Innovation in Kraft Foods

How Kraft Foods Continuously Innovates with an Idea Management System

Introduction

• Kraft Foods – largest global food and beverage companies

• Employs 2000 scientists and engineers.

• Kraft says that many good ideas for food innovation exist outside its four walls.

Kraft & Open Innovation

• "We recognize that we don't know everything," explains Nanako Mura, associate program director, open innovation, at Kraft Foods.

• Recognizing that expertise exists outside of Kraft's core competencies -- expertise that could help the company grow -- has spurred Kraft to adopt the concept of "open innovation."

Open innovation - Kraft

• Working with external innovation partners to speed the development of new products as well as speed the time it takes to bring new products to market.

• Access to additional talent and reduce R&D costs.

• Complementing Kraft's internal innovation networks.

Open Innovation: The next frontier in innovation management

• "No single company is large enough or inventive enough to be an innovation leader without collaborating with an array of partners," write the authors of the A.T. Kearney report, "Open Innovation: the next frontier in innovation management."

Reliance on Open Innovation

• Innovation leaders rely on their customers, business partners and competitors to supplement their own internal functions.

• Best practices in innovation result from ideas generated outside the company."

Using Suppliers in innovation efforts

• For suppliers, Kraft employs several tools, including a supplier relationship segmentation assessment as well as an innovation potential diagnostic tool.

• These tools help the company identify which among its suppliers have the most potential to help Kraft bring more innovations to market.

Kraft’s Supplier Innovation Challenge

• A formal, disciplined engagement of one or more suppliers to address a Kraft business need, and it follows five principles:

• A consumer brief owned by the marketing department that is clearly written and includes information such as the scope of the challenge, acceptable cost range, competitive positioning and other details.

• A compressed time frame (two to three months) to work on the innovation.

• A "fair and reasonable" legal framework.• A showcase in front of a cross-functional Kraft team including

marketing, procurement and other relevant functions.• A 30-day "go or no go" decision on whether to move the innovation

to the next step in the development process.

Metrics to track the Supplier Innovation Challenge

• number of challenges conducted

• number of ideas generated by the suppliers;

• number of ideas advanced in the process;

• number of ideas that remain in the development pipeline;

• number of ideas commercialized.

Co-creation : Can it improve innovation?

• Kraft Foods innovates using “co-creation” with their customers.

• An ongoing dialogue between the two about what improvements Kraft can make.

• This practice has led to new ideas, packaging guidance, and insights into cooking habits.

• Signs of crowd sourcing?

Kraft’s Methods of Co-Creation

• Kraft began by creating an online employee community known as “FOODii”

• Kraft needed to name a new Jell-O product, so they used FOODii to request employee input.

• Within 24 hours, employees had submitted over 100 ideas.

• The marketing team passed the top 10 on to consumers for evaluation.

• Thus, employees and consumers both had a hand in choosing “Chocolate Mint Sensation” as the winning name.

Idea Cafe

• Kraft hosted “Idea Cafe,” a three-week innovation convention.

• 50 consumers invited to offer their ideas.

• Consumers worked with industry professionals to fine tune these ideas.

• This convention led to the generation of 60 new ideas for improving the company.

The Outcome

• Kraft Foods enjoyed a wealth of benefits from opening up to customer and employee input.

• How can other organizations reap similar rewards?

• What was unique about Kraft’s innovation strategy?

The Benefits of Co-Creation

• Using consumer knowledge as an organization’s asset

• Creating an active dialogue between the company and its consumers

• Offering employees and consumers the chance to invest in the success of the organization

To sum up….

• Kraft Foods’ FOODii and Idea Cafe are excellent models of combined innovation and collaboration.

• Use of an idea management system.

Questions

• What is the core competence of Kraft Foods according to you?

• How did Kraft Foods innovate to grow their market?

• What is unique about the innovation by Kraft Foods?

• Which type of innovation is this?

• List the names of any three FMCG companies that can benefit from crowd-sourcing.