Five Factors contributing to the rise of the Farmpreneur

Working as international business consultants we are increasingly exposed to Farmpreneur businesses who are taking modern approaches to selling and marketing their valued added branded food and beverages, creating value from farm to table through direct marketing their produce from paddock to plate. So, what, this is not new I hear you say?  Been happening for some time, has it not? Ever heard of a farmers’ market? How does it affect me anyway, as a consumer or a customer (retailer or foodservice operator)?

The transformation of agricultural and food and beverage supply chains has been brought about by a multitude of factors colliding to create the perfect conditions for farmers to become Entrepreneurs or Farmpreneurs as we like to call them at Creatovate.  Value creators in the supply chain from inputs to outputs predominantly by direct selling and marketing their own “branded” products directly to customers (retail and foodservice) and in some cases direct to consumers as well.

Before we go dive deep into some of the factors contributing to the rise of the “farmpreneur” let us look at some live working examples of these new economy farm to table business models and how you might be able to apply this learning to your own farm, business, brand, customers and consumers.

Gladfield Malt

http://www.gladfieldmalt.co.nz/about-us/#our-history  

Doug & Gabi Michael are fifth generation malting barley growers and first-generation maltsters situated on prime agricultural land on the Canterbury Plains of New Zealand.  After many seasons growing and harvesting the best malting barley possible, they grew tired of working harder year after year to increase their barley yield only to have their farm gate price per Tonne of malting barley produced drop due to only having one real option to sell their malting barley – one very large multinational malting company. The Michael Family decided to take the challenge/opportunity head on and plunge into the malting industry on their own adding value to their premium quality barley by malting it on their farm and selling it directly to the rising tide of Kiwi craft brewers.  Over the next decade, and after a lot of blood, sweat and tears and significant capital investment in plant, equipment, laboratory and people and processes they are now very proud owners of one of Australasia’s leading malting companies with customers from New Zealand to Australia and China and a strong growing demand for their high quality premium craft malts from brewers and distillers worldwide.

Crosby Hops

https://crosbyhops.com/the-farm/about-us/ 

Transplant yourself 7,000 miles across the great Pacific Ocean to Oregon in the Willamette valley at the foot of the Cascade mountains in the Pacific Northwest of the United States and you will find 5th generation hop growers and first-generation hop merchants, dealers and processors of quality craft Hops – Crosby Hops.  Traditionally growing hops for large third-party merchants or grower co-operatives Crosby Hops and the Crosby Families took the brave decision 100 years on from first starting their hop farm to break away from the traditional grower only business model and started selling their hops directly to local craft brewers like Deschutes in Bend, Oregon. Starting initially with freshly dried whole hops Crosby Hops then moved quickly to design and install their own pellet mill with different processing dynamics suited specifically for the unique needs of the rising tide of craft brewers in the USA and the rest is history.  Again, after many years of significant investment in processing technology, capital, people, processes, laboratory and direct to brewer customer service Crosby Hops has not only retained their premium status as a grower of quality hops but is now also seen as a trusted merchant for sourcing from other farms and processing their hops and securing supply of unique hops to keep craft brewers abreast of the modern craft beer drinkers needs.

The Chia Co

https://thechiaco.com/au/our-story/ 

John Foss Founder and Chairman of the Chia Co set out in 2003 to sustainably grow process and market Chia Seeds and Chia based consumer products to the world to achieve the company mission to make a positive contribution to the health and wellness of the global community.  A fourth-generation wheat farmer in the Kimberly, John was not happy with two things from growing wheat – 1st – the returns and 2nd – seeing where his high-quality wheat was going and how it turned up on the kitchen table in overly processed sugar added breakfast cereals, baked goods and the like.

With a passion, for the land and the health and wellbeing of his community John saw a unique opportunity to grow and value add to an ancient Chia seed traditionally associated with Mayans and Incas and at the time only available in a sporadic supply from South America.  The unique microclimate of the Northern Kimberley region combined with the farming know how of John and his fellow farmers in the region enabled them to perfect growing a consistent quality clean and nutritious Chia seed that is now supplied to major food processors, retail customers, and foodservice operators globally.

The Chia Co in addition has launched their own range of premium plant nutrition products featuring Chia from whole cleaned Chia Seeds to Chia Pods® to Oats + Chia and Chia Breakfast and Salad Boosters and Chia Oil and Flour.  The Chia Co now boasts customers across the globe and has offices on three continents in Melbourne, New York and London. The Chia Co is a truly global enterprise exporting to over 35 countries with a vertically integrated and value adding business model every step of the way from the farm to the supermarket shelf and back again.

Heartland Potato Chips

http://www.heartlandchips.co.nz/

Raymond Bowan is not your average potato farmer – far from it he is the epitome of a farmpreneur from the young age of 18 growing his own potatoes and selling them direct to a local fish and chip shop!  Furious at a large multinational that purchased to scrap the local potato chip factory which Raymond was a key supplier, Raymond took it upon himself with the support of his family to purchase the remaining shell of a deserted factory, fly to the other side of the world and invest in the latest European frying technology and install a state of the art modern potato chip factory literally in the shell and remains of a multinational snack company’s throw away.

The Bowan family ability to grow their own quality potatoes and supply them to their own factory and have them processed in under 12 hours from picking using state of the art technology has given Heartland Potato chips a quality difference from day 1 and customers (retailers and foodservice) and consumers love them! The rest is history as they say, and the business continues to grow from strength to strength on the back of an authentic story, a proud and passionate family and workforce that looks after everything from farm to supermarket shelf and back again.  Heartland Potato Chips has an adoring tribe of customers and consumers on social media who cannot get enough of the chips from the Heart of the South Island, New Zealand.

Five Factors contributing to the rise of the Farmpreneur

1. Farmers’ Markets

Admit it! Who doesn’t love a trip to the market? Its in our DNA!  What do we do when we travel to far flung places or dare I say it the third world tourist destinations? Head to the market of course! Why? We love the dynamics of the marketplace, the hustle, bustle, banter, haggling and freshness of the produce and the direct interaction with growers and stall owners.  Well the good news for growers is the farmers market is on the rise again!

2. Family Matters!

No doubt you too can see in the shops or in your pantry some fantastic family owned farmpreneur brands that not only taste great but feel great to support.  After all what family doesn’t want to help another family in need.  It feels good to buy from a family you can empathize and connect with as a consumer and customer.  We all love brands, but it is a little harder to say we love corporations unless of course you are a shareholder in them!

3. Co-ops are Crumbling!

Farmer Co-operative business models are crumbling due to their relentless focus on highest volume lowest cost production vs. value adding branded differentiation business models which results in a price race to the bottom.  Many Co-ops grow over time and are committed to taking every litre of milk or grain or seed from their grower owners and will clear them at any cost and aim to process them at the lowest possible cost at all costs!  We need look no closer to home than a local dairy co-op now in family hands after a strategy that focused on scale and cost of production cutting at the expense of branded differentiation and value adding. Net result = fail = sale!

4. Consumer Trust Drops

Consumer trust with leading large food multinationals is at an all time low as they read about tax minimisation, restructuring or harsh treatment of growers on the land.  Consumers are reading labels more than before, they are finding things out on social media they never knew about that happen behind the scenes in the relentless drive to meet margins, or retailers demands.  Put simply the behaviour of the world’s largest companies on the supply and retail side doesn’t sit right with a lot of consumers today.  How can they react? Can they change the system? Probably not, but they can vote with their wallets and buy family or locally grown or owned where they can afford to and in many cases that starts in their grocery basket!

5. Going Direct to Customers and Consumers

Growers, producers and food manufacturers can go direct to customers and consumers like never.  Retailers are ready and actively sourcing local brands for local customers.  Farmers markets appear in abundance as a great way for growers and consumers to interact directly. Social media and internet marketplaces and platforms from Facebook to eBay to Amazon or Alibaba or TMall afford the opportunity for growers to grow, process, brand and ship directly to consumers from farm to table.  While distributors will also add value in terms of aggregation of many small customers or many small volume products dropped and delivered on a single truck to a seller or buyer there is more and more pressure than ever before to cut out the middleman and modern technology and tools of the trade like e-Commerce and hyper fast logistics are facilitating this transition faster than ever before.

In conclusion, simply put it feels good as consumers to support a farmer and family owned business no matter how small they are today or tall they become tomorrow.  If their values and the values of their branded products align with our own as consumers, we actively seek them out in preference to the brands of faceless corporations.  We take pride in sharing our latest pantry treasures at dinner parties, BBQs or with our friends on Facebook and Instagram.  We take it upon ourselves as consumers and upholders of social justice to help the farmers, other families fight against the behemoth corporations.  Five factors are strongly aiding those farmers and families to take ‘entrepreneurial risk’ and create new value adding business models.  Look out in years to come as we see many more cases in our own backyard or country rise from the soil and land on our supermarket shelves.

Dermott Dowling is Managing Director of Creatovate International and Innovation Consultancy.  Creatovate specialise in helping clients create value through the twin pillars of International Business Development and Innovation.  We believe in the power of sustainable organic growth and using choice-based strategy to clearly articulate where your business is going, how you will get there and when and what resources you will need to deploy to make it happen!  If you are interested in a no obligation face to face or telephone chat, please do not hesitate to reach out to us anytime.For more information on our learning and methodologies head over to our website at www.creatovate.com.au and sign-up for our blog at CreatoBlog

Bibliography & References:

ESTHER ASHBY-COVENTRY (2017) Heartland may employ more staff to cope with growing range of chips February 21, https://www.stuff.co.nz/timaru-herald/news/89630153/heartland-may-employ-more-staff-to-cope-with-growing-range-of-chips viewed on 9/02/2018.

Blake Crosby (2013) A Hop Farmer’s Diary: 30 days in the life of Oregon’s Crosby Hop Farm, Aug 19 https://www.craftbrewingbusiness.com/ingredients-supplies/a-hop-farmers-diary-30-days-in-the-life-of-oregons-crosby-hop-farm/ viewed on 09/02/2018.

Clare Dunn (2015) Is chia the next quinoa? Local growers are positioning themselves to be at the head of the next superfoods trend. The Sydney Morning Herald, May 25, http://www.smh.com.au/small-business/growing/is-chia-the-next-quinoa-20150514-gh1mb2.html viewed on 9/02/2017.

Keith Gribbins (2017) Hop insights: We discuss the rise of Oregon Comet, the slowing of Cascade, Crosby Hop Farm and rock bands with Blake Crosby  https://www.craftbrewingbusiness.com/featured/hops-insights-discuss-rise-oregon-comet-slowing-cascade-crosby-farm-rock-bands-blake-crosby/  April 24, viewed on 22/01/2018.

Abbie Napier (2014) Turning Risky Start-Up into Success The Press, Sep 7, http://www.stuff.co.nz/the-press/business/10467259/Turning-risky-start-up-into-success viewed on 09/02/2018.

Export – Triumphs & Tribulations

Keynote talk and panel discussion at Australian Craft Brewers Conference 2017 in Adelaide.  Special thanks to the Independent Brewers Association of Australia and our esteemed panel of guests Marzen Hajjar – CEO/Founder at Hawkers Beer;  Corrina Steeb – CEO and Co-Founder @Prancing Pony; Callum Reeves – Chief Boss @KaijuBeer; and Ben Giles – Senior Trade Advisor at Austrade who shared their insights and learning.

Here is the audio from the panel discussion that followed the Keynote presentation:

Dermott Dowling is Managing Director of Creatovate International and Innovation Consultancy.

Creatovate specialise in helping clients create value through the twin pillars of International Business Development and Innovation.

We believe in the power of sustainable organic growth using choice-based strategy to clearly articulate where your business is going, how do you get there and when and what resources you need to deploy to make it happen!  If you are interested in a no obligation face to face or telephone chat, please do not hesitate to reach out to us anytime.

For more information on our learning and methodologies head over to our website at www.creatovate.com.au

Build your Beer Brand and Business Internationally

Before you send your beer outside your home country and build your brand and business internationally there are a few critical decisions you need to plan.  We will share those key decisions and discuss in more depth with 3 Australian craft breweries – Kaiju Beer, Prancing Pony and Hawkers Beer exporting around the world at the upcoming Australian Craft Brewers Conference in Adelaide on Thursday 27 July 2017 from 2pm – 2.45pm in the Kegstar Room.

Come and join us for Export – Triumphs and Tribulations and gather some usual insights and learning shared by Callum Reeves – Chief Boss @KaijuBeer; Corrina Steeb – CEO and Co-Founder @Prancing Pony; Mazen Hajjar – CEO and Co-Founder @Hawkers Beer and Ben Giles – Senior Trade Advisor at Austrade as you seek to export your beer, brand and business internationally.

• Where to go? Before you venture off-shore and start shipping or brewing your beer in overseas lands you need to decide Where to go? Which market(s) are best suited to your product(s) in which order of priority? There are a myriad of factors and indicators you can use to help you come to this conclusion.  Unfortunately, in export and in small business too often we see “reactionary undirected spray and pray” approaches to export as opposed to “deliberate, considered, choice based strategic decision making” when it comes to the first fundamental question to answer: Where to go?  Working with many food and beverage clients and delivering capability courses on behalf of the Australian Government to food businesses across Australia we have narrowed the key factors to consider to 5 underneath which you can come up with some lead indicators to make a measured and objective decision on where to go? 1^st, 2^nd, 3^rd… etc in terms of international business development:

1. Socio-demographics – it is easy to get blinded by the newspaper headlines – like 3 billion middle class drinkers in Asia by 2030 (Rohde, 2012) but you need to dig past the headlines to see that middle class is defined as annual per capita expenditure between US$3,650 and US$36,500. Our work with premium quality food clients suggests you look past the simple population to define your target in terms of age, income and urbanisation and other socio-demographic indicators including penetration of high disposable income luxury chain retailers and/or disposable income for food and entertainment.
2. Market Attractiveness – the obvious one – what do the numbers say? How much volume, value, cumulative annual growth and more importantly $/L are drinkers willing to spend on beer and other parallel world beverages (alcoholic or non-alcoholic). Some markets may appear huge on the surface in terms of consumption and volume e.g. China but you need to dig again below the surface to see that the average price of a domestically brewed draught beer of 500mL in China is 6.00 ¥ or A$1.15 per pint vs the average Imported Beer 33cl bottle 15.00 ¥ or A$2.88 per 330mL bottle or 250% more for 33% less beer and that is mainstream beer before we even get into craft beer pricing differentials compared to domestic and/or other imported craft beer brands.
3. Open to Trade – Which markets are open? Importing and exporting a lot of beer around the world? You can dig for data in this space as well to use you head as well as your heart when you consider where you can relatively easily ship your beer in terms of foreign markets.  Common data sources available to mine in this space include ABS statistics for outbound Australian exports (follow the leader) or UN Comtrade for import / export data.  You need to be across your HS Codes and where possible use multiple data sources to triangulate the information.  Knowledge of Free Trade Agreements and where the tariffs are and where they are falling fast is also an important indicator of opportunity.
4. Market Deterrents – You need to be aware of behind the border trade barriers or markets that have product registrations or stringent labeling guidelines like local language labeling and/or religious certification before port of entry. Some Asian markets have their own local equivalent of a Food & Drug Administration and require product registration before entry including: Thailand, the Philippines and Indonesia to name but a few.
5. Dispersion – highly concentrated markets either in terms of supply side power of suppliers or retail side in terms of power of buyers are more difficult to penetrate for obvious reasons. Where you see a concentration of market share in a few strong local players or a concentration of market share on the retail side of the value chain you will need to factor in a higher % share of the value chain to the retailers.  Markets with retail duopolies or oligopolies that extract high retail margins not only include Australia but New Zealand, Singapore and Hong Kong as well.

• How to enter? Once you have narrowed your choice of market(s) to enter to your top 1 or 2 or 3 in terms of order of priority and opportunity you are now able to head to the market and test your hypotheses and validate your assumptions on the right mode of market entry to successfully set up your brand and business in that host country. Depending on how deep your pockets are or the pockets of your investors and shareholders there are three key modes of market entry:
  1. Export the most common and lowest risk first entry mode of many small businesses you need to also take note of the different modes within export and the pros and cons of each entry mode from selling locally to an Australian Based Consolidator or using a local agent to using an in-market agency or selling to a local importer and distributor or direct to an end retail customer. Fundamental to your success in export will be partnering up with the perfect partner to help you implement you go to market launch plan and activate your brand in the host country. Some tips and guidance on how to objectively measure and evaluate a perfect partner for distribution are outlined in our Creatoblog – Looking for Love .  You would not marry someone sight unseen over the internet without meeting them, first would you? So, why would you ship your precious beer sight unseen to an inbound inquiry when you have not checked out the warehouse, distribution, sales and marketing capability of a potential importer in a foreign country?
  2. Contractual modes of market entry include two very common to the brewing industry – licensing and contract manufacturing. Brewing under licence is common for “large multinational brewers” and we might see more of this in craft in the future if craft beer drinkers start to base purchase decisions on factors like freshness and brewed locally for sustainability reasons.  While uncommon to date in craft beer there are some businesses already experimenting with this entry mode the most notable close to home example being Yeastie Boys brewed under licence in UK by Brew Dog and in Australia by Nomad.
  3. Investment is the preferred mode of market entry of the well-resourced large multinational enterprises in search of fast growth. Investment modes of entry include Joint Ventures, Strategic Alliances, Greenfield Investment and Merger & Acquisition.  Some recently publicised equity raisings in craft beer have indicated this mode of entry is under serious consideration for notable northern hemisphere craft brewers looking to more aggressively expand their businesses into the US, Australian and Asian Markets (Kamps, 2016 and The Drinks Association, 2017).

• When to enter? Finally you need to allocate sufficient $/people/time to resource a go to market launch and activate and generate trial and repeat purchase for your beer in the new host country. You need to be strong at home before you head overseas as your Homebase will fund the early years of investment in your off-shore markets.  There are many ways to get your beer in the hands of drinkers and it is vital you resource your business with sufficient funds and people to support your brand during the vital Go to Market launch phase as the saying goes you only get one chance to make a first impression and there are many great craft beers out there!  Some innovative collaborative ways to activate and share the cost of activating your brand in foreign lands are evident in both craft beer and independent wine and worthy of a closer look:
  1. Brewers Association – Export Development Program (EDP) – set up by the Brewers Association in 2004 the EDP objectives include educating international trade and media about US craft beer diversity and informing BA EDP members about international opportunities based around a host of support activity from participation in trade shows, competitions, seminars, inbound buyer missions, export market research and promotion through international media.
  2. New Zealand Beer Collective – friends abroad the NZ Beer Collective is the collective pooling of resources of 5 Kiwi Craft Brewers to enter the UK market and make a bigger dent together than they can make individually pooling their resources to assist with trade activation and distribution. The members include 8 wired, Renaissance Brewery, Three Boys Brewery, Tuatara, and Yeastie Boys and the Collective was established in was formed in 2016 to act as exclusive importer, national distributor, brand management and sales of the New Zealand Beer Collective in the UK market.
  3. The Craft Beer Clan of Scotland – a collection of 35 Scottish Craft Breweries collectively marketed by J W Filshill Ltd, a wholesale business based in Glasgow and run by very experienced international liquor executives they market collectively their craft beers into fast growth craft beer markets like North East and South-East Asia.
  4. Margaret River Wines – 14 winemakers, ranging from some of the region’s smallest to biggest, are stocking their product in four stores branded “Margaret River Wines” in China. And there are plans afoot to open another six by year’s end, and up to 300 within three years (Pancia, 2017). Teaming up they can directly distribute and educate the Chinese wine drinkers on the premium value and position of “Margaret River Wines”.

Exporting can be a great way to diversify your business, reduce risk and increase scale and economies of production in your brewery at home, not to mention the brand equity and business value you can create abroad if you do it well. Come along to the Australian Craft Brewers Conference in Adelaide on Thursday 27^th July 2017, and join us in the Kegstar Room for Export – Triumphs and Tribulations with shared experiences from three Australian craft brewers who are already exporting and be informed of the Government support and assistance available to you from Austrade.

Bibliography and References:

Australian Government (2017) DFAT https://ftaportal.dfat.gov.au/ Free Trade Portal viewed on 11/07/2017.

Austrade (2017) What is EMDG? https://www.austrade.gov.au/Australian/Export/Export-Grants/About/what-is-emdg viewed on 02/07/2017

Australian Brews News (2016) Yeastie Boys announces Sydney venture http://www.brewsnews.com.au/2016/11/yeastie-boys-announces-sydney-venture/ November 14, viewed on 02/072017.

Australian Bureau of Statistics (2017) International Trade http://www.abs.gov.au/International-Trade

Beertown NZ (2016) Yeastie Boys’ future is in the UK http://beertown.nz/wellington/273-yeastie-boys-future-is-in-the-uk Mon, 12 Sep. Viewed on 02/07/2017

Brewers Association (2004) Export Development Program https://www.brewersassociation.org/business-tools/exporting-beer/join-the-edp/ viewed on 02/07/2017.

Cost of Living in China  https://www.numbeo.com/cost-of-living/country_result.jsp?country=China

Creatovate (2014) Take your business off the Road to Nowhere into Lands of Opportunity https://creatovate.wordpress.com/2014/07/23/take-your-business-off-the-road-to-nowhere-into-lands-of-opportunity/ July 23.

Creatovate (2014) How to enter new markets…Export https://creatovate.wordpress.com/2014/10/09/how-to-enter-new-marketsexport/ Oct 9.

Creatovate (2014) Looking for Love? Partnering for growth internationally https://creatovate.wordpress.com/2014/06/19/looking-for-love-partnering-for-growth-internationally/ June, 19.

Creatovate (2014) How to enter new markets…Contractual Modes of Entry https://creatovate.wordpress.com/2014/11/19/how-to-enter-new-markets-contractual-modes-of-entry/ November 19.

Creatovate (2014) How to enter new markets…Investment modes of entry https://creatovate.wordpress.com/2014/12/04/how-to-enter-new-marketsinvestment-modes-of-entry/ December 4.

Chloe Fraser (2017) First Margaret River wine store opens in China https://thewest.com.au/news/busselton-dunsborough-times/first-margaret-river-wine-store-opens-in-china-ng-b88460098z Fri 28 April. Viewed on 02/07/2017.

Haje Jan Kamps (2016) BrewDog brewery raising $50M from the crowd to secure U.S. expansion https://techcrunch.com/2016/08/04/brewdog-equity-crowd/ August 4, viewed on 02/07/2017.

Anthony Pancia (2017) Margaret River wine producers see big future in exports to China as demand grows http://www.abc.net.au/news/2017-05-12/margaret-river-wine-producers-see-big-future-in-exports-to-china/8519932, May 12, viewed on 02/07/2017.

David Rohde (2012) THE SWELLING MIDDLE, Davos, http://www.reuters.com/middle-class-infographic retrieved on 2/07/2017.

Efic (2017) About Efic https://www.efic.gov.au/about-efic/

Food Innovation Australia Ltd (FIAL, 2017) Export Development Program https://fial.com.au/export-market-activity viewed on 02/07/2047.

The Drinks Association (2017) BrewDog announces plans to build Australian craft brewery http://www.drinkscentral.com.au/4751?Article=brewdog-to-open-australian-brewery April 12, viewed on 02/072017.

UN Comtrade (2017) https://comtrade.un.org/ viewed on 02/07/2017

Is your Innovation disciplined or are you simply dreaming up new ideas?

10 Things to Think about before you try to Innovate

What is Innovation? Does a new idea qualify as an innovation?  Not in my mind. Does in it quality as innovation in your customer’s mind?  Not if it does not create economic value for your business or your customers.  An idea might be creativity but the rubber hits the road when you make real changes to the value chain that creates economic value for your customers and your business.  We shared more about how to use upfront thinking and strategic tools and proven idea-to-innovation processes to innovate and create real economic value for you and your packaged goods customers at the Flexible Packaging & Label Makers Association – Changing the Landscape – Conference on 10^th & 11^th November 2016.

For a link or reference to that keynote presentation go to:

Many people confuse creativity and the generation of ideas for innovation which is economic value creation.  There are many great examples of innovation in the marketplace we can all point our fingers at and they each hold one commonality – they create value in the eyes of the end customer who pays money for the innovative good or service.  These innovations remove cost in the value chain from inputs to end user or create value in the value chain generating an improved product or service that a customer is willing to pay a premium for due to a higher perceived value offering.

Many people in the consumer packaged goods and packaging industry get bogged down in the gross misunderstanding that innovation is all about new products and fancy packaging – wrong again!  The lowest return on investment for your innovation effort is Product Performance (new or existing) and yet an alarming 90% of innovation effort is focused on this one of ten types of Innovation (Keeley, et al, 2013).  Innovation is a discipline, not a creative activity. Dreaming up new products or features, in isolation, “provides the lowest return on investment and the least competitive advantage” (Keely, 2015).  Why? Simply because the easiest thing to copy is a product – new or existing!  Think about the health of the Australian Flexible Packaging & Label Industry today?  Who is your greatest threat to your own competitive advantage?  Is it lower cost flexible packaging and label manufacturers in Asia?  Are they capable of copying your new packaging innovation? Yes! To make a truly transformational and sustainable innovation that creates value not only for you and your business but your customers you need to innovate across multiple types of innovation.

Only through strategic upfront thinking and use of a disciplined idea-to-innovation process like Stage-Gate® or Lean® and through Agile® planning and project management processes can you begin to start directing your scarce resources – $/people/time in the right direction.  How can you innovate in the right direction if you have not taken aim at what you are trying to achieve?  You might choose to disrupt the incumbents in your industry but how to do that will rest on a deep understanding of your customers, based on deep insights into what they value today and what you perceive they will value tomorrow.  They can’t tell you what they will value tomorrow because they don’t know the future.  Neither do you!  If Henry Ford had asked people in the early 1900s what they wanted in the way of improved transport options they would have replied “a faster horse!”.

You will still find there is a lot of aim, fire and adjust going on as you pivot and turn and kill off small bests and invest in bigger bets that are taking your business in the right direction.  Where is that direction?  What data sources big and small, quantitative and qualitative do you have to start to build a better tomorrow picture for you to take your fast, agile, lean and innovative company.  Be sure when you are out and about spending valuable time with your customers you are tuning into their problems, NOT yours!  Try to take a step back before you try and sell them your latest greatest flexible packaging or shiny new label that in all reality they probably don’t need or want. Start with a simple question next time you face your customers – old and new and prospects, and dig deep from there.  What is keeping you awake at night? What is your biggest headache or problem in your business right now? Start wide and only then narrow in on their packaging and labelling issues.  You may well uncover an insight or see or hear an opportunity to innovate far beyond a new product or packaging type to one or two or three or four or five different types of innovation that can help you transform your business and your customers.  Once you have more than 4 types of innovation in your new to market launch you are already differentiating yourself from the pack – pardon the pun!  Get up over 5 to 6 or 7 and you will truly transform and disrupt your industry and create a sustainable (profitable) competitive advantage for your business.

Do not underestimate the amount of effort, upfront thinking and discipline that is required to make this happen.  If Innovation was easy everyone would be doing it wouldn’t they? Clearly they are not.  90% of innovation effort is still focused on the easiest to copy “Product Performance” type. Step outside the pack – think outside the box and start innovating on the other 9 types of innovation.

The article above was published in FLEXO November 2016 Issue: p.6 ahead of the Flexible Packaging & Label Makers Association – Changing the Landscape – Conference on 10^th & 11^th November 2016.

Dermott Dowling is Managing Director @Creatovate, Innovation & International Business consultancy. Creatovate help businesses create, innovate and growth through innovation and international business development.

If you are interested to get Dermott to talk to your team, business or conference about creating value for consumers and customers in consumer packaged goods you might like to reach out to him for a chat over a cup of well brewed coffee. Contact dermott@creatovate.com.au or jump onto the Creatovate website and complete the contact form so we understand your needs and can tailor a bespoke consultancy solution to your challenge.

Bibliography & References:

Larry Keeley, Ryan Pikkel, Brian Quinn & Helen Waters (2013) Ten Types of Innovation – The Discipline of Building Breakthroughs John Wiley & Sons, Inc., Hoboken, New Jersey.

http://blog.deloitte.com.au/strategy/not-all-innovation-is-equal/#.V_cPZOB96M8 viewed on 7/10/2016

https://hbr.org/2011/08/henry-ford-never-said-the-fast viewed on 7/10/2016

 

Think Inside the Box

Think Inside the Box – Where is your Food Coming From?

Strolling the many beautiful aisles of BiG (Ben’s Independent Grocer) in Kuala Lumpur earlier in the year with an awesome Aussie food client I was suddenly struck by one product that jumped right off the shelf and slammed me in the face!  Amongst a sea of 50,000+ products (the average number of skus in a supermarket) and BiG is one of the best supermarkets I have ever visited and that’s quite a few in quite a few countries.

What captured my attention from One Degree Organic Foods was firstly a QR code front and centre of pack with a call to action to discover the ingredient story and what’s actually inside the box!  Funny you would think you could just read the ingredients panel for that information wouldn’t you?  You might also expect to see the usual blah blah blah statements that hide the truth on that same ingredient panel. Statements like “made from local and imported ingredients”, “sourced locally where possible”,…etc etc.  Not here, the family who own and operate One Degree Organic Foods are farmers themselves or as I like to call them farmpreneurs – the new breed of farmers who are entrepreneurs taking their value added brands and food products directly to consumers and baring their all in the name of authenticity and pride and passion!

We can not say it better than the owners so I will just quote what they say on their website: “We’re not a conglomerate, nor a big-box retailer, nor a chemical company with a food division. We’re a family who cares deeply about family farmers and the integrity of your food.” Does that resonate with you? It did with me in a busy brilliant independent grocer in KL, Malaysia in a cereals aisle that had local and imported options from the 4 corners of the globe to choose from.  I ended up standing at the shelf scanning QR codes and watching engaging YouTube videos of Pecan farmers in Peru, Buckwheat growers in central Canada and connecting with the passion these farmers showed to their land and the ingredients inside the box!

This is example is not only good social business its smart business and its smart marketing.  The best of the best in my mind.  Brilliantly efficient and transparent in a modern age where BIG is bad – who trusts large Multinational Profit Shifting Corporations anymore these days?  In fact in food, many have resorted to ‘faux branding’ creating cottage brands and hiding behind PO Box or Head Office Addresses with ABC Pty Ltd passing off a mass produced food item as something akin to a cottage industry startup family food brand.  If they are not creating ‘faux brands’ they are buying the genuine article and bringing them into their fold – founders and all to run alongside their mainstream food brands.  I have spoken  and written about this recent trend at Food&DrinkLive! in Sydney, Australia 2015 and in an earlier CreatoBlog Think, Act, Adapt and Innovate like a Startup!

Shoppers and consumers are asking nowadays – where is my money going? When I shop whether locally at an independent grocery store or with a major national supermarket chain they are already making a decision as to where they invest their hard earned $$$.  After get to the supermarket shelves or jump online you faced with 100s upon 100s of brands to chose from before you make another decision as to which company will you support. That support is being consciously or unconsciously driven more towards small, independent, family owned businesses more than ever before and there are many reasons for those choices.

Think about your own shopping decisions you take.  Of course price is important and as the famous jingle goes “everyone loves a bargain! ”  However do you also think of the following factors in your decisions at the shelf or when shopping online?

• How is this food grown? How are the animals treated? Is it sustainably farmed?
• Is this a genuine real article?  How much has my food been processed, added to, tampered with and packaged up?
• Where is this food from? What about the ingredients that go into making it? Is it safe to eat and feed to my family?
• Who am I supporting here? A large multinational or a family owned or small business?

Brands BIG and small need to start to think! act…and adapt to these fast changing times.  Technology is making it practical and cost effective for small to meet BIG and beat them on the playing field. Why? Because they come from a place of realness and not marketing puffery. Consumers connect with founders and their startup stories cooking on the stovetop, growing and processing their own farm produce and packaging up and telling their story in a way that is authentic and real.  You can not copy that if you are a large Corporate and it outpositions BIG as BAD and small is GOOD!

The examples we can list of brands that are doing this well is long and numerous but the list of brands NOT doing this is 100+ times longer.  Why not, take the opportunity to use technology to connect with consumers and customers and share your story? The time is now – there has never been a better time to be a farmpreneur or a small food producer. Here is a few other great examples you might like to explore and if you are interested in taking your own business to the next level of consumer connectivity give us a call or drop us a line.

• Cape Grim Beef
• Outback Organic Honey
• New Belgium Brewing

We love working with independent family owned fast growth businesses @Creatovate.  In fact, we have by accident or choice managed to specialise in it with a focus on the twin pillars of sustainable (profitable) growth – Innovation and International Business – what are you waiting for? Get out and tell your story – its real, it’s authentic and consumers and customers want to hear from you!

If you are interested to come and hear Dermott talk about creating value for consumers and customers in consumer packaged goods you might like to come to Changing the Landscape – The Flexible Packaging & Label Makers Association on 10-11 November 2016 in Melbourne, Australia.  Dermott will give a keynote talk on 11 November titled – Creating Value for your customers in the 21st Century for FMCG’s

Dermott Dowling is Managing Director @Creatovate, Innovation & International Business consultancy. Creatovate help businesses create, innovate and growth through sustainable innovation processes and spreading their wings outside their home base.

Bibliography & Additional Sources:

http://www.consumerreports.org/cro/magazine/2014/03/too-many-product-choices-in-supermarkets/index.htm viewed on 16/9/2016

The Big Group: http://thebiggroup.co/BIG/?p=about

Transperant Supply Chain https://www.onedegreeorganics.com/transparent-supply-chain and our team https://www.onedegreeorganics.com/our-team

 

 

 

Think Past Product when You Think about Disruptive Innovation

Author: Dermott Dowling @Creatovate (2016).

Now more than ever we need to think past new products and improved product performance when we think of truly ‘#disruptive innovation’ that upsets incumbents in industries and creates sustainable competitive advantage for the disruptive innovators.

How many types of innovation can you think of?  Have a go…write them down below as many as you can…can you see 10 or more distinct types of innovation examples?

1. ……………
2. ……………
3. ……………..
4. …………..
5. …………..
6. …………..
7. ………….
8. ………….
9. …………….
10. ……………..

Often, when we think about innovation all we think about is new products or improving existing product performance.  This is very important, but one of the increasing challenges we face in a hyper-competitive fast-pace modern business world is the ability of low-cost fast-to-market competitors copying your innovation and reducing your margin on new products and improved product performance as quickly as you can bring these new products to market.

Take this comment from a former Australian PepsiCo® R&D manager – is it symptomatic of your industry as well?

“We knew Smith’s Popped Chips was going to be a success as Popped Chips was doing very well in the US and our early prototypes tested very well with consumers and retailers.  What we didn’t expect was 3 other competitor brands and a private label retail brand launching at exactly the same time as we did!” PepsiCo® R&D & Innovation Manager, AIFST Innovation Reloaded Conference, Sydney, 2014.

The following extracts from articles and sources follow to help you think of multiple types of innovation so the next time you come up with a great idea for your business you might also think of some additional types of innovation to build on that great idea and ask your peers and customers and networks inside and outside your business for their ideas to help build a truly ‘disruptive innovation’.

Whatever your company hopes to do in terms of innovation, we suggest that the answer involves innovating within the following 10 distinct innovation areas, classified by the Doblin model:

1. profit model,
2. company network,
3. company structure,
4. company process,
5. product,
6. product performance,
7. customer service,
8. customer channel,
9. innovative branding and
10. customer engagement.

Let’s take a look at each of the 10 distinct types of innovation and an example of a company using that type of innovation as a key distinct advantage in their industry.  Note that you need to aim for at least 3 and ideally 5 or more different types of innovation to create a truly ‘disruptive innovation’ that can be sustained for a decent period of time in a highly competitive industry (Keeley, 2015).

How you make money | Innovative profit models find fresh ways to convert your offerings and other sources of value into cash. Great ones reflect a deep understanding of what customers and users actually cherish and where new revenue or pricing opportunities might lie. Innovative profit models often challenge an industry’s tired old assumptions about what to offer, what to charge or how to collect revenues. This is a big part of their power: in most industries the dominant profit model often goes unquestioned for decades. (Doblin, Deloitte Development LLC.)

Examples of companies that successfully altered profit models in established industries to include:

• Gillette – the ‘razor and blades’ profit model has been celebrated for years and adapted to countless other industries from ‘printers & cartridges’ to ‘coffee makers & capsules’
• Dell – reengineered the go-to-market delivery system when it first launched selling direct causing large share loss for competitors with traditional reseller business models.

How you connect with others to create value | In today’s hyper-commercial world, no company can or should do everything alone. Network innovations provide a way for firms to take advantage of other companies’ processes, technologies, offerings, channels and brands — pretty much any and every component of a business. These innovations mean a firm can capitalize on its own strengths while harnessing the capabilities and assets of others. Network innovations also help executives to share risk in developing new offers and ventures. These collaborations can be brief or enduring, and they can be formed between close allies or even staunch competitors. (Doblin, Deloitte Development LLC.)

Examples of companies that have successfully created value through network include:

• Target (US) – work with product designers and world-renowned fashion designers to create items only available at Target, other retailers to create Pop-Up stores for limited times only.
• P&G – Connect + Develop – P&G connects with external innovators and companies who submit innovations to P&G’s Connect + Develop. Connect + Develop is P&G’s program for encouraging open innovation, also known as crowdsourcing.

How you organize and align your talent and assets | Structure innovations are focused on organizing company assets — hard, human or intangible — in unique ways that create value. They can include everything from superior talent management systems to ingenious configurations of heavy capital equipment. An enterprise’s fixed costs and corporate functions can also be improved through Structure innovations, including departments such as Human Resources, R&D and IT. (Doblin, Deloitte Development LLC.)

Some companies that have created value through network innovation include:

• Whole Foods Market – is a ‘high trust organization’ where teams are everything from hiring which requires 2/3 team approval to P&L management, transparency is everything and decentralized innovations are amplified quickly instead of achingly slowly (if at all) (Keeley, et al, 2013, p. 28).
• L. Gore – has used a ‘flat lattice’ organisation model where teams are deliberately kept small and every employee becomes a shareholder after 1 year of service.

How you use signature or superior methods to do your work | Process innovations involve the activities and operations that produce an enterprise’s primary offerings. Innovating here requires a dramatic change from “business as usual” that enables the company to use unique capabilities, function efficiently, adapt quickly and build market-leading margins. Process innovations often form the core competency of an enterprise, and may include patented or proprietary approaches that yield advantages for years or even decades. Ideally, they are the “special sauce” you use that competitors simply can’t replicate. (Doblin, Deloitte Development LLC.)

Examples of companies that have created value through process innovation include:

• Zara – using fast fashion trends and supply chain optimisation Zara can move from the sketchpad or fashion runways of this world to the shop floor in just 3 weeks, the clothes will hang from Barcelona to Berlin to Beirut (Helft, 2002).
• Toyota – ‘lean’ production system reduced waste and excess, driving astonishing efficiency and continual product and process improvement across the business.
• IKEA – ‘flat-pack’ furniture with no variation by region or country with the same hardware and instructions regardless of where bought or sold streamline internal production processes.

 

How you develop distinguishing features and functionality | Product Performance innovations address the value, features and quality of a company’s offering. This type of innovation involves both entirely new products as well as updates and line extensions that add substantial value. Too often, people mistake Product Performance for the sum of innovation. It’s certainly important, but it’s always worth remembering that it is only one of the Ten Types of Innovation, and it’s often the easiest for competitors to copy. Think about any product or feature war you’ve witnessed — whether torque and toughness in trucks, toothbrushes that are easier to hold and use, even with baby strollers. Too quickly, it all devolves into an expensive mad dash to parity. Product Performance innovations that deliver long-term competitive advantage are the exception rather than the rule. (Doblin, Deloitte Development LLC.)

Examples of companies that have used Product Performance innovation include:

• Dyson – from vacuum cleaners to hand-dryers to fans Dyson continuously innovates on ways to deconstruct what is not working well in existing industries and then rebuild products on platforms that offer customers superior product performance and charge premium prices for the privilege of use of these products.
• Mars – with My M&Ms people are able to add their own messages, logos, or images to specific colour M&M candies – personalising product and opening up new uses. Ferrero has done similarly innovative things to reinvent Nutella and put it back on the table at home or out and about in cafes and shopping malls.

How you create complementary products and services | Product System innovations are rooted in how individual products and services connect or bundle together to create a robust and scalable system. This is fostered through interoperability, modularity, integration, and other ways of creating valuable connections between otherwise distinct and disparate offerings. Product System innovations help you build ecosystems that captivate and delight customers and defend against competitors. (Doblin, Deloitte Development LLC.)

Companies that create product system innovations include:

• Microsoft – Office – initially the products that went into MS Office like Word, PowerPoint and Excel were sold as individual products, now bundled together with Outlook and more they create an integrated system that is used as a productivity suite globally.
• Scion by Toyota® – Scion allows consumers to build their own car choosing from a selection of models and colours, paint and tyre trim modifications, radio, and more.

How you support and amplify the value of your offerings | Service innovations ensure and enhance the utility, performance and apparent value of an offering. They make a product easier to try, use and enjoy; they reveal features and functionality customers might otherwise overlook; and they fix problems and smooth rough patches in the customer journey. Done well, they elevate even bland and average products into compelling experiences that customers come back for again and again. (Doblin, Deloitte Development LLC.)

Some companies doing the obvious great are:

• Zappos – who would of thought buying a pair of shoes could be so much fun and so rewarding for the founders – Zappos sold to Amazon for US$1.1billion in 2009. ‘Deliver ‘WOW’ through service’ is the first of Zappos 10 core values.
• Sysco – one of the largest food distributors in North America with $43b in revenues, to elevate service in a relatively commoditized industry, Sysco created ‘Business Reviews’, a FREE consulting service helping clients to design menus or plan back-of-the-house logistics.

How you deliver your offerings to customers and users | Channel innovations encompass all the ways that you connect your company’s offerings with your customers and users. While e-commerce has emerged as a dominant force in recent years, traditional channels such as physical stores are still important — particularly when it comes to creating immersive experiences. Skilled innovators in this type often find multiple but complementary ways to bring their products and services to customers. Their goal is to ensure that users can buy what they want, when and how they want it, with minimal friction and cost and maximum delight. (Doblin, Deloitte Development LLC.)

An example of a company who connected their offer to customers in new and innovative way:

• Xiameter® from Dow Corning is a web-based sales channel first launched in 2002 that assists customers with a new way to buy silicone. Cost conscious buyers without the need for technical support or advice were able to select from 1,000s of product options, choose pricing and terms that suit them and lock in price and volume commitments in a simple but effective no frills business model that ran alongside the mother company.
• Nespresso® has retail stores and coffee shops worldwide, operates concessions inside department stores, online club for ordering capsules and machines, retail resellers for machines, partnerships with hotels like Ritz-Carlton & Hyatt, Airports and a Chefs and Sommelier program for harmonizing coffee with food and wine. Multiple channels are used to engage customers and consumers.

How you represent your offerings and business | Brand innovations help to ensure that customers and users recognize, remember and prefer your offerings to those of competitors or substitutes. Great ones distil “a promise” that attracts buyers and conveys a distinct identity. They are typically the result of carefully crafted strategies that are implemented across many touch points between your company and your customers, including communications, advertising, service interactions, channel environments, and employee and business partner conduct. Brand innovations can transform commodities into prized products, and confer meaning, intent and value to your offerings and your enterprise. (Doblin, Deloitte Development LLC.)

Companies that have used ‘brand innovation’ successfully to date include:

• Virgin – starting as a mail order record business and now involved in planes, trains, rockets, telecoms, wealth and health management and more! Virgin is the elastic band of ‘brand’!
• Aldi – have innovated using brand ‘exclusive’ or ‘destination’ branding that cuts out the middleman and goes direct to suppliers to find unique food products, beverages, and houseware.

How you foster compelling interactions | Customer Engagement innovations are all about understanding the deep-seated aspirations of customers and users, and using those insights to develop meaningful connections between them and your company. Great Customer Engagement innovations provide broad avenues for exploration, and help people find ways to make parts of their lives more memorable, fulfilling, delightful — even magical. (Doblin, Deloitte Development LLC.)

Companies using customer engagement innovation to excite and delight customers include:

• Blizzard Entertainment – World of Warcraft has more than 11million subscribers worldwide who are actively encouraged to engage with each other using a multitude of technology and techniques and ‘team up’ to achieve higher rewards.
• Apple – shows off its new hardware and software first to its developers and affiliates at its World Wide Developers Conference (WWDC) where tickets are distributed in a lottery system with prices of $1,599 a ticket for WWDC2015.

Winning innovations typically use multiple types of innovation – if you can get 3 or more that’s great and if you can get 5 or more in your next big bet that’s even better!  You are much more likely to create a sustainable innovation that endures when you innovate across multiple types of innovation.

An example of a truly transformational business and industry innovation that transcend many types of innovation follows:

1. Profit Model – machines were first available widely across multiple channels and retailers at low prices but pods were only available direct from the club.
2. Network – machine manufacturers were engaged to create truly great coffee and growers were engaged to source elite top quality coffee and retailers were engaged to get the machines out there far and wide.
3. Structure – Nespresso did not start out as an idea from the inside the mothership Nestle but rather the opposite it was ‘incubated’ across the road from head office in a distinct and different building with a dedicated team set about to disrupt their existing instant coffee business
4. Process – Nespresso® licensed a unique technology from the Battelle Institute that made coffee in an instant using an entirely new process (Silberzahneng, 2010).
5. Product Performance – we all can remember the first time we had a good Nespresso and could not believe how good the taste was for a homemade coffee.
6. Product System – build into the Nespresso club was the unique pods system with multiple types of coffee to suit different palates and desires.
7. Service – with Nespresso® club and direct engagement of end consumers through the stores, direct mail, social media, etc. Nespresso® took delivery of a staple to a whole new level.
8. Channel – Machines – sold everywhere Pods – direct from Nespresso®.
9. Brand – Nespresso did not choose George Clooney as their ambassador – the 2 million friends on Facebook decided he was the ultimate spokesman for their most adored brand.
10. Customer Engagement – from online to telephone to direct mail to Nespresso shops and stalls in busy hubs like airports, hotels, etc

Systematically determining what needs to be changed inside and outside your company to create innovation that transcends multiple types of innovation typically involves the following steps according to Keeley (2015).

Understand the beliefs, practices and truths. Start by just listing the unchallenged assumptions about rules, tools, techniques and ingrained habits about the industry.  Now think about ways to challenge these orthodoxies.

Starbucks sought to challenge its industry orthodoxies, the first one it faced was the assumption coffee was a commodity for which Americans wouldn’t pay premium prices.

What are your inclinations or predispositions towards doing business in a particular way today?

Imagine life without those assumptions. Consider a customer group that would not behave the way your customers typically behave.  Imagine a business that specifically does the opposite to what you are doing right now?  What would be some of the likely and unlikely outcomes?

Now think about different ways to rebuild the platform.

Now that assumptions are stated, think of all the ways to challenge them, from a new profit model to different customer-engagement tactics. Most companies stop at trying to do product innovation that marginally alters the offering. The big returns come from multiple approaches, (Keeley, 2015).

Think about Starbucks again. The company flipped its industry’s profit model orthodoxy by creating a premium experience. People may not pay more for coffee, but they certainly do pay more for a different atmosphere in which to drink it.

Start with one of the 10 types of innovation you find most interesting, start thinking of different ways you could innovate under that configuration on your business / category / customer today.

Ask questions. ‘how might we?….’ ‘what if?….’ ‘what’s frustrating you right now? ‘what’s frustrating your customers right now?’ ‘If you had a magic wand, what would you change?….’ Answers to the right questions can lead to an idea, an overview sketch of a new strategy, something to share and build upon.

Once you pick the areas you want to tinker with, how will you explain this new way of doing things to your mother? Where will you concentrate first, and then next? What does the new idea add that is fresh and valuable? What should be prototyped to help customers, users, insiders and partners?

Dermott Dowling is Managing Director @Creatovate, Innovation & International Business consultancy. Creatovate help businesses create, innovate and growth through sustainable innovation processes and spreading their wings outside their home base.

References:

James Janega, (2014), April 2 Larry Keeley, Doblin and the 10 categories of innovation  http://bluesky.chicagotribune.com/originals/chi-larry-keeley-doblin-innovation-strategy-bsi-20140401,0,0.story retrieved 12/04/2016.

Larry Keely, Ryan Pikkel, Brian Quinn, Helen Waters (2013) Ten Types of Innovation: The Discipline of Building Breakthroughs, John Wiley & Sons, New Jersey.

Business Today, (2011), Dec 11 Cover Story: A Happy Marriage http://www.businesstoday.in/magazine/cover-story/innovation-toshiba-ups/story/20185.html Business Today online viewed on 12/04/2016.

Charles Fischman (1996) April 30, Whole Foods is all Teams http://www.fastcompany.com/26671/whole-foods-all-teams viewed on 13/04/2016

W.L. Gore http://www.gore.com/en_xx/aboutus/culture/ viewed on 13/04/2016

Helft, Miguel (2002) May, Fast Fashion Forward Business 2.0

Philippe Silberzahneng (2010) March 18, https://philippesilberzahneng.wordpress.com/2010/03/18/nespresso-complexity-innovation-process/ viewed on 15/04/2016

Can BIG FoodCo Think! Act & Adapt like a Startup?

Concept of small business running fast!

Is it just us or does it seem today that the small food companies are moving faster than ever before and the big companies are moving more slowly when it comes to innovation in our local food industry?  Perhaps you and I are not alone in our thinking? The literature and newswires in the US have been awash with stories of “the war on big food” (Kowitt, 2015) with big bold claims like “big food is under attack from the rise of startup granola!”

Changes are not only taking place abroad in the US supermarket aisles where shoppers are cruising the periphery of the store seeking out new and trendy, authentic and unique chilled, fresh, natural and healthier food options.  The same trends are evident in Australia and plain as daylight for all to see on the high street where the Fast Food Evolution has seen global super brands like McDonalds, KFC, Subway, Pizza Hut and Burger King scrambling to reinvent themselves against the rising tide of ‘fast, casual dining chains’ like Grill’d, Nando’s and Mad Mex (Brown & Han, 2015).  Let’s not even start a conversation about the global food truck trend that could be today’s incumbent fast food operators tomorrow’s ‘disruptor’.

VIDEO: Can big food and beverage think like a startup?

16 Dec 2015 published at Food&Drink Business

Big food companies will need to rethink their business models if they want to innovate like startups, according to Dermott Dowling, managing director of innovation and international business consultancy Creatovate.

Speaking recently at the Food & Drink Business Disruptive Innovation LIVE forum, he explained why this is growing in importance, and how some of the world’s largest food and beverage companies are responding.

According to Dowling, the top 25 food businesses in the US lost at least $4bn in market share last year as consumers skipped the core food aisles in favour of the fresh segments, and increasingly sought out innovative products from smaller companies.

In this video clip, Dowling describes how some of the world’s largest companies, including Nestle and Coca-Cola, are responding to the movement, and he shares some examples of local companies that are having a go at digital disruption in the food space. See the full clip here.

Why is this happening all of a sudden?  Is it another off-shoot of the start-up tech trend finally finding its way into the food industry? Like most complex issues of business today it is a symptom of a number of factors and key influences colliding to create the perfect storm for “disruptive innovators” in the food industry.  Let us start with the trends underlying today’s shopping decisions consumers are making today with their wallets – after all is it not the shopper who ultimately controls the marketplace nowadays?

1. Shoppers and consumers are looking for ‘authenticity’ and ‘realness’ more than ever before. Their trust in global multinationals is at an all-time low and most major food companies operating in Australia are global multinationals http://www.slideshare.net/dowlmott/going-global-in-food-grocery-retailing-business . With a smart phone in every shoppers pocket the truth is out there on Facebook, Instagram and Twitter and consumers trust their friends and followers and influencers’ more than super brands blasting the old mass media airwaves. Hirschberg (2015), founder of Stoneyfield Organic Farms sums it up when he says “There’s enormous doubt and scepticism about whether large companies can deliver naturality and authenticity.”  As a result consumers are more connected with small and medium size family owned or startup food businesses and brands.  They feel a closer affinity with the founders than the boardrooms and polished CEO communicators of “Big FoodCo”.  They connect through their social media accounts, love the storytelling of startup founders and the authenticity of the founder(s) stories up all night packing boxes in their garage or cooking new prototypes on their stovetop before racing to the local farmer’s market or grocery shop on their way to fame and fortune.

2. Mintel (2015) Trends report highlights front, bold and centre Trend #3 Less processed foods, more natural as consumers continue to be concerned with eating natural and ‘less processed’ food products.

3. Consumers and shoppers are more affluent than ever before and yet more sporadic in their shopping and buying behaviour. They fill their trolleys with private label staples and shop at Aldi and CostCo to save on essentials and then simultaneously splash out on their indulgent luxury food treats. They love sharing their discoveries at their local high end speciality independent grocery store or Asian specialty shops with friends and taking something a little unique and special over to their neighbours or friends place for dinner to start a ‘foodie’ conversation.  Again here the shopper leans towards the ‘smaller, more real, and authentic’ food brands.

There are also a few key influences in the background from broader business theory on innovation that are impacting the ability of the smaller and medium size companies to grow faster than ever before and hindering the larger elephants from dancing the same jig when it comes to innovation.

Customer Development Model (Blank & Dorf, 2012)

1. Small and medium size companies by their very nature are ‘searching for growth’ ‘new business models’ and ‘repeatable and scalable business models’ and most importantly they are actively seeking out ‘new customers’. As they seek out new growth pathways for their businesses they discover unmet customer needs and wants, gaps in the market and they scurry back to the lab or pilot plant or co-manufacturer and whip something up quickly in the ever desperate search for sales and a repeatable scalable business model. With those real sales comes learned experience what’s working, what’s not, what needs fixing and so the cycle continues at pace – Build, Measure, Learn or as we like to say @creatovate “earn & learn”.  Less time in research more time spent doing, making, talking to customers and consumers with real prototypes, failing, learning, earning, and eventually success! $:-)

Business Model Iteration (Blank & Dorf, 2012)

2. Being smaller by nature you are in fact at a strategic advantage when it comes to innovation. Less $/people/time makes you smarter in your choices, you look for fast hacks forward, cut corners and try to make more from less without the bureaucracy of Stages and Gates and internal meeting after internal meeting and research after research spending valuable $/people/time but earning nothing, spending a lot and often learning very little about real customer and consumer problems in the marketplace.

3. Small and medium size companies lack middle management aka ‘ the innovation police’ who are stringently guided and controlled by budgets, plans, processes, performance reviews and the need for ‘incremental’ over ‘transformational’ growth and innovation. The middle manager’s role is to shepherd the workforce on the annually set KPIs, Manage Budgets and stop people seeking out opportunities off the strategic plan no matter how promising those opportunities might look or feel to the front line.

Resource Dependency Model

 

4. Stakeholder dependency theory (Hillman, et al 2009) suggests any organisation is interdependent on its ecosystem and the biggest interdependencies on any organisation are its ‘customers’ and its ‘shareholders’. Think about who the dominant customers are of a small or medium size food enterprise in Australia vs. a large one? Think about what investors are seeking in small and medium size business? Fast growth? Exits? Vs. Large stable food businesses? Safe and consistent returns?

Technology and capital are influencers in the background and technology enables the small and medium companies to better connect with their consumers, levels the playing field in terms of ability to interact professionally with customers (retailers) and trade partners.  Capital seeks growth opportunities and will look for the opportunity to enter and exit as quickly as possible where the opportunity for disruption exists.  Are we likely to see the small and medium growth food companies grow faster into the future – most definitely Yes! Will the large incumbents sit back and watch the ants eat their cake?  That remains to be seen and we are in for an exciting food future ahead.

Dermott Dowling is Managing Director @Creatovate, Innovation & International Business consultancy. Creatovate help businesses create, innovate and growth through sustainable innovation processes and spreading their wings outside their home base.

References:

Blank, Steve & Dorf, Bob (2012) The Startup Owner’s Manual K&S Ranch Inc, California, US. First Edition.

Dowling, D (2015) Think! Act! Adapt & Innovate $ like a Startup! http://www.linkedin.com/pulse/think-act-adapt-innovate-like-startup-dermott-dowling?trk=prof-post LinkedIn, Aug 19, retrieved on 05-Nov-15.

Dowling, D (2015) Putting “I” first in Insight to Innovation http://www.linkedin.com/pulse/putting-i-first-insight-innovation-dermott-dowling?trk=prof-post LinkedIn, Feb 25, Retrieved on 5-Nov-15.

Dowling, D (2012) Globalisation of Food & Beverages http://www.slideshare.net/dowlmott/going-global-in-food-grocery-retailing-business Slideshare, Retrieved on 5-Nov-15

IRI Worldwide (2012) The Pacesetters Report http://www.iriworldwide.com/iri/media/iri-clients/4-17-13T_T%20April%202013%20NPP%20vFinal.pdf  viewed on 5-Nov-15.

Kowitt, Ben (2015) The War on Big Food http://fortune.com/2015/05/21/the-war-on-big-food/ Fortune Online 21 May, retrieved on 5 Nov. 15

Brown, R & Han, E (2015) Fast Food Evolution – Global Super brands are having to reinvent themselves to keep up The Sydney Morning Herald online 11 January   http://www.smh.com.au/nsw/fast-food-evolution–global-superbrands-are-having-to-reinvent-themselves-to-keep-up-20150106-12j7mc.html  retrieved on 05-Nov-15

Australian Food News (2015) Top Global Food and Drink Trends for 2015 http://ausfoodnews.com.au/2015/10/21/top-global-food-and-drink-trends-for-2016.html October 21, retrieved on 05-Nov-15.

Amy J. Hillman, Michael C. Withers and Brian J. Collins R (2009) Resource Dependency Theory: A Review Journal of Management 2009 35: 1404 originally published online 23 September 2009 https://www.unifr.ch/intman/assets/files/Teaching/Network_2014/Additional%20Readings/Hillman-Withers-Collins%202009%20-%20Resource%20Dependence%20Theory.pdf retrieved on 5-nov-15

Sue Mitchell (2015) Here’s Why Consumers are Choosing Aldi over Woolworths and Coles http://www.smh.com.au/business/heres-why-consumers-are-choosing-aldi-over-woolworths-and-coles-20150714-gicgix.html July 15 retrieved on 04-Jan-16.

Think, Act, Adapt and Innovate like a Startup!

Large companies’ size and culture make disruptive innovation extremely difficult (Blank, 2010). Despite this challenge many large food businesses today recognise the need to be disruptive innovators and test new business models in the digital world.

 

Why change? Because the bat is coming…

Change is coming, it’s here now and there are many ways businesses can react to change.  They can duck and hide and hope the flying baseball bat misses them and takes out the competition.  They can look the other way and collect the full force of change to the face like the poor gentleman below at the Red Sox game or they can be brave anticipate the changes that are coming and reach out for the bat like the guy just out of shot.  Often its the startup that is just out of shot or sight of the incumbents.  Backed by passionate founders and astute investors they anticipate change, react to it positively and use innovative new business models and new technologies to literally land the baseball bat in the face of the incumbents and harvest the glory of fast growth in a new economy.

In this keynote address given at Food&Drink Business Live! Disruptive Innovation, Creatovate – Managing Director, Dermott Dowling takes the audience through some practical learning steps and lessons from local digitally focused food innovators leading the way in this exciting new land of opportunity.

Think!

Thinking is the first step in any business innovation. Alas, it’s hard in isolation. You sit and stare and scribble on the blank sheet of paper in front of you.  However, people as social beings need each other and our collective mind power to come up with breakthrough ideas to innovate. More often than not we scan the environment for what’s out there already and working? Alternatively, we look for problems – what’s bugging our current customers or potential new customers? We then map the value chain from inputs to outputs looking for – what can we take out? Where can we fit in? How we can create value for customers and ultimately our own business?

 

Act!

Next step in the process of building an exciting startup or disruptive innovation is design & rapid prototyping our ideas into Minimal Viable Prototypes or MVPs. Rough and ready is fine here, what’s most important is we start testing & experimenting our hypotheses on existing and new customers ASAP.   Gone are the days we spend weeks and months in kitchens, pilot plants and focus groups with consumers.  The market demands we move at ‘tech speed’ now!  I can not wait as your customer or your boss for months while you toil and spend $$$ without any real customer or consumer feedback!  By that I mean people reaching into their pockets and paying for the food and beverage products, not just talking about how cool it is or whether they might like to buy it when it hits the shelf in 12-18 months time!  As we act, we simultaneously align as a team adapt to the changing customer feedback. We also measure & monitor early results for signs of customer acceptance and readiness to scale our new business model.

Startups are not small versions of large companies. They need different tools for thinking and acting. Its important you create a common language in your company if you venture down the path of creating intrapreneurial startups inside your large organisation, so people are talking on the same page and not hearing Blah! Blah! Blah! when we mention new terms like Business Models. For this reason at Creatovate, we recommend a common approach to our clients hypotheses generation like the Business Model Canvas (Osterwalder, 2012).  This is an excellent thinking tool to get the team ‘on the same page’ in terms of understanding of terms, hypothesising ideas and creating a new Business Model for real market testing.

Adapt!

Once you have thought and aligned on your initial business model hypotheses “get out of the building” and ask potential users, purchasers, and partners for feedback on all elements of the new business model, including product features, pricing, distribution channels, and affordable customer acquisition strategies. If we accept that startups are engaged in the search for a new business model, we recognize that radical shifts in a startup’s business model are the norm, rather than the exception. For this reason rather than fire the executive team when the normal approaches to go-to-market are not working, we pivot and change tack (Blank, 2013).  Pivots are a completely normal part of the startup process as you first discover customers who will pay an acceptable price for your product and validate your minimal viable prototypes fit their needs and are worthy of scaling.  Venture Capital and astute investors understand pivots as an essential part of building a startup.  The question is does established incumbent business leaders understand they need to treat startups in their own company very differently to the normal go to market new product development that may go through an existing business process like Stage-Gate to existing customers using existing norms.  If you are going to create a breakthrough innovation and business model in the digital economy its highly likely you will be doing things very differently.  As such leaders need to be aware of a different set of behaviours and skills to encourage the startup founders and intrapreneurs to boldly push on and not be afraid to pivot as they learn and lean left and right to find the right business model and validate their multiple hypotheses.

Innovate $

Private equity and venture capital are investing in disruptive startups in the food industry right around the world.  The top 25 U.S. food and beverage companies have lost an equivalent of $18 billion in market share since 2009. Some analysts are describing ‘big businesses in food’ nowadays as being like melting icebergs, every year they become a little less relevant to customers and consumers (Kowitt, 2015).

Major packaged-food companies lost $4 billion in market share last year alone, much of it to smaller, more health-conscious companies.  Venture capital firms are taking notice. Over the past five years, they have invested nearly $570 million in food companies. Famous Australian VC/PE funded food businesses include Rafferty’s Garden (Anacacia Capital’s sale of baby food maker Rafferty’s Garden to PZ Cussons for over A$80m).  Notable trade sales recently of established food businesses that have been reinvented include Pacific Equity Partners’ sale of Peters Ice Cream to UK-based ice cream maker R&R (AVCAL Handbook, 2014).

Large multinational food companies are not taking the changes in their markets lying down.  Nestle founded Inventages in 2002 and has invested EUR$150m in 38 companies across a breadth of categories from consumer health sciences to CRM to supply chain to innovative packaging solutions.  Tate & Lyle established Tate & Lyle Ventures in 2006 initially with a £25M VC fund & currently has another active £30 million fund investing £1-2 million per tranche in each investment.  Coca-Cola Founders program was established in 2011 and already has 19 co-founders, across 10 countries, with 9 startups partnering with Coca Cola to provide much needed scalability to the startups and their co-founders.

Large businesses need startups and vice versa. Is there some magic in the middle and what can incumbents do to learn to be lean and act and adapt and innovate like a startup! Established businesses are in danger of not being able to adapt quickly enough, while nimble start-ups fail due to their inability to scale. Tomorrow’s business winners will be the ones who know how to combine the two (David Butler, VP Innovation & Entrepreneurship, Coca-Cola).

Learn & Lean

Australia is seeing signs of life now in the land of digital disruption with several new startups from both existing food companies and new entrants.  Some digital disruption innovation leaders interviewed for this key note include Dish’d    Kogan Pantry and Marley Spoon  MDs & Founders.  Each business plays to its own unique space in this exciting new field of play, but there are several key common learning shared by their leaders for any business thinking about entering the exciting and highly disruptive digital innovation landscape in food.

Challenges

Challenges of starting a new food business in the online world today in Australia include:

Sub-culture of a startup within a large business can be hard to swallow for staff and senior leaders alike in established traditional food businesses.  Patience is essential alongside persistence with payback horizons very long and initial sales may fall well short of what can be expected from taking NPD to market through traditional go to market retail channels.  Consumers want whole of shop/meal solutions rather than parts of the pantry stocked from several different eTailers, and they are looking for suppliers to make their lives easier, not harder when it comes to shopping online and/or cooking meals at home.  Inventory / demand / supply chain management is even more challenging in the online with demand for hot specials either going viral and off the charts or product being unappealing and not moving at all.  Never underestimate the response from incumbents who will fight back extremely hard with loss leading specials and pressure exerted on their existing suppliers to restrict supply of goods and inputs to the new entrants.  Go in eyes wide open – the online world requires the same effort if not more than a business in the bricks and mortar world of food and beverage manufacture, supply, distribution and marketing.

Why do it?

We get asked this question a lot from our clients!   Our first response, is to remember that whatever innovation or change you make it must create economic value to you and your business.  Change for changes sake is not innovation, it might be creative but its not innovation until it delivers economic return to your business.  This may not happen for significant time when testing new business models or startup strategy but we also ask our clients what are the possible consequences of doing nothing?  Going backwards? Getting hit in the face by a baseball bat?  You may be chasing additional demand and/or contributing back to your online community if you are already an established online entity.  You might be looking to engage and interact with existing and new consumers if you currently exist in the traditional bricks and mortal retail led food industry.  You may be seeking to grow into adjacent verticals. Whatever your strategic reasons, for action they need to be strong enough to survive the bumps in the road ahead as there will be many!

Advantages!

Some of the key advantages from entering the online world of food and beverage eTailing are the longer term potential scale advantage that can come quickly if you are successful.  Likewise the plethora of instantaneous data analytics like Google Analytics that can help you pivot and test and adapt much more quickly than through traditional customer/retailer feedback networks.   Recognise that Australian eCommerce market maturity could be as much as 5 to 10 years behind the US and our Australian eCommerce supply chain maturity has some considerable road to run especially in the area of chilled B2C food or meals solutions delivery to consumers doorsteps.  These are significant challenges and can not be underestimated but the early entrants will learn faster and be further down the field as new enabling technologies like drone deliveries or driverless vehicles become very real solutions to today’s very high cost of service to the Australian consumers doorstep.

Omni-Channel

Omni-channel could be a red herring – beware!  The economics are vastly different between off-line and online retail in Australia, however for incumbent off-line retailers who have online eTail offers the commercial incentives are quite simply not there to lower their online prices for their eTail offers such that it would cannibalise their healthy real world margins in bricks n mortar retail.  Let us not forget the significant sunk costs the incumbents have in ‘land banked’ property investments, the enormous number of staff on their books in their shops who would cost $$$ to layoff if their online services took off!

Food Supply to Disruptors

Food manufacturers, wholesalers and suppliers are aware of the current industry trends and have a strong willingness to supply new food focused digital startups.  That being said beware the earlier caution about incumbent retailers pressure to stop supply to new entrants.

Price Leadership

Price leadership is of paramount importance online and that could be in part due to the fact that Australian consumers have been trained to expect deals online.  Brands matter online and deep cut discounts bring traffic!

 

Groceries look like the last to take-off in the land of digital commerce.  Online suits small, expensive, commodity driven categories hence why it has disrupted so intensely in travel, music and electrical goods.  Wastage is an important driver in eCommerce in food. Consumers care about their household (average 20%) and supermarket waste (average 35%). This can be a compelling emotive and commercial value proposition for digital disruptors.  Consumers also expect their food in the same condition they find it in store when they get home and see it at their doorstep.

Clearly, we have a long way to go in terms of digital disruption and disruptive innovation in the food industry in Australia and what is around the corner is the million dollar question for startups and incumbents alike.  When an intelligent member of the audience from Nestle Australia asked “what’s the next big thing in terms of disruptive innovation in the food industry in Australia?” to the panel of experts on the stage she got 6 very different answers ranging from predictions of drone and driverless vehicle meals and drinks delivery to consumers demanding a direct interaction with their favourite food producers not only in the social media landscape but in terms of direct purchase and order-to-delivery-to-doorstep.

One thing is certain, the businesses that can have the foresight to anticipate change and react positively to it will be the ones who avoid the baseball bat to the face and will seize the opportunity our new tomorrow brings to us all.  The multi-million dollar business question is which of the incumbents or venture backed startups has both a) the foresight and b) the resilience and bravery to not only see the bat coming but to calmly stand up, reach out and catch it!  When everyone breathes the collective sigh of relief and the startup sits back down in the stands, they will have banked the profits on the table and will be the new incumbent. Go Gators!

References & Bibliography:

http://businessmodelalchemist.com/tools

AVCAL (2014) Australian Private Equity & Venture Capital Association Ltd

Blank, Steve (2010) Crisis Management by Firing Executives – There’s A Better Way Nov, 18. http://steveblank.com/category/customer-development-manifesto/page/2/

Blank, Steve (2013) Why the Lean Start-Up Changes Everything, May, Harvard Business Review

Danielle Gould (2014) Food & Ag Investment Sources Explode in 2013  http://www.foodtechconnect.com/2014/01/02/food-ag-investment-sources-explode-2013/ viewed on 11/8/2015

Kowitt, B (2015) Special Report: The War on Big Food Fortune May 21.

Montgomery, M. (2015) How The Tools Of Venture Capital Are Revolutionizing Food July 14 Forbes

Osterwalder, A. Pigneur, Y. Bernarda, G. Smith, A. (2014) Value Proposition Design Wiley.

Osterwalder, A (2013) A Better Way to Think about Your Business Model

Phillips, E. (2015) Food ‘Accelerators’ and the $10 Bag of Pasta The Wall Street Journal Jan 6.

Kolodny, L (2014) Will Investors Still Back Food Startups As Competition Heats Up?

Wall Street Journal July 25.

http://coca-colafounders.com/

http://www.coca-colacompany.com/innovation/

http://www.iamdigital.com.au/2015/02/coles-woolies-vs-kogan-pantry.html

Why do elephants find it hard to dance?

It’s not just the tech sector that is startup crazy – technology is a key enabler of disruptive innovation in every industry, and food and beverage is no exception.

Startups are the talk of the town among both large and small companies, from Silicon Valley to Sydney, and in agriculture, manufacturing and retail and every sector in between.

Many executives scratch their head as more nimble private and venture capital backed businesses nibble away at the edges of their empires.

Their disruptive offerings are slowly but surely taking away existing customers or offering better value goods and services to their customer base.

Moreover, it seems as though the speed of innovation and new products has accelerated beyond what is possible in some companies and the failure rates are getting worse not better for new product development.

So how can traditional companies protect their core business against this endless wave of disruptive innovation whilst simultaneously executing the business plan for this quarter and financial year?

There are a number of strategies, structures and frameworks that companies can use to upskill their people, become an ambidextrous organisation, build an innovative culture, and create their own disruptive innovation.

Creatovate specialises in the critical thinking frameworks that startups use to rewrite business models, innovate beyond product and win with in the market.

At the upcoming Disruptive Innovation Industry Forum in August, I will share some of these, delivered in a way that can be used by traditional companies to unleash the intrapreneurs who are already working inside their businesses.

Dermott Dowling is managing director of innovation business consultancy @Creatovate.

Published on 24 Jun 2015 at http://www.foodanddrinkbusiness.com.au/news/why-do-elephants-find-it-hard-to-dance

Putting “I” first in Insight to Innovation

Welcome to the first in a series of posts as we travel the journey from insight to innovation.  Our plan here is to share some ‘insights’ ironically behind what differentiates the businesses that succeed in finding an insight, generating compelling new product or business ideas and concepts from their insights and taking them through a systematic process to innovation in the market place.

Before we begin we need to start with a simple definition of what an Insight is and Why? it is so important to uncovering unmet consumer or customer needs to create new ideas for products and/or services for your business.  Edwards (2013) points out Insight is a term commonly bandied around in marketing circles and often misused and misunderstood.  Edwards’ definition is:

“Consumer insight: is a revelatory breakthrough in your understanding of people’s lives that directs you to new ways in which to serve your customers better.”

The “revelatory breakthrough” bit really bites. Do not expect “revelations” on a daily basis.  How do you know when you’ve got one? You will feel both surprised and find it obvious at the same time. Insights make you exclaim “Of course!” The revelation makes sense because it fits with what you already understand about human nature; yet there is something about it that is utterly fresh, to which you had been blinded by your, category-based, “curse of knowledge” (Edwards, 2013).

Insights are often discovered through your own painful experience(s) as a consumer or through deep discovery research like ethnography, Pampers nappies is a good example of an insight discovery from research.  Previously everyone in the nappies category was talking about ‘leak-free’ performance during activity and all the innovation and category and brand communications centred on this attribute.  However, following ethnographic research following consumers closely Pampers discovered that what counted for most in a home with a baby was sleep! Everyone craved it – and wetness was often the reason they didn’t get it.  Hence the “Aha!” revelatory breakthrough discovery and a shift in focus from ‘leak-free’ to ‘golden sleep’ and Pampers innovated with extra ‘dry layers’ for bedtime.

Entrepreneurs and small businesses often lack the funds companies like P&G has to do extensive and expensive ethnographic consumer studies.  However, there are countless examples of entrepreneurs own “Aha!” discoveries often bought on by their own ‘pain points’ and real life experience(s) that what they are buying or using in the home is simply not satisfactory and spurns a strong desire to create and innovate – what I call the Insight of “I”!  For example, Rafferty’s Garden baby foods were born out of a firsthand consumer insight and discovery of the founder Adrian Pike, an unexpected full time Dad – looking after two young children and a terminally ill wife.  While trying to feed his 6 month old niece on an extended family holiday with supermarket bought baby food she hated it and when he tasted it he understood why?  Pike was using organic and fresh ingredients in his own kitchen in a bid to improve his family’s health. Years earlier he had made all of his son’s food from scratch, so he knew a thing or two about what babies liked.

“Within that four-year period of looking after my late wife, I learned a lot about nutrition,” Pike says. “I thought, we are doing this upside down. We should be giving children good nutritional food from birth, not start when they are older and get ill.” (Lindhe, 2011).

In what today has become common parlance and the mantra of ‘lean Startup’ methodology Pike did what every resource scarce and persistent driven entrepreneur or small business owner does and rapidly prototyped his own very first batches of Rafferty’s Garden organic baby food with his own children and niece.  Before checking in with consumers on his products he already knew pack formats were woefully inadequate for busy modern parents ‘on the go’ to kinder, activities and parks.  Glass jars were inconvenient on the go so Pike assembled a prototype for how he thought the food should be packaged using a foil soup packet from his pantry and a tube of toothpaste. “It was very rough … I cut it to size myself but I thought it could work,” says Pike (Lindhe, 2011).

An unexpected benefit of the packaging is that babies can suck the food directly from the pouches, saving parents time and mess when they are travelling.  Almost unknowingly or with deep first hand ‘insight’ and experience Pike had stumbled across a deep consumer insight and unmet need.  Trends toward healthy eating and whole foods were globally evident, products in the baby category clearly lacked credibility with modern parents in this space.  Coupled to this fundamental product insight was the need for more flexible convenient pouch formats to heat and eat on the go, in the car, in the pram, remember both parents are often working now so a traditional cook and eat at home experience with baby is a luxury in many households.

From an insight or “Of course!’ or “Aha!” discovery of what consumers really need in a category or market space comes a great opportunity platform to create ideas for new products and services to meet those unmet needs or to recreate your existing product or service offer.  You are digging in rich gold laid territory and the likelihood of finding some gems that people will pay more $ to buy are exponentially increased compared to coming up with product ideas on a hunch or a gut instinct.  Large companies invest spend a lot of $ and time digging for insights.  Personally, I wonder if the incumbents in the baby food category –already had the insights that modern parents were looking for healthier organic baby food options in convenient to carry packages.  Were they asking the wrong questions? Not listening to their consumer and customer feedback lines or heavily invested in existing glass jar manufacturing plant?  In any event a Startup caught them off guard taking a whopping 40% market share of the ‘wet’ baby food and eventually getting snapped up for A$70m by PZ Cussons in 2013 (Bailey, 2013).

Insights are valuable both to existing businesses in their existing categories and markets and to new entrants.  I’s are important in Innovation and starting with the first one – an Insight is a great place to start a value creation journey to innovation pay dirt.

Interested to find out how to find insights in your industry or new markets, please feel free to reach out to us, share your own story or case study and have a no obligation conversation.

Dermott Dowling is Managing Director @Creatovate, Innovation & International Business consultancy. Creatovate help businesses innovate with certainty from insight to innovation in the marketplace using proven methods and partners. Contact Dermott if your business needs help digging for insights and starting the insight to innovation journey.

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References:

Helen Edwards (2013) The true meaning of ‘customer insight’ – and why marketers should treat it with care July, 29, Marketing Magazine, http://www.marketingmagazine.co.uk/article/1193164/helen-edwards-true-meaning-customer-insight—why-marketers-treat-care viewed on 18/2/2015.

Jane Lindhe (2011) Baby Basics, April 28, BRW, http://www.brw.com.au/p/sections/features/baby_basics_tAA85mjCPUDxw8MSe8hEaM retrieved on 15/1/2015.

Michael Bailey (2013) Rafferty’s Garden founder cleans up thanks to Cussons, BRW, 8 July updated 11 July, http://www.brw.com.au/p/entrepreneurs/rafferty_garden_founder_cleans_up_F5j2hJX3P7IbTYzD40nnlK viewed on 26/2/15.