Innovation Management Seminar #1
11 September 2011
March 2009 Arla R & D Presentation
2
Henrik Andersen
Senior Director
The Process of MakingArla becomming
The Leading InnovativeDairy Company
Arla Foods facts …
Arla Foods is a cooperative owned by approximately 7,200 Swedish, Danish and German milk producers
Turnover 2010: DKK 49 bn. (≈€ 6.54 bn)No. of employees 2010: 16,215
Milk intake 2010:…from ownership: 6.174 billion kg…totally: 8.713 billion kg
Arla Foods has production facilities in 13 countries and sales offices in a further 20 countries.
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Arla Foods in a historic view
2008 2011
Innovation situation of yesterday
Fragmentation
Technologydevelopment
NPD
Research
Innovation in the past
Innovation profile
Why no strategic dimension?
Focus on economical bottom line
No common innovation culture
NO COMMON LANGUAGE AND MANAGEMENT SYSTEM - Differences in competence and approach to the specific solutions
No efficient knowledge transfer
No efficient global ’Gate Transfer’
Each ’island’ does not know what the others expect and candeliver
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Innovation performance
Stra
teg
ic d
ime
nsio
n
Innovation
excellence
Change in innovation strategy
From innovation performance
Innovation performance
Stra
teg
ic d
ime
nsio
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Innovation
excellence
Change in innovation strategy
Towards innovation excellence
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Arla Foods is the world’s eight largest dairy company
and the world’s largest supplier of organic dairy
products.
Turnover in 2010 was DKK 49 billion (≈€ 6.54 bn.)
Arla Foods’ position and turnover
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Fresh products 40.2%
Cheese 24.5%
Ingredients 12.8%
Butter and spreads 13.5%
Others 9.0%
Turnover by products Total DKK 49.0 billion (≈ € 6.54 bn.)
Arla Foods 2010
We want to bring consumersCloser to Nature™
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Arla Foods has taken a stance towards nature, where we want to be even
better to ensure more natural products and less environmental
impact, for the benefit of consumers and society as a whole.
…by combining nature and technology…
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Modern technology
Nature
Natural evolution
In order to succeed, we start with nature and combine it with our
innovation, know-how and modern
technology. We call it natural evolution
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..... .....
.....
16
Innovation is in the heart of what we do- Innovation
Customers Consumers
Arla Foods
Why innovation?
Innovation occurs when technology and
inventions are combined with business understanding in an effort to solve real challenges and problems
Innovation Paradox…….Innovation is important but not urgent!
1. New products & services launches
2. Economic turnaround
3. Industry market growth rate
4. Developing new markets channels
5. Entering new geographic markets
6. Joint ventures/strategic alliances
7. Merger/Aquisition
1. Product quality
2. Customer service
3. Manufacturing productivity & costeffectiveness
4. Manufacturing flexibility/responsiveness
5. Supply chain cost structure
6. Sourcing effectiveness
7. Logistics effectiveness
8. Manufacturing lead time
9. Time-to-market
10. Product Innovation
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World of Creation
Top Groth Factors 2004-2007
World of Control
Top Priorities for Supply Chain Strategy
First step in making innovation both important and urgent
- CHANGE IN MINDSET!!!
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We need to make sure supply chain operations and commercial share the innovation agenda and innovate across the value chain- Innovation across functions and areas
Supply chaininnovation
Commercial innovation
Strong link
Examples
• Save processing time
• Bind more water
• Processed cheese with cheap fat source
• PAT – process controls
• Line extensions
• New Packaging
• Convenience
• New experience
• New category
Main focus
CapacityCostEfficiencyFlexibilityComplexity reduction
NPD-Renovate the core-Cost savings-Real new-Roll out
ChannelPackagingProduct MarketingRoll-OutCategory Business Model
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Our re-structured organizational structure and new marketing governance is a first step to change innovation performance – but more is required- Organization
CATEGORIES &INNOVATION
SUPPLY CHAINFresh Dairy Products,Cheese, BSM, Powder
Consumer InternationalConsumer UKConsumer DKConsumer SE
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Source: CUK Future Create, ICB, Ulysses action learning, Boston Consulting Group, CCST, Brands of the World
Innovation will have to come from multiple sources and areas- everyone in Arla Foods need to commit-Definition of Innovation
Innovation is not…
• Only new product development
• Solely a department
• Just about ideas/creativity
• Free of risks
Free return if fired scheme
Innovation is…
• Making newness happen
• A functional discipline, i.e. something which can be managed and led
• Finding and combining insights and translating them into concepts
• Often a collaborative activity exploiting knowledge across functions and companies
Product Process Marketing Packaging Channel Category RolloutService
Big impact innovationexamples
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Key requirements to truly step change innovation performance in coming 3-5years
?What would it require to truly
step change Arla Foods innovation
performance?
•Key requirements (what to achieve)
a. Innovative mindset at all levels • Overall innovation target & KPI’s for innovation at all levels from supply chain to sale
•Actions implied (how to achieve it)
b. Speed up innovation (T2M) • Change from innovation chain (Research (3-5 y) Technology (2 y) N PD (1-2 y)) to strategic innovation mindset
• Cross functional thinking
• Open innovation
c. 1 + 1 = 3 • Open Innovation
d. Innovation, project leader competences & entrepreneurial mindset
• Recruitment & Education
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Key requirements to truly step change innovation performance in coming 3-5years
What would it require to truly
step change Arla Foods innovation
performance?
•Key requirements (what to achieve)
e. Those who benefit have the responsibility to drive associated innovation
• Anchor innovation where it belong (innovation is not only an innovation centre issue)
•Actions implied (how to achieve it)
f. Defined focus • Fewer projects
g. Improved ideation • Open Innovation (partnering)
• Ideation process
h. Next generation issues & breakthroughs are global responsibility
• Corporate anchoring
?
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What is our strategic ambition?
We want to…• …create the best dairy company for
250+ million consumers in Northern Europe/UK
• …pay the highest possible milk price• …reach a turnover of 75 billion DKK
Expand core markets
3 global brands (Arla®, House of Castello®, Lurpak®)
Double product development budget
Develop sales of whey proteins
Reduce CO2 25 % (2020)
Strategic focus areas
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Arla Foods - ”Innovation Toolbox”
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Innovation and R&D organisation spends 220 MDKK/year and employs 230 FTEsdistributed on 3 innovation centers, 2 marketing departments and 1 corporatefunction- Arla Foods Innovation set up
BU Global Fresh Dairy Products, Cheese & BSM
Innovation CentreBrabrand
Cheese & BSM
BU Ingredients
Innovation CentreNr. Vium
Ingredients
Innovation CentreStockholm
Fresh Dairy Products
Arla Strategic Innovation Center
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Research
Technology
NPD
Arla Foods Innovation Chain
Internal long term
R&D
..
Interaction with
external research
environments
Implementation of
new technology
..
..
Improve efficiency
Maintenance of
categories
..
..
line extensions
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Research
Technology
NPD
Arla Foods Innovation Management
Corporate Vision & Strategy
Global Category Vision & Strategy
PROJECT AND PORTFOLIO MANAGEMENT
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The Stage - Gate model- Simplified example
ExplorationPre-
AnalysisAnalysis Design
Implemen-tation
Evalu-ation
Initiatio
n
Co
ntract
Sele
ction
Acce
pt
Han
do
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Clo
sure
Sail over water to an island ?-Is there a better way?
Alternatives- Ferry-Tunnel-Bridge
Select the best long term solution - Wood- Iron
Drawing of the bridge-Prod. spec
Building the bridge
Handover
Did we deliver the desired function and quality?
Task: You have to go from here to an island – how to get there ?
Stage – Gate model
100’s
of
ideas
5-10
solutions 3-5
solutions
At Accept gate the
final product is
approved
1-2
solutions
ExplorationPre-
AnalysisAnalysis Design
Implemen-tation
Evalu-ation
Initiatio
n
Co
ntract
Sele
ction
Acce
pt
Han
do
ver
Clo
sure
Example NPD Pipeline- Mould Category
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New Segment in Market Hard blue
New Segment for Arla Chef cheese
Føtex
Foods (0,1)
Saga Sliceable Brie Cooking
Line Extensions
Castello blue & white mild organic
Castello Blue & white mild (20)
Frozen brie & camembert (44,2)
Round format blue/white, new recipe (Bongrain ref.) for costumer
PL ”Blue Castello”
PL ”Danablu”
Castello round format
Canada Gorgonzola wedge
New Castello blue mould(41,8)
Castello brie & camembert
Product Improvements Improved shelflife in open packaging (11,2 est)
New Packaging on Coreassortment
Castello Bites ->
New Packaging on Core assortment
Cost savings White mould big unit –low priced (4,9)
Increased water-binding, same quality
201* 201* + 1 201 * + 2 201 * + 3 201 * + 4
i.e.
New product
New system
New process
New technology platform
The projectobjective
Deliverables
Cost Time
DELIVERS
i.e.
Value Added Growth
Industry Restructuring
Internal Efficiency
The business
objective
Strategy
Risk
Value
Strategic Innovation Project Objective Delivers Business Objective
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Strategic Innovation Platforms - BG drive essential
Milk Food Safety
ECTWellbeing
PackagingECT
•Commercial potentials e.g
•Commercial potentials e.g•Strategic innovation platforms
Process technologyECT
• Repurchase
• Image
Global Stategic Innovation Innitiatives
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Workflow portfolio management
Update of projectsExtraction of
Portfolio overviews
•Validation ofPortfolio overviews•Presentations made
Portfolio mgt meeting
Portfolio decisions
•Portfolioconsolidation•EMG-reporting
Quarterly
ReportingInnovation NTO
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The Arla Innovation Challenge
Cat
ego
rie
s
FDP
Ch
ee
se
BSM
Milk
Po
wd
er
Milk
an
d w
hey
Supply Chain Needs
Consumer/Customer Drivers
Area E Area F Area GArea A Area B Area C Area D Area E Area F Area GArea A Area B Area C Area D
AF Innovation Strategi
INN
OV
ATI
ON
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The Arla Innovation Challenge
Cat
ego
rie
s
FDP
Ch
ee
se
BSM
Milk
Po
wd
er
Milk
an
d w
hey
Supply Chain Needs
Consumer/Customer Drivers
Area E Area F Area GArea A Area B Area C Area D Area E Area F Area GArea A Area B Area C Area D
AF Innovation Strategi
INN
OV
ATI
ON
Stra
tegi
c
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Research = Knowledge
How to manage?
Knowledge of today
•Becomes more and more mobile
•Are collected and shared with higher speed (electronic media, web-based tools such as Google, LinkedIn, Facebook, Twitter, etc.) Consequently; New knowledge is out-dated "with the same speed. The shelf life of knowledge is decreasing.
• In a competitive field it becomes increasingly important to be very fast and efficient in mobilizing and (re) combining existing and new knowledge Knowledge management is a competence for anyone to be masters in an innovative environment.
Knowledge Management
•Profile and visibility is very functional in such a market situation.
•Workflows will be networking with research groups in and outside the individual organizations.
•The primary 'production processes' will continuously run in changing teams of specialized and highly visible expert groups.
•The combination of extended networks and specialization will make it possible for both research organizations and innovative industries to work faster, more flexible and hereby also more problem-/marked oriented.
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Future Platform for knowledge generation andknowledge access NETWORKING & PARTNERSHIPS
• Knowledge transfer
Innovative partnership must right from the beginning be entered with co-
innovation in mind
WIN-WIN !!!
Networks and partnerships are crucial for mutual inspiration and synergy
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External Collaboration
Arla believe in partnership* with external partners as
an important element to accelerate our strategic
innovation
*A partnership is an arrangement where entities and/or individuals agree to cooperate to advance their interests
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Consequently, to Start a Partnership- We define- What’s in it for the Partner and for AF
Partner
Identify new innovative applications for new or own technologies/sales channels/knowledge etc. with potential for exstra sales or profit
Minimize risks
Speed up innovation through partnership
Close, long term cooperation with Arla Foods as one of the leading dairy companies in the world
Arla Foods
Develop new, innovative and cost efficient solutions to known problems
Minimize risks e.g. eliminate/reduce investments
Speed up innovation <T2M
Be first on market with new (IP protected if possible) solutions
Close long term cooperation with familiar Partner
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The Typical Innovation Partnership Stages
INDISPENSABLEDIALOG STEPS
ESTABLISHTRUST
CREATEValue
BUILDGOODWILL
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Partnership/open Innovation- What does it demand?
Strategy
Governance
World-class project management
Crystal-clear definition and specification of
Goals
Timelines
Deliverables
Milestones
Continuous follow-up
Assignment of IP and value-based solutions
IP Strategy as Part of the Innovation Process
Purpose• Freedom to operate
• Avoid withdrawing good products from the market• Avoid closing down factories• Avoid paying high royalties to our competitors
AIM• Optimize profit margins
• Easier access to new high value market• Lead-time on new product• Fewer competitors higher margins
ExplorationPre-
AnalysisAnalysis Design
Implemen-
tation
Evalu-
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Initia
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Co
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General IP Management- within the Overall Innovation Process
Checkpoint 1
Planning of project
• Prior art searches
• Analysis of
competitors
patents
Checkpoint 2
Start of project, evaluation of
solutions
• recognise possible patent conflicts
• recognise possible designs around
• recognise patenting opportunities
Checkpoint 3
Designing the best
solution, prepare
implementation
• update all IP activities
Checkpoint 4
Project execution
confirmed• drafting and filing of patent
applications
ALWAYSPrevent unintended consequences of disclosures to third parties by the use of confidentiality agreements
ExplorationPre-
AnalysisAnalysis Design
Implemen-
tation
Evalu-
ation
Initia
tion
Co
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Sele
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Accep
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Sunday, September 11, 2011
“Shoot for the moon”
- Even if you miss you will land among the stars
Les Brown
Innovation Philosophy of Arla Foods
Thank you for your attention!
11 September 2011