Monday, October 13, 2014

How Open Innovation Can Help a Big Firm Act Like a Start-Up

An interview with
Steve Paljieg
Senior Director, Corporate Growth & Innovation

Interviewed by Sam Narisi

As a Senior Director of Corporate Growth and Innovation for Kimberly-Clark, Steve Paljieg is responsible for taking the company into new areas of business and, as he says, “innovating the way we innovate.” One of those innovations is the Huggies MomInspired program, in which the company fields product and business model ideas from consumers and offers grants and other support to help those entrepreneurs move their businesses forward.

Frost & Sullivan recently spoke with Steve about the impact the program has had on the Huggies brand and the organization’s internal product development, as well as how companies can move past old ways of thinking and bring new ideas into the fold. Steve will also join us to discuss these topics in greater depth at the 9th Annual New Product Development & Marketing: A Frost & Sullivan Executive MindXchange, January 12-14, 2015, in San Diego, CA.

Tell us about the MomInspired program.

The big a-ha moment for me was looking at the target audience for Huggies – moms with young children or expecting mothers – and realizing that they had the capacity to be more than just people who give us money for the stuff we sell. The MomInspired program is an example of how consumers are looking for more out of brands, and brands ought to be looking for more out of their consumers. What it says is that our moms are just as good at innovating as we are. By recognizing that, we can fulfil even more of our brand promise by engaging customers in the innovation process, helping them succeed in their own enterprises, and getting more problems solved for more moms.

We have a grant period that opens up every year, and entrepreneurial moms put in an application to be part of the program. There are other programs out there that ask customers for ideas, but for us, just coming up with an idea isn’t enough. It’s not close enough to a business proposition for us to appropriately value it. So we ask questions around business models to look for evidence that they’ve thought of this as more than just an idea. As we read through the proposals, we also get great market research information. These are moms who have identified points of pain and are working on solutions.

The moms we choose get a $15,000 grant to spend in a way that moves the business forward, whether it’s to file a patent, get some design work done, or buy some inventory. We don’t claim to know what their business needs better than they do. We also give them access to the Huggies brand name, which is a big door opener. They can get additional distribution because trade partners may be more willing to give them a shot since they recognize our brand. We have 42 businesses right now that are part of the program. About 30 of them are going enterprises that have some sales and supply chain capability.

What are some of the effects you’ve seen since the program started?

It’s a win-win, and there are several things the moms provide for the brand. If we just calculate the brand-building value of the program, to date we’ve gotten about 100 million impressions. And I can rarely ever say this about marketing, but they’ve all been positive. The basic message is: Here’s a big brand that’s investing in moms to help solve problems for other moms. It’s a really good PR story and those impressions are really efficient compared to what we get from traditional marketing.

The second benefit is innovation sourcing. We’ve just acquired one of those seeds of a business and within the next year we’ll be launching it nationally under one of our brand names. That’s going to be a big deal. We spent $15,000 dollars on it for the grant in 2011 and the top line sales it’s going to generate will be in the millions of dollars. That’s a pretty cool ROI. The mom’s going to win as she licenses her product to us, and we’re going to win because we have an innovation that we didn’t have a line of sight to internally. Overall it’s been a really equitable program in terms of what we get and what the moms in the program get.

That’s one instance where the program led to a new product in your portfolio. What have been some of the other effects on your product development process overall?

Another thing we do with the moms is we give them some mentoring by putting them in touch with K-C employees. For example, if they don’t have much design knowledge we’ll pair them with one of our design managers. When that process ends, more often than not, our employee comes back and talks about what a great experience it was because it reminds them what it’s like to be an innovator and entrepreneur, and it reinvigorates them. Sometimes in big corporate environments we get a little weighed down with our processes and ways of doing business and we forget that there’s a whole other way to innovate. We see a lot of value in exposing our people to that start-up mindset so they can bring that passion back to their everyday work.

There’s also the simple value proposition. Many companies struggle with growth beyond their existing value proposition. If you try to do it completely within the enterprise, it takes big investments and big bets. This program has taught us there are other ways to do that. Why not plant some seeds, as we’ve with 42 companies at about a $600,000 investment, and see how they germinate?  There will be winners and losers, but the risk is much lower and the value of the winners is so much more.

You launched MomInspired five years ago. What are some of the things you’ve learned along the way?

The first thing was how to deal with the legal challenge. Companies always worry about how to bring in ideas from outside and protect the company and the inventor. We have the moms sign a legal agreement that protects us and their intellectual property.  I thought this would be a barrier to getting people to submit ideas, but we had a great legal team work on this and the moms really liked it. It’s not too complicated and it shows that we treat them like real business people and respect what they have and want to take care of them.

Another evolution was figuring out the best way to interact with this ecosystem of innovators. When we get involved too early, particularly with a start-up, we stand a pretty good chance of screwing it up. Not because we’re dumb, but as a big company we just lack some of those entrepreneurial skills. We try to have a relationship that’s hands-off but allows us to continue to talk to the moms about commercial opportunities. If we start layering all these processes on the innovators, they’re going to lose steam and lose their ability to move their businesses forward. Over time, we’ve also gotten better at selecting recipients, and we’re figuring out how to create commercial value in different ways.

You’ve touched on how the program has helped Kimberly-Clark incorporate sort of a start-up mindset into its innovation practice. What are some other ways, larger, more established firms can tap into those entrepreneurial skills and strategies?

As a 30-year innovator in the consumer goods space, I’m amazed about what individuals are now capable of in the marketplace. Big companies need to figure out how to take advantage of the innovation coming from those individuals. And it’s not just companies, but government institutions are figuring this out as well. I’ve talked with folks from NASA about their processes for connecting with the outside world. They needed a new prediction algorithm for solar flare activity. They struggled for years and put more astrophysicists on it, and they were still stuck. So they went outside, posted a problem and asked people to look at it. The person that solved it, was it a person at NASA? No. Was it another astrophysicist? No. It was a retired cell phone engineer who had been looking at reception patterns and how they were affected by solar flares. That teaches you that using more people who think the same way is less likely to solve the problem than opening up to a more diverse set of thinking and skills.

You just have to try experimenting and see how these things fit. Some will replace existing processes and some will compliment them. It’s a journey of learning and understanding. As an innovator, you need to come up with new stuff so you have to always be experimenting with new processes.

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