Innovation in the form of BigCo NewCo

How can big businesses combat the disruptive startups and innovators now entering the food industry?

In my previous article, we discussed the changing macro environment of the food industry, and looked at how this could explain why large global organisations may be finding themselves in declining revenue. Now we shall consider what these companies can do to combat this, and adjust to meet the challenges of this new world.

As we discussed, smaller players have taken advantage of market changes at pace due to their agility and unique culture of innovation with value and profit both being a priority. Large companies whose aim is to achieve a repeatable outcome for the customer must sacrifice elements of the above in order to do so. Some argue that the conundrum will always exist, simply that established companies will always lack enough flexibility to explore and nurture breakthrough innovation.

Let us explore this a little…

The most obvious solution would be to simply buy smaller companies with innovative solutions and USP-rich products. This is an effective model and one that Kellogg have adopted with their £100m Eighteen94 Capital fund. Or similarly, Australia’s Lion Brewery’s purchase of several niche craft beer brands. There are of course many other examples.

It must be considered that this does not provide the solution for all. Not every large organisation has the liquidity, internal capability, or relevant industry position to apply such a strategy. Buying companies can also dilute, disconcert, and even disprove the formula that made the original company successful in the first place. Not only this, but integrating systems and business processes may even serve to stifle the innovative culture of the purchased company. This is not to mention the cost of the acquisition and the related fees. It is not to say that this type of activity cannot be successful, it is only that there are legitimate questions for consideration, and therefore we must consider that there are other approaches. Also, to refer to the original challenge, it does not provide the answer as to how larger companies can buck the trend and begin to harbour innovation for themselves…

A possible solution could be to set up a business unit within a large organisation, with the aim of competing with start-ups over the ideas of tomorrow. This requires some real thought as to how best to facilitate on the one hand; the business unit’s best hope for improvement may come through incremental innovation, or be focused on discontinuous innovation; being the radical advances that alter the basis for competition in an industry. The two approaches require two different types of business systems, processes, talents and cultures in order to succeed.

That is not to say it is not an option which is worth considering. Govindarajan and Trimble argue that setting up ‘NewCo’ within ‘CoreCo’ can achieve success, as long as NewCo is able to do three key things in relation to CoreCo:

• FORGET. NewCo must forget CoreCos predictable business model, behaviours and even the perception of CoreCo’s image. This is particularly in relation to recruitment and selection, and what defines success. Acknowledging the need to challenge institutional memory and metrics of performance will allow this to happen. NewCo cannot hope to achieve disruption in a system with a process which is aimed at tracking and facilitating incremental gains and predictability. Indeed, it could even be observed that CoreCo is designed to discourage such innovation.
• BORROW. NewCo is not a new company and should use this to their advantage when competing against their Start Up rivals, harvesting all it needs from CoreCo. Obvious examples may be relationships and contacts with suppliers or retailers, but capital funding and more specific expertise are also very relevant. Interestingly, if NewCo has successfully applied this Forget principle, it will likely lay outside of CoreCo’s communication systems and even their cultural tendencies; making interactions between the two disjointed and potentially tense. It is the management team’s responsibility to facilitate this process and avoid possible resentment from CoreCo which could stifle the progress of NewCo. Put plainly, the two business units will not talk the same language and mediation will need to incur.
• LEARN. The pursuit of discontinuous innovation by definition cannot be structured, tried and tested, or even rigorous. It is the stuff of ‘midnight eureka moments’, hours of idea development and brainstorming, trials and tribulation, and even some sweat and tears. However, the misconception here is that NewCo does need to apply structure and rigour when reviewing and instigating learnings of an action; this could be a product trial, launch, the measuring of success, the hiring of talent, etc. Learning with effect and pace, and applying learnings with the same rigour will be key to achieving success. A key way to understand this from a management perspective is to focus on the team’s ability to learn, and not necessarily the outcome’s success. Disruptive innovation will have many failures along the way by its very nature. Therefore, adherence to business plans, checking balance scorecards, budget measures and standard operational KPIs will not give clear indication of the likelihood of end success.

Breakthrough innovation is both high risk and also high reward. It is ambiguous, immeasurable, scary, complex and all the other relevant superlatives. A strategic framework that harbours an environment where it can succeed will mitigate some of the risk and cost of the failures. The question will always remain; can big business really afford not to?

Written by Chris Allen, Coriolis Consulting Pty Ltd

References

The Ambidextrous Organisation

Building Breakthrough Businesses Within Established Organisation

The Food Revolution: start ups claim their piece of the pie

Recent studies show us that growth in the top food companies is in decline, while smaller players are recording the opposite. In fact, revenue of the top 50 FMCG companies has declined from a 7.4% growth rate in 2010 to 1.7% in 2014, while growth in smaller organisations has risen to 1.9%.

Why is it that, during a time in which the industry is seeing a decline overall, the smaller companies have been able to outgrow their larger competitors? Not only this, but specific brand research has shown that local products have grown by 6.2% compared to their global counterparts, who could only grow by 3.2%. Statistics aside, we must understand what the possible underlying causes are.  Put simply, why might large scale food organisations be losing out?

A first possible cause is the impact that technology is having on the individual, who is now being given so many choices. Technology has moved from a vertical industry to an all-encompassing layer which has spread throughout society. A significant effect of this is that we have never before had such high levels of visibility when it comes to a company’s true operating model. This information can be used to assess their moral compass, and their impact on social and environmental issues. No longer are matters regarding the climate, equality and sustainability clouded, which previously allowed these factors to remain on the periphery of an organisation’s agenda.

Technology’s impact on the industry is profound in many ways. Another key change is the way in which technology has levelled the playing field for smaller companies to market and sell their products. Social media platforms allow a low barrier to entry for smaller companies to gain an unprecedented amount of brand exposure. The Dollar Shave Club is a good example of how a viral advert can contribute to exponential growth.

Another factor that might explain the declining revenue of large companies is the age old truth that big corporate companies are slow to react to market trends and unique opportunities. They are bureaucratic, reasoned in their decision-making processes, cautious by nature, and are often governed by shareholder returns. This leaves an unoccupied space for entrepreneurs to gain ground, innovate, renovate and risk take, without the reputational damage, consequences and repercussions feared by bigger brands. While this observation is not necessarily new, it has certainly been compounded by a globalised world operating at a faster pace than ever before.

What may also exacerbate this fact is the new and unique direction some entrepreneurs have taken. The millennial, as both an employee and increasingly a CEO, is guided by value and principle more than any other generation. What this may be leading to is a different perspective on the world of opportunity that big and well-established companies are simply not programmed to identify due to overwhelming focus on profits. Opportunities where both value AND profit are the focal points have led to some disruptive breakthroughs and future growth markets in fascinating ways. The US based company Hampton Creek provide a good example of this – the owners sought to replace the eggs in food supply chains by developing plant-based alternatives for use in everyday products such as mayonnaise and even cookies, reacting to an increasingly health-conscious consumer base who are looking for ‘free’ alternatives to their old store cupboard favourites.

Returning to the topic of transparency in practices, a recent Oxfam report on the ethical credentials of the top food companies did comment that 9 of the 10 biggest food organisations had improved their practices from the previous year. However, Oxfam added that: “It will take time for them to reverse a 100-year history of relying on cheap land and labour to make mass products at huge profits but at high cost to social and environmental factors”. We must also consider the question of whether these incremental improvements go far enough to harbour the next wave of innovation. They could then go a long way to really tapping into the next generation’s need for value-driven economics.

Clearly there are some challenges which large companies are facing in order to maintain their current position, revenue and market share. In my next article I will address what large organisations could do to address these challenges.

Written by Chris Allen, Coriolis Consulting Pty Ltd

References:

http://edition.cnn.com/2014/02/26/business/oxfam-ethical-brands/

http://www.triplepundit.com/2013/07/one-founders-quest-leapfrog-food-technology/

http://www.consultancy.uk/news/2453/50-largest-consumer-goods-fmcg-firms-of-the-globe

https://insidefmcg.com.au/2016/05/24/local-brands-command-global-fmcg-shopper-choices/

http://coriolisconsulting.com.au/motivating-millennials/

Best before ever

Did you know that canned foods with longer than 2 years’ of shelf life do not require a best before date?

I recently came across an interesting British Waste and Resources Action Programme (WRAP) report promoting reduction in waste by extending product life.  It was estimated that shoppers could save upwards of £500m, and businesses could save £100m in waste prevention alone. The report included some really impressive figures which could make a big difference.

It all sounded like a great opportunity. But how do you go about extending the shelf life?

Brief history

The Guardian reported that sell by dates were first introduced in the UK in Marks & Spencer’s storerooms during the 1950’s, primarily as a stock control methodology. The concept eventually made it’s way on to the supermarket shelves during the 1970’s.

Fast forward a few more years to when food safety implications were better understood, and use by and best before dates on products became legislative.  A use by date is required on foods that, for health and safety reasons, must be eaten before a particular date – legally products cannot be sold beyond this date. Examples include ready to eat and chilled goods such as yogurt, milk, fish and meat. The best before date however, is the manufacturers recommendation of the last day when a product is suggested to be consumed at its peak quality. You may be surprised to know that, legally, it is possible to sell products which are beyond this date.

When we bake at home, there’s no definitive use by or best before date – so how do we know whether we should or shouldn’t eat those leftovers or that batch of chocolate brownies? We check the quality using our senses of smell, sight, touch, and if nothing is amiss, we go ahead and eat it.

Ultimately, the consequence of selling products with a use by or best before date indicated is that, unfortunately, between the manufacturer, retailer and consumer, a great deal of food probably fit for consumption previously, is thrown away.

Manufacturers actively choose to err on the side of caution by issuing shorter use by or best before dates on products to avoid causing irreparable brand damage. The risk of being accused of causing food poisoning, or worse, or selling a less than perfect product is too hazardous in an increasingly competitive market.

So if manufacturers are choosing to be more cautious, how do they calculate use by and best before dates in reality? Are the results scientific? Are they adaptable depending on changing trends and quality of ingredients? The report invites retailers and manufacturers to challenge their current guidance, prioritising products with a short shelf life or high waste impactors.

Another contributing factor to waste is the minimum life on receipt (MLOR); this is the shelf life remaining on the product when it is received by the retailer.  One retailer researched in Australia requires at least 50% life remaining for a product with a shelf life between 1-2 years.  This means that if a product has a 2-year life the retailer has to receive it within 1 year of its life, suggesting they require up to 1 year to sell the product and for it to be consumed. The recommendation in the report is to move from 75% to 85%, which would mean in this instance going from 6 months to 4 months, a long way off the current position.

For the rest of the report and its interesting conclusions and recommendations see:

http://www.wrap.org.uk/content/reducing-food-waste-extending-product-life

https://www.theguardian.com/lifeandstyle/wordofmouth/2009/jun/16/food-waste-best-before-dates

http://www.foodstandards.gov.au/consumer/labelling/dates/Pages/default.aspx

http://www.foodstandards.gov.au/consumer/safety/cannedfoods/Pages/default.aspx

Written by Sally Wood, Coriolis Consulting Pty Ltd

Coriolis & Mosaic acquire WDScott Asia Pty Ltd

We are delighted to announce that Coriolis Consulting Pty Ltd (Coriolis) and Mosaic Advisory and Capital (Mosaic) have recently acquired the iconic Australian consultancy business, WDScott Asia Pty Ltd.

Established in 1938, WDScott is Australia’s first boutique consultancy and is now one of the most enduring brands in the country. The organisation has and will continue to lead the development and application of leading management practices across key sectors including Financial Services, Utilities, Health, Education, Manufacturing & Value Chains, and the Public sector.

Mark Schubert, CEO of Coriolis said “Coriolis’ growth in Europe and Australia is a result of a strong vision to create a leading consultancy that attracts, develops, excites, and retains exceptional people. The Coriolis consultancy framework focuses on harnessing three-dimensional talent™ and there is already strong alignment between Coriolis and WDScott in terms of shared values, culture, consulting philosophies and service offerings. This will lay a firm foundation for our teams to develop new skills and expertise to better serve our clients in the future.”

Mark Dudley, Chairman of Coriolis said “the joint acquisition of WDScott both expands the capability of our key Australian business and provides a platform for significant growth in all of the major markets that we are planning to develop”.

Philip Cormie, Chairman of Mosaic, who has enjoyed a close relationship with WDScott for over 30 years, echoed Mark Dudley’s remarks, adding that “the progressive harmonisation of Coriolis and WDScott’s superb operational pedigrees, as well as the strategic, analytical, process and change leadership credentials of WDScott will expand opportunities for our teams, and increase the depth and range of our services to existing and new clients”.

Mosaic’s interests include Intellectual Property, Advisory and Professional Services, and Sustainable Social Impact Investing.

We are all delighted with the outcome and truly energised by the opportunities that this new chapter will bring.

Adaptive Leadership: the key to performance in your organisation

There’s no doubt about it – great leaders are key to retention. Studies show that leaders with a high level of emotional intelligence contribute to their employee’s creativity and job satisfaction. Conversely, employees will disengage and become cynical when they perceive “value erosion” or a lack of authenticity from their leaders. The question then becomes “why do some leaders help their organisations to flourish while others fail?”. What traits and behaviours separate the successful leaders – those with satisfied, creative and ultimately high performing teams – from those that don’t? It turns out that there is much more to read on the topic than the musings of top CEO’s. Psychology shows us that it is adaptive and flexible leadership which generates true organisational success.

The aim of any business leader is to move the organisation forward. There is always some way in which an organisation can change for the better. The styles of leadership which can be used to achieve this fall into some rather broad categories:

• Transformational leaders: The inspirational visionaries who lead by example and challenge those around them to do better every day
• Transactional leaders: The more traditional leaders who encourage good performance with rewards (contingent reward type leaders) and discourage poor performance with punishments (management by exception).
• Laissez-faire leaders: The coaches, those who empower their employees by allowing them to make their own decisions. This leader provides their employees with guidance rather than rewards or punishments.

But which type of leader is best for organisational performance? Should those in management positions lead, drive or coach their teams to achieve continuous business improvement? The answer lies in the behaviours that the organisation needs their employees to embody.

Employees exhibit different behaviours when faced with different leadership styles. The most beneficial to the organisation is that of genuine emotion. Here, the employee resonates with the aims of the leader and organisation on a deep and true level, and they act to bring these to fruition accordingly. Second is “deep acting”. In this instance, the person truly wants to resonate with the vision of the organisation. They wilfully change their internal perspectives and emotions to bring them in line with what is expected. Finally, “surface acting” is when a person fakes the emotional state that the organisation wants them to display (ie. when your barista wishes you a pleasant day after you’ve just ordered your soy, decaf, caramel mocha latte in a mug…).

So which leaders provoke which behaviours? You can probably guess that transformational leadership is a predictor of genuine emotion and deep acting. Transactional leaders tend to generate both deep and surface acting amongst employees. A laissez-faire leader predicts genuine emotion in the worker.

The answer implies that we should fill our businesses with inspirational coaches… but this will have its detriments. Despite the emotional labour that is implied through surface acting, burnout in employees is most associated with genuine emotion. And we cannot neglect the effect of personal preference of leadership style on the employee. The reality is that some people prefer authoritative leadership, whilst others prefer trainers and mentors.

Adaptive leadership is the true key to organisational success. Leaders must be able to exhibit different leadership styles at the appropriate times – a great leader has the ability to inspire, and coach, and reward their people. Most importantly, they know which situations demand which skills. Successful businesses utilise people who inspire genuine emotion without burning through the talent they have nurtured. They are flexible enough to tailor their offering to their employees because ultimately, it is the workers who create value within the business. In summary, train your leaders to be flexible to limber up your business for success.

Written by Selina Foo, Coriolis Consulting Pty Ltd

References:

http://www.sciencedirect.com/science/article/pii/S0001879105001260

http://www.sciencedirect.com/science/article/pii/S1048984302000991

http://www.sciencedirect.com/science/article/pii/S1048984303000511

http://www.sciencedirect.com/science/article/pii/S1048984315000995

http://www.sciencedirect.com/science/article/pii/S1048984315000648

http://www.ncbi.nlm.nih.gov/pubmed/25844908

https://www.researchgate.net/profile/Gary_Yukl/publication/254848271_The_Importance_of_Flexible_Leadership/links/02e7e538dbd41d4514000000.pdf

Ronald A. Heifetz, Marty Linsky, Alexander Grashow, The Practice of Adaptive Leadership: Tools and Tactics for Changing Your Organization and the World, Harvard Business Press, 2013, ISBN: 1422131025, 9781422131022

http://dx.doi.org/10.1037/a0019835