Application of Open Application of Open Innovation in a Collaborative Innovation in a Collaborative

Supply ChainSupply ChainPackaging That Sells!

2009 ConferenceJason Husk

Group Manager, Open Innovation NetworksThe Clorox Company

October 22, 2009

OverviewOverview

This is not This is not WHYWHY OIOI, but , but HOW OIHOW OI

What are the key framing questions?What are the key framing questions?What are the mental models I need?What are the mental models I need?What are the work processes to support What are the work processes to support our move to Open Innovation?our move to Open Innovation?How does this work in the supply chain?How does this work in the supply chain?

CloroxClorox’’s Decision to Pursue s Decision to Pursue Open InnovationOpen Innovation

Clorox: Founded in 1913Clorox: Founded in 191395 year history: leading brands in mid95 year history: leading brands in mid--size categoriessize categories$5B in sales, 8000+ employees$5B in sales, 8000+ employees20 yrs acquisition20 yrs acquisition--driven growth & driven growth & ““fast followerfast follower”” strategystrategy

Clorox Strategy Change in 2000: Clorox Strategy Change in 2000: Lead in InnovationLead in Innovation

Enormous competitors; canEnormous competitors; can’’t spend way to successt spend way to successInnovation identifies new opportunities beyond Innovation identifies new opportunities beyond current capabilitiescurrent capabilities

Clorox RealityClorox Reality

Clorox RB SCJ P&G

P&G 3M Unilever Colgate Clorox

U.S. Patents in CLX CategoriesU.S. Patents in CLX Categories……

Annual R&D SpendingAnnual R&D Spending……

Clorox RB SCJ P&G CloroxPartners

Clorox Colgate Unilever 3M P&G Partners

……broader investment with Partnersbroader investment with Partners

……broader protection with Partnersbroader protection with Partners

Key areas to focus on:Key areas to focus on:

Culture & MindsetCulture & Mindset

Innovation Approach/ModelsInnovation Approach/Models

Work ProcessesWork Processes

Change is needed!Change is needed!

Changing the CultureChanging the CultureMust make a commitment to going outside for Must make a commitment to going outside for ideas and opportunitiesideas and opportunities

This is not just an R&D mindset change, but an This is not just an R&D mindset change, but an enterpriseenterprise--wide mindset changewide mindset change

R&D has the bulk of the effortR&D has the bulk of the effortMust enroll Procurement, Marketing, Product SupplyMust enroll Procurement, Marketing, Product Supply

Need to implement the appropriate Need to implement the appropriate (collaborative) and effective work systems to (collaborative) and effective work systems to reinforce this strategic changereinforce this strategic change

Changing the CultureChanging the Culturein CLX Packaging Developmentin CLX Packaging Development

Packaging just holds the productPackaging just holds the product

THE OLD WAYTHE OLD WAY THE OPEN INNOVATION WAYTHE OPEN INNOVATION WAY

Development ideas created internally Development ideas created internally by R&Dby R&D

Innovation systems created and Innovation systems created and managed by the business unitmanaged by the business unit

Networks managed ad hoc, Networks managed ad hoc, on a projecton a project--byby--project basisproject basis

External partners not actively engaged External partners not actively engaged in strategic product planning, nor in strategic product planning, nor rewarded for delivering innovationrewarded for delivering innovation

Packaging is a key piece of the Packaging is a key piece of the consumer experienceconsumer experience

Development ideas come from Development ideas come from everywhere, even outside the companyeverywhere, even outside the companyInnovation systems reinvented at the Innovation systems reinvented at the crosscross--BU level to access and focus BU level to access and focus

external product and technology external product and technology solutionssolutions

Strategic relationships identified, Strategic relationships identified, grown, and managed over timegrown, and managed over time

External partners rewarded for External partners rewarded for delivering innovation via Win Balancing delivering innovation via Win Balancing

programprogram

Changing the Mental ModelChanging the Mental Model

New New Tech or Tech or ProductProduct

ConsumerConsumerBusinesBusines

s s ResultsResults

TechnicalTechnical ConsumerConsumer BusinesBusinesss

Changing the Mental ModelChanging the Mental Model

New Model Drives ProgressNew Model Drives ProgressCritical to Critical to understand that understand that progress (read: progress (read: change) does not change) does not happen in a happen in a vacuum!vacuum!Power is in Power is in synchronizing and synchronizing and integrating all threeintegrating all three

How does this How does this change the way we change the way we workwork……

TechnicalTechnical

ConsumerConsumer BusinessBusiness

Work Process in OIWork Process in OI

SCOUTING

SELECTING

SECURING

SUPPLIER RELATIONSHIP MANAGEMENT

Work Process in OIWork Process in OIWhat do you want?What do you want?

Use all three lensesUse all three lensesBusinessBusinessConsumerConsumerTechnicalTechnical

WellWell--defined problem defined problem statement/hypothesisstatement/hypothesisSet initial metrics on Set initial metrics on how to evaluate ideashow to evaluate ideas

Tools: Tools: Think TankThink TankIdea TrackerIdea Tracker

SCOUTING

SELECTING

SECURING

SUPPLIER RELATIONSHIP MANAGEMENT

Identifying Needs & GapsIdentifying Needs & Gaps

Design• Holistic Design Thinking• Build Emotional Connections• Design for Manufacture/Cost• Sensory Engagement• Active/Intelligent Decoration

Materials• Sustainable• Stronger + Lighter• Sensory Engagement

Forming• Performance• Unique Structures• Cost Advantage

Dispensing• Convenience + Ergonomics• Control of Product• Consistent Delivery

Work Process in OIWork Process in OIHow will you find it?How will you find it?

What is your search What is your search strategy?strategy?NetworksNetworks

Internal Internal –– what do we what do we already know?already know?External External –– who else is who else is looking at this?looking at this?

Tools: Tools: Oval IdeasOval IdeasNetbaseNetbase –– AccelovationAccelovation, , illumin8illumin8

SCOUTING

SELECTING

SECURING

SUPPLIER RELATIONSHIP MANAGEMENT

Work Process in OIWork Process in OIHow will you know How will you know when you have found when you have found it?it?

Importance of setting initial Importance of setting initial metrics on idea evaluationmetrics on idea evaluationCull list of potential Cull list of potential partners from hundreds to partners from hundreds to the feasible fewthe feasible fewEvaluate external Evaluate external solutions vs. initial metricssolutions vs. initial metrics

Does this solution deliver Does this solution deliver the business case?the business case?If not, determine where to If not, determine where to change:change:

Metrics for evaluationMetrics for evaluationFeasibility of business Feasibility of business casecase

SCOUTING

SELECTING

SECURING

SUPPLIER RELATIONSHIP MANAGEMENT

Work Process in OIWork Process in OIHow do you get How do you get access to the access to the solution?solution?

What type of What type of agreement do you agreement do you need to put in place?need to put in place?What enables and What enables and fulfills the business fulfills the business case?case?What deal enables this What deal enables this ideaidea……and the next and the next three after it?three after it?

SCOUTING

SELECTING

SECURING

SUPPLIER RELATIONSHIP MANAGEMENT

Changes in Work ProcessChanges in Work Process

Partnership TypePartnership Type

OneOne--timetimeNeedNeed

LicenseLicense

Platform Platform OnOn--GoingGoing

AllianceAlliance

FocusedFocusedOnOn--GoingGoing

Joint Joint DevelopmentDevelopment

Agreements Agreements –– Doing the DealDoing the Deal

Take the long viewTake the long viewThink through the whole process and Think through the whole process and future interactions while living the current future interactions while living the current dealdeal

Change in negotiating techniques Change in negotiating techniques ––Collaborative vs. ConfrontationalCollaborative vs. ConfrontationalWhat are the different What are the different ““currenciescurrencies”” we can we can use?use?

FinancialFinancialIPIPCoCo--brandingbranding

Work Process in OIWork Process in OIHow do you manage How do you manage the relationship?the relationship?

Is this a oneIs this a one--time deal, time deal, or the start of a longor the start of a long--term relationship?term relationship?How applicable is this How applicable is this partnerpartner’’s portfolio vs. s portfolio vs. our enterpriseour enterprise’’s?s?How sustainable is the How sustainable is the competitive competitive advantage?advantage?What is the next What is the next Scouting opportunity Scouting opportunity this partner can help?this partner can help?

SCOUTING

SELECTING

SECURING

SUPPLIER RELATIONSHIP MANAGEMENT

Managing Open Innovation Managing Open Innovation CollaborationCollaboration

Deep, strategic partnering yields impactful innovationDeep, strategic partnering yields impactful innovationTechnology solutions enable defined opportunities Technology solutions enable defined opportunities developed through strong relationships & cooperative effortdeveloped through strong relationships & cooperative effort

Manage topManage top--tier partners via tier partners via ““WinWin--BalancingBalancing””Selected most strategically aligned suppliers to join programSelected most strategically aligned suppliers to join programMutual investment in relationshipMutual investment in relationship

Annual partnership review Annual partnership review with quarterly checkwith quarterly check--insinsMeaningful rewards for Meaningful rewards for delivering innovationdelivering innovation

Deep understanding of strategy Deep understanding of strategy & development pipeline& development pipeline

Initial Initial ‘‘ProductProduct’’ Successes with Successes with Open InnovationOpen Innovation

2001: Armor All Wipes2001: Armor All WipesImproved technology: NonwovensImproved technology: NonwovensResults: Dramatic sales, new categoryResults: Dramatic sales, new category

2003: Clorox Bleach Pen2003: Clorox Bleach PenNew delivery system New delivery system –– package, formulapackage, formulaResults: Strong sales, multiple design awardsResults: Strong sales, multiple design awards

2004: Clorox Teflon Bath Cleaners2004: Clorox Teflon Bath CleanersDu Pont partnership on nonDu Pont partnership on non--stick, polymersstick, polymersResults: 8 pts share gain, #3 to #1 in categoryResults: 8 pts share gain, #3 to #1 in category

2000: Clorox Disinfecting Wipes2000: Clorox Disinfecting WipesNew technology: Nonwovens conversionNew technology: Nonwovens conversionResults: Explosive sales, new categoryResults: Explosive sales, new category

Successes ContinueSuccesses Continue

2007: Armor All Wheel Protectant2007: Armor All Wheel ProtectantTechnology Technology ““pushpush”” from Winfrom Win--Balancing partnerBalancing partnerResults: New product category in auto marketResults: New product category in auto market

2005: Glad Force Flex Trash Bags2005: Glad Force Flex Trash BagsP&G Joint Venture; core polymer technologyP&G Joint Venture; core polymer technologyResults: Market share & category grew 5 pts Results: Market share & category grew 5 pts

2008: Green Works natural cleaners2008: Green Works natural cleanersDeep supplier partnerships to build new brandDeep supplier partnerships to build new brandResults: In 6 months grew market 300%Results: In 6 months grew market 300%

Case Study: Case Study: Clorox Disinfecting WipesClorox Disinfecting Wipes

Project borne from consumer insights Project borne from consumer insights leaving the leaving the canister out leads to increased usagecanister out leads to increased usage

How do we get consumers to leave this package out?

Case Study: CDWCase Study: CDWConsumer insight Consumer insight drives better business drives better business resultsresultsBusiness case Business case advantages clearadvantages clearNeed technology to Need technology to encourage consumer encourage consumer behavior without behavior without ruining product ruining product financialsfinancials

TechnicalTechnical

ConsumerConsumer BusinessBusiness√√ √√

??

What is the technology/suite of technologies What is the technology/suite of technologies which deliver the consumer/business needs?which deliver the consumer/business needs?

Apply the 4Apply the 4--S ProcessS ProcessScouting:Scouting:

Who has design and Who has design and technology expertise?technology expertise?

Selecting:Selecting:Strategic Development Strategic Development Partner Partner –– Union StreetUnion Street

Securing:Securing:Deal is a Project Deal is a Project Appendix in MAAAppendix in MAA

SRM:SRM:How do we integrate with How do we integrate with the entire development the entire development team team –– all the way all the way through the supply chain?through the supply chain?

SCOUTING

SELECTING

SECURING

SUPPLIER RELATIONSHIP MANAGEMENT

Concept design exploration

DesignDesign

Replaceable face and poly-bag insert

Reusable body

Weighted base helps hold container in place

3D aesthetic exploration: shape, opening

DesignDesign

Aesthetic exploration (environment of use)

DesignDesign

Kitchen and bathroom environment

Crisp edge design looks contemporary in the homeIntegrated lip design for

stacking on store shelf

Final container design selected

Easy to grip, modern shape

DesignDesign

MaterialsMaterials

-- No dissimilar materials No dissimilar materials -- All components Polypropylene All components Polypropylene --100% recyclable 100% recyclable

Sustainability

Label text: Usage info and

UPC on wrapped label

.04” label gap strategically located in rear corner of package

STM label design artwork

Full wrap IML (In-Mold Label)

MaterialsMaterials

ApplyingApplying Open Innovation to PackagingOpen Innovation to Packaging……

Clorox Disinfecting Wipes Canister: Launched Jan-09

Union Street/Clorox Open Innovation Union Street/Clorox Open Innovation Keys to SuccessKeys to Success

Robust application of Innovation Mental Model Robust application of Innovation Mental Model and 4and 4--S ProcessS ProcessQuick alignment and decisions on partner Quick alignment and decisions on partner strategystrategy

Build the internal alliance/consensus before the Build the internal alliance/consensus before the externalexternal

Determine key development success criteria Determine key development success criteria Must vs. WantMust vs. WantWhat enables the business case?What enables the business case?

Supplier integration Supplier integration –– itit’’s all about the network!s all about the network!B d i li i h b d i

ConclusionsConclusions

Open Innovation impacts all aspects of product creationOpen Innovation impacts all aspects of product creationDetermine where you want to innovate Determine where you want to innovate –– focus on biggest gaps focus on biggest gaps in overall system (technicalin overall system (technical--consumerconsumer--business)business)Build capability specific to your needs Build capability specific to your needs –– no prescribed no prescribed templatestemplates

Recognize the change management needed to Recognize the change management needed to systematize OIsystematize OI

Develop change processes and work processes to support OIDevelop change processes and work processes to support OIStart with changing the mindset and cultureStart with changing the mindset and cultureIdentify Innovation Models that resonate with your companyIdentify Innovation Models that resonate with your companyBuild the supporting needs and gaps analysisBuild the supporting needs and gaps analysisDeliver work systems and networks to deliver against those Deliver work systems and networks to deliver against those needsneeds

Thank You