Remaining Innovative in a Disrupted Ecosystem

© 2016 Blue Canyon Partners, Inc.

SAMA’S ANNUAL CONFERENCE MAY 23-26, 2016

Remaining Innovative in a Disrupted

Ecosystem

Axel J. Leichum, Partner

Laura J. Putnam, Consultant


Information/Data Disruption

Competitor Disruption

End Customer/Demand Disruption

Disruption can come in many forms

2

Channel Disruption

Technology Disruption

Roles changing?

Value provided evolving?

New players?

Product innovation?

Tools/roles automated?

Information sharing across

customer chain?

Information creating value? How?

Competitor business

models shifting?

New competitor threats?

Key needs changing or evolving?

Decision process changing?

Regulatory changes?

http://us.allegion.com/irstdocs/riserdiagram/110135.pdf











What kinds of disruption are you currently experiencing with

your key accounts?

a. Channel

b. Technology

c. Information/Data

d. Competitor

e. End customer/demand

f. Unknown

Poll

3


Innovating in a disruptive ecosystem poses both

possible risks and rewards

4

Risks

Rewards

Place the

wrong best

Misinterpret

the trend

Upset channel/

customers

Distract from

core strengths

Increase

barriers to

entry

Opportunity for

differentiation

First mover

advantage

Increase price,

share or

decrease costs


Case Study #1 – Ingredient Supplier

5


Case study background

6

A global ingredients manufacturer needed to develop

a more integrated approach to growing its ingredients

sales with existing food and beverage CPG customers

in the U.S. and Canada, while staying on top of major

consumer trends


The manufacturer had questions about how to innovate

to keep up with industry trends

7

“We’ve identified top

trends in the

marketplace, and have

prepared an inside

presentation in each area

to show our offering. We

also coordinate

innovation days.”

“The time of greatest

change in the industry is

now. The process food

industry is saying ‘I don’t

know what to do.’”

“If we were better at

marketing-to-marketing

relationships with

customers, it would

help us understand

what the consumer is

thinking.”

“Our current innovation

process isn’t good for

making product

extensions, and we

know consumers want

their needs addressed

tomorrow.”


Clean label

Unique textures

and flavors

Non-GMO

Three disruptions caused by changes in

consumer preferences

8


Consumers are looking for simple language to

describe the ingredients in their food

9

“In my area, sweet goods, the

big trend is clean label. We

want insights around this.

Sure, it’s a doughnut, but

how can you make

consumers feel healthier

about it? Clean label can

help there, but we don’t want

to sacrifice texture. What’s

most important to the

consumer?” (Marketing)

Clean label


Consumers are looking for simple language to

describe the ingredients in their food

10

“The thing that is really big is

naturally functional. That trend is

all about two things. The first is

the health halo that comes

from clean label or more

natural items. But the second

part is that the ingredient needs

to be functional and deliver

certain benefits. Almond milk is

an example of this, even though

it’s really just riding the coattails

of almonds. Almonds are natural

and they’re also perceived as

containing protein and being

healthy.” (R&D)

Clean label


Non-GMO food is recognized as a driving trend by

specific accounts…

11

“Non-GMO everything is a

big impact to our business.

We want to be on the

forefront. We have a big

initiative to make most if

not all of our products

non-GMO. It’s going to be

big now. The difference now

is that there are groups out

there who are very vocal

and have a lot of influence.”

(R&D)

Non-GMO


…while other accounts embrace the trend hesitantly

12

“Everyone is trying to dip

their toes into non-GMO.

The area has potential but

no one knows how much

potential, and it’s hard to

understand how much of it

is consumer driven. We’re

so big though, and it would

be hard for us to go all non-

GMO, so the opportunities

are different niches.”

(Procurement)

Non-GMO


…while other accounts embrace the trend hesitantly

13

“Non-GMO is certainly a

big trend area, but no one

has proven they’re actually

bad for you. It’s emerging

and we’ll see on that area. It

will be niche for us.”

(Procurement)

Non-GMO


Consumers increasingly desire unique textures, flavors

and ingredients

14

“Unique flavor combinations,

that’s where the growth is.

Things like salty and sweet. Or

sweet and spicy. Ancient grains

are also huge for us, and it’s a

challenge to make sure the

texture and flavor is right.”

(Marketing)

Unique textures

and flavors


Consumers increasingly desire unique textures, flavors

and ingredients

15

“For our products in the snack

world, any ingredient that we

can use to differentiate to create

consumer appeal is key. But the

next level is all around

ingredients that ‘unlock’

something, such as texture or

flavor. Can the texture provide

a new eating experience,

maybe multi-texture? That’s

the second biggest thing behind

flavor.” (R&D)

Unique textures

and flavors


Disruption summary

16

Supplier needs to be

in-sync with customer’s

customer

Account-based strategies

required to respond

to trends

Summary Implications for Innovation

Origin of disruption:

end customer

Radically different

responses to trend by

account


A deeper look into four key accounts confirms that

one-size-fits-all strategies will not work

17

Account A

Account C

Account B

Account D


Account D

• Large company

• Fairly innovative

• Small share of wallet

Account B

• Struggling to innovate

• Low-cost/low-end focus

“Account A is an incredible innovator that carved out space in

the bakery segment – we know gluten-free is going to be a big play with them. They are doing

well and growing”

“Account B’s business is struggling, they are taking on a

low-cost/low-end focus and haven’t been innovative in the past. They try, they come to us

every year about innovating, but it never seems to go anywhere.”

“Account C has historically struggled, but now they are

becoming innovative and starting to pick up more of our core

business now.”



18

“Account D is a large company that is fairly innovative, but we are

just a small player there now.”


Account D

• Large company



Account B



Account A

• Innovative

• Growing

Account C

• Historically struggled

• Recent improvement



19


Innovation strategy needs to be account-specific

20

Account A

• Innovative

• Growing

Collaborative product

innovation focused on natural

ingredients that maintain taste

and texture in gluten-free items

Offer superior service that is

proactive and responsive to

keep up with this nimble

customerElevate innovation

relationship by offering

corporate-wide innovation

session focused on gluten-free

and non-GMO customer

insights HIGH PRIORITY ACCOUNT



21

Account B



Product innovation

focused on maintaining

texture, moisture while

boosting nutrient content

Relationship focus on

exec-to-exec

relationships to have

clear communication

about top priorities

Improve collaboration in order to

drive more project to execution;

focus on cadence with more

frequent check-ins with R&D

LOW PRIORITY ACCOUNT



22

Account C

• Historically struggled

• Recent improvement

Be innovation partner of

choice by focusing product

innovation on new/high-growth

areas (clean label, gluten-free)

Grow base product sales by

leveraging current relationships and

by showing how they can help with

cost reduction, not price reduction

Broaden reach with R&D by sharing

consumer insights research around

non-GMO and texture

MEDIUM PRIORITY

ACCOUNT



23

Account D

• Large company



Elevate co-innovation projects

to go beyond cost-saving

approaches and customize

innovation to their key challenges

Relationship focus on

initiating marketing

relationships in order to

understand customer’s

reactions to key consumer

trends

Broaden reach within the company to

connect across divisions and focus on

“mid” executive-level to learn about

new opportunities

HIGH PRIORITY ACCOUNT


Significant profit improvement

Approval of use of innovative product in the works

Increase in innovative products sold, despite growth slow-down in customer organization

Sales have not improved, but..

Relationships improved across geographical and functional areas

Increased connectivity with CEO

Innovation projects successful

Regained some of the contract business

Improvements from 2014 - 2015

24


Case study #1 takeaways

25

Disruption can come from several steps down the

customer chain

Key accounts were radically different in terms of their

interpretation and reaction to disruptive trends and

approach to innovation

Improvements to sales and innovation endeavors

will not happen overnight

Customized, account-specific strategies are necessary to

innovate effectively and profitably during disruption


Case Study #2 – Packaging Supplier

26


Case study background

27

A North America packaging supplier wanted to

develop a strategy to increase penetration of major

QSR and Convenience Store accounts, leveraging

their innovation capabilities to take advantage of

market disruptions


Catering/ Delivery

Regulatory Changes

Rapid Cook Ovens

Three key disruptions driven by new technology,

regulatory changes, and changing end

customer preferences

28


Catering/ Delivery

29

“Catering is a huge focus now. It’s a

good portion of our business and it has

just exploded. For some of the stores,

it’s like 25-30% of their business and

it is growing at double digit rates.

We are also looking to expand our

coffee program, and we may expand

our breakfast catering.”

(Marketing)

“We want the catering experience to

be as good as possible. We have a

big focus on food quality. There are

some things that we won’t even cater

at this point because we can’t meet

the quality standard.”

(Supply Chain)

Catering/Delivery is a high growth, incremental

revenue stream for QSRs, but comes with food

quality challenges


Rapid cook ovens open up significant menu expansion

opportunities, but offer operational challenges

30

“Breakfast sandwich – we are seeing

people crack an egg into a paper cup and

put it into the oven next to three strips of

bacon and an English muffin, turn on the

oven, and then assemble them into a

sandwich for the customer. We are also

seeing people cook frozen soup in a

paper bowl. Pastries is another area of

opportunity. There is a lot both now and

in the future that we can do with the

ovens that we couldn’t do before. Now

we need to find a packaging solution

that works best.”

(Sourcing)

“Speed of service is huge for us. A lot of

what we do is trying to simplify things, so

if something can get popped in the

oven and not have to be prepared,

that’s interesting. Anything that’s going

to save labor is interesting.”

(Brand Engagement)

Rapid Cook Ovens


Food outlets must maintain customer experience

while meeting new regulations

31

“We use a foam cup today. There are a

lot of bans coming in right now from

places. However, all of the bans are

different. So even within one state

the bans can be different within

the cities or counties of the state,

so we have to use different cups

within different territories.”

(Marketing)

“One of the stumbling points is that our

consumers are very attached to our

lid, and that’s one of the more

intimate parts of the drinking

experience. Being able to find

a comparable lid is a challenge

for us.”

(Supply Chain)

Regulatory Changes


Disruption summary

32

Origin of disruption:

technology, customer,

regulatory

Suppliers need to be aware

of entire ecosystem, look

along multiple dimensions

for disruption

Summary Implications for Innovation

Disruption often generates

unmet needs, either

directly or indirectly

Disruption is an opportunity

for innovation as much as a

challenge to innovation


How can a supplier set themselves up for success?

Know where to go (and where not to)

33

Opportunity Potential

Size, Growth & Profitability

= size of the TAM

Account

B

High

Low

Low

High

• Accounts A and C are significant opportunities, with high innovation priority and openness to collaboration

• Accounts D and E are small but fast-growing, with significant openness to collaboration around innovation

• Account B is the largest opportunity with strong growth potential, but limited openness to supplier

collaboration and lower innovation priority

• Account F is the lowest priority due to limited openness to supplier collaboration and low innovation priority

Account

AAccount D

Account E

Account F

Strategic Fit

Innovation Priority,

Openness to Supplier

Collaboration &

Importance of

Packaging

Account C



Become the “Innovation Coordinator”

34

Relationships across

ecosystem

Ability to shape

discussion

Value-added role in

information

gathering/sharing (and

more likely to be “first

to know”)

Ensure innovations

best positioned for

success

Packaging Supplier

Rapid Cook Oven

Manufacturers

Ingredient/ Food

Suppliers

End Customers

QSR/ Convenience

Stores

Coordinated development of end-to-end packaging

concept for rapid cook ovens to significantly reduce

labor costs while ensuring high levels of food quality



Have R&D/Product Development resources become part

of SAM teams

35

Embed R&D/Product Development

resources into strategic account teams

Build more innovation focused

account relationships

Facilitate closer collaboration

with customer

Supplier innovation teams become

deeply knowledgeable of

customer needs

Coordinate innovation activity

with account strategy

Development of best catering packaging solution for

fastest growing QSR



Establish position as key source of innovation

36

Proactive Innovative Concept #1



Customer Requested Innovation –Supplier Opportunity

Disruption

TIME

Getting the opportunity

to innovate (or getting it

first) is often half the

battle

Need to establish

position as key source

of innovation

Proactive innovation

must be customized to

account needs (not

generic solution you are

bringing to everyone

else) and focused

Longer term investment

to be top of the list when

disruption occurs and

innovation is neededNot called for opportunity to collaborate on cup to meet

new regulatory requirements


Case study #2 takeaways

37

Disruption can come from multiple angles; need to be aware of

the complete ecosystem

Your resources are limited; focus innovation efforts on where

they have the greatest potential for a better return

You can establish a strong position by taking on the role of

“Innovation Coordinator”

Embedding R&D/Product Development resources into

SAM teams has proven to drive greater innovation success

You can’t wait for disruption to happen to show innovation

capabilities; you won’t be at the table


Diagnose where disruption originates

Understand how disruption affects different strategic accounts, what the

innovation opportunities are, and decide where to go and not to go

Map out the ideal relationship structure for each account,

and identify gaps in order to…

Create a strong foundation that can endure (and take advantage of) disruption and does not rely

on a single relationship

Establish “hooks” into R&D/Product Development and Marketing to create multiple

communication channels for top priorities

Customize innovation plans by identifying top priorities in each account

Determine if you can play a higher, value-added role as

“Innovation Coordinator”

Checklist

How to Remain Innovative in a Disrupted Ecosystem

38

© 2016 Blue Canyon Partners, Inc.39

Disrupting the Market: Three Models for Success

How Strategic Are Your Customer Relationships? A Framework for

Assessing Your Account Portfolio (Velocity, Vol. 17 Issue 2, 2015)

Is it Time to Rethink Segmentation?

Expensive Decisions: Getting Pricing Right: A Pricing Framework for

Large Deals in Complex Markets

Resources

© 2016 Blue Canyon Partners, Inc.40

Laura J. Putnam, Consultant

(847) 929-5231

[email protected]

www.bluecanyonpartners.com

Speakers

logo

Axel J. Leichum, Partner

(847) 967-0253

[email protected]

www.bluecanyonpartners.com

mailto:[email protected]

http://www.bluecanyonpartners.com/

mailto:[email protected]

http://www.bluecanyonpartners.com/

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Remaining Innovative in a Disrupted Ecosystem

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