
Many food corporations have responded by establishing their own investment vehicles, which often operate as independent venture capitalists within the auspices of the big brand owners.
Thinking outside the box
This kind of open innovation model allows large corporations to challenge their existing biases and think about innovation in fresh ways, Victoria Spadaro Grant, chief technology officer at Barilla and CEO of the group’s investment arm, Blu1877, said.
“Open innovation is the way we catalyse external or internal changes,” she explained at the Future Food Tech conference in London last month. “Externally, it is a window to the world. Internally I like to call it a chief catalyst officer.”
According to Spadaro Grant, new approaches to innovation are needed to grapple with the rapid pace of change in the food industry. “In this day and age, I cannot think what served us in the past 50 years will serve us for the next three.”
Spardaro Grand suggested that the business environment within large corporations, the process and bureaucracy, is “a little stuck in time”.
“Frankly, for big organisations it is difficult to understand change needs to happen.”
Damien Jourdan is Danone’s open innovation manager. In his own words, Jourdan heads up a team of a dozen “pirate mavericks” who are entering the third year of seeking out start-ups with whom to collaborate.
Jourdan also sees a significant gap between corporate culture and quick-fire innovation capabilities that the French dairy giant hopes to bridge through open innovation.
“I have spent a lot of time with corporate innovators… The type of challenges we have as a corporate is it is difficult to convince management to innovate in new business,” Jourdan observed. “Corporate innovation falls into the short-term… open innovation is really how to challenge that.”
‘Shared ambition and mutual value’
For open innovation to work effectively, it has to bring benefits to both partners at the table.
This requires trust, transparency and mutually agreed mechanisms to measure success, Spardaro Grand believes. “There has to be profound clarity… The objective has to be mega clear. What is the problem we want to solve?”
For open innovation to be truly effective, it is all about the people, she continued. “Sponsorship from the very top [of a corporation] has to be there… What I mean is, time and money… Dedicated people are important – most important is emotionally dedicated people.”
Gerardo Mazzeo, Nestlé’s global innovation director, agrees that open innovation only works if it delivers win-wins to all the parties involved.
Nestlé launched its open innovation platform Henri in 2017. “We wanted to design a mechanic all about shared ambition and mutual value exchange,” Mazzeo explained.
In order to achieve this, Nestlé ensures the start-ups it works with through Henri are addressing “challenges anchored in our purpose and values”.
Like Jourdan, Mazzeo focuses his investment decisions on long-term objectives. “Nothing that goes into Henri is about short-term or tactical innovation,” he revealed.
To successfully collaborate with start-up businesses Nestlé has made adjustments to align itself with the needs of the start-ups it works with. Importantly, the company has recognised the different timelines that small start-up companies work to by reducing payment terms and speeding its decision-making process.
“We try to live and breathe what it is like to be a start-up, even though we get a cheque at the end of the month.”
Open innovation can be a challenging process – for both the corporation and start-up. But if done well, it can also accelerate game-changing innovation.
“We look at it as the place where we can drive change, we can catalyse change,” Spadaro Grant concluded.