By
Alberto Cappellini
Our
operating environment today is comprised of old, and
new, but increasingly complex challenges. Externally
we are dominated by increasing variety and variability.
Variety in terms of markets, customers, shoppers, users
and technologies. But particularly variability of demand.
Consumers’ needs are getting more complex
as demographics rapidly change and people take increasing
personal control of their lives.
Multiple lifestyles and a fragmented media mean it is
increasingly difficult to reach our consumers. The interactions
with brands have changed. If we are not able to understand
this complexity, and reflect these diverse requirements
in our categories, our brands and our products then we
are missing fantastic opportunities, as well as the prospect
of missing our markets.
Whether we like to admit it or not, we are driven by
an internal focus. Internally we are faced with an industry
that has an increasing trend toward excess capacity across
our markets and rising input costs in an already capital
intensive business. And it is mainly the traditional
capital intensity of our business that is driving behaviours
within our industry that I believe are unsustainable.
We tend to look at where we are now rather then asking
where we could be. We use models based on experience,
based on the past, to understand the complexity of our
markets.This is because we take an internal perspective
of what technologies, capabilities and products we have
and how we can best use them at less cost to drive more
revenues. Yet while we all need to manage the ‘now’ in
our businesses to improve current performance, the market
and the best opportunities might be missing us. In a
market as challenging and diverse as ours, improving
by internal focus has little or no relevance.
"In a market as challenging
and diverse as ours,
improving
by internal focus has little or
no relevance." |
Markets are the source of change, disruption and possibility
today because they change faster then our companies ever
can. The need for improved results, better growth and
higher margins simply shape our challenges, but they
are not our truth.
The
pursuit of truth happens by looking ‘outside
in’. Where are the markets? What are our customers,
shoppers and users saying? How can we seize these opportunities
better than others? What solutions will they need? We
still follow a traditional model of what I like to call
simplification. To simplify is to be internal and innovate
based on what we already do or already know. We like
to take a new machine that creates a product innovation,
like trying to make a product 5% softer then it was before,
or a new technique that improves operating efficiency,
and from there we create new products.
We use our old
approach to brand or user insights to shape products.
We take products to the consumer to see what they think.
We refine the offering until the consumers say they are
happy with it. But does this mean we have created a product
that the consumer desired in the first place? We replace
benefit with function.
If we start our innovation process
by listening to this insight, if we filter what is important
and apply it correctly across our innovation process,
then I believe we can start a paradigm shift from the
internal focus to an external focus, from looking inside
out to outside in. This thinking in terms of current
paradigm extends even to what we call ourselves as an
industry – tissue.
Yet this too can be challenged.
Through market insight we know that consumer needs are
not focused exclusively on tissue. Tissue is simply the
product. If we are to deliver greater value to our industry
then we need to start thinking in terms of consumer benefit.
And when we do this, we can see that there is the potential
for us to belong to other types of category, such as
Hygiene, or even Well being.
If we start to think in terms of hygiene the door opens
to a new world of possibilities in terms of technology,
markets, consumers and collaborative possibilities. In
a fast moving and rapidly changing world, it is entirely
possible that in a few years we may no longer be called
Tissue World but are instead known as Hygiene World!
In a few years after that, who knows?!
So what is this innovation journey and how do we create
value? Quite simply, we must deliver personal value in
benefits to the consumer – and if we do this then
we can realise the benefit of commercial value for our
industry as a result. Consumers perceive the value of
a solution based on the relevance and applicability of
that solution to them – the benefits that it creates
articulated in financial gain, sensory pleasure, function
or time.
There are many definitions of innovation. One
common one is: “Seeing what everyone else has
seen but thinking what nobody else has thought.” I
think to many people this sounds smart and maybe it sounds
right. But to me, it is confused with invention. The
distinction between "invention" and "innovation" is
that invention is the creation of a new idea or concept.
Innovation is the process that turns new concepts or
ideas into commercial value.
The most typical form of innovation is cosmetic, typically
modifications or extensions to existing brands and products.
As an industry when we innovate we spend most of our
time looking through the microscope delivering cosmetic
change. I am not saying that this type of innovation
is without merit. Of course we must continue to improve
what we already do and think of new things to do with
existing products and brands. Nevertheless, it is a limited
horizon - let us call it Horizon 1 (H1). If we use Geoffrey
Moore’s model
of the market adoption curve, it is easy to see that
working in this horizon is about innovating in a maturing
market where unfortunately most of the value passes to
the consumer, not the producer.
The next type of innovation
is context innovation where we are able to create more
genuine innovation but on an existing theme – to
formulate new products, new solutions or even categories.
As an industry we spend some time her but not enough.
I am going to refer to this kind of innovation as Horizon
2 (H2).
"... we can start a paradigm shift
from the internal focus to an
external focus, from looking
inside out to outside in." |
Finally, there is concept change – Horizon 3 (H3)– advanced
innovation that rethinks the business model in order
to redefine how things happen. We have to be honest and
ask whether we spend any time here at all. If we were
thinking in terms of H3 right now we would be focused
on hygiene,health and well-being and, for sure, dreaming
of categories that haven’t been thought of yet.
If we look at the market adoption curve, we see that
market growth begins with H2 or H3 innovation, either
creating a new position in an existing market or even
better, in a new market. This is where we create more
value for us and where we need to spend more time as
an industry. But how do we respond when these markets
mature? We need to embrace disruptive innovation as a
way of life in our industry to ensure we create new market
curves as each maturing one reaches its peak. We need
to regard ourselves as a industry that builds new categories,
not one that merely sustains existing ones.
I believe that if we are able to better manage the information
about the complexity in our markets, and let our insights
drive our innovation horizons, then we can create the
capability to achieve this reinvention.
There is a need for data and insight into consumer needs
and desires to drive the innovation process. But throwing
resources at innovation is clearly not a recipe for success – about
half of all consumer-segment innovation investment is
in products that never make it to the consumer. We need
to understand what good insight is and to ensure it is
deployed within our industry to maximum effect.
If a truth of the industry is that our reality sits with
the consumer, then for the future of the tissue industry
we must pursue stronger customer, shopper and user insight
to better understand complexity.
We need to understand that there is a breadth to insight
that means we must understand every stage of consumer
interaction with tissue, how it affects them and what
they really want from our products. I call this process
connection. It is about understanding and decoding the
soft signals from our consumers and developing these
needs or wants into solutions, rather than developing
a product and testing it. Even if we listened better
to the insights we already know and share as an industry,
we would surely do things differently. We need only to
look at the kitchen towel market where one of the key
measures is TWA! If we were focused externally on consumer
insight instead of internally on function, we would recognise
that this measure has nothing to do with user experience.
On the other hand, we know that the single biggest attribute
for tissue is softness, but do we have a measure for
softness?
In our pursuit of the truth we must understand that there
is a hierarchy of insight. So we must better use insight
but we must also link our insights together and draw
out common themes to guide our businesses.
For example, 65% of shoppers in Tesco in the UK that
buy a cold and flu remedy do not buy a tissue. This is
a useful shopper insight that contributes to a shopper
theme that messages need to stand out and be instantly
decoded because shoppers lead busy lives with little
time to think about commoditised products. An integrated
theme could be summarised by the phrase capture me. This
is about the fact that brands need to convince people
that they have differentiated value. Only in this way
can they create a bond with consumers but once created
the loyalty is of great value.
We can help our businesses by thinking about the challenge
in terms of our innovation horizons; H1, H2 and H3. I
believe that if we organise ourselves internally around
these horizons and our external focus is on these horizons,
then we have a greater chance to add value.
In addition, we can go one step further by blending investment
decisions to reflect our horizons. Why should so much
of our investment be dedicated to H1? The total pot needs
to be split across all three horizons so that we always
look to reinvent our future.
"... we may be
on the verge of significant changes
to our category
and therefore our industry." |
Many of you understand the
theory of punctuated evolution. It dictates that nothing
much happens for a long time and then many changes occur
in a short space of time. Well I think we may be on the
verge of significant changes to our category and therefore
our industry.
The starting point for all of us is to
constantly expand and redefine the perimeters of our
category. To help understand how we are going to deliver
innovation value I think we can just peek at what the
future might hold for our industry journey.
If we look
at what the future might hold, at where our insight is
currently pulling us, the journey of our category could
look something like this. I believe this because I know
that we are already moving in that direction, as are
many of our competitors.
In our H2 horizon we are now
selling Kleenex® Antiviral Tissues, designed to kill
nearly all cold and flu viruses. This manages to be a
new product and solution which helps to redefine the
category. It has been developed as a result of consumer
insight and is dedicated to the benefit of hygiene.
In order to make this product we collaborated externally.
Operating outside of our microscope shows a shift in
paradigm and expands our horizons, developing our potential.
Going beyond hygiene, Kimberly-Clark is just launching
a new range of spa products for use at home which is
branded SpaSensials®.
The insight theme is that women play multiple roles and
struggle to devote time to themselves. They welcome anything
that helps preserve and maximise use of this time with
emotional benefit - feeling pampered and functional benefit
- being cleansed. This is a range of essentially tissuebased
products that begin to move us towards a new market of
well-being. Again, the combination of cross-industry
expertisecreates a compelling value proposition. Within
our current markets there is much more we can do to deliver
value through H1 innovation. There is certainly more
growth yet to come and we in Europe and the Rest of the
World need only look to per capita consumption in North
America to understand the scope for development. And
a shift to a more external focus can mean many more exciting
product developments to follow, and I am sure we will
be hearing a lot more from the Tissue Growth Task Force
regarding this point.
All of these types of innovation need to take place in
parallel. If there is no concurrency, if we focus only
on one type of innovation, one horizon, then we will
miss much of the value in our future.
And there lies our challenge – we need to embrace
a culture of innovation in everything that we do. We
need to think differently, work in new ways and act differently
to ensure that we add real value through innovation rather
than extend our existing businessthrough incremental
development. In this sense innovation becomes the job
of everybody, not just R&D or some other silo. By
changing our paradigm from an internal focus to an external
focus, from microscope to telescope, we create a future
for tissue that, far from falling into a commodity trap,
is exciting and diverse with strong brand equity to be
captured in new categories, new markets. Let us be clear – this
is about our future. We can no longer afford to be led
by our current view of innovation, our current paradigm.
We have the people, the tools and the capability to be
better. All we need is desire - to challenge ourselves,
pursue the truth, be brave and reinvent ourselves. So
let us embrace this journey together. If we do, I am
convinced a new and exciting future awaits all of us.
TW
Alberto Cappellini is president, Family Care Europe with
Kimberly-Clark Corporation, UK
