UniversityofSt.Gallen
GraduateSchoolofBusiness,Economics,LawandSocialSciences(HSG)
MasterofArtsinStrategyandInternationalManagement
Integrating open innovation inthestrategicplanningprocess
January,27th2009
Submittedby
LigiaFoleaReferee:Prof.Dr.GünterMüller‐Stewens
MasterThesis
‘No problem can be solved from the same consciousness that
created it.’
—Albert Einstein
Tableofcontents
i
Tableofcontents
TABLEOFCONTENTS ......................................................................................................................I
LISTOFFIGURES ............................................................................................................................III
LISTOFABBREVIATIONS............................................................................................................ IV
ABSTRACT......................................................................................................................................... V
1 INTRODUCTION ........................................................................................................................11.1 RELEVANCEOFTHEPHENOMENON.................................................................................................... 11.2 ORGANIZATIONOFTHETHESIS ........................................................................................................... 21.3 RESEARCHGAPANDRESEARCHQUESTION ....................................................................................... 21.4 KEYTERMDEFINITION ......................................................................................................................... 41.4.1 Openinnovation.............................................................................................................................41.4.2 Strategicplanningprocess........................................................................................................5
2 THEORETICALFOUNDATIONS .............................................................................................72.1 STRATEGYPROCESSRESEARCH........................................................................................................... 72.1.1 Historicaloverviewonthemaindebatesinstrategyprocessresearch ................72.1.2 Makingstrategicplanningmoreinnovative–ideasfromliterature .................. 10
2.2 OPENINNOVATIONRESEARCH ..........................................................................................................112.3 INTERMEDIATECONCLUSIONANDDISCUSSION..............................................................................13
3 METHODOLOGY ..................................................................................................................... 143.1 RESEARCHAPPROACH–MULTIPLECASESTUDY ...........................................................................143.2 CASESELECTION ..................................................................................................................................153.2.1 Thefastmovingconsuminggoodsindustry ................................................................... 153.2.2 Twomajorcompaniesinthefastmovingconsumergoodsindustry .................. 16
3.3 THEPROCESSOFDATACOLLECTIONANDDATAANALYSIS ..........................................................173.3.1 Datacollection............................................................................................................................. 173.3.2 Dataanalysis ................................................................................................................................ 18
4 ACASESTUDYOFTWOMNCINTHEFMCGINDUSTRY............................................. 194.1 CASE1:PROCTER&GAMBLE ...........................................................................................................194.1.1 FactsandFigures ....................................................................................................................... 194.1.2 Strategicplanningsystem ...................................................................................................... 214.1.3 Howtomakestrategicplanningmoreinnovative ...................................................... 22
4.2 CASE2:UNILEVER...............................................................................................................................294.2.1 FactsandFigures ....................................................................................................................... 29
Tableofcontents
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4.2.2 Strategicplanningsystem ...................................................................................................... 314.2.3 Innovatingstrategicplanning .............................................................................................. 33
4.3 ATHEORYOFHOWSTRATEGICPLANNINGPROCESSCANBEMADEMOREINNOVATIVE.........394.3.1 Innovatingtheplanningprocessitself .............................................................................. 404.3.2 Innovatingstrategyformulation......................................................................................... 424.3.3 Innovatingstrategyimplementationandcontrol ....................................................... 454.3.4 Innovatingthecompany’sculture ...................................................................................... 48
4.4 HOWOPENINNOVATIONMAKESTHESTRATEGICPLANNINGPROCESSMOREINNOVATIVE ..494.4.1 Addressingthe“Who”............................................................................................................... 514.4.2 Addressingthe“What” ............................................................................................................. 534.4.3 Addressingthe“How” ............................................................................................................... 55
5 DISCUSSION ............................................................................................................................. 585.1 CONTRIBUTIONSTOTHETHEORY.....................................................................................................585.2 LIMITATIONSANDRECOMMENDATIONSFORFUTURERESEARCH ..............................................595.3 RELEVANCEFORTHEPRACTITIONERS.............................................................................................60
ACKNOWLEDGEMENTS............................................................................................................... 61
APPENDIX1:INTERVIEWLIST................................................................................................. 62
APPENDIX2:INTERVIEWGUIDELINES ................................................................................. 63APPENDIX2.1.QUESTIONSABOUTTHESTRATEGICPLANNINGPROCESS(EXAMPLE).......................63APPENDIX2.2.QUESTIONSABOUTOPENINNOVATION(EXAMPLE) .....................................................64
APPENDIX3:LISTOFPROPOSITIONSANDCROSSCASEANALYSISTABLE .............. 65
REFERENCES................................................................................................................................... 69
PRESSANDINTERNETRESOURCES ........................................................................................ 78
DECLARATION ............................................................................................................................... 81
Listoffigures
iii
Listoffigures
FIGURE1ORGANIZATIONOFTHETHESIS ..............................................................................................................................2FIGURE2RELATIONBETWEENSTRATEGYANDPROCESS ...................................................................................................6FIGURE3:DELIBERATEVS.EMERGINGSTRATEGY ...............................................................................................................8FIGURE4TOP3COMPANIESINWORLDMARKETSHAREINPERSONALCAREANDHOUSEHOLDCARE ................... 16FIGURE5FACTSHEET:PROCTER&GAMBLEIN2008 ................................................................................................... 20FIGURE6P&GORGANIZATIONALSTRUCTUREIN2008.................................................................................................. 21FIGURE7STRATEGYPROCESSCYCLEATP&G ................................................................................................................... 21FIGURE8OVERVIEWPLAN–INNOVATINGSTRATEGICPLANNINGWITHINP&G ........................................................ 23FIGURE9INNOVATIONFUNNELATP&G............................................................................................................................ 25FIGURE10P&G’SSPECIALSTRUCTURESTOCAPTUREIDEAS ......................................................................................... 26FIGURE11P&G’SOPENARCHITECTURESTRUCTURE ...................................................................................................... 27FIGURE12FACTSHEET:UNILEVERGROUPIN2008...................................................................................................... 29FIGURE13UNILEVERORGANIZATIONALSTRUCTUREIN2008...................................................................................... 30FIGURE14STRATEGYPROCESSCYCLEATUNILEVER ....................................................................................................... 33FIGURE15STEP‐UPININNOVATIONPROCESS................................................................................................................. 34FIGURE16RESOURCEALLOCATIONFORR&DONLEVELSOFORGANIZATION............................................................. 35FIGURE17INNOVATIONFUNNELATUNILEVER ............................................................................................................... 35FIGURE18OVERVIEWPLAN–MAKINGSTRATEGICPLANNINGPROCESSMOREINNOVATIVE .................................... 40FIGURE19OVERVIEW‐INNOVATINGTHEPLANNINGPROCESSITSELF......................................................................... 40FIGURE20OVERVIEW–INNOVATINGSTRATEGYFORMULATION .................................................................................. 42FIGURE21OVERVIEW–INNOVATINGSTRATEGYIMPLEMENTATIONANDCONTROL.................................................. 45FIGURE22INNOVATIONFRAMEWORK................................................................................................................................ 46FIGURE23OVERVIEW–INNOVATINGTHECOMPANY’SCULTURE.................................................................................. 48FIGURE24OVERVIEW–INNOVATINGSPPTHROUGHOPENINNOVATION................................................................... 50
Listofabbreviations
iv
Listofabbreviations
BU BusinessUnit
e.g. exempligratia(forexample)
ed. Edition
Ed. Editor
etal. etalii(andothers)
etc. etcetera(andsoon)
FMCG FastMovingConsumerGoods
GBU GlobalBusinessUnit
HPC HealthandPersonalCare
IP IntellectualProperty
MDO MarketDevelopmentOrganization
MNC MultinationalCompanies
OI OpenInnovation
p.a. perannum
PGS PathtoGrowthStrategy
R&D Research&Development
SPP StrategicPlanningProcess
Abstract
v
Abstract
A recent McKinsey Global Survey (2006) highlights a high discontent with the
strategic planning processwithin practitioners. Although the existing literature on
strategyresearchpointsthatstrategicplanningcontinuestoplayanimportantrole
inacompany,veryfewattempttoinvestigatehowtheprocesscanberedesignedto
supportreal‐timestrategymakingandtoencourage“creativeaccidents”.
This thesis aims at providing researchers and practitioners with an integrated
analysis of how growth ideas can be fostered within each phase of the strategic
planningprocess.Inparticular,itinvestigateshowopeninnovationcanbeusedasa
tool to account for more innovative strategy making. The thesis is based on a
multiplecasestudyoftwoleadingcompaniesfromthefastmovingconsumergoods
industry:ProcterandGambleandUnilever.
Theobservationsfromthecases,theinsightsfromthecompanydocuments,articles
and reports andexisting theory are analyzed andpropositions aredeveloped. The
author’s perspective of how strategy making can be made more innovative is
developed along the following structure: strategy process itself, strategy
formulation, strategy implementation and control and innovation of the company
culture.A special chapter isdedicated tohowopen innovation, ifmadecentral to
the businessmodel, can foster new strategic options. In this chapter, the analysis
starts from how open innovation affects the company positioning, customer
segments and geographies, then looks at how open innovation impacts the
company’s portfolio of products and services offered and finally shows how open
innovation affects company capabilities. It thus attempts to offer an integrative
perspectiveofthedifferentareaswhereopeninnovationallowsforthegeneration
offuturecompanygrowth.
The study concludes with the implications for research and practice, including
recommendationsforfutureresearch.
Introduction
1
1 Introduction
1.1 Relevanceofthephenomenon
According to a McKinsey Quarterly Global Survey (2006), fewer than half of the
participating executives are satisfied with their company’s approach to strategy
planning. Furthermore, executives raise significant concerns about the way their
companyexecutes the strategy, communicates it, aligns theorganization to it and
measuresperformanceagainstit.
Ontheacademicsside,manyresearchersincludingHamelandPrahalad(1994)have
pointedoutthattraditionalstrategicplanningfailstotakeintoaccountthecreative
processesanddiscoveriesthatgeneratebreakthroughsandpromptgenuineshiftsin
strategicdirection.Furthermore,planninghasbeenaccusedofstiflingcreativityby
eliminatingtruevisionandsynthesisfromtheprocessofchange(Mintzberg,1994b;
Hamel,1996;Grant,2003).Hence,bothacademics(Bower,1970;Burgelman,1991)
and practitioners (McKinsey Global Survey, 2006; Lovallo and Mendoca, 2007;
Stephenson, Pandit, 2008), agree thatmany companies get little value from their
annualstrategic‐planningprocess.
Despitethesenumerouscriticstostrategicplanning,itremainsapervasivemethod,
influentialacrosstheworld,perhapsnowadaysmorethanever.Since1996,Bain&
Company’ssurveyofmanagementtoolshasregularlyreportedstrategicplanningto
beusedbyaround80percentofitsrespondingcompanies,andin2007itwasfound
to be the most popular tool of all, with an eleven‐year record of 88 per cent of
companies using it (Rigby and Bilodeau, 2007). Another consultancy company,
Accenture, describes the rising appointment of ‘the Chief Strategy Officer’, with
supporting departments, in large multinational companies around the world
(Breene,NunesandShill,2007).
Thus,bothresearchers(HamelandPrahalad,1994;Wilson,1998)andpractitioners
(Beinhocker and Kaplan, 2002; Foster and Kaplan, 2001) agree that the strategic
planningprocessshouldberedesignedtosupportreal‐timestrategymakingandto
encourage “creative accidents”. Despite its high relevance, this issue remained
unsolved.Aresolutionishighlyneeded.Managersneedguidanceondoingitbetter,
whileacademianeedstounderstandwhyitisstilllargelyusedafteralltheseyearsof
criticism.
Basedonanextensiveliteraturereviewandtwocasestudiesfromthefastmoving
consumergoodsindustry,thisthesisaimsatdefiningmethodstomakethestrategic
Introduction
2
planningprocessmoreinnovative,withaparticularfocusonexaminingthepotential
roleopeninnovationcanplayintheprocess.
1.2 Organizationofthethesis
Thisthesisconsistsoffivechapters(seeFigure1).Thefirstchapterelaboratesonthe
relevanceofthephenomenonandtheresearchgapdiscovered.Buildingonthis,the
purpose of the thesis is precisely defined and a research question is derived. This
chaptermainlydrawsonthereviewedliterature.
The second chapter first identifies relevant literatureon strategyprocess research
and on open innovation, and then introduces the main strategy process models
described across academic literature. The third chapter discusses the key
methodologicalissues,includingmethodsusedfordatacollectionanddataanalysis.
Thefourthchapterrepresentstheempiricalpartofthisstudy.Inthissectionthetwo
chosencasestudiesareanalyzedandpropositionsaredeveloped.
The final chapter draws mainly on the interim conclusions found at the end of
Chapter2and4andreflectsthequestioninitiallyoutlined.Itsummarizesthethesis’
contribution to the research field, the implications it brings for practitioners and
outlinesfurtherresearchopportunities.
Figure1Organizationofthethesis
Source:ownillustration
1.3 Researchgapandresearchquestion
Atitspeakinthe1970sand80s,planningwasthecentralactivityofmodernfirms,
which was thought to enable them to achieve a competitive advantage. On the
academics’ side, influential literature stems during this period, shaping the way
managersthoughtaboutstrategicplans(Bower,1970;Burgelman,1983;Mintzberg,
1978).However,inthelastcoupleofyears,researchonthissubjectlostmomentum.
AsWhittingtonandCailluet(2008)argue,researchonstrategicplanninghasnotkept
upwiththeimplicationsbroughtaboutbynewdecentralizedandnetworkedforms
of organization. Meanwhile, planning remains a pervasive practice in today’s
organizations, one that is taking on new forms far removed from the academic
stereotypesoftwodecadesago.
Introduction
3
Intermsof focus,empiricalstudiesareconcentratedontwobroadareas.Thefirst
area is the impact strategic planning has company performance and the role
strategicplanningtakesinstrategicdecision‐making,whilethesecondareaexplores
theorganizationalprocessesofstrategyformulation(Grant,2003).Whilewritingsin
the two areas are extensive, research has been “limited by the lack of empirical
investigationofthephenomenon[strategicplanning]itself“(Grant,2003).Thislack
ofempiricalevidencetogetherwithchangingenvironmentalconditions,suchasthe
Internetboom,andincreasingdifficultytomaintaincompetitiveness,ledtoarevival
of the strategic planning topic. Authors such asGrant (2003) state that there is a
knowledge gap concerning the formal strategic planning systems. Furthermore,
ratherthanspeakingaboutadeclineofstrategicplanninginthelate1990s,theways
companiesconductthisprocesshasfundamentallychanged.Thus,Whittingtonand
Cailluet(2008)callforanewperspectiveonstrategicplanning,seenasacraft.This
involves going beyond the performance implications of the stereotypical strategic
planning process and examining intimately the kind ofwork that is actually being
done.
Thefocusontheintegrationofinnovationunderitsmanyformswaschosenbecause
studies (Hagel and Brown, 2006; McKinsey Global Survey, 2008; Sousa, 2007)
concludethatthis isamongthemostsignificantdriversofacompany’ssustainable
growth. Moreover, companies have realized that they could come up with even
more innovative ideas to enhance growth and limit risks by involving external
partners.Thatiswhyopeninnovationisbeingincreasinglyusedasatooltotapnot
only in the knowledge within the company, but also outside it in order to reach
beyond the existing core competencies and achieve higher growth (Chesbrough,
2007;ChesbroughandSchwartz,2007;Chiaromonte,2006).Moreover,thetopicof
openinnovationisstillanoveloneandtheexistingliteratureinthisfieldisupuntil
now limited (Fredberg, Elmquist and Ollila, 2008), in terms of the amount of
publications and authors that havewritten about the subject. In addition, a large
part of the existing literature is practitioner focused,which valuable nevertheless,
doesnotprovidemuchtheoreticaldevelopment.
Assuch,thisthesisaimstocoverthisresearchgapandadvancestowardslinkingthe
strategyprocessresearch literaturewiththefieldofopen innovation.Thepurpose
of this endeavor is to create a deeper understanding of how to achieve a more
innovative strategic planning process by making use of open innovation. Thus, it
addressesthefollowingresearchquestion:
Howdoestheintegrationofopeninnovationmakethestrategicplanningprocess
moreinnovative?
Introduction
4
1.4 Keytermdefinition
Beforegoingintoabriefdescriptionoftheacademicstreamsrelevantforthisthesis,
a common understanding over the terms under analysis needs to be established:
openinnovationandstrategicplanningprocess.
1.4.1 Openinnovation
The concept of open innovation represents an extension to the term innovation.
Both in the theory and in the practice of innovation management, a generally
accepted notion of the term innovation is found to bemissing. As such, different
criteria have been used to describe innovation (Hauschildt and Salomo, 2007;
Lecker,2005).
According to Hauschildt and Salomo (2007), existing definitions of the term
innovation share the following underlying particularities: innovations are
“qualitativelynewproductsorprocesseswhichmarkedlydifferfromthepreceding
status”.Inthisthesisinnovationisusedfromaneconomicperspectiveasdefinedby
Schumpeter(1934),whoconsiderstobeinnovationanintroductionofnewgoods,a
newqualityofgoods,anewmethodofproduction,anewmarket,anewsourceof
supplyoreventhechangingofruleswithinanindustry.
Innovation is different than invention, as the latter becomes an innovation only
when it is commercially exploited (Hauschildt and Salomo, 2007; Roberts, 2007).
Drucker (1985, p. 67) supports this view and highlights the importance of added
valuebydefininginnovationas“themeansbywhichtheentrepreneureithercreates
new wealth‐producing resources or endows existing resources with enhanced
potentialforcreatingwealth”.
Chesbroughintroducedtheconceptofopeninnovationin2003asaresponsetothe
changingprinciplesof innovation.Thetermrefersto“theuseofpurposive inflows
and outflows of knowledge to accelerate internal innovation, and expand the
markets for external use of innovation” (Chesbrough, 2003, p. 43). Although
Chesbrough’stermhasbecomeestablishedintheacademicandpracticeliterature,
there are synonyms for this model: “the convergence of like‐minded parties”,
“distributed co‐creation” (Burghin, Chui and Johnson, 2008), “collaborative
innovation”(RigbyandBilodeau,2007).
Open innovation isaparadigm,whichassumesthatcompaniescanandshoulduse
externalaswellasinternalideasandpathstomarket,astheylooktoadvancetheir
technologies(Chesbrough,2006). Inthisregard,theopeninnovationmodelcanbe
Introduction
5
compared toapokergame,whereeachplayermustbeup todatewith the latest
informationandwherealthoughtheplayerknowshis/herresources, theirvalues
are uncertain. During the game, as new information emerges, the player has to
decidewhetherto investadditionalmoneytostay inthegameinordertoseethe
nextcard.Thus,optionsforfuturebusinessfieldsneedtobecreatedandbusiness
modelsneedtobeexpanded(Chesbrough,2003).
1.4.2 Strategicplanningprocess
Thetermstrategyhasreceivedvariousdefinitionsintheacademicliterature,aswell
as in practice. In some cases, the words “strategies”, “plans”, “policies” and
“objectives”areinterchangeablyused.Porter(1996)usesthetermstrategyforthe
processthroughwhichacompanydefinesitspositiononthemarketbychoosinga
specificsetofactivitiestodeliveranuniquemixofvalue,tomaketrade‐offs,andto
forgefitamongactivities.Mintzberg(1987)definesstrategyintermsofthefiveP’s:
plan,ploy,pattern,position,andperspective. Hearguesthatnotasingleviewcancapture the totality ofwhat strategy is, but that they are all equally valuable and
usefultocreateacomprehensiveviewonthecomplexityofthisphenomenon.
Inpractice,strategyiscommonlyunderstoodas“apathfromthepresenttoafuture
desirable goal. As this path is expressed in language, strategy becomes “a plan of
how a firm intends to move from one position to another” (Lechner, 2005). In
research,ontheotherhand,strategy“doesnotconcentrateonwhatsomeonesays
orwantstodo,butlooksattheactualeventsgoingoninfirms”(Lechner,2005).
In this thesis, we reconcile these different definitions and describe strategies as
managerial guidelinesor statements,which servedecision‐makingand subsequent
actionbyprovidingpointsofreference.Theyareintendedtoensurecoordinationin
asituationwhereanumberofmanagersareactingatdifferentplacesandmoments.
Furthermore,inordertounderstandwhatprocessmeans,wechooseVandeVen’s
(1992,p.162)understandingofthisconceptas“asequenceofeventsandactivities
thatdescribehowphenomenachangeovertime”.
Strategicplanningprocessisnotprimarilyconcernedwithoptimizingsuccessduring
the planning period itself (Grünig and Kühn, 2006). Instead, the strategic planning
processfocusesontheinvestmentsthatwillberequiredtoensurethepreservation
ofexistingsuccesspotentialsandtobuildnewones.Therelationbetweenstrategy
andprocessisillustratedinthegraphbelow.
Introduction
6
Figure2Relationbetweenstrategyandprocess
Source:ownillustrationbasedonGrünig&Kühn,2006
Thus,thisthesisinvestigateswaystomakethestrategicplanningmoreinnovativein
termsof coming upwithmore ideas for growth, or even changing the company’s
business model. It does so by analyzing two companies from the fast moving
consumer goods industry. From several instruments capable of fostering a more
innovative strategic planning process, the focus will be on placed on open
innovation. The reason for doing so lies in the fact that open innovation allows a
companytogobeyonditscorecompetenciesandachievesustainablegrowth,while
bettermanagingtherisksthatcomealongwiththeinnovationprocess(Chapter4.4).
The choice of the industry, aswell that of the two companies, is explained in the
methodologysectionofthisthesis.
Theoreticalfoundations
7
2 Theoreticalfoundations
This chapter establishes the research context and theoretical background of the
topic.Tothispurpose,themaintheoreticaldebatesintheresearchfieldsofstrategy
processandopeninnovationarediscussed.
This chapter begins with (2.1) with the main debates in the strategy process
research,whicharereviewedinchronologicalorder(2.1.1).Section2.1.2bringsinto
discussionideasfromliteratureonhowtomakethestrategicplanningprocessmore
innovative,ingeneral.
The chapter proceeds in Section 2.2 with a presentation of the relevant research
streams in theopen innovation literature.After this literature review, Section2.3.
draws on the implications raised by literature findings for this thesis and,
consequently,theresearchquestionisrefined.
2.1 StrategyprocessresearchWithinstrategyresearch,strategicplanningremainsoneofthecoreareasofstudyin
academicliterature.Inpractice,itisoneofthemaintoolsinstrategicmanagement
(Rigby,1999).Planningisimportantbecauseithelpscompaniesadaptbettertothe
changingenvironmentalconditions.Furthermore,strategicplanning isveryspecific
tothecompany.Thus,itcannotbeoutsourcedorconceivedentirelybyexternals.In
otherwords,strategicplanningisdependentonthecompany’sculture, leadership,
externalenvironmentcomplexityandorganizationalstructure.
2.1.1 Historicaloverviewonthemaindebatesinstrategyprocessresearch
The origins of the concept date back to Chandler (1962), who shows how the
challengesofdiversity,implicitinagrowthstrategy,callforimaginativesolutionsto
be used in the administration of a company. Chandler’s work initiates a heated
debateon‘topdown’vs.‘bottomup’planning(Bower,1970;Mintzberg,1978;Noda
& Bower, 1996; Quinn, 1980). Ansoff (1965) builds upon Chandler’s ideas and
introduces the concept of strategic planning, which means strategy seen as a
conscious plan to align the firm with the opportunities and threats posed by its
environment. Andrews (1987) adds to this the difference between corporate and
business strategy and argues that a company’s current businesses influence its
choice of likely future businesses as well, which is an important insight for
understandingcorporateinnovation.
Inthe1980sand1990s,conventionalideasaboutstrategicplanningarechallenged
for the first time.Forecastsand futureplanningarebecoming increasinglydifficult
Theoreticalfoundations
8
due to changes and uncertainty in the business environment. Global competition
and innovative entrepreneurs make conventional strategic planning look like an
artifact from the past. During this time, the famous debate between Mintzberg
(Mintzberg1987;Mintzberg1991)andAnsoff (Ansoff1991;Ansoff1994)emerges,
outliningthedifferencetheLearningSchoolvs.thePlanningSchool.
In their research,Mintzberg together withWaters (1985) consider strategy to be
“formedasapatterninastreamofactions”.Suchrealizedstrategyisthoughttobe
acombinationoftheintended(resultingfromtheplannedordeliberateintentionsof
seniormanagers) and theemergent (resulting fromongoing decisions and actions
throughouttheorganization)strategies.
Figure3:Deliberatevs.emergingstrategy
Source:ownillustrationbasedonMintzbergandWaters(1998)
In this approach, senior management continuously focuses on the organization’s
development,thereforelearningaboutprocessesthatworkandthosethatfailover
time.Itiswiththislearningexperiencethatstrategyshouldbederivedandstrategic
planningpracticesinternalized.Inaddition,thelearningapproachallowsstrategists
todealwithcomplexandturbulentenvironments–aprocesswhichtheauthorscall
‘logical incrementalism’. Consequently, the strategy process can be seen as a
“complex interactive process, in which politics, values, organizational culture and
management styles determine or constrain” strategic decisions and actions
(MintzbergandQuinn,1991).
Contrary to Mintzberg, Ansoff (1991; 1994) supports the prescriptive views of
strategymaking,inparticularthe‘planningschool’.Hebelievesthatformalplanning
isbeneficial inboth stableandunstableenvironments.Ansoff argues that rational
decision‐making is less time‐consuming thanMintzberg’s ‘experimental approach’.
Formalization helps produce appropriate alternatives in times of rapidly changing
environments, therefore preparing the organization for different scenarios. This
thinkingmakesstrategicplanningfocusonstrategiccontrol.
Meanwhile, in the business world, General Electric appears to be dismantling its
strategicplanningsystemunderitscharismaticCEOJackWelch.Likewise,McKinsey
Theoreticalfoundations
9
& Co. consultant Richard Pascale (1984) attributes the success of many Japanese
companies to theirdistrustofbureaucraticand inflexible strategicplanningand to
theirreadinesstolearnincrementallyfromexperienceontheground.
The peak ofMintzberg and Ansoff’s debate is reached in the early 1990s, a time
when long‐termstrategicplanningwas concernedwith short‐termdownsizingand
restructuring activities. During this timeMintzberg (1991, 1994) writes about the
pitfalls of strategic planning and its decay. In his 1990 paper, Mintzberg (1990b)
fundamentally criticizes the prescriptive approaches to strategy formulation.
Essentially, he refers to them as unable to adapt to changing environmental
conditions.Anothercriticalpoint inhisview is that theseschoolsof thoughtmake
false assumptions such as: “the role of conscious thought […]must not only take
precedence over action but must precede it in time and correspondingly the
organizationmust separate theworkof thinkers from thatofdoers”. In addition,
Hamel and Prahalad (1994) claim that companies are responding to a more
competitive and fast‐moving environment by dismantling and downsizing their
strategicplanningdepartmentsandconcludethat“Strategicplanning iswellsuited
to the challenge of extending leadership. It is not well suited to the challenge of
regeneratingnewleadershipandbuildingnewfoundations”.
To sum up,when looking back at the evolution of strategic planning, one notices
howthetopicbuiltupinthe1960and1970s,peakedinthe1980sandearly1990s
and lost attention in the mid to late 1990s. The focus shifted as well, from
conductingstrategicplanning,toformulatingstrategy,tocriticizingitseffectiveness
andimpactoncompanyperformance.
Furthermore, the theme of people involved in the planning process receives
attention.Muchlikethe‘top‐down’vs.‘bottom‐up’debateinthe1960sand1970s,
planning is seen to be restricted to top management or, conversely, divisional
planning is remarked similar to planning that comes from the top level (Wilson,
1998). The learning school concludes that planning is an emergent process,which
should originate from a complex interaction between high‐level individuals
(Mintzberg,1991).
Starting from the observation that strategy is the result of strategic planning
(Mintzberg, 1993, 1994a, 1994b), the concept has considerably evolved. More
recentstudies(Grant,2003)showthatstrategicdecisionsaremadeoutsidetheplan
in response to upcoming opportunities and threats, being thereafter incorporated
into the strategic plans. Thus, asWhittington and Cailluet (2008) argue, strategic
planning scope shouldbe seenmorebroadly. TheStrategyasPractice perspective
advanced by Whittington and Jarzabkowski can help in this regard (Whittington,
Theoreticalfoundations
10
1996; Jarzabkowski, 2005). Traditionally, strategy research has been concerned
mainlywithstrategyasanorganizationalproperty:abusinesshasastrategyprocess.
StrategyasPracticeaddsthat,aswellasanattributeofanorganization,strategyis
also something that people do. Strategy is a kind of work, a craft (Whittington,
Cailluet,2008).Thus,theAnsoff‐Mintzbergdebateoverperformanceoutcomesand
strategicdirectionsassumestoomuchby looking for thedirect impactofstrategic
planning process on performance. As Robert Merton (1968) points out, an
anthropologistunderstandsthatNativeAmericanrain‐dancersareimportanttotheir
communitiesregardlessoftheamountofrainfalltheyproduce.Thesameisvalidfor
strategicplanning:itisnoteasilyunderstoodfromtheoutside,butitcertainlyhasto
bedancedwell.
2.1.2 Makingstrategicplanningmoreinnovative–ideasfromliterature
Whileplanningprocessesmayvaryamong industriesandcompanies, anumberof
recommendationsastohowstrategicplanningshouldbedonecanbeformulated.
Mintzberg (1994c,1994d)promotesthe ideathatplannersshouldnotbetheones
who create strategies. Instead, planning is concerned with supplying data and
collecting necessary information to create a vision. Behind this thought lies
Mintzberg’sbeliefthatstrategicplanningandstrategicthinkingarenotoneandthe
same activity. Planning is an analytical activity while strategic thinking involves
intuitionandcreativity.Mintzbergpointsoutthe‘fallacies’ofplanning.Thefirstone
isthefallacyofprediction,whichreferstotheassumptionthattheworldstandsstill
while implementation plans are in progress. The organizational environment,
including the competition, does notwait for formalmeetings to take place or for
planstobeapproved.Anotherfallacyliesindetachment.Plannersareplanners,and
managersaremanagers.Bothexisttodotheirjob,butinrealitytheyareeitherboth
thesameorrelyoneachothertodevelopanefficientstrategicplan.Thefinalfallacy
stands in formalization, namely in the assumption that formal systems, especially
mechanical ones, work just as well as human beings. In fact, formal systems can
neverinternalizeorcomprehendinformation;itisthepeoplewithinthesystemwho
synthesizeinformation.
Ifthisistrue,thenhowshouldplanningbeconducted?
In their study, Mintzberg and Waters’ (1985) point to the role of the strategic
planning process as a step‐by‐step effort that shows how to achieve a strategic
vision.Plans,ontheotherhandaretoolstocommunicateandcontrol,tointernalize
anewprogram,budgetorculture. In linewiththisreasoning,plannersareseenas
Theoreticalfoundations
11
catalysts for new, creative strategic ideas that might arise when conventional
assumptionsarechallenged.
On the practitioners’ side, Mankins (2004a, 2004b) claims that most companies
nowadays run strategic planning as a kind of ‘batch’ process, according to a
predeterminedcalendar,andBUdriven.Hisadviceistomovetoamorecontinuous
model of strategic planning,whereby outputs do not take the form of aplanning
document but rather a set direction for the company, issued together with an
accompanying agenda. In addition, he encourages clearer accountabilities: each
itemonthestrategyagendashouldbeassignedtoan individual responsible for it.
While Mankins’ work is very practically oriented, it lacks a certain theoretical
grounding and thus his contributions remain of limited value for the purpose of
academicbackground.
Finally, inaMcKinseyQuarterlystudy,BeinhockerandKaplan(2002)statethatthe
purposeofstrategicplanningistobuild“preparedminds”,thatistomakesurethat
decisionmakers have a solid understanding of the business, its strategy, and the
assumptions behind the strategy, therefore making it possible for executives to
respond swiftly to challenges and opportunities as they occur in real time. The
authors give a practical guide to creatingpreparedmindsby looking at the actors
involved,thedegreeofinvolvementfromthecorporatecenter,theneedforfollow‐
upandthealignmentofrewardsgrantedforachievingstrategicgoals.
As mentioned earlier in the thesis, one tool to make strategic planning more
innovative isopen innovation.Thus, theevolutionof thestrategicplanningdebate
as well as recommendations for a more innovative strategic planning process is
followedbyanopeninnovationliteratureexamination.
2.2 OpeninnovationresearchThereviewof theexisting literatureonopen innovation revealsaveryyoung field
focusedon thedefining the termas such (Chesbrough,2003a,2003b,2004,2006;
Chiaromonte, 2006; Gaule, 2006;West and Gallagher, 2006;West, Vanhaverbeke
and Chesbrough, 2006). The research streams relevant for this thesis investigate
howopeninnovationchangesvaluecreationandstructuresinanorganization,and
whatkindoftoolsandtechnologies,aswellasleadershipstyle,supporttheadoption
ofopeninnovationwithintheorganization.
The first research field on value creation (Chesbrough, 2007; Chesbrough and
Schwarz, 2007; Chiaromonte, 2006) looks at how companies can create value and
capture a portion of that value by engaging in relations with external partners.
Theoreticalfoundations
12
Chesbrough(2003)researchonhightech industriesshowsthatcompaniesneedto
adapt theirbusinessmodels tomakeuseofopen innovationasawaytogenerate
value from their IP. Furthermore, Chesbrough (2007) argues that, by using open
innovation,acompanycanattackthecostsidethough leveragingonexternalR&D
resources, thus saving time and money, and also approach the revenue side by
licensingoutinternaltechnologies.Thesameauthorrevealsthatcompaniesneedto
develop capabilities to experiment with their business models, which requires
commitmentandsupportfromthetopmanagement(Chesbrough,2007).According
to Chesbrough and Schwartz (2007), co‐development partnerships are increasingly
importantintheopeninnovationmodel,whichisinlinewithChiaromonte’s(2006)
argument that outsidepartners are seenaspeers, andnot as suppliers.However,
researchon this topicdoesn’tgoany furtheras toshowhowthebusinessmodels
shouldlooklike.
This is where the second research stream comes into attention investigating the
organizationaldesignofthecompaniesthatareinvolvedinpartnerships.Depending
on who the other party is, studies discuss about vertical architecture integrating
suppliersandcustomers(JacobidesandBillinger,2006;DittrichandDuysters,2007)
oraboutcreationnets (BrownandHagel,2006),whereamultitudeofparticipants
collaborate to create new knowledge. Dittrich and Duysters’ (2007) analysis of
Nokia’s outside contacts shows that for the third generation telephony, Nokia
openedup itsprocessesandengaged inexplorationwithoutside firms.Thissetof
“weakties” impliesamoreorganicwayofworkingthantheprevious“strongties”
exploitationagreementsthatwerebuiltonstablestructures.
Lichtenthaler and Ernst (2006) further discuss the management of boundaries by
introducingnewnotionsfororganizationalattitudes. Inopeninnovation,managers
need to organize the knowledge transactions with the environment. Their major
tasksinknowledgemanagementare:knowledgeacquisition(make/buy),knowledge
integration(integrate/relate)andknowledgeexploitation(keep/sell).
Thethirdresearchfieldanalyzesthetechnologicalinterfacethatenablesthefirmto
collaboratewitha large setof customers.AsarguedbyDodgson,GannandSalter
(2006)thechangeoftheinterfacedemandsachangeintheorganizationalabilityto
absorb,orassesstheoutside influences. Furthermore,theeffectsoftechnologies,
tools, and processes used by open innovation can largely be described as:
coordinating/aggregatingideasandsolutions(Dogdsonetal.,2006);liberatingideas
ascustomershave“stickyknowledge”,which theydonot reveal throughstandard
market research (Piller and Walcher, 2006); and allowing/including ideas and
solutions,whichmeansthattheimplementationofanewworkingsystemneedsto
Theoreticalfoundations
13
bealignedwiththeleadershipoftheorganizationandwiththeroles,responsibilities
andrelationshipsofthepeopleandprocessesinplace(HustonandSakkab,2006).
Finally,thefourthresearchstream,whichinvestigatesleadershipandcultureinthe
openinnovationcontext,statesthatleadershipneedstosupportpeoplestrivingto
beinnovative.Yet,veryfewarticlesactuallyanalyzeleadershipinopeninnovation.
In their research, Witzeman et al. (2006) find that powerful forces inside the
organizationworktoharnesscurrenttechnologyratherthansearchfornewoutside
technologies. Thus, they conclude that the more the firm sources external
innovation, themore it alsoneeds to transform its systems,processes, valuesand
culture.ThisisinlinewithDodgson,GannandSalter(2006)whorecognizethatopen
innovationmakesbothculturalchanges,andnewskillshighlynecessary.
2.3 Intermediateconclusionanddiscussion
The literature on strategy process advises to take a broader view on strategic
planning and see it as a craft. This approach does not discount the traditional
concernwithplanning’simpactonorganizationalperformanceordirection.Infact,it
proposes an extra step: to start with strategic planning process as ‘performance’
(Whittington and Cailluet, 2008), rather than going straight to the economic and
organizationalconsequencesofthisplanningeffort.
Theliteratureonopeninnovationisstillquiteyounganditstheoreticaldepthisyet
to be developed. So far, researchers havemainly explored issues related to open
innovation in general termsandhave concluded that somethingmust change,but
howthischangeshouldlooklikeissofarlessclear.
Hence, this thesis attempts to go deeper into the strategic planning process, by
discussing how strategic planning can be made more innovative and argues in
Chapter4.4thatopeninnovationcanbeusedasatooltoachievethisend.
Therefore, the research question for this thesis presented in Chapter 1.3 can be
refined,bydividingitintwosubsequentinterrogations:
1) What changes in the company’s processes, structure and culture are needed in
ordertomakestrategicplanningmoreinnovative?
2) Howdoestheembracementofopeninnovationmakestrategicplanningprocess
moreinnovative?
Methodology
14
3 Methodology
To answer the considered research question, this thesis follows Punch’s (2005)
methodological approach in qualitative studies. According to Punch (2005), the
research design in a qualitative study should give the answer to three questions:
“Followingwhatstrategy?,Fromwhom?andHow?”
Thefirstsectionofthischapter(3.1)describestheresearchapproachandmotivates
thechoiceofamultiplecasestudy.Section3.2explainstheselectionoftheindustry
andthatofthecases,whereasSection3.3goesintodatacollectionanddataanalysis
processes.Assuch,thischapterprovidesanswerstoallrelevantquestionsregarding
themethodologicalapproachinaqualitativeresearch.
3.1 Researchapproach–multiplecasestudy
A multiple case study methodology is used to answer the two specific research
questions. Firstly, this study attempts to answer a “How” question, which can be
best tackled by using a qualitative research design. Both the general research
question,aswellasoneof the twospecific researchquestionsconcern the“how”
aspect. The second specific question comes as an extension to the first one, to
analyzehowthecompanyadaptsasaresultofembracingopeninnovation.
Secondly,thechoiceforthisresearchdesignismotivatedbythefactthatacomplex
socialphenomenonisaddressed“withinitsreal‐lifecontextinwhichtheboundaries
between phenomenon and context are not clearly evident” (Yin, 2003). As
Ramanujamet.al.(1986)observe,“planningsystemsaremultifacetedmanagement
systemsthatarecontextembedded”.Hence,theycannotbeadequatelydescribed
through quantitative analysis, as the latter are overly “thin” and lack consistency
(BoydandReuning‐Elliot,1998). In sucha case,Yin (2003) suggests theuseof the
casestudymethod,which“allowsinvestigatorstoretaintheholisticandmeaningful
characteristicsofreal‐lifeevents”.
Thirdly, thisparticular topic representsa contemporaryphenomenon (Whittington
and Cailluet, 2008;McKinsey Quarterly, 2006), which has hardly been researched
(Chesbrough andAppleyard, 2007).Moreover, the thesis does not limit itself to a
certaintypeofopeninnovationactivityortoacertainlocationinorfunctionofan
organization.Rather, it looksatall theopen innovationactivitiesbeingpursuedby
the companies under review and how these make the strategic planning process
moreinnovative.Thisholisticandexploratoryresearchapproachisnecessaryasthis
Methodology
15
studyexploresanunaddressed issueand isendeavoring,also for the first time, to
give an overview of the process of integrating open innovation, in general terms.
Thus,asYin(2003)andPunch(2005)pointoutintheirresearchonmethodologyin
social sciences, a collective case study research matches such an exploratory
purpose.
Fourthly,asthestrategicplanningprocessisinternaltothecompany(Rigby,1999),
theresearcherhasnocontroloverhowtheprocesstakesplace.Insuchcaseswhere
theresearcherlackscontroloverevents,Yin(2003)suggeststheuseofacasestudy
method.Lastbutnotleast,thestrengthofthecasestudyapproachliesinitsability
todealwithafullvarietyofevidenceintheformof:documents,artifacts,interviews
andobservations(Yin,2003).Thisconcentrationondatadepthandqualityfacilitates
accesstothemeaningsandinterpretationsofmanagers(Barnes,2002).Thismakes
thecasestudyverystrongintermsofbothconstructandinternalvalidity.
However,externalvalidity is inevitablycompromisedduetothe limitednumberof
companies that can be studied. As Yin (2003) points out, “case studies are
generalizable to theoretical propositions and not populations”. Thus, in order to
makeamorecompellingcase,thisstudyutilizesmultiplecases.
Next,theunitofanalysiswillbedefined.FollowingYin(2003)inthisendeavor,one
lookswhethertheresearchquestionsfavorsoneunitofanalysisoveranother.The
research question is explorative and takes an overall look at ways in which open
innovation can make the strategic planning process within a corporation more
innovative.Thus,theappropriateunitofanalysisisthecorporation.Havingdefined
theunitofanalysis,thecaseselectionprocesswillbedescribed.
3.2 Caseselection
3.2.1 Thefastmovingconsuminggoodsindustry
This study takes two cases from the fast moving consuming goods industry. The
industry choice ismotivated by three reasons. First, as Rigby and Bilodeau (2007)
and Innovaro (2008) indicate, the fastmovingconsumergoods industryusesopen
innovationas a tool to improve their top‐line, aswell as theirbottom‐line results,
moreoftenthanotherindustriesdo.
Secondly, studies on open innovation have been generally focused on high
technologyindustries,whicharecharacterizedbyrapid,unexpectedenvironmental
changesintermsofindustryvelocity.Thus,thisstudytakesanexploratoryapproach
Methodology
16
andextendstheobjectofstudytomiddlevelocity industries,withthefastmoving
consuminggoodsindustrybeingagoodexampleinthisregard.
Thirdly,thenumberofcompanieswhichapplyopeninnovationatalargescaleisstill
limited. The two chosen companiesmentionedby several authors as belonging to
thisselectgroup(Fredberg,Elmquist,Ollila,2008;Innovaro,2008;Pryor,2008).
3.2.2 Twomajorcompaniesinthefastmovingconsumergoodsindustry
This study takes as case studies Procter&Gamble andUnilever, two of themain
playersinthefastmovingconsumergoodsindustry. Inselectingthecompaniesfor
thecasestudy,fourselectioncriteriahavebeenapplied.
The first selection criterion is the use of open innovation as management tool.
AccordingtoRigbyandBilodeau(2007)NorthAmericaandEuropehavethehighest
percentage use of open innovation. Thus, the next step is looking at companies
originatinginthesetwocontinents.
Thesecondselectioncriterioniscompanysize,measuredintermsofworldmarket
share. As companies in the fast moving consumer goods sector usually play in
severalmarketsatthesametime,thepresentstudytakesthePersonalCareandthe
Household Care segments as reference markets for comparison. This choice is
determined by the fact that these two categories have the highest growth and
added value potential according to Euromonitor studies (2007, 2008). As such,
Procter&GambleandUnileverfeatureamongthetopthreecompaniesinthesetwo
categories, ranked by global market share, according to both classifications
(Euromonitor, 2007). While the former has US as country of origin, the latter
originatesintwoEuropeancountries:GreatBritainandTheNetherlands.Thus,these
twocompaniesfulfillthefirsttwoselectioncriteria.
Figure4Top3companiesinworldmarketshareinPersonalCareandHouseholdCare
Source:ownillustrationbasedondatafromEuromonitor(2007)
Methodology
17
The third reason for choosing these two cases is the fact that one of the studied
companiesisknownasabestpracticecaseforimplementationofopeninnovation.
As this study attempts to find an answer to the question of how the strategic
planningprocesscanbemademoreinnovativethroughopeninnovation,selectinga
best practice case is a reasonable approach. Furthermore, in order to ensure the
literalreplication(Yin,2003)ofthefindings,thesecondcompanywaschosenonthe
groundsofsimilarity.
Finally,thefourthcriterionusedisdataavailabilityandaccessibility,wherethetwo
companiesstandoffintermsofopennesstocollaborationforresearchpurposes.
Toconclude,thesefourreasons(1)useofopeninnovation,(2)size,(3)bestpractice
case and literal replication and (4) data availability, recommended the two
companiestobeselectedforthecasestudy.
3.3 Theprocessofdatacollectionanddataanalysis
Thischapterdescribesthemethodsusedfordatacollectionanddataanalysisforthe
twocasestudies.AstheconstructshavealreadybeendescribedinChapter1.4,the
process of data collection is first described (3.3.1); a presentation of the data
analysisprocedurefollowsshortlyafter(3.3.2).
3.3.1 Datacollection
Datacollectionwasdoneinthreesteps:(1)preparationofacasestudyprotocol,(2)
secondary research on the case studies and (3) primary research through semi‐
structuredinterviews.
Inordertoensureforreliabilityofthefindings(Yin,2003),acasestudyprotocolwas
usedandthe findings fromthecaseswerecollected inadatabase.Thecasestudy
protocol comprises of an overview in which the objectives of the cases are
enumerated, followed by a list of questions,which ensures that the researcher is
focused on the type of information needed to be collected. Furthermore, in this
protocoladraftoutlineforthecasestudyreportisincludedtolimittheanalysisto
relevantinformationexclusively.Asasecondstepinthedatacollection,secondary
research on the two companies was done based on internal (company annual
reports,presentations,minutesofmeetings)andexternaldocumentation(articlesin
thepress,casestudies,companyreports).
Thedatacollectionprocesscontinuedwithcontactingknowledgeablepeopleonthe
topicsofopeninnovationandstrategicplanningprocesswithineachcompany.Alist
Methodology
18
of interviews is included in Appendix 1 of this thesis. Personal and phone semi‐
structuredonehourinterviewswerearranged,dependingonthetimeavailabilityof
thecontactperson.Theaimoftheinterviewswastogaindeeperknowledgeabout
the studied phenomenon and to collect unexpected suggestions about the topic.
Notes were taken during the interviews and full reports of the interviews were
writtenupimmediatelyaftereachinterview.Tokeepaclosefocusontheresearch
question,theinterviewscoveredthefollowingareas:
- The planning process, including the annual planning cycle, individuals involved,
methodologiesemployed,contentandroleofmeetingsanddocuments;changes
oftheplanningprocessinthelasttwoplanningtimeframes(1999‐2008).
- General suggestions on how to make the strategic planning process more
innovative.
- Opinions on how open innovation makes the strategic planning process more
innovative.
To sum up, for each case three sources of evidence were triangulated:
documentationprovidedbythecompanyonitswebsite,articlesinthemassmedia
andinterviews.
3.3.2 Dataanalysis
The interviewdatawereanalyzedusingEisenhardt’s (1989) technique formultiple
case study analysis, which is comprised of five steps: (1) within case analysis, (2)
crosscaseanalysis, (3)shapinghypothesis, (4)enfolding literatureand(5)reaching
closure.
Acasestudydescribingeachcompany’sstrategicplanningprocess,theapproachto
open innovation and the changes in processes, goals, organizational changes and
cultural changes that followed,wasprepared.Wheregapsor inconsistencieswere
apparent, the interviewees were contacted to request clarification or additional
information.Thisprocesscorroboratedwiththeuseofmultiplesourcesofanalysis
from internal and external documentation to ensure for construct validity (Yin,
2003). The amount and quality of the data varied depending on the degree of
cooperation and the contact persons’ concerns over disclosing proprietary
information.
According to Eisenhardt’s recommendations (1989) the within case analysis was
followedbyacross‐caseanalysis,inwhichcommonpatternswereobserved.Closure
is reached when the cross case patterns lead to the formulation of propositions,
which were then grounded in the literature in order to strengthen them.
AcasestudyoftwoMNCintheFMCGindustry
19
4 AcasestudyoftwoMNCintheFMCGindustry
Thefastmovingconsumergoodsindustrycanbeconsideredamatureindustry,who
faces one major threat: product commoditization, which leads to deteriorating
profitability for thecompanies (Grant,2007).Thus, thechallenge forallplayerson
this market is to find ways to differentiate against competitors and to keep the
growthmomentuminanindustrywhichregisteredanaverageyearlyincreaseoffive
percent during the last four years, and has been geographically driven by Eastern
Europe and Asia‐Pacific regions (Euromonitor, 2009). Moreover, according to a
Business Insight report (2007), in the fast moving consumer goods industry,
innovationisthekeydriverforgrowthandpositivebusinessperformance.Addedto
this, competitive pressure and limited opportunities to foster technology‐based
advantages create impetus for innovation areas other than product and process
innovation(Dodgson,GannandSalter,2006).Allthesefactorsleadtoathirdphase
of innovation, known as strategic innovation, which refers to new ways of doing
business, “new game strategies” (Grant, 2007; Meziane, 2007), “a process of
exploringtheemergingfuture,understandingthechangingneedsofcustomers,and
usingtheinsightstoidentifynewbusinessopportunities”(JohnstonandBate,2003,
p.ix).Consequently,thereisanever‐increasingneedforthecompaniesactiveinthis
industrytointegrateinnovationintheirstrategies.Thatiswhythisthesisfocuseson
openinnovationasameanstomakethestrategicplanningprocessmoreinnovative.
Thischapterisorganizedasfollowing.InSections4.1and4.2,eachcaseisanalyzed
independently. Each case is organized around the same structure: Section 4.X.1
makes a short presentation of the key facts about the company; Section 4.X.2
presents the strategic planning process; Section 4.X.3 discusses the changes that
havemadestrategicplanningprocessmoreinnovative.Thisisfollowed(Section4.3)
by a cross case analysis in which common patterns evolve around how to make
strategicplanningmoreinnovativeandpropositionsaredeveloped.
4.1 Case1:Procter&Gamble4.1.1 FactsandFigures
Procter&Gambleistheworld'sleadingcompanyinhouseholdcare,cosmeticsand
toiletries, having gained the number one position following the US$57 billion
acquisition of The Gillette Company in 2005 (Euromonitor, 2007). P&G’s business
model is directed towards building a relatively few very big brands and then
leveraging them around the world. It currently has 24 “billion dollar” brands,
including very strong names such as Ariel, Pantene, Crest, Gillette, Duracell,
Pampers,Pringles,whicharesupportedthroughthebrand‐buildingethosembedded
AcasestudyoftwoMNCintheFMCGindustry
20
in itsorganization. Inaddition, thecompanyhasa trulyglobal reach, including12
"billiondollarcountries",withaleadingortop‐tworankingineveryregionalmarket.
Also,itinvests2.7%ofrevenueinR&D(P&G,2008a).
Figure5FactSheet:Procter&Gamblein2008
Source:ownillustrationbasedoncompanywebsite
Organizationalstructure
One of the measures used to foster company growth has been a shift in the
organizationstructure.Followingtherestructuringactivitiesof“Organization2005”,
thecompany’sstructurehaschangedtobetterleverageeconomiesofscale,toshare
best practices and ideas between geographies and to cut costs and inefficiencies
acrosssectorsandregions.Thepresentstructureisbuiltontheorganizationalchart
in Figure 6,which comprises threeGlobal BusinessUnits and aGlobalOperations
Group. The primary responsibility of the Global Business Units is to develop the
overallstrategyforthebrands,whichimpliesidentifyingcommonconsumerneeds,
developing new product innovations and building brands through commercial
innovation,marketingandsales.
TheGlobalOperationsGroupismadeupoftwodivisions:theMarketDevelopment
Organization andGlobal Business Services. TheMarket DevelopmentOrganization
(MDO) is responsible for developing local “go to market plans”, the marketing
strategy,variouscustomerdevelopmentprograms,externalrelationsandrecruiting
AcasestudyoftwoMNCintheFMCGindustry
21
activities.TheGlobalBusinessServicesdivision’sroleistosupporttheactivityofthe
MDOs by using minimal capital investment to provide technological, process
standarddatatools.
Figure6P&Gorganizationalstructurein2008
Source:ownillustration,basedoncompanywebsite.
4.1.2 Strategicplanningsystem
Figure7StrategyprocesscycleatP&G
Source:ownillustration
Strategic planning takes place on three levels: executive committee level, global
businessunitslevelandregionallevel.Strategicplanningisanongoingprocess;and
althoughitisdividedintophases,thesephasesoftenruninparallel.Hence,strategic
planningisaniterativeprocessandnotanone‐wayprocedure.
AcasestudyoftwoMNCintheFMCGindustry
22
ExecutiveCommitteeLevel
Followinganinternalandexternalanalysisoforganizationcapabilitiesandindustry
trends,theGroupChiefExecutivesetsupthestrategicdirectionofthecompanyfor
five‐yeartimeframe.SinceLafley’sappointmentasaCEOin2000,thegoalhasbeen
togrowbydelightingconsumersattwo“momentsoftruth: first,whentheybuya
productandsecond,whentheyuseit”(LafleyandCharan,2008).Since2006,when
theinnovationprogram“ConnectandDevelop”wasintroduced,“consumercentric
innovation”hasbeenput in the centerof thebusinessmodel as themaingrowth
lever.Thestrategicdirectioniscomplementedbyasetofclearperformancetargets
to be achieved yearly. In order to reach these performance targets, three growth
strategieshavebeenconstantlypursued:(1)Growfromthecore:leadingbrands,big
markets, top customers; (2) Develop faster‐growing, higher‐margin, more asset‐
efficient businesses and (3) Accelerate growth in developing markets and among
low‐incomeconsumers.
GlobalBusinessUnitLevel
Duringthefirstquarteroftheyear,eachbusinessunitsrenewsitsvision,setsgoals
forafive‐yeartimeframeanddecidesonthemainstrategiestodeliverthosegoals.
In the second quarter, global business units (GBUs) deploy goals to the market
development organizations, which take the form of financial commitments.
Furthermore, the GBUs negotiate the goals with the regional units. However, no
conclusionisreached.
Marketdevelopmentorganizations
The regionalunits (marketdevelopmentorganizations)design specificactionplans
and set the building blocks in order to follow the progress of those plans. This
processusually takesplace in thethirdquarter. In the fourthyearquarter,market
development organizations implement those actionplans and continuously review
theprogresstowardstheagreedgoalswiththeGBUs.
4.1.3 Howtomakestrategicplanningmoreinnovative
Thekeyturningpointforthecompanyisrepresentedbytheappointmentofanew
CEO,AlanLafley inAugust2000.Facingclimbing innovationcostsandmatureR&D
productivity,heinstigatedare‐inventionofthecompany’sbusinessmodelalongthe
followingaspects,whichtriggeredchangeinthefollowingareas:companymission,
strategy formulation and implementation, R&D strategy, organizational structure,
corporatecultureandleadership(Figure8).
AcasestudyoftwoMNCintheFMCGindustry
23
Figure8Overviewplan–InnovatingstrategicplanningwithinP&G
Source:ownillustration
Changesinthecompany’smission
ThekeydriverbehindP&G’sbusinessmodelredesignhasbeentheacknowledgment
thatinamaturemarketsuchasthefastmovingconsumergoods,theonlypossibility
toachievegrowthisthroughinnovation.Additionally,theinnovationlandscapehas
changed and innovation was increasingly being done by small and medium‐size
entrepreneurial companies, university laboratories and even by private individuals
looking to monetize their ideas. Following a re‐evaluation of the company’s
innovationprocess,P&Ghastakenamoreoutwardlookingmodelbestsummarized
intheobjectivesetbytheCEO:toacquire50%ofthecompany’s innovations from
outsidesources.Nevertheless,changingthecultureandattitudefromresistanceto
innovations “Not Invented Here” to enthusiasm for those “Proudly Found
Elsewhere” represents a significant challenge. The change process began with
purposeandvalues.
Changesinstrategyformulationandimplementation
MakingstrategicplanningprocessmoreinnovativeimpliesthatP&Ghastobeclear
aboutitsstrategy,whichreducescomplexityandconfusionandbringsfocustothe
entireorganization.P&Ghasmadethreestrategicchoicesatthebeginningof2000:
focusongrowingP&G’score,namelyfabriccare,haircare,babycareandfeminine
care; migrate P&G’s portfolio toward faster‐growing, higher‐margin, more asset
efficientbusiness;andwinwith lower incomeconsumers,particularly in the fastest
growing developing markets (Lafley and Charan, 2008). In terms of targets, P&G
aspiresto10+percentannualearningspersharegrowthforadecade,4‐6%organic
salesgrowth,andfreecashproductivityof90%+(P&G,2008a).However,asLafley
andCharan(2008)argue,strategyformulation is insufficient if there isnotenough
alignmentwithinthecompany.Thatmeansaligningtheentireorganizationtowards
thesameobjectivesiscriticalinanopeninnovationapproachastheonechosenby
P&G.AsLafleyandCharan(2008)pointout,openinnovationallowsP&Gtostretch
strategy targetsmainlyby increasing the sizeofmarketdemandandcreatingnew
AcasestudyoftwoMNCintheFMCGindustry
24
customer needs. Furthermore, a stretched earnings goal puts pressure on
productivitythatleadstobetterrelativepricing,highermarginsandrevenuegrowth.
On the strategy implementation side, putting innovation at the center results in
managers “pulling” rather than “pushing” innovation projects (Lafley and Charan,
2008). Thismeans being consumer centric, focusing on ideas driven by consumer
needs rather than R&D output. To ensure a constant flow of consumer‐driven
productideas,eachbusinessunitisrequiredtodrawayearlylistoftheircustomers’
top10needs that theybelievecoulddrive thegrowthof theirbrands.Oncethese
needsareidentifiedandaclearbusinesscaseismade,atechnologybriefisprepared
bythebrandmanagementteamandcirculatedthroughoutP&G’spartnernetwork
toestablishifaready‐madesolutionisavailablefromanoutsidesource.Theaimis
toreducetheR&Dinvestmentriskontheonehand,andtoreducetimetomarket
fornewproducts,on theother.Moreover, thebenefitofusingopen innovation is
evidentwhenabusinessunitrunsshortinmeetingtargets.Thesolutioninthiscase
isacceleratingthetimelineforprojectsalreadyinthepipeline,scalingupprojectsor
addingnewones.Sucha resourceaccumulationoverashort timespan ispossible
onlybyappealingtoexternalpartnersandthusactivatingopeninnovation.
ChangesintheR&Dstrategy
In1999 lessthan10%ofthe internallydevelopedtechnologieswerebeingused in
products(Sakkab,2002).Anewstrategy,theConnectandDevelopprogram,aimed
touseopen innovationpractices inordertoturnmoretechnologies intoproducts.
An objective of Connect and Develop is to drive new innovation through
collaborationwithexternalpartnersinatleast50%ofcases.
Open innovation allows P&G to leverage its core competencies, namely a deep
understandingofthecustomer,creatingandbuildingbrandsthatendure,itsglobal
size and scale advantage; and also build additional competencies such as jointly
creatingvaluewithcustomersandsuppliersandmakinginnovationthe“core”ofthe
core strengths (LafleyandCharan,2008). Innovationasa core strength represents
the competence that unites and drives all the other core competencies to create
value.Inordernottolosefocusbyundergoingdivergentinnovationpaths,P&Ghas
madeinnovationasystematicprocessnamedStage‐Gateprocess,toselecttheideas
andproductsmostlikelytoyieldthehighestgrowthforthebusinessandbestreturn
oninvestment(seeFigure9)(Meziane,2007;Mirandadiaz,personalcommunication,
2008). Generally speaking, there are three key criteria that need to be satisfied
beforesignificanttimeandinvestmentarecommittedtoproductideas.Theseare:a
working product, prototype or technology; evidence of consumer interest and a
clear case for leverageof P&G’s existing capability, such as technology,marketing
and distribution. This represents a significant move away from the traditional
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25
approachof “lettingmany flowers bloom” towards focusing resources onprojects
which are most likely to yield high return on investment. Additionally, open
innovation turned innovation into a “two way street” (Lafley and Charan, 2008)
whichmeansbeingopento learnfromeverywherewherebest inclasscapabilities
are,inordertothenreapplytheminotherpartsoftheworld.
Figure9InnovationfunnelatP&G
Source:ownillustration,basedonMeziane(2007),Mirandadiaz(personalcommunication,2008)
Changesintheorganizationalstructure
This shift in the business model has translated into a change of the organization
structure,aswellasaclearcutmovetowardsanopen,collaborativeandmutually
supporting organizational architecture. As Lafley and Charan (2008) point out,
innovationisabout“just‐enoughstructure”.Whilesomelevelofstructureisneeded,
abalancemustbeachievedbetweenstructureandcreativity.Oneofthemainaims
of the “Organization 2005” restructuring was to stimulate innovation by making
P&G’s internally focused and fragmented communicationmore outwardly focused
and cohesive (Schilling, 2005). Gordon Brunner, Chief Technology Officer, and
WorldwideR&DHead,saidthathewantedtocreateaculturethatconnectspeople
and technologies in a more effective way. For him R&D could become C&D –
“ConnectandDevelop”.
Specialstructurestocaptureideas
Three special structures have been designed to promote innovation within P&G:
P&GFutureWorks,NewBusinessDevelopment,andExternalBusinessDevelopment.
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Figure10P&G’sSpecialstructurestocaptureideas
Source: own illustration, basedonMirandadiaz (personal communication, 2008) andWai (personal
communication,2009)
P&GFutureWorksconsistsofmultidisciplinaryteamswhoseprimaryobjectiveisto
seekout innovationopportunities thatcreatenewconsumption.Unlike innovation
teamsthatresideinthebusinessunits,FutureWorksisnotconstrainedbyexisting
categoryparadigms.Rather,itexploresdiscontinuousideasthatmightcreateanew
category or segment, cut across existing categories, or create an adjacency to an
existing business. A business unit “sponsor” is identified early on for each Future
Workprojecttoprovidepragmaticbusinessinputupfrontandtakeresponsibilityfor
thecommercializationphaseof the innovationprojectafterFutureWorksqualifies
theinitialconceptandprototype.
Thesecondstructure,NewBusinessDevelopment(NBD)StructureinaBusinessUnit,
is focusing on creating both disruptive and incremental innovation for a specific
category, which can also be partially or entirely sourced from the external
environment. The third structure, External Business Development works like a
“brokerage house” for innovation. Instead of each business unit doing its own
outside search for innovation opportunities, such a structure facilitates speed and
interconnections of business units with outsiders, as well as interconnections
betweendifferentbusinessunitswithinthecompany.
Apart from thesemore structured organizational approaches for innovation, P&G
also introduced innovation hot zones that can be used to identify and start
developing ideas, by testing them through theeyesof the customer:whathe/she
actuallyexperiencesasashopper,thusimprovingthechancesofsuccessbeforethe
actual innovation development process is launched. This innovation centered
strategy has mirrored into a dedicated resource allocation to foster new ideas
through P&G Corporate Innovation fund, an organizational structure with some
resemblance to a venture capital firm,which specializes in high risk/ high reward
ideas.
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To conclude, there are four structuresmeant to capture ideas for growth: Future
Worksfordiscontinuousinnovations,NewBusinessDevelopmentforbothdisruptive
and incremental innovations, External Business Development as a “brokerage
house”,“hotzones”totestconsumerinterestandmarketopportunityfornewideas
andCorporateInnovationfundasa“quasiventurecapitalfirm”.
Openarchitectureasinnovationenabler
P&G’sConnect&Developmodelreliesontheresponseandfeedbackfromaglobal
network, which provides the necessary platform to harness the ideas and
technologicalinnovationrequiredtoanswerthebriefsdevelopedbydifferentbrand
teams. This platform consists of both proprietary and open networks (Meziane,
2007)(seeFigure11).
Figure11P&G’sopenarchitecturestructure
Source:ownillustration,basedonHustonandSakkab(2006)
P&G’s proprietary network consists of associated “technology entrepreneurs” and
“suppliers”. The “technology entrepreneurs” are senior employees in charge of
leading the development of the consumer “needs” lists and writing technology
briefs.Thisinvolvescontinuousscoutingofretailers’shelvesandlocalmediafornew
innovative products and technologies that can be leveraged using P&G’s existing
capabilities. The collaborationwith suppliers is done via a secure IT platform that
allows P&G to share technology briefs with suppliers. Although this adds to the
existingcostsofmanagingsupplier relationships, itallows thecompanytocapture
valuable information thathashadadirect impacton the company’sperformance,
increasinginnovationprojectsby30%.
The open network complements P&G’s proprietary network and allows project
teams to source the technologies theyneed todevelop their top10products and
bring themtomarketmuchquicker.Themost fruitful in termsof ideasgenerated
are: NineSigma, InnoCentive, YourEncore and Yet2.com. These are independent
businesses,whosebusinessmodelistoactas“openinnovationbrokers”.Although
this involves extra management time and resources, the incremental spend on
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administrationislikelytobeafractionoftheR&Dspentonin‐housedevelopment.
Furthermore, the risks associated with upfront investment to develop new
technologiesareavoided,thusboostingtheoverallreturnoninvestment.
Changesincorporatecultureandleadership
Innovative strategic planning implies creating the right corporate culture, attitude
and incentives to ensure that all personnel involved in the development process,
from R&D,manufacturing, market research,marketing and other functions works
togetherinamannerthatmaximizestheproductpipeline’spotential.Consequently,
P&Ghas attempted to change its slow, cautious and risk adverse culture,with an
emphasisonstretch,innovationandspeed:
“aculturethatrewardsgoingforbreakthroughgoals,thatsupportsstretching,takingrisks–evenif
thereisachanceoffallingshort…aculturethatstimulatesrobustinnovation–bigideasthatchange
the game – and encourages visionary leadership; a culture that encourages collaboration and
emphasizes learning and sharing new knowledge. A culture that values speed and fosters fast,
streamlineddecision–making”(VedpuriswarandKhan,2005).
As Lafley and Charan (2008) argue, creating an innovation culture takes time and
involves focusing on following four elements: courage, connectivity and
collaboration, curiosity, andopenness. P&Gpromoted courage by establishing the
“there’snobadidea”operatingprinciple,andthusrewardedandrecognizedteams
whotriedandfailed.Thishasenabledittocapturelearningfromfailedinnovations
and share it with other teams for reapplication (Mirandadiaz, personal
communication,2008).Thesecondelement,beingconnectedandcollaborative,has
led P&G to create in‐house infrastructures (e.g. Clay Street, co‐location) and
communities of practice to foster knowledge exchange and establish ways to
encourageemployeestoleverageandextendtheirexternalnetworks.Thirdly,being
curious,meanstosetanexpectationofongoing learning, topromoteshopperand
customer immersion and keep asking “why” and “why” again. Lastly, being open
means to be openminded to new ideas from anyone, anywhere, anytime, to be
opentolearnbearinginmindtheassumptionthatothers’ideawillultimatelymake
aproductorservicebetter,tobeopenandempathictothecustomers inorderto
bestunderstandtheirneedsandwantsandtobeopentosuspendjudgment(Wai,
personal communication, 2009). As Lafley and Charan (2008) argue,many people
within P&Gwere defensive about what Connect & Develop couldmean for their
positions. That is why performance appraisal and rewarding systems have been
aligned to measure and champion the application of these principles. As Lafley
(2008) acknowledges, getting people together on the spur of themoment so that
everyone hears the same thing and builds on each other’s ideas increases the
chancesofreachingtheclickpoint.
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To conclude, P&Ghas innovated strategic planning by changing its entire business
model towards an open approach known as the “Connect and Develop” strategy
(HustonandSakkab,2006).This strategy isderiveddirectly fromthe top, fromthe
CEOwho committedhimself to capture50%of innovation externally. Thebusiness
model involves a new way of creating and capturing value, by simultaneously
leveragingexternalknowledgeandreapingthebenefitsofsellinginternalknowledge
which does not directly fit P&G’s strategy. Furthermore, this open innovation
approachhasbeenappliedsimultaneouslyonseveraldirections:beginningwiththe
company’s mission and purpose, to culture, strategy formulation and
implementation,andorganizationalstructure.
4.2 Case2:Unilever
4.2.1 FactsandFigures
Unilever is an Anglo‐Dutch consumer goods company with corporate centers in
LondonandRotterdam.Withsalesofabout€40billion, it isoneoftheworld’stop
three food firms, after Nestlé and Kraft Foods and the world’s second largest
packagedconsumergoodscompany,behindProcter&Gamble(Euromonitor,2008).
Figure12FactSheet:UnileverGroupin2008
Source:ownillustrationbasedoncompanywebsite
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TheGroupproduces andmarkets awide rangeof foods, homeandpersonal care
products, includingwell‐knownbrandssuchas:Lipton,Flora, ICan’tBelieve It’sno
Butter, Omo, Dove.With a global presence, Unilever employs 174000 people and
invests about2.2%of annual turnover inbasic researchandproduct innovations,
leading to the filling of more than 400 patent applications annually (Unilever,
2008d). Unilever pursues a different business model than P&G, the organization
having a rather extensive history of clear decentralization, with only a recent
tendencytowardscentralization.UnlikeP&Gwhichfocusesonafewverybigbrands,
Unilever simultaneously manages a high number of brands, including many local
brands.
Inordertounderstandtheinter‐hierarchicalinteractionwithinthecompanyduring
theplanningprocess,abriefoutlineontheorganizationalstructureusedbyUnilever
follows.
Organizationalstructure
UnileverGroup functionsas theoperationalarmofUnileverNV (Netherlands)and
UnileverPlc.(UK),itstwoparentcompanies.Thoughtheparentcompaniesoperate
as separate legal entities, they function as a single business, with a single set of
financialsandacommonboardofdirectors.
Unilever is structured along three dimensions: categories, regions and functions.
Categories are the business units, which are responsible for strategy, brand
developmentand innovationandareheldaccountable for:mediumand longterm
marketshare,brandhealth, innovationmetricsandCategoryvaluecreation.There
are two categories: Foods and Home & Personal Care. Regional units play a
complementaryrole,beingresponsibleformanagingthebusiness,deployingbrands
andinnovationseffectivelyandwinningwithcustomers.Thiscentral/regionalmix
is visible on the accountability side, aswell. As such, Regional Presidents are held
accountable for growth, profit, cash flows and short‐term market shares. In the
entireprocess,theyaresupportedbytheFinance,R&DandHRfunctions(Figure13).
Figure13Unileverorganizationalstructurein2008
Source:ownillustration,basedoncompanywebsite.
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4.2.2 Strategicplanningsystem
At Unilever, strategic planning is taking place on three levels: corporate level,
categorylevelandregionallevel.
Corporatelevelstrategicplanning
The corporate level through its Executive Committee and through the Chairman’s
voicedevelopsastrategyeveryfiveyears,whichisupdatedonaquarterlybasis.This
timeframe is considered to be appropriate for the velocity characterizing this
industry(Maljers,1990).Itsmainpurposeistosetthedirectionforthecompany.At
the basis of the strategy stands the company mission, on which the corporate
purpose is built. Apart from the corporate purpose,which is broadly defined, the
Chairman establishes a set of strategic priorities and performance targets to be
achievedbytheendoftheplanningperiod(Gatej,personalcommunication,2008).
As such, during the last two corporate planning cycles, Unilever has shifted its
mission, from“Meetingeverydayneedsofpeopleeverywhere” (used in the2000‐
2004 strategicplanningperiod) towards “To addVitality to life”(from2004on). In
line with the mission, the strategic priorities have changed, as well. Hence, the
following three strategic priorities have been derived: Personal Care Category,
Developing and Emerging Economies (D&E) and Vitality. These three strategic
priorities are considered levers of value creation (Markham, 2006). Before
proceeding, the motivation and implication of these priorities will be briefly
explained.
Firstly,anemphasisonPersonalCaremeansthatmoreresourceswillbededicated
tothiscategorycomparedvs.theFoodscategoryinordertoincreasetheCategory’s
momentumandgrowthrate(Benea,personalcommunication,2008).Thisinvolvesa
reshapeoftheproductportfolioandaconcentrationonmarketleadershippositions,
whereUnilevercanbenefitfromhighgrowthspaces(Markham,2006).Secondly,the
focus on D&E merely reflects the acknowledgement that developed markets are
alreadysaturatedandthat inordertogrowUnilevermustconcentrateonmarkets
that have a clear expansion potential (Benea, personal communication, 2008). In
this regard, Unilever builds on its deep local roots and long local presence, and
makes sure to incorporate this knowledge in locally adapted products (Markham,
2006). This strategic priority is also reflected in the organizational structure:
Romaniamoved alongwith its CEE neighbors into the Asia / Africa / CEE Region,
whichmarks an important attitude change from the previous situationwhen CEE
wasnotparticularlydistinguishedamongtheEuropeRegiongroup(Benea,personal
communication,2008).Thirdly,putting ‘Vitality’upfront isessentiallya reaction to
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existing trends, with people placing greater focus on living longer, better, higher
qualitylives(Markham,2006).
Apart from these strategic priorities, Unilever is guided from the top by a set of
performance targets,whicharesetevery fiveyears, theirprogressbeing reviewed
annually.Forthetimeframe2004‐2009,theobjectivesare:underlyingsalesgrowth
of3%‐5%p.a.,operatingmargininexcessof15%by2010,increaseintheROICover
its2004baseof11%andanungearedfreecashflowof€25‐30bio(Unilever,2008d).
CategoryLevelStrategicPlanning
Categories are responsible for brand development and innovations. They have a
planning horizon of three years and in the strategy development stage, they are
collaboratingwith theProductdevelopment teams.Theirmainactivities consist in
market forecasting,pickingupmarket trends, competitoranalysis,developingnew
product ideas. Based on the value creation capacity, growth rhythm,market size,
profitabilityandothermetrics,Categoriesmakeabrandprioritizationatcorporate
and regional level and set targets (Gatej, personal communication, 2008). InApril‐
May,theCategoriespresenttheplansforthefollowingyeartotheRegions(Benea,
personalcommunication,2008).
RegionalLevelStrategicPlanning
Regionsandcountriesareresponsibleforbrandbuilding.Inotherwords,theyhave
the task of deploying the innovations, which the Categories are developing, at
country level. Based on information received from the Categories, Regions split
targetsonoperatingunits(MCOs)(Gatej,personalcommunication,2008).Thesame
happens with innovations, which Regions receive one year in advance. As such,
Regions set annual performance targets and establish annual budgets, which are
then discussed at Category levelwhen targets are agreed upon. Aggregated plans
are then discussed and approved by the Board (Benea, personal communication,
2008).
At regional level, corrections can be made in the course of a year only on the
operational side in order to ensure that agreed targets are met (Gatej, personal
communication, 2008). Regions have the possibility to make suggestions to the
Categoriesregardingnewproductsbasedontheir localknowledge,whicharethen
included in the global portfolio (Gatej, personal communication, 2008). Regional
Presidentsareheldaccountableforgrowth,profit,cashflowsandshort‐termmarket
shares.
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Figure14StrategyprocesscycleatUnilever
Source:ownillustration,basedonBenea,GatejandCross(personalcommunication,2008)
4.2.3 Innovatingstrategicplanning
Strategicplanningshouldincludethechangeofopportunitytoreflectthefutureof
thebusinessmodel (Cross,personal communication,2008).A shift in thebusiness
model implies a change in all the elements of a company, starting from the
company’s mission, strategies, organizational structure and processes, as well as
softer factors such as the corporate culture and leadership style; they all need to
change.
Changesinthecompany’smission
Assettingpurposerepresentsthefirststepinaplanningsystem(Chrakravarthyet.
all, 2003; Grant, 2007), Unilever strengthened the importance of innovation by
puttingitatthebasisofitsmission.Consequently,from2000thecompany’smission
has progressively shifted from “meeting consumers’ everyday needs” towards
“adding Vitality”. When the latter established itself as the company’s mission in
2004, the focus on innovation has been derived directly from the top, from the
Chairman’shimselfwhopointsouttheemergenceofamovefrom“astep‐upinthe
qualityofproducts”towards“astep‐upininnovation”.Likeanychangeinstrategy,
the support from the top is essential (Cross, personal communication, 2008). The
change in strategic direction has cascaded down into a change in the innovation
strategy.
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Changesinstrategyformulationandimplementation
InnovatingstrategytowardsadoptingthismoreopenapproachimpliesforUnilever
arealinternalstrategyalignmentbothwithinthecompanyandalsoagainstwhatit
wants toachievewith its externalpartners (Cross,personal communication, 2008;
Lindegaard, 2008).Without such alignment, the company can find itself in a very
vulnerableplace,ifitstartsdoingsomethingitdidn’tplantoorforwhichthereisnot
enoughcommitmentfromthetop(Pryor,2007).
Intheareaofstrategyformulation,beingoutwardsorientedrequiresUnilevertobe
clear about where it wants to position itself in the future “based on its core
capabilities and on its capacity to envision the future” (Cross, personal
communication, 2008). Furthermore, in order to make strategic planning more
innovative, a highdegreeof internal coherencybetween strategy formulation and
strategy institutionalization is needed. This calls for a very good target and
performance appraisal to reward people forwhat they agree to do and notwhat
theywouldliketodo(Cross,personalcommunication,2008).
ChangesinR&Dstrategy
Inordertoachievehighergrowththantheoverallmarket,Unilevermanagershave
beenconvincedabouttheroleofknowledgeandinnovationasakeydifferentiator,
and have thus committed to “driving 40% of growth through innovation“ (Banga,
2008). The contribution innovation brings to the table is affected by the level of
funding that can be made available, the technical capability of the research and
developmentfunctions,andthesuccessregisteredbytheoperatingmanagementin
quicklyrollingouttheresultingimprovements(Unilever,2008d).Inordertoreapthe
maximum benefit out of innovation given a fixed level of resource allocation,
Unileverhasopeneduptolookforthebesttechnologieseverywhere,whereverthey
are. Figure 15 shows how the corporate strategy translates itself downwards on
operationallevel.
Innovating within Unilever involves four steps: want, find, get, manage (Unilever,
2008g).Thisbasicallymeanstobeclearaboutwhatyouwantbeforeyougooutto
finditandsearchforpartners,andbeforeyoubuildthedeal;thelaststagerefersto
managingtheconsequences(Cross,2006).
Figure15Step‐upininnovationprocess
Source:ownillustrationbasedonCross(2006)
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In linewith the same strategicdirection,Unilever invests in fewer,biggerprojects
developedgloballyandregionally,whichareconsideredtodeliverthehighestvalue
tothebusinesseitherintermsofproductsalesormarginimprovements(Unilever,
2008d). Consequently, Unilever aims to reach an average project size ten times
biggerthanin2005andtoadecreasetheundergoingprojectsfigurefrom5000+in
2005 to no more than 700 in 2009 (Banga, 2008). In terms of organizational
structure, this aim translates intoa concentrationof researchanddevelopment in
globalandregionalcenters,whichoperateas innovationpowerhouses. Theeffect
on resourceallocation is visible inFigure16,which illustrates the shift in resource
allocationonlocal,regionalandgloballevel.
Figure16ResourceallocationforR&Donlevelsoforganization
Resourceallocation(%shareoftotalR&Dbudget)Levelintheorganization
2006 2007
Local 40% 25%Regional 37% 42%Global 23% 33%
Source:ownillustrationbasedonUnilever(2008d)
ThefigurescitedabovecometostrengthenthefactthatlocalUnileverbranchesdo
nothavethesamepowerasbeforetocomeupwithlocalproductsandbrands.Mr.
Benea (personal communication, 2008) argued the same during the interview,
mentioningacentralizationofthecompanyintime,withnegativeconsequenceson
the independenceandpowerof localbranches towardsbuildingupownproducts.
However, as Ms Gatej (personal communication, 2008) argues, there is still a
possibilitytodeveloplocalproductswhich,followingasetofsystematicwell‐defined
phases(Figure17),areincludedintheglobalproductplatform.
Figure17InnovationFunnelatUnilever
Source:ownillustrationbasedonBanga(2008)
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One of themethods used to foster more idea generation is open innovation. An
advantage of open innovation is that it allows Unilever to benefit from the
knowledgeofitspartnersandprogressivelybringinexternalcapabilitiesinitsearly
thinking (Cross,personalcommunication,2008),which in turnallowstheGroupto
stretchstrategicobjectives,suchasgrowthtargets.Thus,thisprocessrevealsanew
avenueforlearningandappropriatingnewcapabilities(Krogh,Nonaka,Aben,2001).
Thismeansdeploymentofsuperiortechnologies,shortertimetomarket,whichthen
make possible a rapid rollout across keymarkets (Unilever, 2008d). Furthermore,
openinnovationallowsUnilevertoleverageexternalcapabilitieswhicharedeployed
for the company by engaging in partnerships with external collaborators. Open
innovation promotes strategic experiments involving lower levels of risk and
resources allocation, together with the opportunity to extend core business and
create new sources of growth (Pryor, 2007). This argument is confirmed during
interviewswith thecompanyrepresentatives,whichacknowledgethehigh levelof
riskwhenfunctionsinnovateontheirown(Cross,personalcommunication,2008).
Changesinorganizationalstructure‐Towardsanopenarchitecture
Incorporating innovation in the corporate mission involves a change in the
organizational structure, as well. This change bears two dimensions: first, how
Unilever operates internally and second, how Unilever interacts with external
partners.
Internally,strategicplanningneedstorespondtothetrendtowardscross‐functional
innovation, in that “a cross‐functional sense of risk taking is reflected in a cross
functional sense of reward” (Cross, personal communication, 2008). Innovation
requiresan increase inthequalityofcross‐functionaldiscussions,togetherwithan
increase in coherency. Cross‐functional discussions foster leverage of existing
capabilities (Krogh, Nonaka, Aben, 2001), regardless wherever these capabilities
mightcomefromthe insideor fromexternalpartnersthroughopen innovation. In
the absence of cross‐functional collaboration Unilever may end up only with
incremental change as this involves a low risk (Cross, personal communication,
2008).However, inthecaseofincremental innovationthebenefitsarealsolimited
asthefinancialperformancereveals,dependingontheconsumptionlevelwithinthe
given category, usually within a year after its implementation (Gatej, personal
communication,2008).
Still, Unilever has to improve its way of gathering ideas at the regional level. As
mentionedduringtheinterviewswiththecompany’srepresentative,localsuppliers,
brandmanagers, local consumers, advertisingagenciesbringa lotof insight about
trends, which in many cases fail to be captured. Thus, an Innovation board is
suggested, which would stimulate and receive ideas from within the company’s
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regionalbranches,fromthelocalsuppliers,advertisingagenciesandotherexternal
partners at local level. These ideas will then be tested and internalized in the
company’sproductportfolio.AlthoughtheplatformIdeas4Unileverhassucharole,
it is apparently not promoted enough within the company. Hence, the suggested
innovationboardshouldbehighlyvisibleandcentraltothecompany,andshouldbe
alsoprofileitselfasthemaindriverforinnovation(Gatej,personalcommunication,
2008).
Being aware that innovation capacity is limited if only internal innovation is used,
Unileverhasopenedup to theexternal environmentandengaged in relationships
with external partners: main suppliers, academia, scouting networks, basically
anyone that had ideas which fit Unilever strategic priorities or new technological
solutions(NottinghamUniversityBusinessServices,2008;YSTN,2008).
AsDavidBird,R&DAcademyLearningManageratUnileverexplains:
"AtUnilever,wewant todevelopourcollaborationwith thebestminds in the industry to
makethedifferencethatnosinglecompanycouldmakeonitsown."(Brightwave,2008)
For the external world, Unilever has built an external web interface, which is
dedicated to all those individuals / companies coming to Unilever to build new
businesses through Unilever Ventures and to people who bring new technologies
throughPhysicVentures.Fortheoneswhohaveideas,technologiesandcapabilities
that fit Unilever’s strategy and can go to market to generate value the
Ideas4Unilever website is used. With existing partners, Unilever shares its
investment plans and strategy so that the partner company can find what role it
could play to achieve Unilever’s growth targets (Cross, personal communication,
2008).
Besides a more open organization structure, this implies to develop the right
information technology tools to capture the value that derives from open
innovation. Unilever Ventures, Physic Ventures and Ideas4Unilever are such
examples.
Changesincorporatecultureandleadership
If planning is in itself a performance (Whittington and Cailluet, 2008), then
innovatingstrategicplanningmeansthatthementalityofdoingthedailytaskshasto
change. Using open innovation as a tool to promote idea generation calls for a
change in both the corporate and employee mindset. This is in line with the
interview findings,where open innovation is fundamentally seen as “amindset, a
wayofthinking,whichisallaboutchangingeverythingyoudoinacompanysothat
youextractmaximumvalue”(Cross,personalcommunication,2008).Thischangein
mentality is driven from the topby clearly communicating innovation as a growth
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38
driver. In addition to this, there is a range of programs (Standards of Leadership
Program, Senior Executive Seminar) directed tomanagers,which target to change
theirbehavior.Thenewe‐Learningprogram“OpenInnovationAwareness”ismeant
togetemployeesthinkingaboutopeninnovationinadifferentway,explainingthe
need for change,providingdistinctionsbetweenopenand closed innovation inan
Unilevercontext(Brightwave,2008).AsDavidBird,R&DAcademyLearningManager
atUnilever,argues:
"In order to develop our plans for open innovation further, we need to drive deeper
understandingofthesubjectamongstourglobalemployeepopulation.”(Brightwave,2008)
The “Standards of Leadership” Program aims to instill a set of behaviors, which
should ensure that every manager takes personal responsibility for delivering
Unilever’s agenda through excellence in strategy execution. Senior Executive
Seminarisorganizedeveryyearandexamineskeybusinessissues,inordertomake
managersawareoftheopportunitiesthattheenvironmentoffers(Unilever,2008d).
This change in behavior is also reflected in the performance appraisal. That is,
Unilevertries to findtherightbalanceof functionalandcross‐functionalorshared
targets in order to foster collaboration. However, asmentioned in the interviews,
the focus is on the outcome, on growth achieved by any means, including open
innovationamongotherinstruments,andnotonusingopeninnovationjustforthe
sakeofkeepingupwithwhatcompetitorsdo.
Toconclude,duetotheneedtogrowandtokeepupwiththeindustrypace,Unilever
hasinnovateditsstrategicplanningprocessandhasbeendeployingopeninnovation.
The institutionalization of this tool has called for several changes in the
organizational structure and, more importantly, has required a commitment from
top management, which set the strategic direction towards a “step‐up in
innovation”. The change has allowed Unilever to stretch goals and targets by
including/ leveragingpartners’capability intheirearlythinking,andinthisprocess,
acquiringnewcapabilitiesbecamepossible.Furthermore,forstrategyinnovationto
be effective, a clear corporate direction had to be accompanied by a very good
internal alignment. Apart from this, the corporate culture has changed,
counteractingthe“NotInventedHere”syndrome,beingmoreopentoexternalideas
andbeingmoreentrepreneurial.Furthermore,ashifttowardsmorecross‐functional
collaborationandhigherrisktakingsoonbecamevisible.
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4.3 A theory of how strategic planning process can be made more
innovative
‐Applyingtheinnovationtagtostrategicplanningprocess‐
The case studies reveal severalways tomake the strategicplanningprocessmore
innovative in terms of developing more ideas for growth. Innovating in strategy
termsinvolveschangesintheentirestrategicplanningprocess,fromthecompany’s
missiondowntostrategyevaluationandcontrol stage.Thischapter integrates the
findings from the cross case analysis,which are then confrontedwith the existing
theories inthe literature.Consequently,propositionsaredrawn. Inordertobetter
understandtheresults,theanalysisbeginswithanoveralllookoverwaystoimprove
theplanningprocess itself, andcontinueswith improvement suggestions targeting
eachofthemainstrategicplanningphases:formulation–implementation–control.
Finally,onemethodisdescribedingreaterdetailasitisofgreaterimportancetothe
fast moving consumer goods industry: making strategic planning more innovative
throughopen innovation. Indeed, open innovation as a tool tomake the strategic
planningprocessmore innovativedeservesparticular attention since,when scaled
up, open innovation leads to changes in the entire businessmodel. The focus on
opennessandinteractionininnovationstudiesreflectsawidertrendatthelevelof
company behavior research, which hints at the idea that the network of
relationships between the company and its external environment can play an
important role in shaping business growth. For instance, Shan,Walker, and Kogut
(1994) find an association between cooperation and innovative output in
biotechnologystart‐upfirms.Powell,Koput,andSmith‐Doerr(1996)showthatfirms
embedded in benefit‐rich networks are likely to have greater innovative
performance. Laursen and Salter (2006) reach a similar conclusion, their results
showingthatinvestigatingwidelyanddeeplyacrossavarietyofsearchchannelscan
provide ideas and resources that help firms gain and exploit innovative
opportunities.
Research in evolutionary economics also suggests that a firm’s openness to its
external environment can improve its ability to innovate. Evolutionary economists
highlighttherolesearchingplaysinhelpingorganizationstofindsourcesofvariety,
which allow them to create new combinations of technologies and knowledge
(Nelson andWinter, 1982). Furthermore, open innovation, once just amethod to
conduct R&D, is increasingly becoming central to the business. The relationship
between open innovation and strategic planning works the other way around, as
well. As Lichtenthaler (2008) argues, strategic planning plays a critical role in the
successfulexploitationofexternaltechnology.Toconclude,literaturefindingsshow
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40
the increasing importance of collaborative innovation to innovation performance.
Thus,thisstudywilldiscussinaseparatechaptertheimpactofopeninnovationon
strategicplanning.
Figure18Overviewplan–makingstrategicplanningprocessmoreinnovative
Source:ownillustration
4.3.1 Innovatingtheplanningprocessitself
Figure19Overview‐Innovatingtheplanningprocessitself
Source:ownillustration
Theprocessofstrategicplanningitselfcanbedesignedsothatacontinuousflowof
ideas is captured in the strategymaking.What is presented in the literature as a
phase based process, which starts with the company’s mission and follows a
stepwise approachof strategy formulation, implementation and control (Bradford,
Duncan and Tarcy, 2000) is in practice an ongoing, iterative process, in which
formulation, implementation and control are intertwined. Furthermore, based on
thenewacquiredinformation,planningiscontinuouslymonitoredtoberesponsive
to significantand systematicmarket conditions changes,whose implicationsaffect
strategy formulation. This idea was confirmed during the interviews and is
strengthened by both academic and practitioner oriented literature. During the
interviews,Ms.Gatej (personal communication, 2008)mentions thatplanning and
performance appraisal at Unilever happen on a rolling basis and are not calendar
driven.Althoughanindicativetimeframeforagreeingonperformancetargetsexists,
new ideasand innovation intentionsarepresentedat several times,dependingon
when innovation projects are ready. Mr. Mirandadiaz (personal communication,
2008) confirms this when saying that planning is an iterative process, in which
strategy formulation and implementation take place in parallel. In the academic
literatureMintzberg(1994b)arguesthatstrategymakingisnotanisolatedprocess,
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41
being in fact interwoven with all that it takes to manage an organization.
Furthermore, in order to be able to come up with more ideas for growth, an
integrated perspective of the enterprise, a not too precisely articulated vision or
direction shouldbepromoted. In another study,Wilson (1998)drawsattention to
the same, supporting that strategicplanning isnota “sometime” thingand that it
cannot be turned on and off. Other researchers such as Wall and Wall (1995)
consider strategymaking a process in which strategy evolves organically, through
constant “give and take” and iteration, rather than being formulated via analysis
alone.
On the practitioners’ side, Hamel (Bryan and Hamel, 2008, p. 2) observes that
“strategy is not a once a year rain dance, nor is it a once a decade consulting
project”,butaprocessthatrequiresanddeservesalong‐termcommitment.Within
thesameline,Rumelt(McKinseyQuarterly,2007,p.3)pointsoutthat“theneedfor
strategywork isepisodic,notnecessarilyannual”.Thus, strategicplanning isnota
one‐timeprocess,butonewhichtakesplaceonanongoingbasis.Theadvantageof
such an arrangement is that it makes planning more adaptive to environmental
changes and allows for new growth ideas to be internalized. Hence, the first
propositioncanbedrawn:
Proposition 1a: A continuous monitoring strategic planning process allows for
adaptability to changes and internalization of new ideas, which in turn make the
strategicplanningprocessmoreinnovative.
Besidesthis,otherresearcherssuggesttheseparationbetweenthestrategymaking
andthefinancialsdiscussion.Simpson(1998)arguesthatfinancialplanningaspects
shouldnotbediscussedtogetherwithstrategymakinginordertokeepthestrategy
dialoguewell focused. Rumelt (McKinseyQuarterly, 2007) supports the same idea
whenheadvisesagainstusingthelabel“strategicplan”andthebudgets“longterm
resource plans”, favoring instead the setting up of a separate, nonannual,
opportunity driven process for strategywork. Dye, Sibony (2007) add to this that
budgetingmustbecomplementedwithafocusonstrategicissuesthatwillhavethe
greatest impact on future business performance. However, every business’s main
goalistomakeprofit,andtheliteraturesupportedvisiononhowtomakeplanning
more innovative isonlypartially implemented.P&Gseparatesthisvisionaryaspect
ofstrategymakingfromfinancialcommitmentsbyschedulingthediscussionofthe
two tasks at different points in time. That is, during the bottom up process of
planningwhichusuallyhappensinthefirstquarter,visionisrenewed,goalsareset
andstrategiestodeliverthosegoalsaredeveloped.Inthesecondquarter,financial
targets are set from the top and goals are negotiated with the business units
(Mirandadiaz,personalcommunication,2008).Thishelpsavoidstiflingcreativity in
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the strategy making process and thus promotes an innovative strategic planning.
Hence,thesecondpropositioncanbedeveloped:
Proposition1b:Disconnectingstrategicplanning fromfinancialplanningmakes the
strategicplanningprocessmoreinnovative.
4.3.2 Innovatingstrategyformulation
Oneof themain areasof improvement concerning the innovativenessof strategic
planning isstrategyformulation.Becauseof itshigh importance,bothpractitioners
and academics make recommendations on how to reap more benefits from this
stage. Findings cluster in the following areas: outward orientation, strategy clarity
andinternalalignment,togetherwithsettinglimitedpriorities.
Figure20Overview–innovatingstrategyformulation
Source:ownillustration
Oneofthemainwaystocomeupwithmoregrowthideasisthroughbeingoutward
orientedinstrategyformulation.AsLafley(LafleyandCharan,2008,p.34)putsit:
“thebusinessisprettysimple.Theconsumerisourbossandwehavetowinwithherattwomoments
oftruth(whenbuyingandwhenusingtheproducts)dayinanddayout”.
Beingexternally focusedhelps identifyandserveconsumer’sneedsandwantsand
thuscomeupwithsolutionstosatisfytheseneeds.P&G’sCEOfurtherarguesthat
“it is inspiringtounderstandconsumers’ livesandhowP&Gcanmaketheireverydayhouseholdand
personalcareexperiencesmoresatisfying”(LafleyandCharan,2008,p.35).
Mr. Mirandadiaz (personal communication, 2008) confirms this idea during the
interview and adds that by being consumer focused, P&G translates needs into
unsolvedproblemsandthusopensuptheavenueforgrowth.Lafleystrengthensthis
by saying that growth opportunities can be found through understanding the
customer’sunmetneedsanddesires,botharticulatedandunarticulated(Lafleyand
Charan,2008).Withinthesameline,Mr.Cross(personalcommunication,2008)from
Unilever highlights the need to shift the company’s positioning from promoting
product‐related brands to service‐related brands, which helps move the
organization’s business thinking towards adjacent areas. In another interview, he
points to the fact that Unilever is using a combination of exposing employees to
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43
customersandmakingsureemployeesgetexposedtowhat'sgoingonoutsidethe
company(Cross,2006).
Academicliteraturestrengthensthisfindingandconcludesthatunderstandingwhat
the customer’s truly needs and values is the essential basis for strategic success
(Wilson,1998).Wilson(1998)goesontoaddthatmanagersshouldfocusmoreon
creative thinking, the strategic capability that this understanding should generate.
Within the same line,Mintzberg (1994a) concludes that studieshave revealed the
mosteffectivemanagerstorelyonsomeofthesoftestformsofinformation.
On the practitioners’ side, Beinhocker (McKinsey, 2006) argues that improved
identification of and focus on important strategic issuesmakes strategic planning
more innovative. Rumelt (McKinseyQuarterly, 2007) calls this outward looking an
acknowledgementofstrategydynamicsandmarketgaps,orwhathenames“value
denials”.Hepointstotheneedtoturnasidefromcentral innovationandaskwhat
valuedenialsitwillbeuncovered,and,moreimportantly,howwilltheybefixed.
Thisdiscussionisprolongedintoanadjacentareaoftheparticipantstobeinvolved
in strategy formulation. Bryan and Hamel (2008) have recently restated that the
traditional management belief according to which strategy is decided at the top
should be abandoned. Along the same line,Wall andWall (1995) argue that the
broader the participation is, themore evolutionary the strategyprocess becomes,
andthereforecallstotakeintoaccountinputfromexternalsuppliersandcustomers
informulatingstrategy.
Other researches also support this argument, concluding that it is impossible to
developaplan that canbe implementedunless key stakeholdershavea say in its
content (Clark and Krentz, 2006). However, some researchers such as Simpson
(1998) disapprove of this and argue against participatory planning pointing to the
factthatitleadstoanever‐endingdebateandthatitdoesn’tallowthecompanyto
stretchgoals.Thisstatementnot longerholdswater innowadays’world,asLafley,
the CEO of P&G points out that only innovation allows strategy targets to be
stretchedandthusideasfromeverywherearewelcomed(LafleyandCharan,2008).
Hence,thefollowingpropositioncanbedrawn:
Proposition2a:Beingoutwardorientedinstrategicformulationmakesthestrategic
planningprocessmoreinnovative.
Complementary to this, another way of unleashing innovative growth ideas is
throughhavingaclearstrategyandfewstrategicprioritiessothateveryonewithin
theorganizationcandirectitscreativitytowardsthesamegoal.Academicresearch
supports using this method to foster a more innovative strategic planning. As
Simpson(1998)states,simplicityandclarityarethekeystoinfluencingbehavior.He
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44
arguesthatoneof thekeystogoodstrategy is tomake it simple, tosynthesizeall
the complexities of the business environment and the company’s position for the
futureintoafewimportantactions,afewimportantdirections.Itshouldincludenot
onlyasimplestatementof theobjectivesandgoalsof theunit,butalsostrategies
(nomore than five), measures by which progress against those strategies will be
evaluated,andspecifictactics(actionplans)whichbringthestrategytolife.
Furthermore, strategies and tactics should cascade into lower levels of the
organization. So thatpeople at lower levels in theorganization clearlyunderstand
how theypersonally impact the strategyand itspriorities (Simpson, 1998).Wilson
(1998, p. 510) argues that a powerful and coherent strategic vision that is well
communicated and well understood throughout an organization increases the
organization’s flexibility. In the absence of such a clear vision, the following
observation gains substance: “if you don’t know where you’re going, it doesn’t
matter how you get there”. Mintzberg (1994b) supports the same view when
presenting the three steps of strategic planning (codification, elaboration and
conversionofstrategies),stepswhichensurethateveryoneintheorganizationpulls
towards the same direction. In the practitioner‐oriented literature, a McKinsey
QuarterlySurvey(2006)statesthat,byimprovingthecompany’salignmentwithits
strategicplan,strategicplanninginnovativenessispromoted.
Both companies under review follow this best practice. Unilever (2008d) has set
threeclearstrategicpriorities:personalcare,developingandemergingmarketsand
vitality.Mr.Crosspointstotheimportanceofinternalstrategyalignmentinorderto
focus the resources within the company towards the same direction and thus
innovatestrategy(Cross,personalcommunication,2008).P&Ghasputinnovationat
thecenterofitsthinking,whichaccordingtoLafleyhasenabledthemtonowlookat
businesses and brands previously considered mature, and see the growth
opportunities in them (Lafley and Charan, 2008). The strategy is summarized into
onesentence:drawing50%ofallnewproductsdevelopmentfromopeninnovation
(P&G, 2008). Building on this innovation‐centered approach, priorities have been
derived: focus on P&G’s core, migrate portfolio toward faster growing, higher
margin, more asset efficient businesses and win with lower income consumers,
particularly inthefastestgrowingdevelopingmarkets.Bytriangulatingthefindings
fromtheacademicandpractitioner‐orientedliteratureandthoseextractedfromthe
casestudies,thefollowingpropositioncanbedrawn:
Proposition 2b: A clear strategy and good internal coherency directs all the
company’sresourcestowardsthesamegoalandthusfostersthegenerationofnew
growthideas.
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45
4.3.3 Innovatingstrategyimplementationandcontrol
Growth ideas from strategic planning appear not only in the strategy formulation
process, but at all times, including during strategy implementation. This remark
results from the interviews with the studied companies and is strengthened by
respectedacademicresearch,aswellasbypractitioner‐orientedliterature.
Figure21Overview–innovatingstrategyimplementationandcontrol
Source:ownillustration
AsMintzberg(1994b)argues,innovativegrowthstrategiescannotbedevelopedon
scheduleandimmaculatelyconceived.Theymustbefreetoappearatanytimeand
at any place in the organization, typically through unsystematic processes of
informal learning that must be carried out by people at various levels, who are
deeplyinvolvedwiththespecificissuesathand.Withinthesamelineofreasoning,
DyeandSibony(2007)claimthatthosewhocarryoutstrategyshouldalsodevelop
it, which advocates for increasing the involvement of business unit leaders in the
strategicplanningprocess.Additionally, cross functional collaboration is supported
in the practitioner‐oriented literature by Beinhocker (2006) who concludes that
increasing discussion among business units makes strategic planning more
innovative.
Theneedforcross‐functionalcollaborationisdrawnfromtheinterviewfindings,as
well.Infact,accordingtoMr.CrossfromUnilever,strategicplanningshouldrespond
tocross‐functionalinnovationneeds.Hegoesontooutlinethenecessitytocreatea
cross‐functional sense of risk taking, reflected down the line in a cross functional
senseof reward, inorder to foster thegenerationofnewgrowthenhancing ideas
(Cross,personalcommunication,2008).Ms.GatejfromUnileverfurthersuggeststhe
institutionalization of an “Innovation Board”, which should be a very central and
visible platform to collect ideas from brand managers, suppliers, advertising
agencies; and to act as the main driver behind the innovating strategy (Gatej,
personalcommunication,2008).Similarly,LafleyfromP&Gpointstothebenefitsof
collaborationbystatingthatinnovationisa“teamsport”,asocialprocessandthus
drivinginnovativeideasimpliestakingactiontofosterthisspirit(LafleyandCharan,
2008). Mr. Cross further suggests that in order to promote cross‐functional
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46
collaboration,abalancedapproachinsettingindividualandsharedtargetsshouldbe
taken (Cross, personal communication, 2008). Hence, the following propositions
result:
Proposition3a:Cross‐functionalcommunicationandcollaborationfostersintegrative
thinkingandthegenerationofgrowthenhancingideas.
Proposition3b:Settingbalancedindividualandsharedtargetsandrewardspromotes
cross‐functional collaboration and thusmakes the strategic planning processmore
innovative.
Strategicplanningcanbemademoreinnovativebychangingtheincentivesofthose
whoimplementit.Thismeansachangeintheperformancemetricsusedtoevaluate
strategyachievement.Alotofevidenceisfoundtosupportthisargument.Simpson
(1998) emphasized the fact that performance measures help focus attention on
what is important and getting the right set of measures is extremely difficult.
Generally, companies prefer to measure results in terms of financial targets, or
outputmetrics.However,asDyeandSibony(2007)argue,acompanyundertakinga
majorstrategicinitiativetoinnovateitsstrategicplanningprocessshouldmeasurea
varietyof inputmetrics, such as thequality of available talent and thenumberof
ideas/projectsateach stageofdevelopment,not justpureoutputmetrics suchas
revenuesfromnewproductsales.
Anotherbenefitof thisbalancedapproach toperformanceappraisal is that sucha
systemcan give anearlywarningof problemsoccurring at the strategic initiatives
level,whereasfinancialtargetsaloneprovide,atbest,laggingindicators.Withinthe
same line of reasoning,Müller, Välikangas andMerlyn (2005) argue that although
outputmetricssuchasannualR&Dbudgetasapercentageofannualsales,number
ofpatentsfiledduringthepastyear,percentageofsalesfromproductsintroduced
during the previous year, and number of ideas submitted by employees are
somewhat useful, they do notmeasure a company’s overall innovation capability.
Thus,theysuggestaframework(seeFigure22)fortheselectionofmetricsthatcan
help senior executives assess their company’s innovativeness and hence combat
strategydecay.Figure22Innovationframework
Source:ownillustrationbasedonMüller,ValikangasandMerlyn(2005)
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The framework combines three views on innovation: resource, capability and
leadershipview.Metricsundertheresourceviewaddresstheallocationofresources
tobalanceoptimizationandinnovation.Theresourcesinputsarecapital, laborand
time and the output is the return on investment in strategic innovation. The
capability viewassesses the extent towhich the company’s competencies, culture
andconditionssupporttheconversionofinnovationresourcesintoopportunitiesfor
business renewal. The inputsof this capability vieware the verypreconditions for
innovation, whereas the outputs include the development of new skills and
knowledge domains that spawn innovation as well as the number of strategic
options(opportunitiestosignificantlyadvanceanexistingbusinessorinvestinnew
business).Theleadershipviewassessesthedegreetowhichacompany’sleadership
supports innovation. As such, it evaluates leaders’ involvement in innovation
activities,theestablishmentofformalprocessestopromoteinnovation,andtheway
innovation goals are disseminated across the organization. Innovation processes
compriseorganizationalstructuressuchas incubators, innovationmarkets,venture
fundsandinnovationincentives.
Aneffective systemenablesmanagement to step in and correct, redirect, or even
abandonaninitiativethatisfailingtoperformasexpected(Dye,2007).AMcKinsey
GlobalSurvey(2008)pointtothesamedirection,statingthatcompanieswouldgain
adeeperunderstandingoftheirinnovationperformanceiftheypaidmoreattention
to inputmetrics aswell as outputmetrics, benchmarked themselves against their
competitors, and dug into the relationship between innovation spending and
shareholdervalue.
Thisbalancedapproach tometrics isalso supportedby the interview findings.Mr.
Mirandadiaz(personalcommunication,2008)fromP&Gremarksthathiscompanyis
currentlyworkingonanewgenerationofmetrics,whicharemorequalitativeand
provideawell‐balancedcombinationof input/outputmetrics. Mr.Cross (personal
communication,2008)fromUnileversignalsthesamedirection,statingthatUnilever
usesmorethancommonoutputmetrics,whichheconsiderstobeoflimitedvalue.
He further adds that Unilever is using uniform world definedmetrics, which also
capturequalitative aspects thathavebecome increasingly relevantnowadays (e.g.
the sustainability issue). By corroborating the interview findings and the academic
literatureinsights,thefollowingpropositionscanbedrawn:
Proposition3c:Usingabalancedmixofinputandoutputinnovationmetricsrewards
new ideas generation and thus makes the strategic planning process more
innovative.
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Proposition 3d: Using a balanced mix of quantitative and qualitative innovation
metricsfostersstrategicrenewal.
4.3.4 Innovatingthecompany’sculture
Figure23Overview–Innovatingthecompany’sculture
Source:ownillustration
Making the strategic planning process more innovative through the methods
presentedabovecannotbedonewithoutachangeinthecorporateculture, inthe
way employees think and act and theway the organization perceives employees’
initiatives.This idea is found inbothacademicandpractitioneroriented literature,
beingalsoconfirmed in the interviews.Well‐known researchers suchasMintzberg
(1994c) argue that planners should find patterns “amid the noise of failed
experiments, seemingly random activities, andmessy learning”. They can discover
newwaysofdoingorperceivingthings.Mintzberg(1994b)furthersupportstheidea
that the essence of strategy making is promoting experiments that gradually
converge into viable patterns that eventually become strategies.Within the same
line of reasoningWall andWall (1995) acknowledges that the best approach in a
changingenvironment is toallowstrategytoevolvethroughthediscoveryofwhat
works and what doesn’t. That is, new growth enhancing ideas can arise when
employeesarelefttoexperimentandwhentheentireorganizationlearnsfromsuch
mistakes. Such a behavior involves a change in how people regard successes and
failuresandinhowthecompanyappraisesthem.
Ari de Geus (1988) argues in the same direction when hementions that the real
purposeofeffectiveplanningisnottomakeplans,buttochangethementalmodels
thatdecisionmakerscarry in theirheads.Simpson (1998)strengthens theneed to
workonchangingtheattitudesandskillsofpeopleinordertorejuvenatestrategies.
Markides (1997) argues that a changedmindset allows a company to look at the
businessnotintermsofproducts,butintermsofcustomerneedsittriestofulfillor
intermsofcorecompetenciesportfolio.Thisideaisconfirmedinbothcasesunder
review:Unilever sees itself in termsof customer function ‐ “addingvitality to life”
(Unilever, 2008d), while P&G portrays itself as a portfolio of core competencies
“developing the core strengths to win in the consumer products industry” (P&G,
2008a).Inthepractitioner‐orientedliterature,Beinhocker(2006)goesevenfurther
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and looks atwhatmoderates such a change. She acknowledges that people have
difficultytoadaptbecausetheyactinaccordancetomentalmodels,whichbecome
morerigid,more locked in,andmoreaversetonoveltyaspeoplegainexperience.
Withinthesamelineofreasoning,TomPeters(2008)arguesthatfailureisthekeyto
successandcallsforfastfailureinordertogeneratefastsuccess.JudyEstrin(2008)
highlights the importance of integrating “learning from failure” into the corporate
culturetoallowacompanytokeepitsgrowthmomentum.
As Lafley points out, an innovation culture fosters openness, curiosity and
networkingwithsuppliersandcustomers(LafleyandCharan,2008).Itisthiskindof
behavior that discovers new market niches and new ways of serving customers,
thereforegeneratinggrowth for thecompany.For this tohappen,P&Gusessocial
mechanisms and tools (e.g. Clay Street, co‐location) to mold diverse experts into
highlyfunctioningteams(MirandadiazandWai,personalcommunication,2008).Mr.
Cross fromUnileverdrawson the same reasoningwhenhe states that companies
risktolimitthemselvestocurrentcapabilitiesbecauseofhumanpride,alsoknown
as the “not invented here” syndrome. By corroborating the information from
academic and practitioner‐oriented literature, as well as interviews insights, the
followingpropositioncanbedrawn:
Proposition 4a: Amore proactive, higher risk ‐ taking, collaborative culture fosters
thegenerationofnewgrowthenhancingideas.
Proposition4b:Aculturethatpromotesexperimentationandapproaches failureas
sourceoflearningincreasestheinnovationpaceinstrategyformulation.
4.4 Howopeninnovationmakesthestrategicplanningprocessmore
innovative
In thepreviouschapter itwasexplored thewayswhichallow innovation toplaya
bigger role in each stepof the strategymakingprocess: from changes in strategic
mission,toshiftsinstrategyformulationandimplementation,alongwithchangein
softerfactorssuchascompanyculture.Asshownbyseveralstudiesonthemotives
to engage in open innovation, the most common reason for external technology
acquisition is the commonbelief that it is critical tomaintain growth (Chesbrough
and Crowther, 2006). Thus, open innovation represents an important source of
businessgrowth.Itsimpactoninnovatingstrategicplanningwillbediscussedlaterin
this chapter. Van der Vrande, Jong, Vanhaverbeke and Rochemont (2008) have
reached a similar conclusion, namely that basic entrepreneurial values such as
growthandrevenueswillbeamongthekeymotivesurgingenterprises topractice
open innovation. Other literature suggests that enterprises may engage in
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50
collaborations inorder toacquiremissingknowledge,complementaryresourcesor
finance;tospreadrisksortoenlargetheirsocialnetworks(HoffmanandSchlosser,
2001;MohrandSpekman,1994).
Theimpactopeninnovationhasonstrategicplanninglargelydependsonthedegree
to which open innovation is integrated within an organization. Case study based
findings show that open innovation has beenprogressively institutionalizedwithin
the organization. As a first step, open innovation is considered just a means to
performR&Dmoreeffectively.Thisneedsaclearstrategy,combinedwiththeright
tools to capture open innovation ideas, and supported by a good partnership
management. A second phase of integration involves scaling up innovation in all
businessprocesses,andgraduallyleadstochangingeverythingfromthecompany’s
purpose and values to strategies, structure and systems, up to culture and
leadership.Usingtheaboveperformedanalysis,thetwostudiedcompaniesseemto
beindifferentdevelopmentphases:whereasUnileverconsidersopeninnovationas
oneoftheseveralmeanstoachievegrowth,P&Gcallsinnovationasthemaindriver
of its business. Nevertheless, Unilever is in the process of creating the adequate
structuresandchangingthemindsetforfurtherscalingupopeninnovation.
Open innovation promotes new idea generation by changing theWho,What and
Howof a company (Markides, 1997).Who is derived from the company’smission
andreferstothecustomersservedandneedsmet,Whatcomesfromthestrategy
formulation and refers to the products being offered, and How refers to the
capabilitiesrequiredtoservethecustomers.Thisstructurewillbeusedtoshowhow
open innovation makes strategic planning more innovative in terms of a more
intensegenerationofgrowthenhancingideas.
Figure24Overview–InnovatingSPPthroughopeninnovation
Source:ownillustration
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4.4.1 Addressingthe“Who”
Embracingopeninnovationhasallowedthetwocompaniestoextendtheirpurpose
andserve largerconsumersegments,thus increasingtheoverall revenuepie.Both
companiesarenowservingtheentireconsumerincomespectrumandgeographies,
withanemphasisondevelopingandemergingmarkets,whileinthepasttheywere
primarilyfocusedonmiddleincomeconsumersfromdevelopedmarkets.
Thisprocesshasbegunwithredefiningthecompany’smissionandbythischanging
thecorporateandemployeemindsetconcerningwhatthecompanystandsfor.Both
case studies show that progressive openness towards collaborative innovation is
accompaniedbyanupgrading in the company’smissionandpurpose.Procterand
Gamble’s corporate purpose has shifted from delivering sustainable growth and
“improvingeverydaylivesofconsumers”throughcreatingthemostsuccessfulglobal
brands ineachcategory inwhichtheycompete(“Designtogrowth”)to“Designto
Innovate”, in which customer centered innovation is the basis for growth. In the
formerstage,innovationislimitedtodevelopingnewproducts,whileinthelatterit
isdefinedmorebroadly,beingattheverycenterofthebusiness(LafleyandCharan,
2008). Unilever hasmodified itsmission aswell from “meeting everyday people’s
needs” to a more service‐oriented purpose of “adding vitality to life”. In fact, as
Cross (personal communication, 2008) argues, open innovation is primarily a
mindset,whichisdrawndirectlyfromcompany’spurposeandvalues.Thisextension
intermsofpositioninghasallowedthemtoseestrategicchoicesinadifferentlight
(LafleyandCharan,2008).Businessesandbrandspreviouslyconsideredmatureare
now be looked upon as growth opportunities (Mirandadiaz, personal
communication,2008).
Innovationhasalsoenabledthetwocompaniestomakedecisionsaboutwherenot
toplay.AssuchP&Gexitedmostfoodandbeveragebusinessesasitconsideredthat
theyneitherhavethepotential togrowthrough innovation,nordotheyrepresent
long‐term competitive advantage (Lafley and Charan, 2008). Consequently,
resources have been freed up and deployed toward the faster growing, higher
margin, more asset efficient beauty, health and personal care businesses. Open
innovationhasalsoopenedupanentirelynewopportunityforP&Gtocapturemore
than a billion new lower income consumers, particularly in the fastest growing
developingmarkets (P&G,2008a).Unileverhas even setdeveloping andemerging
markets as one of the threemain strategic priorities (Unilever, 2008d). Thus, the
new approach towards innovation is reflected in the companies setting higher
purposesintermsoftargetedcustomer,servedgeographiesandrangeofneedsto
bemet.Thisideaissupportedbybothacademicandpractitioner‐orientedliterature.
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Intheacademicliterature,FetterhoffandVoelkel(2006)contendthatnewcustomer
demandscanbemetthoughopeninnovation.DittrichandDuysters(2007)conclude
thatunderchangingconditions,collaborative innovationnetworkshelpacompany
tore‐define itsstrategicpositioning.VandenVrandeet.al. (2008)reachthesame
conclusion,namelythatthemostimportantmotiveforacompanytoengageinopen
innovation is market related: better meet customer demands and needs. In the
practitioner‐oriented literature, Lafley (2008) largely supports this, by stating that
open innovation is critical for company repositioning and profiling the essential
growthopportunitypresentedbyemergingmarkets.Hefurtherarguesthatgrowing
the business in these countries is achievable only by consistently developing new
products, processes, and forms of community presence, which is possible only
throughcollaborative innovation.By summingup interview insights, academicand
practitioner‐orientedliterature,thefollowingpropositioncanbetraced:
Proposition 5a: Open innovation fosters growth by changing the company and
employees’mindsets regardingwhat they stand for, thusallowing the company to
targetnewcustomersegmentsandgeographies.
However,asEstrin(2008)claims,acompanycanexperienceincrementalinnovation
by llistening o its customers. As for the development of the next generation of
products,whichaccountforthecompanyleapfroggingthecompetitionandmeeting
thefutureneedsofcustomers,acompanyshoulduseinformationderivedfromthe
customers,and,atthesametime,fosterinnovativethinkingwithingroupsofpeople
whothinkdonotsharetheparadigmsofmainstreambusiness.Makingaparallelto
Henry Ford’s times, “ifHenry Ford had asked the customerswhat theywanted, it
wouldhavebeenafasterhorse,notacar“(Estrin,2008).Thus,acompanyneedsto
beable tocombinecustomercentricitywithacontinuoussearch fornewbusiness
areas. Special dedicated teams should be appointed to “hunt” down such new
venuesandmaderesponsiblefortheso‐called“disruptiveinnovation”.
This idea isalsostronglysupportedby theacademic literature.Trott (2001)makes
the case that traditional market research can have a devastating effect on the
developmentofradical ideas,orcanevenbemisleadingattimes.Withinthesame
line,Assink(2006)underliesthefactthatmarketswhichdonotyetexistcannotbe
analyzed.Hence,asChristensenandRaynor(2003)suggest,establishedcompanies
could exploit a disruption only by creating a separate unit, and thus investing the
time of a multi‐functional group to “out of the box” thinking. Both studied
companies have distinct structures to support the two types of innovation. P&G
tackles both types of innovation with different organizational structures. Through
P&G Future Works it aims to deliver disruptive innovation, which leads to new
businesses (P&G, 2008d), while the New Business Development structures within
AcasestudyoftwoMNCintheFMCGindustry
53
eachbusinessunitandthe“hotzones”accountfor incremental innovation.Within
Unilever, Knowledge Workshops and the ideas4unilever website account for
incremental innovation, whereas R&D centers located within universities lead
researchthatcouldresult indisruptiveinnovation.Bytriangulatingtheinformation
obtained via interviews and literature review, the following propositions can be
drawn:
Proposition 5b: Being customer centric accounts for growth ideas coming from
incrementalinnovationactivities.
Proposition5c:Futuregrowthareasshouldbeinvestigatedcontinuouslybemeansof
appointing specialmulti‐functional teams,whose timeallocationand rewardsplan
aredirectlylinkedtothistask.
4.4.2 Addressingthe“What”
Except for decidingwhom to serve, another areawhere a company can come up
with more growth enhancing ideas is its product offer. Open innovation brings a
company closer to the customers, to theend consumers,makes itmore awareof
trends and thus increases the chances that new product ideas could become
successfulproductlaunches.Asaresult,thecompanycanstretchitsgrowthtargets.
Inthepractitioner‐orientedliterature,Lafley(2008)confirmsthisassumptionwhen
he proves that successful products have been launched and growth has been
achievedbyusingopen innovation,byhavinganoutwardorientedattitude,being
clearlyandfirmlyfocusedontheexternalenvironmentandconstantlyconcentrating
on the consumers’ needs. Burghin and Johnson (2008) outline in a McKinsey
Quarterly article the increasing success of new product development which
originates in co‐creation and point to the added value captured from open
innovationactivities. Linder, JarvenpaaandDavenport (2003) strengthen this idea,
showingexamplesofcompaniesthathavegrownbycreatingnewsalescategoriesas
aresultofnewformsofinteractingwiththeirconsumers.
Intheacademicliterature,vonHippel(2005)discussesevidenceofhowcompanies
canbenefitfrompartneringwiththeircustomers,processwhichformsthebasisfor
breakthrough products that satisfy unmet needs and thus create new areas of
growth for the business. Lokshin, van Gils and Bauer (2008) argue that customer
centricopeninnovationpositivelyinfluencesinnovativeoutputandbusinessgrowth.
However, academic literature raises warning over the fact that customers have
“sticky knowledge” that is not easily revealed through standard market research
(PillerandWalcher,2006).Openinnovationsolvesthisprobleminthatitopensnew
waysto interactwiththecustomersandend‐consumers,an ideaderivedbyLafley
(2008)fromP&G’sexperience.Amongtheacademics,VanderVrandeet.al.(2008)
AcasestudyoftwoMNCintheFMCGindustry
54
support the same idea stating that firmsmay benefit from their customers’ ideas
and innovationsbyusingproactivemarket research,providing tools toexperiment
withand/ordevelopproducts similar to theones thatarecurrentlybeingoffered.
Comingupwithproductsbasedoncustomermadedesignsandalsoevaluatingwhat
maybelearnedfromgeneralproductdevelopmentareothermeasuresthecompany
shouldusetotapinthehighpotentialofcustomercreativeinvolvementandontime
feedback.Fromthepreviousstreamofarguments,thefollowingpropositioncanbe
drawn:
Proposition6:Co‐creationandcustomerfocusexperimentsareopeninnovationtools
thataccountfornewideageneration,thusmakingstrategicplanningprocessmore
innovative.
Furthermore, open innovation introduces new elements or practices to strategic
planninginthesensethatitallowsthecompanytotransformitsunusedIPbaseinto
additional revenue sources. For instance, one part of the P&G’s “Connect and
Develop”platformisdedicatedtoknowledgecommercialization(P&G,2008c).This
ideafindssupportinbothacademicandpractitioner‐orientedliterature.Chesbrough
(2003)mentionsthatonebenefitoftheopeninnovationparadigmisthatcompanies
canbringtheirin‐houseideastomarketbydeployingpathwaysoutsidetheircurrent
businesses,thusopeningnewavenuesforthegrowthstrategy.DittrichandDuysters
(2007)contributetothesamepoint,observingintheirstudybuiltonexamplesfrom
thehightechindustrythat,throughefficientuseofopeninnovation,newproducts
andservicesaredeveloped,andsothegroundissetfornewgrowthopportunities.
Kirschbaum(2005)presents inoneofhisarticlesacasestudy inwhichacompany
efficientlycombinesinternalandexternalcompetenciesandout‐licensesknowledge
togrowitsbusinessrevenue.Vanderet.al.(2008)consideropeninnovationtobe
onewayofextendingtherevenuebase.Intheirstudy,theauthorsobservethatout‐
licensing allows companies to profit from their IP when other companies with
different business models, use the unused, but valuable knowledge to find
profitable,externalpathstothemarket.Hence,interviewfindingscorroboratedwith
resultsadvancedinthereviewedliteratureleadtothefollowingproposition:
Proposition7:BycommercializingunusedIPbase,openinnovationaddsnewgrowth
sourcestothebusiness.
AcasestudyoftwoMNCintheFMCGindustry
55
4.4.3 Addressingthe“How”
AsLafleyandCharan(2008)pointto,itisveryimportantforcompaniesactinginan
open innovation environment to know what they are good at in order to decide
wheretoplayandwhetheran innovation‐drivenstrategy isdecisive.This ideawas
confirmed during the interviews, when one Unilever representativementions the
need to know what the capabilities of a company are in order to be able to go
beyondthesecapabilities(Cross,personalcommunication,2008).
In the academic literature, Chesbrough and Schwarz (2007) argue the same,
emphasizing the need to accurately define and distinguish between the business’
core capabilities and its contextual, little added value competencies, in order to
know which circumstances allow the company to engage in co‐development
partnerships without losing its competitive advantage. Chesbrough (2003)
strengthens this point when he states that cooperation is not to be seen as a
solution to all innovation problems, but as part of the portfolio in which some
projects are carried out by the company itself, while others are developed out in
cooperation with other firms. From the above argumentation, the following
propositioncanbedrawn:
Proposition 8a: Open innovation fosters growth enhancing idea generation by
pressuringtheorganizationtoaccuratelydefineexistingcapabilities.
Besidesbetterdefiningthecompany’scorecapabilities,openinnovationfostersnew
capabilitycreationthroughextendedcollaborationamongcompanybusinessesand
among the company and various external parties. This idea of new knowledge
accumulation finds consistent support in literature. Cohen and Levinthal (1990)
argue that the ability to exploit external knowledge is a critical component of
innovative performance. Cohen and Levinthal (1989, 1990) further state that not
onlydoesR&Dgenerategenuinelynewknowledge;italsoenhancesthefirm’sability
to assimilate and exploit existing knowledge from the external environment. As
found by Dodgson, Gann and Salter (2006), the adoption of open innovation has
extended the interface’s role, therefore improving existent connections among
differentbusinesseswithinthecompany,orthosetyingthefirmtotheoutside.This
interface increases the organization’s ability to absorb, or assess the impressions
fromtheoutsideenvironmentandallowsmorebusinessgrowthenhancingideasto
begenerated.Furthermore,LaursenandSalter(2005)intheirquantitativeresearch
concludethatfirmswhohaveopensearchstrategies—thosewhosearchwidelyand
deeply—tend to be more innovative and come up with more growth enhancing
ideas.
AcasestudyoftwoMNCintheFMCGindustry
56
Ontheotherhand,practitionersconfirmthatopeninnovationhelpsbuildupcritical
knowledgeuseful fornewproductdevelopmentbyextensively leveragingexternal
partners’ capabilities (Chesbrough,2003; Innovaro,2007). Lafley (2008)argues the
sameclaiming thatopen innovationgivesacompany thepossibility tobroaden its
capabilities.Lichtenthaler (2008)adds to thisby stating that ifexternal technology
exploitation is an established component of corporate strategy, in identifying
technologycommercializationopportunitiesthecompanyshouldseriouslytakeinto
account the exploitation of external technological possibilities, beside its own
resources. This thinking should be applied to all major decisions concerning
technology acquisition. Hagel and Brown (2005) argue that it is imperative for
companiestoengageincollaborationwithexternalcapabilitiesinordertobuildnew
capabilitiesandsustaintheircompetitiveadvantage.
Thereviewedcompaniesmakethecaseforthisargumentation.Overthecourseofa
few decades, Procter & Gamble has developed through “Connect and Develop” a
way to connect internally inorder to improve theattitude towards initiatives that
came from outside one’s own department (both from outside and inside of P&G)
(Huston&Sakkab,2006;2007).Unileverhas initiatedtheplatform Ideas4Unilever,
which functions as a “one stop point” meant to capture ideas from inside and
outsidethecompany.Thus,openinnovationallowsforexternalknowledge,including
tacit knowledge, to flow into the company, be leveraged and subsequently
internalizedbytheemployeeswhouseittodevelopnewcapabilities.Initsturn,this
willformthebaseforextendingthebusinessandachievinggrowth.
Asconfirmedduringtheinterviews,intherelationshipwithcustomers,Unileverhas
a wide reach across the store, bringing ‘shopper insight’ to the partnerships with
customers. With main suppliers, it has built long‐term partnerships, which have
already produced benefits in the form of new launched products (e.g. Lipton
pyramidal teabags). In cooperation with the academia, Unilever deploys new
technologies at industrial scale and develops new capabilities (e.g. ice cream
crystals).Furthermore, intimecapabilitiesofmainpartnersareconsideredearly in
thestrategyformulation(Cross,personalcommunication,2008).P&Ginnovateswith
the support of retail and non‐retail customers, that of suppliers and even with
competitors input (Lafley and Charan, 2008). The “Inverting the Pyramid” model
adopted by P&G in relation with its main retail customers implies direct
communication flowsandplanningactivities involving the corresponding functions
of each company, expert to expert, speaking a common languagewith joint goals
and measures. Thus, knowledge is built on both sides and idea generation is
fostered.Addedtothis,asLafleyargues,partneringwithretailersisawaytocreate
AcasestudyoftwoMNCintheFMCGindustry
57
demandbybetterunderstandingtheshoppers(LafleyandSharan,2008).Hence,the
followingpropositionsresult:
Proposition 8b:Open innovation fostersmore growth enhancing ideas by allowing
externalknowledgetobeleveragedinternally.
Proposition 8c: Open innovation makes strategic planning more innovative by
promotingnewknowledgeacquisitionandbuildingnewcapabilities.
Discussion
58
5 DiscussionThisthesisconductsanexploratoryresearchonhowtomakethestrategicplanning
processmore innovative, and is based on two case studies from the fastmoving
consumer goods industry. Grounded on pieces of information collected from the
interviews, as well as from secondary sources like company sites, articles and
industry/companyreports,whicharethenlinkedtotheory,thisqualitativeresearch
provides directions on how strategic planning can be made more innovative.
Furthermore, it enlarges upon how open innovation can be used as a tool to
innovate strategymaking. The findings from this thesis complementedwith other
recent evidence (Grant, 2003) show that strategic planning continues to play a
centralroleinthemanagementsystemsoflargecompaniesandthatchangescanbe
doneinitsdistinctphasestoaccommodateforamoreintensegenerationofgrowth
enhancing ideas. In this way, the thesis develops new theory (5.1.) and reveals
opportunities for futureresearch(5.2.).Furthermore, thepaperhelpspractitioners
get a better understanding of how strategic planning process can bemademore
innovative. The role open innovation can play is also outlined, this tool bearing a
muchgreaterpotentialthanthatofjustanotherR&Dstrategymethod(5.3.).
5.1 Contributionstothetheory
This thesis aimed to contribute to the two research fields mentioned in the
introduction.Threereasonssuggestitmanagestodoso.First,thethesisaddstothe
strategyprocessresearchfield inthat itattemptstoprovide informationregarding
actions thatcompaniesundergo inorder tocounteract thedissatisfactionwiththe
strategicplanningprocess(McKinsey,2006)andincreasetheinnovativenessoftheir
corporate strategy. As such, this study extends Grant’s (2003) research on how
strategic planning process is done, by showing how companies from the FMCG
industrymakechangesineachphaseofthestrategicplanningprocesssothatthey
encourage the appearance of “creative accidents” (Beinhocker and Kaplan, 2002).
The thesis explores the evolution of two leading FMCG companies as they
progressivelychangetheirbusiness,startingfromthecompanymissionandculture
andgoingfurtherintostrategyformulation,implementationandcontrol.
Secondly, the thesis contributes to theopen innovation research field,whichwas,
until now, mainly focused on defining open innovation. This thesis sets out to
connect two researchsubjects:open innovationon theonehand,and strategyon
the other; and shows how open innovation, if scaled up to bemore than a R&D
Discussion
59
method and placed at the center of the business model, fosters more intense
generationofgrowthenhancingideasandthusinnovatesstrategyformulation.
Thirdly, this study sheds light on how the innovation process actually takes place.
Despitea largebodyof literatureonthistopic, innovationhas longbeenseenasa
“black box” (Rosenberg, 1994). If the locus of innovation is not only the R&D
department,buta fieldofcollaborationbetweenthecompanyandoutsideactors,
this puts themagnifying glass on how innovation actually happens. The two case
studies show what organizational structures companies have created to foster
innovationandhowtheyopeneduptheorganizationtonewthinkingbyadoptingan
open architecture to promote a more intensive generation of growth enhancing
ideas.
5.2 Limitationsandrecommendationsforfutureresearch
AsYin(2003,p.8)argues,“casestudiesaregeneralizabletotheoreticalpropositions
andnottopopulationsoruniverses”.Consequently,oneneedstobeawareof the
followinglimitations,whichopentheavenueforfurtherresearchinadjacentareas.
Firstly, in linewiththecasestudyapproachprinciples,thepropositionsneedtobe
testedthroughquantitativeresearch.Aquantitativestudywouldnotonlyprobethe
validity of these findings, butwould also integrate other aspects,whichwere not
visible using the case study approach. For instance, this study has mainly
investigatedhowtocomeupwithmore ideagenerationandhowopen innovation
contributestothis.Furtherresearchcouldlookatthewayopeninnovationimpacts
theperformanceofthestrategyplanningprocess.
Secondly, a change that comes along with the current movement towards open
innovationistheabilitytocollaboratewithmany.Surowieckicallsthisthe“wisdom
ofcrowds”(Surowiecki,2005).Theassumptionisthatthecollectiveintelligenceofa
largergroupofpeopleexceedsthatofafew,bothintermsofideasandknowledge.
Aproblemhere ishow toorganize thecollective intelligence– to create structure
out of the information chaos that would otherwise exist. As argued by Dodgson,
Gann and Salter (2006) the change of the interface demands a change in the
organizational ability to absorb, or assess the impressions from the outside. As
shownbythecases,therearedifferenttypesoforganizationalstructuresthatcanbe
created in order to gainmore benefits from open innovation throughmore ideas
beinggenerated.Afurtherstudy, toprovideacomprehensiveviewontheexisting
organizational structures and on their contribution to creating strategic options,
wouldbehighlywelcomed.
Discussion
60
Furthermore, a quantitative study, to investigate the variables that facilitate the
integration of open innovation in the strategic planning processwould also prove
necessary. Some of the moderators have been already mentioned in the current
study(e.g.leadershipstyle,companyculture).Thecompaniesstudiedbelongtothe
same cultural group, characterized by individualism and performance basedmerit
(meritocracy).Thus,adistinctinvestigationoncompaniesfromotherculturalgroups
(e.g.Asiaregion)wouldbeusefultotestwhethersomeofthefindings(e.g.mixof
individualandsharedtargetsandrewards)holdtrueforthese,aswell.
Thirdly,inordertoensurefortheoreticalreplication,thisstudyhasbeenlimitedto
the fastmoving consumer goods industry. In particular, the thesis has focused on
largemultinational companies, whichmanage a great deal of resources. Thus, it
needstobefurtherresearchedwhetherthefindings,especiallytheonesrelatedto
resourceallocationandknowledgeleverage/acquisition,stillholdtrueforsmalland
mediumsizedenterpriseswithinthesameindustry.
Finally,most of the research until now has been focused on the high tech sector
(Chesbrough,2003;WestandGallagher,2006;GruberandHenkel,2006).Hence,it
wouldbeinterestingtoverifywhetherthesefindingsfromthefastmovingconsumer
goods are relevant for other less technology intensive industries, such as
manufacturing,garment,furniture,etc.
5.3 Relevanceforthepractitioners
Thereare threeareas inwhich this thesis seeks todeliver informationvaluable to
managers. First, this studymentions situationswhere practitioners should step in
the different phases of the strategic planning process in order to make it more
innovative. Thus, it responds to themanagement concerns that were voiced in a
McKinseyQuarterlyGlobalSurvey(2006),whichhasfoundthatlessthanhalfofthe
executives are satisfied with their company’s approach to planning strategy.
Secondly, itoffersa firsthandunderstandingonhowto integrateopen innovation
intomanagementprocessesinordertocomeupwithmoregrowthenhancingideas.
Thirdly, itpoints to importantaspects ina company’s structure, culture,processes
andrewardsystemthatneedtobechangedsoastoaccommodateforthescaleup
of the place open innovation occupies in the business model. Hence, it draws
attention to significant elements, which impact the competitive advantage and
profitabilityofacompany.
61
Acknowledgements
Firstofall,IwouldliketothankProf.Dr.Muller‐Stewensforhiswillingnesstoaccept
mythesisforhissupportandadviceduringthewritingprocess.
I am also thankful to Ms. Gatej, Mr. Cross andMr. Benea from Unilever, to Mr.
Mirandadiaz,Ms.DuprayandMs.WaifromProcter&Gamblefortheircooperation
and insights, which boosted my knowledge about the topic and made valuable
contributionstothisthesis.
Finally,Iwanttothankmyfamily,andthevariousfriendsinSt.GallenandBucharest
whosupportedmeduringthesepastfewmonths.Withouttheirpatienceandlisten
tomyideas,thispaperwouldhaveprovedmuchmoredifficulttowrite.
Appendix
62
Appendix1:Interviewlist
Company Interviewpartner
Function Date Duration Type
December15th,2008
70min Phoneinterview
Procter&Gamble
Mr.AlvaroMirandadiaz
P&GFutureWorksC&D
December2nd,2008 30min Phoneinterview
Procter&Gamble
Ms.JoelleWai FinanceDepartment
January6th,2009 45min Personalinterview
Unilever Ms.AlexandraGatej
ChairmanUnileverSouthCentralEurope
December2nd,2008 60min Phoneinterview
Unilever Mr.GrahamCross
CollaborativeInnovationDirector
December1st,2008 70min Phoneinterview
Unilever Mr.AdrianBenea
MarketingandAdvertisingConsultantandContractor
November28th,2008 60min Personalinterview
Appendix
63
Appendix2:Interviewguidelines
Thesetofquestionsadministeredisdividedintotwogroups:
- a set of questions administered to the managers responsible for strategic
planning
- asetofquestionsadministeredtotheopeninnovationexecutives
Appendix 2.1. Questions about the strategic planning process
(example)
1) Whatistheroleofstrategicplanninginyourcompany?Howimportantisit?
2) Canyoushortlydescribeit:mainphases,whoisinvolved,whenduringtheyearit
takesplace.
3) Did the strategic planning system (planning cycle, frequency, content, process
itself)changedovertime?WhydiditchangeandHow?
4) Howdoesyourcompanycomeupwithgrowthideasforitsbusinesses?
5) Aretherecorrectionsregardingthestrategicplanningwhichtakeplaceduringthe
yearandwhy?
6) Isthereapossibility/howoftendoyoudeveloplocalbrandsandscalethemupin
theglobalproductportfolio?
7) At regional and local level, how do you treat open innovation? Do you have
specialresourcesallocatedforthis?
8) Ifyouwereaskedtoprovideyourideasonhowstrategicplanningprocesscould
beimproved,whatwouldyourecommend?
Appendix
64
Appendix2.2.Questionsaboutopeninnovation(example)
1) Howdoyoudefineopeninnovationinyourcompany?
2) Do you think that being more open to collaborative innovation has had an
influence on your strategic planning process or on its outcome? Did anything
change?Whatkindofinfluence?(growthtargets,resourceallocation).
3) Afterhowmuchtimearethebenefitsofopeninnovationresultstobeseeninthe
financialresults?
4) How does your organization support open innovation (corporate culture,
processes,structure)?
5) Can you provide me with an example of a product, which is the result of
collaborativeinnovation,andexplainmethemainstepsinitsdevelopmentuntil
itwaslaunchedonthemarket?
6) At regional and local level, how do you treat open innovation? Do you have
specialresourcesallocatedforthis?
7) Whatinnovationmetricsdoyouuse?Sincewhendoyouuseinnovationmetrics?
Howdoyoumonitoropeninnovation?
8) Ifyouwereaskedtogiveideasonhowmakethestrategicplanningprocessmore
innovative,whatwouldyourecommend?
Appendix
65
Appendix3:Listofpropositionsandcross‐caseanalysistable
Case1:Procter&Gamble Case2:Unilever
Proposition1a:Acontinuousmonitoringstrategicplanningprocessallowsforadaptabilitytochangesandinternalizationofnewideas,whichinturnmakethestrategicplanningprocessmoreinnovative.
‐Planningandperformanceisaniterativeprocessinwhichstrategyformulationandimplementationtakeplaceinparallel.
‐Planningandperformanceappraisalareonarollingbasisandarenotcalendardriven.
Proposition1b:Disconnectingstrategicplanningfromfinancialplanningmakesthestrategicplanningprocessmoreinnovative.
‐Thetwotasksatdifferentpointsintime.
‐Duringthebottomupprocessofplanningwhichusuallyhappensinthefirstyearquarter,visionisrenewed,goalsaresetandstrategiestodeliverthosegoalsaredeveloped.
‐Inthesecondquarter,financialtargetsaresetfromthetopandgoalsarenegotiatedwiththebusinessunits
‐Corporatestrategyisrenewedeveryfiveyears.
‐Corporategoalsandfinancialtargetsaresetbasedontheformulatedstrategy.
‐Regionallevelsareboundtoachievethefinancialtargetsagreedwiththecorporatelevel.
Proposition2a:Beingoutwardorientedinstrategicformulationmakesthestrategicplanningprocessmoreinnovative.
‐Lafley:“theconsumeristhebossandwehavetowinwithherattwomomentsoftruth.”
‐Mr.Mirandadiaz:bybeingconsumerfocused,P&Gtranslatesneedsintounsolvedproblemsandthusopensuptheavenueforgrowth
‐Mr.Crosspointstotheneedfindthebesttechnologyanywhere;nomatterifitcomesfromtheinsideoroutside.
‐Mr.CrossmaintainstheneedforemployeestobeattheperipheryofUnileverwhentheycanlookbothoutsideandinsidethecompany.
‐Mr.Cross:appraisalincludeselementsthatforceemployeestolookoutsideforideas.
Proposition2b:Aclearstrategyandgoodinternalcoherencydirectsallthecompany’sresourcestowardsthesamegoalandthusfostersthegenerationofnewgrowthideas.
‐Lafleyhassummarizedthecorporatestrategyintoonesentence:“drawing50%ofallnewproductsdevelopmentfromopeninnovation”
‐Clearprioritieshavebeenderived:focusonP&G’score,migrateportfoliotowardfastergrowing,
‐Hassetin2004threeclearstrategicpriorities:personalcare,developingandemergingmarketsandvitality
‐Mr.Crosspointstotheimportanceofstrategyalignmentbetweencorporatelevelandtheregionallevel.
Appendix
66
highermargin,moreassetefficientbusinessesandwinwithlowerincomeconsumers.
‐Mr.Miradadiaz–confirmsthatregionallevelsdiscussthestrategyandagreeontargets.
‐Ms.Gatejmaintainsthattargetsarediscussedandagreedwiththecorporatelevel.
Proposition3a:Cross‐functionalcommunicationandcollaborationfostersintegrativethinkingandthegenerationofgrowthenhancingideas.
‐Lafley:“innovationisateamsport”
‐Ms.Waiconfirmsthattheusualworkingprocessestakeplacewithinamultifunctionalteam
‐Mr.Cross:strategicplanningshouldrespondtocross‐functionalinnovationneeds.
‐Ms.Gatejsuggeststheinstitutionalizationofan“InnovationBoard”,whichshouldbeaverycentralandvisibleplatformtocollectideasfrombrandmanagers,suppliers,advertisingagenciesandwhichshouldbethemaindrivertoinnovatingstrategy
Proposition3b:Settingbalancedindividualandsharedtargetsandrewardspromotescross‐functionalcollaborationandthusmakesthestrategicplanningprocessmoreinnovative.
‐Usesacomprehensivesetofmetricswhichreflectsideasgeneratedthroughcollaborationwithotherunitsandwithexternalparties.
‐Mr.Cross:thenecessitytocreateacross‐functionalsenseofrisktakingreflectedinacrossfunctionalsenseofreward
‐Mr.Cross:inordertopromotecross‐functionalcollaboration,abalancedapproachinsettingindividualandsharedtargetsshouldbetaken
Proposition3c:Usingabalancedmixofinputandoutputinnovationmetricsrewardsnewideasgenerationandthusmakesthestrategicplanningprocessmoreinnovative.
‐Mr.Miradadiaztalksaboutthenewsetofmetrics,whichismorebalanced.
‐Apartfromtraditionalinnovationmetrics,specificmetricstomeasuretheefficiencyofopeninnovationareused.
‐Mr.Crossconsidersusingonlyoutputmetricstobeoflimitedvalue.Confirmsthatasetofinputandoutputmetricsisused.
Proposition3d:Usingabalancedmixofquantitativeandqualitativeinnovationmetricsfostersstrategicrenewal.
‐Mr.Mirandadiaz:thenewsetofmetricsbeingcurrentlydevelopedisacombinationofquantitativeandqualitativemetrics
‐Mr.Cross:acomprehensivesetofmetricsisused.
‐Includesdistinctivemetricstoreflectcurrenttrendssuchas:environmentalconcerns.
Proposition4a:Amoreproactive,higherrisk‐taking,collaborativeculturefostersthegenerationofnewgrowthenhancingideas.
‐Lafley:aninnovationculturefostersopenness,curiosityandnetworkingwithsuppliersandcustomers.
‐P&Gusessocialmechanismsandtools(e.g.Clay
‐MrCross:companiesrisktolimitthemselvestocurrentcapabilitiesbecauseofhumanpride,alsoknownasNIHsyndrome.
Appendix
67
Street,co‐location)tomolddiverseexpertsintohighlyfunctioningteams
Proposition4b:Aculturethatpromotesexperimentationandapproachesfailureassourceoflearningincreasestheinnovationpaceinstrategyformulation.
‐Mr.Mirandadiaztalksaboutthereportsoffailedprojectsthathavetobewrittenandpresented.Theseserveaslearningtools.
‐Mr.Cross:talksabouttheneedtotakerisksalsoincollaborationwithotherunitsinordertodrivesignificantinnovationandfuturegrowth.
Proposition5a:Openinnovationfostersgrowthbychangingthecompanyandemployees’mindsetsregardingwhattheystandfor,thusallowingthecompanytotargetnewcustomersegmentsandgeographies..
‐P&Ghaschangeditsmissionin2004:from“Designtogrowth”to“DesigntoInnovate.
‐Lafley:startedchangingP&Gwithchangingitscorporateculture.
‐Unileverhasshifteditsmissionfrom“meetingeverydaypeople’sneeds”toamoreservice‐orientedpurposeof“addingvitalitytolife”.
‐Mr.Cross:openinnovationisamindset
Proposition5b:Beingcustomercentricaccountsforgrowthideascomingfromincrementalinnovationactivities.
‐ Puttingcustomercentricityexplicitlyaspartofthecompany’smissionfrom2004on.
‐ Mr.Mirandadiaztalksaboutthe‘hotzones’and‘ClayStreet’,whereideasaretestedbyconsumers
‐Mr.Cross:employeesarebeingexposedasmuchaspossibletocustomers’ideas.
‐Mr.Crosspointstotheneedtoshiftthecompany’spositioningfrompromotingproduct‐relatedbrandstoservice‐relatedbrandsaimedtosatisfyconsumerneeds.Thishelpsthecompanydifferentiateandthusopensupthebusinesstonewadjacentareas.
Proposition5c:Futuregrowthareasshouldbeinvestigatedcontinuouslybemeansofappointingspecialmulti‐functionalteams,whosetimeallocationandrewardsplanaredirectlylinkedtothistask.
‐ Hasspeciallydedicatedstructuressuchas:FutureWorks,NewBusinessDevelopment,ExternalBusinessDevelopment
‐ SpecialfundsdedicatedtoinnovationoutsidethecurrentbusinessthroughtheCorporateInvestmentFund.
‐Mr.Cross:pointstotheneedtocollaboratebetweenbusinessesinordertogeneratedisruptiveinnovations.
‐Noadditionalinformationavailableonspecialteams
Proposition6:Co‐creationandcustomerfocusexperimentsareopeninnovationtoolsthataccountfornewideageneration,thusmakingstrategicplanningprocessmore
‐ Lafleypointstothecooperativeactionswithsuppliersandmaincustomers,whomtheyhelptosolvetheirproblemsandthusgrowthebusiness.
‐Mr.Crosspointstothecloserelationshipswiththemainsuppliersandwiththemajorcustomersandgivesexamplesofsuccessfullaunchedproductsdesignedincooperationwithexternalparties.
Appendix
68
innovative.
Proposition7:BycommercializingunusedIPbase,openinnovationaddsnewgrowthsourcestothebusiness.
‐ConnectandDevelopinternetplatformcontainsaspecialareadedicatedtoownedtechnologies,whicharecommercialized.
‐Ideas4unileverinternetplatform
‐Fromtheavailableinformation,nofocusisputyetoncommercializingownedbutunusedtechnology
Proposition8a:Openinnovationfostersgrowthenhancingideagenerationbypressuringtheorganizationtoaccuratelydefineexistingcapabilities.
‐Lafleyassertsasthebenefitofinnovationtheneedforthecompanytoevaluateitselfanditscapabilities.
‐Mr.Crossmentionsoneofthemajorrisksofopeninnovationtobelaunchinginprojectswhicharenotthecompany’smaincapabilitiesorwhicharenotwithinitsstrategies.
Proposition8b:Openinnovationfostersmoregrowthenhancingideasbyallowingexternalknowledgetobeleveragedinternally.
‐Mr.Mirandadiazconfirmsthistheoryandgivesexamplesofproducts,whicharetheresultofcombiningexistingcapabilitieswithcapabilitiesofexternalparties.
‐Mr.Crosspointstotheneedfortheemployeestobenotonlygreatintheirtechnologyarea,butbeinggreatatbrokeringexternaltechnologythattheyunderstandintothecompany.Givesexamplesofproductswherecapabilitiesofmainsuppliersweresuccessfullyleveraged.
Proposition8c:Openinnovationmakesstrategicplanningmoreinnovativebypromotingnewknowledgeacquisitionandbuildingnewcapabilities.
‐Lafleypointstothenewcompetencieswhicharedevelopedintimeasresultofcollaborationwithexternalparties.
‐Mr.Cross:thescientistsknowingthattheyareoneofthebesttendtoshuttheireyesforthecapabilitiesofothers.Thustheyriskremaininggoodatwhattheycandonow,buttheynevergobeyondthat.Byembracingopeninnovation,thisphenomenoniscounteracted.
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