unilever open innovation case study

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Access is the new ownership: a case study of Unilever's approach to open innovation

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Alison Kraft , Geoffrey Jones

This article explores the issue of corporate innovation using a case study of new business creation within a large, established, multinational corporation.The focus is Unilever, which during the late 1970s and 1980s created the Clearblue home pregnancy test. The Unipath subsidiary was designed specifically to commercialize Unilever’s scientific leadership in immunology by building a new business in medical diagnostics. By 1980, Unilever had built up substantial expertise in immunology and lay in the vanguard of antibody-based technologies. The commercialization of a home pregnancy test drew on Unilever-wide capabilities in innovation, branding and packaging. Unilever bankrolled the project, and financially supported it for several years. This benign support from a cash-rich corporation was critical in the early stages. The study shows that the creation of Unipath and the development of Clearblue were initially dependent on the commitment of ‘champions’ at board level in Unilever. In a finding consistent with the existing literature, champions played a played a pivotal role in the Clearblue story: they were crucial in driving what was undoubtedly a groundbreaking, high-risk venture. Equally important was the commitment and managerial skills of scientists who played crucial roles in developing a tightly focused research program in which great emphasis was placed on translating scientific and technological capabilities into marketable products. As important was the creation of an organization separate from the mainstream organization. This energized and mobilized Unilever’s capabilities, enabling them to be focused in delivering a commercial product in a new market. Unipath developed a distinctive business and innovation environment. The new company was innovation-driven and science-led and pursued a proactive, risk accepting approach to product and market development – a culture central to its success. This, together with Unipath’s flatter, goal-oriented and closely knit team culture, provided an environment conducive to new business creation. The open channels of communication between marketing and research was especially important. Yet the article also argues that if the differences between Unipath and its parent were crucial to its success, they were also problematic: Unipath engendered a sense of ‘otherness’, of being developed within Unilever but not of Unilever. This led to its eventual sale.

Berea College Entrepreneurship of the Public Good …

Debbi D . Brock

Nicole van Baardwijk

Leon Cruickshank

Objectives The purpose of this case study is to explore and review the collaborative processes and outcomes involved in the setting up of a network and partnership of three universities, namely, Lancaster University Management School (together with ImaginationLancaster), University of Liverpool Management School and Manchester Business School. The aim of IDEAS (Innovation Design Entrepreneurship and Science) is to establish and enhance the performance of firms and organisations at Daresbury Science and Innovation Campus and those in the wider North West and UK business community. Essentially to put ‘new ideas into practice’ through research and knowledge transfer activity centred on innovation, competitive performance and economic development. Approach This case study explores the opportunities, barriers and drivers encountered in establishing the IDEAS network and partnership. We review the importance of stakeholder support, strategic alignment of the goals of the partner institutions, the importance of ‘neutral’ space and explore motivations and the experience of the individuals involved. Findings The case study reveals the difficulties and successes, the achievements and outcomes of this collaboration so far, including, an analysis of the processes involved in the formation of IDEAS, including which aspects of this particular collaboration have been successful and why? Implications IDEAS has been identified by policy makers and research councils as a potentially powerful model for work that combines innovative approaches to research and knowledge transfer that may offer itself to replication. Value The case study highlights the issues, complexities and outcomes from a collaborative approach to knowledge transfer and research activity centred on innovation, competitive performance and economic development at large scale science facilities.

SSRN Electronic Journal

Proceedings of the 6th European Conference on Innovation and Entrepreneurship, Robert Gordon University, Aberdeen, Scotland, UK ; vol. 1, pp. 225-235

Tomina Saveanu

Zachary Kaufman

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Open innovation

If you have a technical solution that will help us achieve our vision we would like to hear from you.

Open to your ideas

Unilever has world-class research and development facilities, but we are constantly looking to work with partners with great technical solutions, whether they are individuals, businesses, existing suppliers, universities or NGOs. We will work with anyone who has an idea that will help us achieve our ambition of doubling the size of our business while reducing our environmental footprint and increasing our positive social impact.

We call this way of working Open Innovation.

By working with us, you could help change the world – even if it is a little at a time. More than two billion people use a Unilever product every day, so even the smallest improvement can have a huge impact.

There are a number of challenges which we're already working on and where we'd like to link up with partners. We call these our ‘wants’ and they cover three main areas:

Changing habits, improving hygiene

We're looking for solutions around handwashing, oral care, self-esteem and drinking water safety. We have made commitments on the amount of salt, saturated fats, trans fats, and sugar we will use in our products. We also want to develop foods that supply micro-nutrients at an affordable price and functional ingredients that reduce the risk of heart disease.

Reducing our environmental impact

Most of the water and more than half the greenhouse gas emissions associated with laundry product use come not in our factories but when consumers use them to do a wash. Similar challenges apply to our soaps, shampoos, and other home care and personal care products.

Building better livelihoods

Smallholders in developing and emerging economies face many challenges. Yet relatively small improvements to their agricultural practices can bring large increases in yield. We want to help them make their land more productive and their methods more sustainable.

See a full list of our ‘wants’ on our global website, unilever.com .

From this point, all information and details of submitting a technical solution is in English.

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P&G and Unilever Open Innovation Case Study

Open innovation is considered to be an idea which companies can follow to bring together both internal and external ideas and generate ways of bringing new and better changes in the organizations by accessing internal and external path while enhancing their existing technologies. The main concept following open innovation is that in this era of largely distributed knowledge, firms cannot take the risk of depending solely on the research of the single individual, thus in such cases it buy inventions such as patents and license processes from other companies. In the recent times, organizations have realized the significant of open innovation. They have become aware of the fact that all acknowledeged ideas can not be implemented within every company, these ideas are implemented upon the basis of the production and management of the company. Consequently, services as well as product manufacturing companies have now shifted their efforts to open innovation. This report is a detailed comparison of open innovation efforts carried out in the leading organizations of the product manufacturing companies i.e. P&G and Unilever, and also provides information based upon the opportunities and challenges of open innovation countenance by the two companies. The research approach applied in this research study is qualitative. The findings of this study provides recommendations for other companies in the product manufacturing industry regarding implementation of open innovation.

Introduction

Background to context.

In today’s fast moving world, the competition is fierce. In the wild market economy of the present times, it is trickier and hard for an organization to differentiate itself. To tackle with these issues, experts suggest that there is only one way out, which is to do something that the customers have not seen before, in short “innovate”. Most organizations fail to look in a new direction for the reason that they keep all their attention centered in one direction in which their business is focused. Such firms remain stuck in their typical method of operation. They make every effort to make the existing model operate in an improved way but donor pay attention to discover a better way of doing things. Many organizations are built for unremitting enhancement, rather than for discontinuous innovation (Chesbrough 2003).

Change is a process of moving from one condition or state to another. Nevertheless, change is not necessarily innovation. An organization which discovers a primarily a new way to approach and serve its buyers has in short attained innovation.

Innovation is the accomplishment of the new processes or products. Innovation suggests the course of thinking of imaginative ideas and turning them into real form, thus eventually executing and employing them. Innovation does not only includes generating new products, but it also includes employing new business procedures, new techniques of performing tasks, major coalitions, implementing new strategies and expanding towards new markets (Chesbrough 2003).

Unreserved resourcefulness devoid of any discipline or course of innovation is at best distracting and at worst detrimental to the company. Innovation implies taking the most capable ideas and trying them for actual. Not all will happen as expected; several will be unsuccessful. Regardless of certain failures, majority of the population within an organization is truly always in search of innovative and entrepreneurial ways of fulfilling their goals (Ebersberger 2010).

Essentially innovation has two types –closed innovation and open innovation. The Closed Innovation functions as a catalyst for innovation process, taking into account that most of the greatest inventions, either in the product or services space had its initial stages in the vertically integrated model of closed Innovation (Chesbrough 2003).

However, numerous factors have resulted in the wearing a way of closed innovation. Firstly, the mobility and availability of well-educated individuals has become greater than before over the years. Consequently, great amount of knowledge is present outside the research departments of huge organizations. Knowledge and expertise are taken out of the firm when the staff members switch their jobs which lead to among organizations. In the present era, fine and capable ideas as well as technologies are getting a chance to be more enhanced outside the companies’ territories due to the rise in venture capital, for example in the form entrepreneurial companies. Companies through establishing new departments or acquiring services through licensing agreements can actually create opportunities in their setup to generate ideas and technologies which are not possible in their routine. Lastly, other organizations in the supply chain, for example suppliers, take part in the innovation process (Chesbrough 2003).

Therefore, businesses have started to seek out additional means to add to the competence and efficacy of their innovation procedures. For example, it helps to search for new ideas and processes that exist outside the firm. Another advantage through innovation is that excels the collaboration with parties involved in the value chain, which helps in creating value for the customers. Moreover, it could also allow companies to sell their knowledge and technology which is found to be unfit for their own strategy (Open Innovation.eu 2006).

Hence, the comprehensive definition of open innovation can be given as: to enhance the development of new technologies by the integration of internal and external ideas and on the other hand exploiting in-house and external networks within the business markets (Chesbrough 2003). This implies that in every organization a change is necessary, as it helps to improve people’s perceptions and company’s environment. It also involves other entities when producing new products and implementing new technologies.

Keeping in mind its ever-increasing importance and use, open innovation is being applied by a large number of companies and helping them gain competitive advantage in the market. Companies irrespective of whether they are service or product oriented need to innovate their products as well as processes to sustain themselves in the market.

Company Profile of Procter & Gamble

Procter & Gamble (P&G) was established in 1837 and is an American multinational corporation based in Ohio Cincinnati which has its main business lines in the consumer products. It manufactures a wide variety of consumer goods. Procter and Gamble Hygiene and Health Care Ltd. was formed in the year 1985 under the name Procter and Gamble.The organization is one of the best providers of health care and hygiene goods in the world market which is operating in more than 80 countries and employs more than 140,000 individuals throughout its global chain. Procter & Gamble spends a high amount of money in their innovation processes particularly on their Research and Development department of the business and puts the 4 percent of the global sales in R&D, which has allowed the company to acquire almost 24,000 patents worldwide, and every year it received on average 3,800 patents of new designs and products.

Innovation has facilitated the company to boost its growth; in the year1999 P&G initiated an innovative strategy known as Organization (Dodgson et al. 2006). The Company’s Organization Strategy is a building block of the Connect and Develop (C&D) plan that P&G established (Chesbrough 2003, Christensen 1997). The rationale of this program was encouraging innovation by creating P&G’s internal communication processes more focused and interlinked with the external processes (Bons and Daams 2010). As an integral part of this strategy the company adopted an approach which allowed it to bring in external ideas and knowledge within the organization through generating internal seed funds and acquiring innovation entrepreneurial firms and generating (Dodgson et al. 2006). With this approach the company is able to boost innovation within its organization by forming close ties with external partners and working closely with them to improve and develop patents which surely gave the company a competitive advantage (Dodgson et al. 2006). Before the introduction of this program, less than 10% of the innovation Procter& Gamble had were employed in its products (Sakkab 2002).

Company Profile of Unilever

Unilever is a product manufacturing company, which has lately, came forward out as an organization, which is at all the times ready to embrace new ways of reaching out solutions unprejudiced of the fact from where these solutions are being originated. It is imperative to note here that most of the solutions to the firm’s problems are offered by Unilever’s those suppliers, where the company is managing strong innovation relationships and supplier collaborations. Creating and sustaining good relations with suppliers founded on the basis of trust require time and effort; however this is something that Unilever takes critically. Its alliance with the University of Liverpool Centre for Materials Discovery is an illustration of the fact that Unilever also managed to establish various academic research partnerships other than the collaborations with suppliers; it also shares mutual facilities, which are a vital element of the open innovation strategy of the Unilever. The Unilever and Liverpool together form a suitable team; Liverpool has a safe lasting strategic investment and the company has now attained a molecular design capability, which will allow it to develop innovative functional molecules and a provide it with a facility to screen more ingredients and find out the most suitable plan in a shorter time frame (Innovation Europe 2010).

The capability of Unilever to influence IP into and out of Unilever is a big potency, and realizing this, both open innovation and patents are two of Unilever R&D’s critical efficient skills (Innovation Europe 2010).

In managing Unilever capabilities in the region of joint innovation, it is vital to be skilled at making the suitable connections. The company has started by utilizing the compilation of internal talents and skills that cover an exceptional range of product categories plus by defining which collaboration innovation tools work best for them (Graul et al. 2006).

Unilever is the market leader in almost each and every one of the core-product activities. The aim of Unilever is to become the market leader with the help of acquiring national organizations, by expending and investing in a green field areas of every region, or by bringing in from external resources, which is attainable, advantageous and cost effective (Unilever 2011).

In the recent times the Company has acquired approximately 2000 distinctive brands internationally. This is the up-front outcome of the company’s history of preeminent strategies. Over the last few decades the company has acquired many local as well as national companies, each one having its own national brands. These acquisitions continued for a long period of time. In the late 1990’s, Unilever came up with an innovative strategy to increase the speed of the company growth; it’s known as Path to Growth. The most preeminent feature of this strategy involves additionally refocusing on its major brands. This strategy helped to minimize its number of brands from approximately 1600 down to 400 major brands (Unilever 2011).

Research Objective

The core objective of the research is to compare and analyze two organizations in the product manufacturing industry i.e. Unilever and Procter & Gamble (P&G) with regard to open innovation, demonstrate the results, and with the help of the findings evaluate the tools they used and the challenges faced by them.

Research Aim

The research aim is to compare open innovation process at Unilever and Procter & Gamble, their efforts to achieve competitive advantage in the service market by the use of open innovation and the benefits gained by them from the process. The research illustrates the findings from both companies, assesses the challenges confronted in implementing open innovation and the tools used for the purpose. The epoch has now changed the world into a place of widely distributed knowledge and technology. In such a situation companies are not in the favor of taking the risk of depending upon the company’s own knowledge, technology and research. In order to uphold themselves and stay novel in the market they should rather purchase or license procedures or inventions such as government grants and copyrights from other organizations. The research is a comprehensive study on open innovation at the leading companies in the product manufacturing industry.

Research Questions

The research questions laid out for this research study are to highlight the research aim and objectives emphasized for this particular study, and these research questions will assist in identifying different constituents of open innovation selected for this study:

In what ways open innovation contribute to innovation and business performance?
What tools are being used to implement open innovation at Unilever and P&G?
What were the challenges faced by the two companies in implementing open innovation efforts?

The scope of the research is specific as it analyses open innovation in the leading product manufacturing companies. It evaluates both the companies’ effort to implement open innovation and achieve renewal, sustainability and competitive advantage against its rivals in the market and rise ahead, the tools used and the challenges encountered by them. The research provides a detailed theoretical and conceptual framework for such study. However; it also set out that the interpretation of the findings presented in this report is dependent upon the researcher’s own understanding of the research topic and its presentation in such a way that the objective of the study is achieved in the best possible manner.

Significance of Research

The study carried out in this report contrasts two companies that use open innovation but in different approaches. The research provides in depth assessment of the impact of innovation on product manufacturing companies. This research is of great value to the product manufacturing organizations, which can help in identifying the tools and strategies used by the leading companies with regard to open innovation, and helps other companies in the same industry in directing their strategies consequently to exploit the elements of open innovation. On the other side, the study carried out in this report helps the researcher to learn about important theories that provide reasons and ways for implementing open innovation also allows him to develop and practice research skills that would surely help him in future throughout his professional career.

Literature Review

In the recent era, open innovation has turned out to be the most imperative factors for continuous expansion and economic progress that initiates at a solitary organization level, and goes up to the regional and then to the national level, posing an influence upon the country competitiveness in worldwide economy (Fredberg et al. 2008). The importance of open innovation has become increasingly known and realized in the duration of the last two decades by the companies of all the sectors of the economy. Pure Research & Development is any longer believe to be ample for economic expansion of any organization, as new ideas only enhances earnings and employment, but on the other hand, new ideas when commercialized into practice –which is called innovation – also enables social and economic influence, and for this major fact innovation is considered highly imperative. Open innovation that is a prevailing model for maximizing economy and expansion has changed the approach to innovation in leading organizations.

There has been a significant increase in product and service organizations shifting towards innovation to gain sustainability, renewal and achieve competitive advantage in the market. With the times continuously changing the idea of closed innovation gradually eroded away. At the same time as some businesses that were unable to adapt were faced by significant losses, some have been innovative in the sense they innovate and have shifted to Open Innovation. Therefore, knowledge and know-how that were once carefully guarded within the boundaries of the department of R&D, was now becoming more and more accessible to other firms (Leonard-Barton 1995, Gassmann 2006). Consequently, it became progressively easier for an organization to take advantage from the skills of another by poaching in specific key staff members of the challenger. Increasing number of high quality suppliers that bigger organizations now rely on is also a factor contributing in the erosion of closed innovation. As a result, organizations had to adapt. It was important for them to become skilled tapping outside technologies and also learn how to capture the worth of technologies that were leaving. This marked the start of Open Innovation (Fredberg et al. 2008).

Theoretical Framework

A substantial quantity of coverage has been given to the latest phenomenon of ‘open innovation’ within the academic literature and outside. (Trott and Hartmann 2009). In order to develop a better understand of shift to open innovation and its need for organizations, various theories have been suggested. These theories provide a deeper knowledge of open innovation in product and service organizations. Some of the theories pertinent to this research study are explained below:

Chesbrough Open Innovation Model

Henry Chesbrough introduced an “Open Innovation” model in 2003 which was much commended and set a model for innovation management and the joint enterprise. At that time, it was an intrepid and far-reaching notion and it challenged the traditional approach on innovation.

Open innovation is an idea based on the supposition that companies possess the ability and hence should employ external ideas along with the firm’s internal ideas, and exploit in-house and external roads to the business markets, at the same time when these organizations are seeking to enhance their technology. The development consists of internal and external estimations into architectures and systems, for which the needs are characterized by business model. The business model uses equally the external as well as internal initiatives to create significance, while explaining internal operational procedures to sustain some portion of that significance (Chesbrough, The Era of Open Innovation 2003, West 2006 and Simcoe 2006, ).

On the basis of his research on companies practicing open innovation, Chesbrough deduced that industrial R&D was experiencing a “paradigm shift” from the closed to the open model.

Open innovation can be considered as a collection of practices for which will earn the company profits from improvement and also a cognitive model for the conception, acceptance and exploration on these activities. For instance, for the period of more than 50 years ago government funding agencies and non-profit foundations have financed scientific research, playing the part, which Chesbrough (2003) named the “innovation benefactor”. “If exercising innovation is changing for the reason that new forms of innovation are economically feasible then this offers opportunities for researching and describing these new practices. The open innovation paradigm offer propositions for how such innovation should work” (Chesbrough, The Era of Open Innovation 2003 and Davis 2006).

The main messages of this model are:

Shift the organization even further away from the linear process, which has subjugated much of the 20th century firms’ approach.
Utilize the ‘open’ iterative process, become more multi-dimensional in collaboration, and assimilate the customer more centrally into the ‘web’ of collaborators.
Invention from the R&D bench resulted in market ‘push’ and an effort to rationalize corporate thinking by forcing it on the market and onto the customers.
Concentrate on consumers unfulfilled, unspoken or necessary needs by making customers the centre in the web of co-creators and co-creation activities (Chesbrough 2003).

Henry Chesbrough introduced a novel phenomenon of open innovation, which is much different from the conventional closed innovation model. Chesbrough described that this closed model started to alter in the 1990s when companies such as Cisco systems vied very vigorously with the research- endowed businesses like Lucent Technologies (Chesbrough, The Era of Open Innovation 2003).

Trott and Hartmann (2009) in their research suggested how Chesbrough has given a counterfeit dichotomy by giving an argument that open innovation is the only inimitable existing alternative to a closed innovation model. Instead of being held intimately inside the firm, following the idea of open innovation research results are able to cross the company’s boundaries. Other businesses which are capable of making use of a technology can license it is generating a win –win condition. Likewise an organization can license the technologies manufactured by other companies.

Von Hippel Democratized Innovation

Von Hippel (2005) has observed that lead users at most times create and modify products for themselves and frequently liberally disclose what they have done. He also observed that most users may be interested in taking on to the solutions that lead users have developed. Altogether, these findings enable the basis for user-centered innovation models that may entirely change manufacturer-based innovation models in specific scenarios and counterpart them in other situations. User centered innovation is gradually growing its worth as computing and communication technologies expands. In his theory, Hippel discussed the ongoing democratization of innovation and patterns of user-centered innovation that are rising.

Innovation is swiftly moving towards democratization. Consumers, fully utilizing enhancements in computer and communications technology, increasingly can create their own new products and services. These innovating consumers—which can be an individual as well as firms—sometimes freely reveal their innovations to others, generating user-innovation communities and a highly rational commons. Much discussion is made on user-centered innovation paradigm in “Democratizing Innovation “ by Eric von Hippel. He clarifies why and when consumers deem it gainful to create new products and services for themselves, and why it frequently pays consumers to share their innovations generously for the use of everyone (Hippel 2005 and Kirschbaum 2005).

The software and information items—most remarkably in the free of charge and open-source software movement- as well as in bodily items are an example of the shift to democratized innovation. (Hippel 2005).

Von Hippel (2005) further suggests that in order to attain sustainability, organizations must now revamp their innovation processes and that they must methodically look for innovations made by the consumers. Businesses were specifically discussed by Hippel—the custom semiconductor industry is one similar instance—which has learned to help user-innovators by supplying them with means to create novel and innovative products. The objective of a democratized user-centered innovation system, according to von Hippel, is well worth struggling for (Hippel 2005).

Open innovation Model and the Role of Knowledge Brokers

Milton Correia de Sousa (2008) was the first one who gave the idea of knowledge brokers as a source of making way for innovation in the companies. Sousa observed in the report that the movement from internal R&D to external join and develop unlocks the door for organizations –whether they are large or small –to go ahead of their core competencies to stay competitive in an increasingly multifaceted, unpredictable and changing environment. Milton has explained the phenomenon and the process and concluded that open innovation is necessary for firms to attain comparative advantage. Open innovation enhances adaptability, and at the same provides various direct benefits to the organization (Sousa 2008).

It is understandable that successful innovation under intricacy, implausibility and variation can only be attained with the help of collaborative approaches that incorporate knowledge inside and exterior the company. Across the globe, firms are now utilizing this model of innovation gradually, and at the same time when this model has become a necessity for small enterprises, which usually are deficient in knowledge of some sort to entirely complete the innovation process, bigger firms are also shifting from their long-established R&D strategy to a joint connect and develop (C&D) process (Sousa 2008).

However, open innovation is never free from risk. It is necessary for the organizations to understand the skills, potentialities, and knowledge that are different in the market. So that they could evidently recognize what is need to be outsourced using processes to bring new ideas (Penin, Caroline and Burger-Helmchen 2011).

It is also imperative to minimize knowledge leak risks by devising suitable protection strategies.

Knowledge brokers have a significant part in open innovation processes. They are aware of the part that individuals can play in brining close the solution seekers and provides which effectively promotes collaborative efforts (Maula, et al. 2006). The appearance of knowledge broker as SPI, in a small country, comparatively far away from the main global decision centers makes obvious the fact that knowledge is invasive. Two outcomes from this are:

Successful innovation speedily becomes outmoded and therefore, need a constant and sustainable flow of innovation to remain competitive.
Knowledge can be accessed from anywhere, but if and only you have the correct connections and links to knowledge sources, and the right technical, technological as well as organizational tools. As a result, knowledge brokers can emerge wherever (Sousa 2008).

Keeping these corollary in mind, Sousa says that one can safely establish that knowledge brokers are here to stay and will have, at all the times, an ever-increasing vital part in accelerating innovation through global and interconnected networks of individuals and knowledge. Brokering knowledge for innovation has turned out as the main factor for innovation activity, which could work with itself.

Conceptual Framework

Most of the previous researches and studies regarding open innovation are focused primarily on the firm level of big corporations. However with the changing times, the scope of innovation has been altered enormously. Now, enterprises cannot afford to carry out their innovation processes on their own, owing to the labor mobility, copious venture capitalists and broadly dispersed knowledge across several public and private firms. With growing disintegration, outsourcing, modularization these days the management of open innovation in small organization is becoming equally important. This study fills the gap in the literature of open innovation by giving a comparative evaluation of open innovation processes carried out by two companies in manufacturing industry.

Elements of Open Innovation

For an organization to become capable of implementing open innovation practices, they need to focus on their processes management.

The significance of partnership capabilities has become vivid in open innovation literature. In addition, the formation of an atmosphere for innovation and visionary leadership is deemed to be criteria for the execution of innovative processes. At last, the presence of the right systems, tools and processes seems to be a vital facilitator of open innovation initiatives.

Relational elements are essential in association management studies. Cullen et al and Kauser and Shaw explain the necessity of loyalty and trust among cooperating partners (Kauser and Shaw 2004). Furthermore the institutionalization and repute of working partners as explained by Mora-Valentin et al. and Ireland et al. have an impact on the implementation of cooperation. Organizations, which have the name of being a fine partner, may see themselves in a good situation while seeking new partners. Nevertheless, knowledge management studies also attend to partnership concerns. Absorptive capacity is more centered on the company itself than on the partnership; however it assists a company in making the best of partnerships. This encompasses the integration of the knowledge of the partner but is led by the choice of the partner who has the accurate knowledge. Moreover choosing the right partner, it is also essential for firms to choose the correct form of cooperation for each initiative. This selection should rely on the strategy and abilities of the companies and the objectives of the particular initiative. Firms therefore require some partnership capabilities that will augment their innovative performance (Kauser and Shaw 2004).

One more aspect essential for the success of open innovation is the creation of the surroundings for innovation. This kind of atmosphere can motivate employees to work hard for better performance and encourage them to be innovative and entrepreneurial. In open innovation activities the concentration is not merely on being innovative internally but also when exploiting external paths to market (Chesbrough 2003). The staff should be capable of spotting external knowledge paths for their ideas, which require a definite entrepreneurial spirit. Hence, the formation of an environment for innovation must also include the establishment of an entrepreneurial culture.

Other than partnership capabilities and an atmosphere for innovation, the open innovation activity must be facilitated. This assistance encompasses internal processes, structures, systems and tools set up to make the implementation of open innovation activities possible. Quality and process management researches provide deeper details of various elements, which aid in enhancing the quality and effectiveness of processes. Building up the accurate procedures can have an influence upon the performance of open innovation endeavours.

Types of innovation

Innovation is divided into numerous types depending upon the chosen criteria. According to well-known researcher named Schumpeter, innovation can be categorized into five different kinds including, innovation of new products, introducing new ways of production, adopting latest supply sources, the exploitation of new markets and last but not the least introducing new methods of systemizing the business. Furthermore, Innovation is categorized under two main types known as product innovation and second is process innovation. In product innovation, the alterations are made in the product or service to offer an innovative new thing (Fagerberg and Nelson 2005). Tidd et al. (2005) describes that process innovations are given as “changes in the methods with which such new products/services are manufactured and supplied” (Savitskaya 2009). Even though this division is extensively accepted it is not supposed to guide us to disregard other central factors of innovation. For instance, in the last few decades majority of the prominent innovations have been taken place in organizational ways such as, the reformation of production and supply, or as explained by Schumpeter that these organizational innovations are comprised of arrangements within the companies and eventually assist in restructuring of the entire industry (Fagerberg and Nelson 2005).

Two other forms of innovation include incremental innovation and radical innovation. Both of them facilitate the company to bring continuous improvement. According to Tidd.et.al,

“The basis for this categorization “the degree of novelty”. Bigger fraction of financial profits is reached with the help of incremental innovations and enhancements, since the costs of such innovations are noticeably lower” (Banks 2007).

In addition, process innovation helps the organization in reformation, cost reduction and optimization. Bower and Christensen introduced an entirely new term of innovation known as disruptive innovation, which contradicts sustaining innovation that means a firm making a reaction to the progress alterations in their business industry (Hockerts and Morsing 2008).

Christensen also signified that the most imperative factor to sustain progression within the organization is to manage and bring innovative modifications within their markets. Such innovative modifications are referred as disruptive innovation or in other words disruptive technology. Disruptive technology is described as a technological innovation that creates an entirely innovative market with the introduction of a latest kind of product or service that will make all the previous technology based products or services out of date (Savitskaya 2009).

Whether a company is taking into account incremental or radical innovations, it is vital to closely assess the critical need for the product and its prospective return on innovation. Innovating more than requires can at times be damaging in that it increases cost and time to market, with little desired output. It has been defined as neutralization, where a product can be just sufficiently good to make it into the marketplace and grab market share from the rivals.

IP, Patenting and Appropriation

All companies making use of open innovation must tackle with the requirement to protect company’s cerebral capital (Fredberg et al. 2008).

One of the presumptions of open innovation is that there should be a massive quantity of ideas gathered from outside of the company and the firm should be an efficient purchaser as well as the seller of IP. Von Hippel and von Krogh (2003) have stated, “ free revealing can regularly be the best naturalistic way for innovators to increase the profits using their innovation and that free revealing must be used beyond software” (Hippel and Krogh 2003). The following are the workable causes why innovators wish to without restraint disclose information rather than holding it secret or licensing. First is when others find out your company’s innovative secret. Second is when the revenues gained by patenting are minor. And third is when the influence of complimentary information is beneficial.

The trend behind free revealing is that it is private-collective model of innovation. According to Von Hippel and Von Krogh the society is provided with the best of whole of this idea, which hints that public goods are gathered by using private funds (Hippel and Krogh 2003).

Joachim, Henkel (2006) demonstrates in his theory that company’s qualitative and quantitative research produces entrenched innovations. He states that organizations are accustomed with this dilemma and it utilizes various techniques to secure their knowledge and information. They disclose 50 percent of the regulations they form, depending upon how essential the external help will be during operation developments, as more assistances discloses more regulations. Small-scale companies with a small amount of internal sources therefore reveal more. The writer also states that companies implement selective revealing to minimize rivalry loss. It remains constant with the implementation of growth maximization behavior (Fredberg et al. 2008). “Jauhiainen (2005) declare that the issue on whether to be defensive or to outwardly use innovative knowledge is two folded” (Fredberg et al. 2008).

Jauhiainen (2005) has used the term “appropriability regime to explain about exploitation of information assets and sustain competitive edge”. The strengths and weaknesses of any firm in the defending manner might turn into both encouraging or harmful, relying upon the circumstances of the organization.

Limitations of Open Innovation

Until now, open innovation has appeared to be an attention-grabbing phenomenon. Although various writers refer to the extensive history of combined development of innovations, just a small number of companies have really used it in the shape that we are talking about it in this era. One more problem faced is that even if the company is able to do that, a major issue is to manage within to utilize the innovative ideas and knowledge.

To a growing amount, companies use outside sources in their innovational activities, but still there is a requirement for comprehending the evaluation process in an enhanced manner. Only a minute number of analysts believe that to continue with the local evaluation bias more research is needed. One more central question is to find out how the procedures for open innovation models and customer development can be interlinked with the already existing systems within the company’s R&D structures. The NIH syndrome also known as Not Invented Here Syndrome, is described as a susceptibility of recognized project groups to deliberate that they know all the required information in this field of interest, therefore they are rejecting to accept ideas from the groups, which can create hurdles for the companies that are willing implement open innovation practices.

Open Innovation Performance

Open innovation poses a positive impact on the innovation performance of an organization as Fey and Birkinshaw (2005) stated that openness to innovative ideas is the sole most vital forecaster of R&D performance (Rosing 2011). Laursen and Salter (2006) in a prior evaluation of corporate search strategies, discovered that knowledge sources such as company’s individual R&D, suppliers and customers are the most frequently used by manufacturing firms. The unswerving exploitation of universities as resources of ideas remain restricted to a minute proportion of businesses, found either in a limited number of sectors and amongst those who utilize other information resources most expansively, and along with those who have well-built own R&D capacities. Laursen and Salter (2004) discovered that innovation performance increases equally with the breadth and depth of external search; i.e. with the assortment of external knowledge sources employed, and their extent of usage.

The impact of open innovation on innovation performance is further thought to be relying on the strength of technological inputs and opportunities obtainable in the surroundings, and the easiness with which these sources can be utilized into. As such the level of complexity in industrial knowledge bases, exploration costs and the likelihood of over-searching influence the relationship between search and performance.

Granstrand et al . and Fey and Birkinshaw explained that sourcing implies the acquisition of information or solutions on a marketplace basis. The sourcing company is first and foremost concerned with the yield of the contract, not the learning processes taking place in the course of the development work (Ahuja 2001).

The contract partner, sequentially, whether it is a research organization or a seller, is liberated in making use of the experiences achieved if not also the IPRs developed to work for other client firms. This may have an impact of boosting the innovativeness of a bigger population of firms.

The growing popularity of open search and sourcing strategies in companies in general and the reduction of IPR regimes join to open ways for external technology commercialization (Grandson and Gassman 2006). It can be in the form of licensing, development of new enterprises. Through licensing, the originating firm remains in control of the technology in question, but can utilize the already available complementary capabilities of other firms. Licensing therefore combines organizational resources at their margins. By establishing new enterprises as vehicles for commercialization the company may utilize external sources of funding to reduce its own risk, while remaining in possession of an option for later full re-internalization.

Not much investigation has been done on external technology commercialization phenomenon, even though anecdotal case evidence as well as larger sample case evidence point to the fact that it is becoming a broader trend and has an impact on open innovation performance.

Collaboration is the expansion of knowledge by relationships with particular partner organizations, and includes mutual trade of knowledge. Industrial organizations can work together with universities or research establishments or with suppliers and customers or form associations or joint projects with other industrial companies having complementary knowledge.

For the reason that collaboration encompasses intense communication and coverage of own knowledge, it also needs trust. Helper et al. (2000) explained that characteristically, there is a requirement for mechanisms to control opportunism and the development of mutual understandings regarding what is to be accomplished (Fagerberg and Nelson 2005). Much of this can be realized as relation specific, irrevocable investments. It will, depending on the level of intensity and accomplishment in the communication, produce joint learning and adaptation processes. On the other hand, it also involves the possibility of each partner attaining less from the inflows of knowledge as compared to what is shared outwards. Also, it will frequently need the allocation of considerable resources in the shape of personnel. Hence, collaboration is most probably a more selective aspect of open innovation as compared to search, and can be prone to lock-in (Fagerberg and Nelson 2005).

Benefits and Opportunities offered by Open Innovation

The organization of developed R&D has experienced significant transformation since the mid of 1980, principally in the United States. However, instead of establishing a completely new process, this reforming has revitalized essential elements of the industrial research processes. In particular, most of the features of Open Innovation Approach to Research and Development management are noticeable in this earlier period (Mowery 2009). The early levels of open innovation by now take place in many organizations. In fact, almost any firm can point to instances of innovation activities that are different from the closed model in ways that would be termed as open innovation. However, the level varies from an insignificant few percent of the overall innovation effort inwardly focused companies to the remarkable stage of almost 50 percent that P&G has reached. Regardless of where the organization is now on this spectrum, the main thing to understand is that open innovation is the prospect, so it’s vital to start making some kind of open innovation part of the overall strategy (Lindegaard and Kawasaki 2010). The commonly accepted primary advantages of open innovation are to:

Speed the growth of new products and services and consequently augment revenues and market share.
Cut down time to market for new products and services and speed up profits.
Decrease direct expenditure on R&D.
Enhance the accomplishment rate of new products and services.

Challenges faced by companies, which are at early stages of open innovation:

Of course open innovation also presents challenges, particularly for seeking and existing managers and leaders who are habituated to work in a closed setting (Lindegaard and Kawasaki 2010). These following three primary matters must be answered prior to shifting to open innovation strategy:

How will open innovation influence the firm’s business model?

In an open innovation environment, the organization may end up in working with anyone-even its rivals. How will this affect the business model and change your competitive landscape?

How the organizational chart will be altered to adjust to open innovation?

What sort of associations does the company want to engage in? What general vision and mission will the company share with its associates? Systems, processes, values and culture throughout the organization will have to be changed. Individuals who have spent their careers remaining internally focused now need to focus externally also.

How does this influence the role of manager as a leader of the organization?

Most of the companies have not mastered the skill to innovate across diverse business sectors internally, let alone doing so with exterior partners. Consequently, most managers and leaders do not comprehend open innovation at a beginning stage. They must understand the effect of this movement-its opportunities and risks-and become skilled to adapt to leadership style which optimizes trust, inspiration and performance (Lindegaard and Kawasaki 2010).

Innovation Marketplaces: A major source for open innovation

Now, as open innovation is becoming prevalent, the call for innovation market places that can act as intermediaries to which organizations can quickly connect increases. A few of these intermediaries will act as niche markets, while others will be more all-purpose. Several will established by firms to meet their particular requirements, and some will be set up by third parties to position their companies as an interface between organizations looking out for solutions and the smart people-or firms with solutions (Lindegaard and Kawasaki 2010).

InnoCentive is a third party innovation marketplace which functions with a prize-based open innovation model. InnoCentive unites various companies, educational organizations, the public sector, and non-profit association with a wide-reaching set of connections of approximately more than 16,000 specialists and experts and problem-solvers in 175 nations across the globe. A pharmaceutical giant Eli Lilly as an in-house innovation incubator initially established InnoCentive. An autonomous company since 2005, InnoCentive at first had success within the pharmaceutical market place; however it is currently active in various other sectors, including consumer packaged goods, where organizations like P&G have had success by making use of InnoCentive.

InnoCentive model functions like this: A company (a seeker) offers a challenge to solvers across the globe who can win cash prizes for providing solution to the problem. Approximately, more than a third of the solvers have doctorates. Issues have been provided in engineering, computer sciences math, chemistry and business sector etc. InnoCentive takes a posting fee and a finder’s fee if the solution is provided and has solved the problem (Lindegaard and Kawasaki 2010).

Hypothesis Setting

Hi: open innovation practices increase innovation performance.

Various studies have shown results according to which open innovation practices pose a strong impact on innovation performance of an organization. These results suggest that broad-based approaches give in the strongest effects, and that the collective of open innovation strategies seem to be more essential than individual practices. The manufacturing industry is going into a new age of “open innovation”; an age of focused corporate strategies with the help of which investments in intramural R&D are enhanced or even replaced by extensive utilization of exterior knowledge sourcing and external paths to commercialization. Moreover, organizations whose innovation process has been professed as tightly closed are gradually opening up their innovation processes to enhance their performance. Regardless of the extensive consideration that has been given to open innovation, there is little methodical proof on open innovation practices or on the influence on company’s performance. A wide-ranging, holistic approach to open innovation is expected to give greater returns than a profound attention on a particular aspect. Combining the results together, what seem to be most essential are the overall strategies rather than the particularized dimensions of open innovation.

If external individuals and firms look at a company, they may have novel trends to bring changes within the organization. They will apply procedures and ideas that might not have been implemented by the people working within the company, because of the reason that they are only emphasizing upon the business vision. Companies adapting Open Innovation practices should be able to support both innovation approaches based on the objective of the company.

H2: The high cultural long-standing orientation of the company’s causes intense “Not Invented Here” syndrome and in turn reduces the tendency to consume outbound open innovation

The studies and researches have proved the fact that “Not Invented Here” syndrome is supposed to be the most important obstruction to outbound open innovation. According to the hypothesis cultural peculiarities impose a obstacle towards outbound open innovation in companies creating protective attitudes towards the external utilization of knowledge (expressed through Not Invented Here syndrome).

H3: Open Innovation helps to minimize the time period for innovation activity

Open innovation develops the company’s business system to outline its research investments. “This cuts down the time period to sell for more radical innovation thus making the pursuit of radical innovations more sustainable. This reduces the overall time spent on a portfolio of innovation” (Chesborough 2003).

The literature review presented in this section of the paper provides the source for the conceptual framework for the analysis of the findings of the nearby study. In this chapter various relevant theories and factors are discussed related to the open innovation elements, limitations and effects and manufacturing companies, and consequently, the advantages accomplished due to the open innovation models. These theories form basis for greater understanding of the open innovation processes. Three hypotheses have been proposed to be tested in order to evaluate different factors determining open innovation systems with respect to the performance of the companies.

Research Methodology

Research methodology is a manner adopted to solve problems. It is more highlighted as an art of figuring out ways to conduct research scientifically. However, it is necessary that the researcher is aware of the techniques. Every problem needs to be solved through a different technique and methodology; this requires the researcher to have proper knowledge about the dimensions and research methods. This section of the study highlights the methods and techniques used to evaluate the data accumulated for the research. The purpose of research is to find out the unveiled truth or make a new discovery through theoretical and hypothesis support. The approach selected for analyzing the data in the current study is qualitative and secondary in nature, in order to attain reasonable conclusions described by its logical limitations. The chapter also provides an analysis of the tools used for the collection of secondary data.

Purpose of Research and Areas to be investigated

The rationale of the present study is to compare open innovation in two companies of the industrial sector with respect to tools applied and challenges encountered. The results of this report should be explained in such a manner that the theories covered in the literature review are focused adequately to establish views on the research hypotheses prompting various aspects that adds up to the success of open innovation in industrial sector.

Research Problem

The open innovation system has been targeted in the current study, which has already been discussed in the theoretical background in the literature review chapter. As a result, the study has its concentration upon providing an inclusive view on the elements of specific open innovation techniques applied and its effects in the performance of the companies.

Adopted Research Methodology

Qualitative research is employed to explore and comprehend people’s beliefs, experiences, attitudes, behavior and interactions (Key 1997). This type of research produces non-numerical data. Various techniques such as focus groups and in-depth interviews are usually applied for qualitative research fieldwork to record a variety of experiences, or in researches regarding how a company is functioning, revealing views and experiences of test respondents.

Qualitative research results are not stated as percentages, are not subjected to statistical analysis and the findings cannot be applied to general population.

For the purpose of the present study, the case study approach as qualitative research methodology has been adopted and implemented. Case study research may involve only one cases or several cases often two to four. The investigator carrying out a case study makes an effort to evaluate the variables with respect to the topic under study (Tellis 1997).

The reason behind the selection of the given methodology is that with that qualitative research helps explore topics in more profundity and detail as compared to quantitative research. Also, qualitative research has been proven to be economical than quantitative research, since there is no need of recruiting a large number of respondents or apply extensive techniques. It provides flexibility in locations and timing as well. Case study is used here because the field of the study is a single case and not a case of large population. This case study addresses a bounded system, which is featured in a natural condition, in order to realize the system’s own habit (McNabb 2008).

The case study approach of qualitative research methodology is chosen because it is estimated to offer a distinct picture of findings, and a single person can perform it, either longitudinally or in a more restricted time span.

Inductive Research

Inductive and deductive researches are the two methods of developing logic which are applied to make a conclusion on the basis of data which is supposed to be accurate. It comprised of attempts to give general principles starting with various particular examples. Rather than starting with laws and principles and giving conclusions, most researches gather related experience and try to create general rules from it. Where the subject of the research is too diversified in nature then inductive method is brought into use. After the identification of the problem, research audience is targeted and observed through several means. On the basis of observation and analysis patterns of behaviour are pointed out and conclusion is derived. Many of the researches begin with inductive method. Identification of the problem is a rather difficult step in inductive research process. The identification leads to series of detailed studies known as programmatic research. The hypothesis created out of inductive research is just theory based and is not supported in numerical terminology (Saunders and Lewis 2003)

For the present study, inductive approach to the study is adopted, which is most suited for quantitative research. In the specific inductive mode of research, the case study approach will examine the minutiae and meanings of knowledge and would not require a prior hypothesis. Rather, attempts have been made to find significant patterns and themes in the data. To create clear connections among the research aims and the conclusions gathered from the raw data and to ascertain that these connections are both visible as well as defensible, inductive research is applied (Thomas 2003). Keeping in mind the nature of the research it is useful as the scope of the sample selected is restricted and the results that are obtained from the sources can be easily categorized from the performance of both the companies’ i.e P&G and Unilever.

Data Collection

Information for the current study is gathered from numerous secondary sources, which are deliberated in this sector of the research study.

Secondary Data

This study is making an extensive use of secondary data. The purpose of using secondary data is to cut the research cost and use the data, which is already available. For the current research the secondary information is collected from journals, documents and any other form of unstructured data. The secondary data collection strategy is applied which involves unofficial documents, official documents, objects, etc. from various websites, studies on open innovation and documents from the company websites which provide insight of the usage extent of open innovation in the selected companies.

According to Steppingstones (2004), “The data acquired from secondary sources is useful for carrying out a comparison of the data collected in the study. The secondary data assists in making data collection more specific because with the help of secondary data, it is easier to recognize the gaps and deficiencies and what further information should to be collected.” Moreover it has been confirmed to be economical as no interview and questionnaires have been carried out and save time and efforts as compared to the primary data collection. The secondary research process is accomplished quickly mostly within two to three weeks. The best aspect of secondary data is that it lets the researcher to start with the research without setting the base from scratch.

As the present study is a qualitative research, an appropriate sample size should be chosen to adequately answer the research questions. Since, the present study is targeted at comparing open innovation at two organizations in the same industry, Unilever and P&G have been selected. Moreover, as qualitative research methodology has been adopted for this study it was important to take a smaller sample size. The selection of the companies is made on the basis of their position in the industrial sector. On one side of the story is the P&G which is leader of the consumer goods industry and has all its focus concentrated on open innovation, sharing information, advanced efficacies, first mover and cost reduction benefit that implies fast in gaining novel ideas from outset to the shelf. On the other hand, Unilever is primarily concentrated upon strong brand identification, expansion of its product lines through innovation department, and development of coalitions and therefore making extensive use of the concept of open innovation. Both the companies are benefited from worldwide expansion in the forthcoming markets and from cost reductions.

Basis for Analysis

For the present study, qualitative case study research methodology is adopted and in the analysis of case studies, traditional statistical analyses cannot be applied (Kohn 1997). Hence, descriptive analysis is used to systematize and methodically evaluate large amounts of information. Descriptive analysis will be used to present findings from the secondary research. The findings from the secondary data accessed are supposed to be entirely suitable and completely adequate to be able to give conclusions and provide answers the research questions and address the research problem. The findings from the selected companies i.e. P&G and Unilever will then be evaluated on the basis of the open innovation framework presented in Chapter Two of the research. The research has remained open to new opportunities and insights, while assessing and analyzing the data.

The triangulation of data to make the findings and research results more powerful is permitted by the case study method. Furthermore, in descriptive analysis, data triangulation strategy would be used. “The data triangulation involves the use of different sources of data/information” (Guion 2002). The technique is used in order to enhance the end results and perceptions of formation of users of this study. Triangulation here will be used to involve several studies and information from other secondary sources of the information at different time periods (Guion 2002). In an associated manner, this qualitative research will be employing investigator triangulation and regarding the concepts and descriptions generated by other researches and studies on the given subject as well as the findings from the company databases as well. The findings from both the companies i.e. Unilever and Procter & Gamble regarding open innovation would be compared to produce general principles that could be applied in the companies of industrial sector.

Research Methodology Limitations

The research methodology implemented for the particular research study is considered to be the most appropriate one based on the researcher’s own understanding of the research topic; however, there are certain limitations that are also realized and highlighted in the following for better understanding of the users of this report.

There is a chance that the information collected is not timely. Outdated information offers insignificant worth little value chiefly for companies challenging each other in this rapid changing markets. For this care has been taken when depending upon secondary data that might have been investigated well in the earlier period and the reliability of the sources used is examined prior to using the information for the findings.
The secondary data relevant to the research topic is only available in insufficient quantities. As such all possible efforts have been made to fill the gap with the help of including literature and theories from easily accessible and current secondary information and study of findings is then explained to relate them to existing data.
The results cannot be generalized to the specific audience or the general public at large. Here the researcher’s aptitude to provide a convincing and appealing outline of the case, with suitable examples and relations to broader concerns, is used to work under this limitation.
Limited funds are available for the research; therefore, all possible attempts were made to keep the costs of research to minimum.
It is harder to determine the validity and dependability of linguistic data.The richness of the data depends on the quantity of detail and contextualization. As such minute number of crucial issues are scrutinized in this research study.

Findings and Analysis

This chapter critically examines and evaluates the data gathered through findings that are acquired from the research study in order to evaluate the connection between a manufacturing organization’s open innovation and the benefits gained by them as well as the challenges encountered in implementing the open innovation efforts that is taken from the current study.

The chapter further lays down, an evaluation between the literature review and the research study that will be assisted by assessing the results of the findings, for the purpose of understanding the open innovation in product manufacturing companies and its dynamics.

Open Innovation at Procter & Gamble

P&G is an organization that mainly focuses on consumer enterprise. P&G is working in almost 80 nations and has over 140,000 employees. Procter & Gamble focuses the most on innovation process by spending its major time on the research and development (R&D) department. The company invests its 4 percent of total (global) sales in R&D. P&G has 24,000 patents globally and obtains 3,800 exclusive rights on average every year.

To boost growth with the help of innovation, in 1999 P&G introduced a new strategy known as Organization (Dodgson et al. 2006). This scheme is a building block of the Connect and Develop model that P&G develops (Chesbrough 2003). The rationale of this plan was motivating the process of innovation by focusing on internal strengths and disjointed communications more externally focused and interconnected (Bons and Daams 2010). The scheme was built with an aim of finding out fresh complementary technologies from outside of the company and to concentrate on the licensing to increase the return on invest of the company (Dodgson et al. 2006).

At a trading technologies expo “Innovation 2000” P&G brought all its open innovation ideas together. The company invited all the external suppliers. The technologies expo was a great success because it was able to generate approximately 2,200 innovative concepts for novel and most up-to-date products (Dodgson et al. 2006).

Considering other techniques from the above-mentioned techniques, Procter & Gamble also exchange the entrepreneurial firms and tried to make domestic seed resources (Dodgson et al. 2006).

The C&D project help with the making, transfer and exploitation of knowledge across organizational territories. These applications utilizes data searching, simulation, mining, rapid prototyping, and modeling. In a way, as if there is an innovative idea then it must be utilized (Dodgson et al. 2006).

Data searching and mining

Procter & Gamble’s Connects and Development strategy is used to connect the internal and external sources which employees the technologies (Dodgson et al. 2006).

Workers of P&G can get in touch with each other across the globe by the supposed “InnovationNet” (this is an internal website). This function, InnovationNet performs with the records of the person’s requirements. This entails that users with similar beliefs are connected to one another (Dodgson et al. 2006). Besides exchanging information between nations, the basic focus of P&G is to enable the communication facilities available to everyone within and among communities involved (Brown and Duguid 2000).

A system needs to be developed by the researchers that must be based on the Internet to share the statistics and information for the company’s internal and external resources. For instance, there must be communication with the external sources or by providing link to the external database (Sakkab 2002). In addition, P&G set up the Technology Entrepreneurs network, which is a team of 70 individuals who help in linking Procter & Gamble to exterior innovation prospective (Dodgson et al. 2006).

Simulation and modeling

“Ultimate Supply System” was introduced by Procter & Gamble in 1995. It was setup in order to create link between the suppliers and by augmenting the magnitude of the supply chain. It was achieved by the sequence of information, products and goods, and economic activities among two or more industrial firms. The aim is “to considerably enhance sales, decrease costs, increase cash flow and, eventually, to supply the right goods at the appropriate time at the right price to the customers” (Wegryn and Siprelle, undated; as cited in Dodgson et al. 2006).

Moreover, P&G has a domestic operations research group, which is responsible for inventing the supply chain arrangement by optimization and recreation techniques. This research group is recognized as Global Analytics. This group is responsible for the scheduling cycles and the schedules of the manufacturing process. It also provides results for capacity utilization, which works in close collaboration with supply chain (Dodgson et al. 2006).

Virtual and rapid prototyping

Computer system is implemented in P&G to analyze the archetypes of goods within the implicit circumstances, which is suggested with single building equipment, the effect of the production line adjustments. These commodities are removed for earlier period needs and virtual prototyping gives the chance to expect and go successfully to give a response to the what-if question. P&G also has a group with the name of CreatelInnovate, which makes innovative packages to establish brand identity. On the other hand, with the computer aided design the company is able to see the prototypes for testing purposes. For CreatelInnovate, brainstorming is a primary task. If some useful ideas invoke a good feeling in the minds, the model should be constructed in a couple of days. This model is then considered for the whole of the process. Groups across the globe observe the virtual model and can provide constructive and/or off-putting comments. Later, at times a small video will be arranged of the company’s product and mail it to a specific number of consumers. Majority of the trial products fail, but few of the ideas work exceptionally. The complete process may take only days and not months. Later on, a wide-ranging market evaluation should always be carried out (Dodgson et al. 2006).

To earn additional profit P&G licenses its technologies and access to corresponding technologies. Procter & Gamble gets licenses for all of their technological products in the beginning and it gets patent agreement for five consecutive years. Governmental grants and various other patents are also engaged within the company’s operations.

Open innovation at Unilever

Unilever is a product manufacturing company, which has lately, came forward as an organization that is at all the times ready to embrace new ways of reaching out resolutions logical of the fact from where these resolutions are being derived. It is imperative to note here that most of the solutions to the firm’s problems are offered by Unilever’s those suppliers, where the company is managing strong innovation relationships and supplier collaborations. Creating and sustaining good relations with suppliers founded on the basis of trust require time and effort; however this is something that Unilever takes critically. Its alliance with the University of Liverpool Centre for Materials Discovery is an illustration of the fact that Unilever also managed to establish various academic research partnerships other than the collaborations with suppliers; it also shares mutual facilities, which are a vital element of the open innovation strategy of the Unilever. The Unilever and Liverpool together form a suitable team; Liverpool has a safe lasting strategic investment and the company has now attained a molecular design capability, which will allow it to develop innovative functional molecules and a provide it with a facility to screen more ingredients and find out the most suitable plan in a shorter time frame (Innovation Europe 2010).

The capability of Unilever to influence IP into and out of Unilever is a big potency, and realizing this, both open innovation and patents are two of Unilever R&D’s critical efficient skills.

Unilever has changed from corporate business enterprise into a vital open innovation tool and means with the creation of Unilever Corporate Ventures in the year 2001. Externally it has been noticed that various Unilever brands are running as competitors against each other advertising ideas (Innovation Europe 2010).

Open Innovation portfolio management and metrics

Open innovation associated with the internal alignment appears apprehensible. Nonetheless, open innovation patterns must remain unaltered and they must concentrate on the company’s corporate strategy, and it must influence on an urgent action to affect the Open innovation with the assistance of robust metrics. Most organizations companies set metrics against the figure or proportion of projects made possible through open innovation. Without any delay, Unilever became conscious of the need to create ways to make this numeral 100%, and looked forward to set metrics on the basis of value (Innovation Europe 2010).

Unilever scouting community

The Company also spends in the area of scouring and has established a scouting community. Their foremost responsibility is to make sure they don’t have the solution within the Unilever territory; before they pursue the idea of approaching a small number of chosen scouting partners which they feel can envelop the greater part of their needs and challenges. The Company’s scouts possess affluence and extensiveness of experience complemented by a healthy scouting toolkit which Unilever has made over the years.

Academic Research Partnerships

Other than the relationships and associations with suppliers, the company also has a large number of academic research partnerships as well. “The Company’s alliance with the University of Liverpool Centre for Materials Discovery is an illustration of the fact that Unilever also managed to establish various academic research partnerships other than the collaborations with suppliers; it also shares mutual facilities, which are a vital element of the open innovation strategy of the Unilever” (Unilever 2011). They both constitute a perfect team. Liverpool has a safe lasting strategic investment and the company has now attained a molecular design capability, which will allow it to develop innovative functional molecules and provide it with a facility to screen more ingredients and find out the most suitable plan in a shorter time frame (Innovation Europe 2010).

Intellectual Property

The alliance with Liverpool helps in bringing to light one more central feature of the Unilever toolkit for open innovation, which is intellectual property. One outcome of the Liverpool partnership is that the Company has a really profound knowledge of the chemistry, and so is at a much better position to make stronger the value of the IP. The capacity of Unilever to influence IP into and out of Unilever is a strong point, and realizing this, both open innovation and patents are two of Unilever R&D’s important efficient abilities (Unilever 2011).

Unilever Corporate Ventures

The creation of Unilever Corporate Ventures transformed corporate venturing into a vital open innovation tool and means of the company in the year 2001. Prior unsatisfactory collaborative venturing proved to be lessons for Unilever in nurturing new businesses. They taught them that the abilities they had in expanding billion euro brands, of which the Company at present has 13, are poles apart from what is considered necessary to bring into being and incubate new businesses (Graul et al. 2006).

Ever since its establishment, which took place in 2007,Salon Spa International is generating strong financial profits. In particular, firm connection exists between the spa business and the Unilever’s Skin Category, facilitating both the organizations with a chance to conduct research and testing services with new skincare technologies, moreover, to build and create worthful customers’ insight (Unilever 2008).

Collaborative Ventures

A good example of Unilever’s collaborative venturing is Pepsi Lipton Tea Partnership (PLTP), which was developed in 1991. This has helped the Unilever brand with the best opportunity to enclose itself to introduce itself with ready-to-drink tea industry. It has also helped to provide business channels with Pepsi. The Lipton Tea was able to introduce itself in the United States industry, which increased its growth and there was a rapid development in 2003 and 2008. (Unilever 2011).

Crowd-sourcing

On the outside, consumers must have lately witnessed several Unilever brands competing against each other for advertising ideas. The founder of Unilever, William Hesketh Lever, is considered to be the one who put forward the concept of crowd-sourcing method during his hunt for new talent in the village of Port Sunlight (Graul et al. 2006).

Entrepreneurial mindset

Lever, the founder of the Unilever Company was an entrepreneur in its true sense and the entrepreneurial way of thinking is a critical component in the open innovation toolkit. Moreover, to promoting this internally, the Company approaches various other entrepreneurs with whom it carry out live projects. The Axe Bullet Body spray is merely one case of where Unilever aligned with an entrepreneur, the outcome being an unusual approach that saw the product launched in half the time it would usually have used to get into to market (Innovation Europe 2010).

Benefits of Open Innovation

Benefits of open innovation offered to procter & gamble.

Open innovation, when in its true sense, was applied at Procter & Gamble generated noticeable benefits for the Company. Approximately 35% of the firm’s new products consist of components that are taken from the sources outside of P&G, which are about 15% in the year 2000. The inventiveness in the commodity was discovered 45% which were came upon from outside. With the help of connect and develop—in conjunction with the enhancements in other aspects of innovation concerned with the product cost, design, and marketing—the company’s Research & Development productivity has augmented by almost 60 percent (Graul et al. 2006). The success rate of Procter & Gamble’s open innovation practices has been doubled, at the same time as the cost of innovation has reduced.

Investment funds on the Research and Development sales have greatly reduced which were down to 3.4% in 2005 from a spending of 4.8% in 2000. The last two years, the company introduced 100 new items, for which the implementation occurs from the outside sources of the company. Over a period of 5 years from 2000 to 2005 the company’s stock after hitting their lows nearly double and the values of the brans that the company has crossed US$22bn (Graul et al. 2006), due to the introduction of the Connect and Develop model the company is able to maximize its innovations. This was possible by grouping with the external allies by making better use the patents that P&G already have (Dodgson et al. 2006). Before this model was introduced, very small amount even lower than 10% of technologies was utilized for the products (Sakkab 2002).

The stress on open innovation at P&G did not only provide the advantage of 50 percent decrease in concept-to-launch time with partial cost of innovative plans for the project, nevertheless it has attained above 35 percent of innovations and has achieved with huge amount of revenues

(Huston and Sakkab 2006). Networks and collaborations generate an environment of the firm, which produce value that no solitary firm can construct on its own.

The C&D was successful to achieve the targeted growth in the innovation levels expected by the organization in the year 2005, which was possible through external alliances. In order to further develop take C&D and gain superior value by C&D teamwork, P&G in the last quarter of 2010 set two new targets to be achieved: First to increase the Connect and Develop program in Procter &Gamble’s innovation practices to three times more with offering 3 billion dollars for the Company’s yearly sales revenues with the help of open innovation. P&G earned $56.7 billion revenue in the year 2005 and the company’s assets totaled to $20.3billion. However, on the other hand according to Procter and Gamble’s annual report of year 2011, “Research and development expenditure was $1.9 billion in the same year and the company employed about 7500 R&D individuals” (P&G 2011). Second is to become known as the Collaborator of Choice for innovation partnerships by persistently attaining effective relationships.

Projects enabled through Connect &Develop constantly served with better effectiveness, promptness, significance and market influence. The annual report shows that “Less than 50% of P&G innovation at present sourced externally. 70% greater than average NPV from Connect & Develop enabled projects in 2009. (Out of 112 initiates representing 77% of NOS). Forty percent of Connect & Develop partners have several deals with the Company. Approximately $3 billion in annual sales at collaborator firms driven by P&G-shared innovation” (P&G 2011).

Connect & Develop alliances have provided innovation practices in almost all departments of the organization, including excellent product innovations. Some of P&G’s well-known product innovations include Oil of Olay skin cream and Oil of Olay Eye Roller that has become highly eminent eye product within a few months (P&G 2011).

The number of patents P&G issued on yearly basis has decreased during 1996-2005 (Figure 3). Yet, on the other hand, the company’s revenue has appeared to be augmented during the decade and the company is still acquiring nearly 4500 government grants yearly. The effect of its outside innovation set of connections and the company’s policy of licensing in and gaining latest goods and selling those products as a P&G brands is provided in numbers; even if the amount of grants that are issued declines, profits rise, particularly those following strategic. For Procter & Gamble licensing is an element of their innovation association and is a provider in market for purchasing and selling technologies.

The figure above shows the patent analyses for P&G which is not very flattering considering the fact that the number of issued patents has decreased in the years; however observation of the all intangible assets shows that P&G is working keeping in mind the future of the company. In the year 2005, Procter & Gamble carried the highest amount of intangible assets as compared to its competitors, and out of 49 assets almost 40 percent of them were intangible. Keeping in mind that the goodwill is acquired by maintaining the proportion above 80 percent (P&G 2005). The Connect & Develop model of P&G has facilitated the company to manage attain licenses and attain the competitive edge for many products from other companies that specifies its high amount of intangible assets (Viskari 2007).

At present, the company holds approximately 20 billion dollar different brands, and has consumed almost 2.2 billion dollars upon innovation in the year 2010. The financial annual report of year 2010 demonstrates that currently the external partners have carried out fifty percent of the P&G’s innovation, whereas it was 15 percent since the last six years. In 2008, Procter and Gamble has made earnings of $83.5 billion. At the same time, the company’s Research and Development budget raised to 2.32 billion dollars, as compared to 1.92 billion dollars in the last year. In spite of this, most importantly the relative amount of revenues of R&D lessened to 3.4% from 4.8 percent (P&G 2011).

Benefits of Open innovation offered to Unilever

Benefits of Open innovation at Unilever can be clearly seen in its products. Some of which are following:

The company was able to manufacture an upside-down roll-on deodorant, which makes use of 18% less plastic in each pack, which in turn has reduced the cost.
Pureit, a home water purification device that is operated from a battery which gives households the ability to obtain pure and hygienic drinking water at an affordable price.
Minor and powerful laundry detergents which, for the reason that of their size is so small and concentrated, decreases transportation cost, carbon dioxide and water utilization.
Comfort Easy Rinse Fabric Conditioner that lessens the capacity of water, needed to wash garments.
ProActiv margarines that has organic sterols which are medically approved to minimize the amount of cholesterol from the body (Unilever 2011).

Such innovations constitute a significant fraction of the Company’s Long-lasting Living Plan aim is to divide the ecological effect of the manufacturing and application of its products.

The Company has six strategic Research and Development laboratories across the globe. Company’s Research and Development labs are located in various regions such as in United States, India, United Kingdom, China and the Netherlands (Unilever 2011).

Customer Development

Unilever provides exceptional customer care, and is able to attract consumers from leading worldwide companies such as Wal-Mart, Carrefour, Target, Tesco and some wholesale stores like Metro. The company is also attracting customers from mom an pop retailers that are present in more than 170 countries all over the world. The ten leading retail suppliers are uplifting the sales of Unilever to almost 20 percent. Unilever is selling its products to more than 10 million national markets both in developing and prevailing markets (Unilever 2011). Unilever also achieved the Tesco’s Global Supplier of the Year Award in 2010 (Unilever 2011).

Manufacturing

Discussing the manufacturing side, Unilever has 264 manufacturing sites across the globe. From the year 1995, its performance, per tonne of production, owing to open innovation, has improved steadily:

The release of Carbon dioxide CO2 from energy has reduced by 44 percent
The usage of water has decreased significantly by 66 percent (Unilever 2011).
The total waste has fallen by 73 percent
Unilever’s total recorded rate for accident frequency is taken as per million hours. which is used to gauge the safety level –was recorded at 1.61 in the year 2010.It implies a fall of 15.7 percent as compared to the previous year (Unilever 2011).

Challenges of Open Innovation

Challenges of open innovation at procter & gamble.

Given below are precisely explained some of the most serious issues identified, which in case are not handled accurately might put in risk P&G’s long term accomplishment.

The risks of “outsourcing” innovation

Having the ability to gain access to knowledge exterior to the firm and leveraging in this manner, open innovation appears to be a very rational strategy. However, main risks are positioned behind it; first of all “Lean innovation” may turn out to be breakable innovation and show the tactic to a progressive stoppage of internal competencies to create its personal innovations. This might influence them in the future particularly their most imperative competitive edge, their aptitude to innovate.

Managing the intellectual property and its negotiations in an open environment

The Connect and development (C&D) of P&G will transform into a leading innovation model of the era; this notion is explicitly given by the Company (Huston and Sakkab 2006), however the negative aspect is noticeably regarding the issue of how to make safe the company’s intellectual property. Case is converted to be much more complex following the application of the open innovation model. Some time ago, majority of the innovations were carried out in reserve within the organization, and Procter & Gamble was only required to make a choice whether to grant for the patent for the specific innovative products or not. Hence, in the Connect and Develop program, there is a number licensing facility both in and out for innovation and latest technologies that transfers the protection of the cerebral property into a massive dilemma. The firm must think about the most suitable way to guard their new inventions and hence, patents should be looked at closely (Panduwawala et al. 2009).

One more issue emerging from this matter is regarding the management of more than hundreds of collaborations with small technology suppliers, which have no long-term regular partnership with Procter & Gamble and do not carve up the similar incentives. Enormous expenses of transactions are frequently incurred in the attempt to innovate methodically in an open environment; these are the costs, which may not have taken place if the innovation occurs in a closed setting. (Panduwawala et al. 2009).

Matters regarding selecting and sorting the required innovative ideas

In order to embark upon the complications that are discovered in the C&D concept, the organization finds a way to prefer technologies as accepted and verified (Huston, Sakkab 2006). The strategy while decreasing the opportunities to modify and generate radical innovations is also considered to be helpful for the reason that it is thought to help in decreasing the execution and technological threats since P&G’s Research and Development department arbitrates right in the concluding stage. This filter without doubt constrains the capability of the open innovation approach, forming a restriction on it, and also creates an issue as internal R&D capabilities are less practiced.

Evaluating the “Serial Innovators”

The Pareto Principle affirms, “We should suppose that most of the priceless innovations derive from a much-condensed set of bright individuals. This is for the reason that of the high number of persons involved and the reality that they are not within the organization. For P&G identifying and promoting this important group will become a major problem and an out of the ordinary potential competitive advantage” (Panduwawala et al. 2009).

Connect & Develop financial results

It is not still clarified whether this approach has enabled P&G a significant advantage to its predictable approach of innovation before the year 2000 or not, despite of the fact that sales and profits augmented in an unexpected less time after the execution of C&D. The company’ stock has experienced similar growth in its value which is comparable to the trends observed in the industry stocks. Consequently, the factual effect of C&D is difficult to determine in financial requisites (P&G 2011).

The complicated system and its interactions

The running of this system is transformed into a hard task by itself by Procter & Gamble’s Connect and Develop feature and also various innovational activities, owing to the creation of a complex set of arrangements and connections. P&G has two serious titles; The “Technology Entrepreneurs” and the “Research Fellows” at the center of these connections and the administration of innovation. The Technology Entrepreneurs are those who seek out innovations taking place in the external environment and bringing them within their organization. The next are responsible for the conceptual growth and unremitting enhancement of Connect & Develop, functioning as the fortitude of this complicated structure (Panduwawala et al. 2009).

Challenges of Open Innovation offered to Unilever

The performance of open innovation at Unilever is challenged in the following areas:

Cost Reduction

Unilever is confronted by the biggest challenge of improving efficiency in reducing costs, particularly in its usage of people, and the time to deliver the product to the market (Graul et al. 2006). The company’s expenses and employees’ costs are much higher than Procter & Gamble’s cost. Since P&G takes a hands-on move in e-business and innovation, the company’s position is a reactive one.

Overall Strategy

Even though Unilever appears to have gained expansion worldwide with some achievements, it gives an impression of being lacking an overall worldwide strategy. The strongest point of P&G is to gaining knowledge and giving out information on a global basis whereas it is one of the weakest factors for Unilever.

Strong entry barriers and substantial rivalry

While mergers and acquisitions keep on occurring , the product manufacturing industry is likely turn into more consolidated one, which, alongside with tough entry barriers and large competition between present rivals, will support sustainability for incumbents. Expenditure and accessibility of raw materials can carry on create a danger to smaller companies which are deficient of adequate capital reserves required balance for additional costs.

Expansion into global markets

Expansion into international markets is vital for the future growth of the company. Expansion into the worldwide industry is not novel to the product manufacturing industry. “Low consumption of household products in emerging markets – such as China and India – represents an opportunity for companies to expand their revenues and escape from the stale performance of their home markets” (Graul et al. 2006).

The fastest upcoming markets are the Eastern Europe, the Pacific Region and Latin America. On the other hand, the Asia-Pacific region is foremost as an essential emerging market for the industry, although there are some hurdles in this region, and the most prominent one is the low income.

In the light of the above findings, it can be suggested that both companies Procter & Gamble and Unilever are the market leaders and both of the companies have acquired higher profit margins by applying effective open innovation techniques. The research study highlights that Procter & Gamble is industriously involving in various activities that assure a better future of development and expansion. Procter & Gamble has made considerable investments in open innovation, and made use of acquisitions, joint ventures, and alliances for the expansion of their market understanding and approach. On the other hand, Unilever with its renewed efforts for strong line expansion and partnerships with good corporate partners like Pepsi are applying open innovation to progress their business. The Company has aligned its reserves and supplies and is fully dedicated to open innovation processes. It is generating a significant amount of funding for its Research and Development Department, and today Unilever is holding a better position in the market thus improving its present standings.

Open Innovation Methods has augmented market share of Procter & Gamble on base business and at the same time has helped the firm to focus on each business as well as investing in the emerging markets. P&G’s global strategy is also based upon innovation techniques. The company’s open innovation strategy provides innovative R&D techniques to reduce costs and at the same time increase quality and improving go-to-market capabilities. Procter & Gamble has been keenly encouraging partnerships and open innovation in nearly each and every phase of product and process development as well as the launch, which ranges from basic chemistry to packaging. P&G’s open innovation practices are positively affecting the open innovation performances. It is also highlighted in the above research study that P&G has acquired ample sufficient market awareness, embraces innovative database technologies comprising of more than 100 million customers and also exploits a combination of worldwide resource facilities and associations and alliances for promoting local acceptance and an atmosphere, which enables knowledge, transfer. Company’s R&D has enabled continuous initiations of new products, and has made expansions and reformations within their existing lines to accomplish consumer needs.

As stated in the study that NIH syndrome can have negative effects on the open innovation performance. Therefore, Procter & Gamble has uncompromisingly tackled with the NIH (not-invented-here) syndrome; the company has reproduced its prospective sources of insight and solutions. This has made selected resources accessible to the community, but also listens carefully for signals of emerging customer need. P&G is further dealing with this issue successfully and therefore progressing drastically.

In contrast, Unilever is a little behind as compared to Procter & Gamble in applying open innovation techniques. Unilever can increase its open innovation performance by transferring its in-house researchers into outdoor technology investigators; subsequently Unilever’s external technological exploration will be carried out by most of the same researchers who are currently within the company’s R&D labs. This is one way, which can help Unilever in tackling the “NIH syndrome”. The required thing is to develop a culture internally, which is appreciative of external capabilities. Historically research labs were reviewed and assessed on the basis of the number of patents they delivered, which is very internally focused. However, for open innovation, it is best to judge a research lab on the basis of number of patents it finds and manages to get access to.

The chapter has presented a comprehensive analysis of open innovation in the leaders of the product manufacturing industry i.e. P&G and Unilever. The findings of this study have therefore proved the hypothesis set out in the Conceptual framework. The conclusions and recommendations of the findings are explained in the next chapter.

Conclusions and Recommendations

Conclusions.

The objective of the study has been addressed by carrying out a comprehensive study that is descriptive in nature. The purpose of the study has been to investigate open innovation in P&G and Unilever and then suggests which one is better. The results from the present study are summarized in the following.

This analysis has investigated open innovation practices of the leaders of the product manufacturing companies i.e. P&G and Unilever. The descriptive results reveal a number of insights. This section summarizes the main results of the descriptive analysis and ties them into the theoretical discussion mentioned above.

Open innovation has a positive effect

Open innovation practices pose a sound impact both on the capacity for fresh innovation and on the company’s innovation performance. In most cases it is the breadth of these activities – that is the range of interfaces with the environment exterior to the firm – which produces the constructive impacts.

An international, holistic approach to open innovation can generate greater profits as compared to a profound focus on a particular aspect

Combining the findings together, what seems to be most vital are the general strategies as compared to individual dimensions of open innovation.

A robust internal ability is still significant

Two findings indicate in this regard. First, the findings point out that R&D strength is an important factor determining innovation performance. The next finding is related to sourcing. There exists some varied evidence, which suggests that sourcing has constructive effects.

Global vertical collaboration is a critical factor determining high innovation performance

Innovation collaboration alongside the value chain – i.e. vertical collaboration – is much positively connected with greater innovation performance of companies.

In the light of the analysis and conclusion, the following tools can be recommended for the product manufacturing companies, which can assist them in successfully implementing open innovation in their organization.

This involves both dependence on exterior sources for the development of finishing products and processes and purchases of outside knowledge for internal improvement activities. Contribution of external sources is considered as high if product innovations or process innovations are completely developed by exterior sources.

Open innovation strategies and practices related to employment causes a firm to become more absorbent for ideas from outside and taking advantage from allies. Search is the positive constituent of this practice. It is keenly looking for novel information or screening of a firm’s setting for innovative ideas.

Collaboration

The coupled method is an arrangement of the inside out and the outside-in procedure as business boundaries are open in both directions. Collaboration is termed to be a way to gain access corresponding assets and to internalize information spillovers. The collaboration dimension within the open innovation practices captures the variety of different kinds of collaboration partner like consumers, suppliers, rivals in the market, etc.

For organizations considering the idea of adopting an open innovation strategy, protection IP is a critical activity in attaining positive financial benefits from the inside-out course of action. Protection can be termed as the closed dimension of open innovation since the stringent protection of IP can be regarded as a closed innovation strategy. Nevertheless, registration of IP can also be exploited as a means to commodity proprietary knowledge, in turn allowing more interaction.

Recommendations for Future Study

From the present study, it is clear that open innovation performance of P&G is better than Unilever due to a number of factors and therefore is leading the product manufacturing industry. The present study has kept its focus on the benefits of open innovation to both the companies and tools applied by them in implementing open innovation efforts. A future study can target open innovation in the leading companies of the service industry and the techniques applied by them. This will allow to extend the scope of such study and to discuss comparison of trends of open innovation in service and product industry.

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Appendix A: Financial Highlights (P&G)

	2009	2008	2007	2006
Net Sales	$76,694	$79,257	$72,441	$64,416
Operating Income	15,374	15,979	14,485	12,551
Net Earnings	13,436	12,075	10,340	8,684
Net Earnings Margin from Continuing Operations	13.9%	14.2%	13.3%	12.7%
Diluted Net Earnings per Common Share from Continuing Operations	$ 3.39	$ 3.40	$ 2.84	$ 2.49
Diluted Net Earnings Per Common Share	4.26	3.64	3.04	2.64
Dividends Per Common Share	1.64	1.45	1.28	1.15

Source: (P&G 2010).

Appendix B: Consolidated Earnings (P&G)

Source: (P&G, 2010).


See accompanying Notes to Consolidated Financial Statements.
	$76,694	$79,257
Cost of products sold	38,690	39,261
Selling, general and administrative expense	22,630	24,017
OPERATING INCOME	15,374	15,979
Interest expense	1,358	1,467
Other non-operating income/(expense), net	397	373
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	14,413	14,885
Income taxes on continuing operations	3,733	3,594
NET EARNINGS FROM CONTINUING OPERATIONS	10,680	11,291
NET EARNINGS FROM DISCONTINUED OPERATIONS	2,756	784
NET EARNINGS	$13,436	$12,075

Earnings from continuing operations	$ 3.55	$ 3.61
Earnings from discontinued operations	0.94	0.25
BASIC NET EARNINGS PER COMMON SHARE	4.49	3.86

Earnings from continuing operations	3.39	3.40
Earnings from discontinued operations	0.87	0.24
DILUTED NET EARNINGS PER COMMON SHARE	4.26	3.64
DIVIDENDS PER COMMON SHARE	$ 1.64	$ 1.45

Appendix C: Companies Financial Data

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BUS604: Innovation and Sustainability

Case Study: A Vision for Unilever

In 2009, the multinational company Unilever adopted a new strategic vision that integrated societal and environmental responsibilities. The company's Sustainable Living Plan was the center of this strategy. This plan aims to help more than a billion people improve their health and wellbeing, decouple Unilever's growth from its environmental impact, increase its social impact, and enhance the livelihoods of all those involved in its supply chain. Read this chapter to discover how Unilever merged sustainability with profitable growth.

What steps did Unilever take to re-engineer the company and implement the Sustainable Living Plan successfully? How did sustainable innovation play a role in helping Unilever achieve its goals? What were the results?

Vision and Concept

Polman's vision for Unilever was rooted in the company's history. William Lever had always seen Lever Brothers as much more than a vehicle for making money for himself: he saw no trade-off between seeking to make a profit and seeking to improve society. Its products helped to improve public health and hygiene, and the company treated its employees with dignity and respect. After it became Unilever and grew into a multinational corporation, it continued to make everyday products and to treat its employees well. But when Polman took over, he decided to refashion Unilever so that social responsibility moved from an important facet of the company to become its driving force. He had always seen business as needing to play an important role in the development of a more just and equal society.

At the beginning of the twenty-first century, other factors had to be taken into account: climate change, globalization, population growth, scarcer natural resources, greater individual wealth, an expanding middle class in both the developed and developing worlds, more informed and demanding customers, and more active shareholders.

An important response popular at the time to address this combination of factors was the philosophy of "frugal innovation", defined as the ability to do more with less, creating increased business and social value while minimizing the use of ever-diminishing resources. One way of doing so is to strip non-essential and unnecessary items out of everyday products, such as cars and mobile telephones, to make them cheaper and more available to the less affluent and to the ecologically aware.

Paul Polman showed his commitment to this philosophy by writing the Foreword to the book Frugal Innovation: How To Do Better With Less, written by two pioneers of the concept, Navi Radjou, and Jaideep Prabhu, and published in 2015 by The Economist and Profile Books, London. He wrote: "The insatiable demand for ever higher quality products will continue to rise while at the same time the availability of the resources needed to satisfy that demand will remain constrained. Reconciling this apparent conflict is rapidly emerging as one of the biggest business challenges of our age".

He concluded: "By combining the frugal ingenuity of developing nations with the advanced R&D [research and development] capabilities of advanced economies, companies can create high-quality products and services that are affordable, sustainable and benefit humanity".

In 2010, Unilever unveiled the new concept through which it would apply Polman's vision: its Sustainable Living Plan, which would be applied to every aspect of the company's operations, from top to bottom. Launching the plan, Polman summarized its ambitions: "We have to develop new ways of doing business which will increase the positive social benefits arising from Unilever's activities while at the same time reducing our environmental impacts. We want to be a sus tainable business in every sense of the word". But, he added, "We do not believe there is a conflict between sustainability and profitable growth".

In 2010, Unilever unveiled the new concept through which it would apply Polman's vision: its Sustainable Living Plan, applied to every aspect of the company's operations.

He outlined vision, strategy, and targets: "Our vision is to create a better future in which people can improve their quality of life without increasing their environmental footprint. Our strategy is to increase our social impact by ensuring that our products meet the needs of people everywhere for balanced nutri tion, good hygiene, and the confidence which comes from having clean clothes and good skin.

"We recognise that, to live within the natural limits of the planet, we have to decouple growth from environmental impact. This starts with our own operations. We now send zero waste to landfill across our entire global factory network, cut CO2 from energy by 47% per tonne of production in our operations, many of our factories run on renewable energy and we'll be carbon positive by 2030.

"However, our impact goes beyond our factory gates. The sustainable sourcing of raw materials and the use of our products by the consumer at home have a far larger footprint. That's why our plan is designed to reduce our impacts across the whole lifecycle of our products. Innovation and technology will be the key to achieving these reductions".

Polman announced three hugely ambitious targets as a part of the USLP: to help more than a billion people take action to improve their health and wellbeing by 2020; to decouple Unilever's growth from its environmental impact by 2030, achieving absolute reductions across the product lifecycle and halving its environmental footprint; and enhancing the livelihoods of "hundreds of thousands" of people involved in its supply chain by 2020.

Polman himself has always had a strong personal moral compass, stemming from his upbringing as one of the six children of a Catholic family in Enschede, Netherlands. As a teenager he considered becoming a priest and then a doctor before deciding on a business career. Just as importantly, he recognised that in the first decades of the twenty-first century a growing number of customers, both actual and potential, were becoming more concerned about the quality of life than mere consumerism and the pursuit of material things, and buying into the notion of sustainability.

Polman told us: "Consumers are asking for it and citizens are asking for it. The circular economy and issues like climate change are becoming more and more relevant. People want to have food that is more natural or organic. People are moving from a concept of 'my world' to 'our world'. Millennials are more purpose-driven". That also applies to Unilever's own staff. "We have no problem attracting millennials: about 50 percent of the people who work for Unilever are millennials. And they want to make a difference in life. There is absolutely no question about it: they are an engine for change".

The other key element making sustainability possible is technology. "Technology has developed very rapidly and is opening up new possibilities. Electric vehicles are one example: very soon electric vehicles will be more popular than internal combustion engines.

At Unilever we find that moving to zero waste in our factories and shifting to renewable energy makes economic sense. Increasingly data shows that companies operating more responsibly tend to perform better because they reflect the needs of society better. They probably set more realistic targets, they make more data public, which lowers the cost of capital, and so on.

"Implementing our Unilever Sustainable Living Plan is not that difficult, as long as we are all aligned on the direction we need to take and why it needs to be done. But what you need to focus on is the speed and skill of implementation.

"What we find is that our brands with a social purpose are an enormous engine for innovation. Our Sustainable Living Brands, as we call them, grow 70 percent faster than the rest of our portfo lio. An example is in water-scarce regions, such as parts of Africa, where rinsing out the soap suds from laundry accounts for around 70 percent of domestic water use.

"It is really the energy that comes from people in terms of having a meaning, having a purpose, that drives innovation".

With our Sunlight soap brand we developed a new anti-foam molecule called SmartFoam which breaks down suds more quickly. This reduces the amount of water needed, as well as speeding up the process of rinsing. People prefer that product, they see the multiple benefits, and the brand grows by addressing a societal problem.

"Take Domestos, or Domex as it is called in India, our toilet-cleaning product. If you just sell toilet-cleaning products, that is not a very exciting thing. But if you address open defecation, suddenly you start to innovate quite differently. For example, we have just launched the first small powder sachet, Domex Toilet Powder. The brand provides an affordable toilet-cleaning solution to consumers. And not surprisingly the brand is growing.

"Or take Lifebuoy soap, with its mission to help a child reach the age of five. So far, we have reached 426 million people with handwashing behavior-change programmes in developing countries. We do that because we want to help enhance people's wellbeing, and at the same time the brand is growing very well.

"But it also works in developed markets. Our compressed deodorant technology is a good example. Scientists at our R&D facility in Leeds, northern England, reengineered the spray system of our aerosols to reduce the flow rate. Using 50 percent less propellant gas and 25 percent less aluminum in the packaging, we have reduced the carbon footprint per can by about 25 percent. This also means that more cans can be transported at a time, resulting in a 35 percent reduction in the number of lorries on the road. We felt so strongly about it that we did not patent the technology to encourage wider industry use".

How does the need for innovation fit into the broad framework of the Sustainable Living Plan?

"It starts as a broad purpose that aligns everybody in whichever direction you want to take," Polman replied. "We have translated the Unilever Sustainable Living Plan into what we call a Compass, so everybody has the same true North. And in that Compass we look at winning with innovation, we look at winning in the marketplace, winning with people, and winning with continuous improvement, which we call efficiencies. But we want innovation running through all of these areas.

"The packaging is up to 30% lighter and allows us to get 40% more product on a pallet, which means we could reduce the number of trucks on the road by 800 per year".

We provide the tools and we explain to people what sort of objectives there are. Anything we do now in our innovation programme has to go through what we call the sustainability phenomenon. It has to be in line with the Unilever Sustainable Living Plan.

"It is really the energy that comes from people in terms of having a meaning, having a purpose, having a contribution to life, that drives innovation. We spend one billion euros on R&D, we have 7,500 R&D professionals and 20,000 patents. But the global population is 7.6 billion. So, you need to have an open innovation system where you work together with everyone else to expand your consumer base and achieve wider success. For example, our top 15 suppliers are involved in about 50 percent of our innovations.

"We have Unilever Ventures, our venture capital and private equity arm which invests in young and innovative companies to help accelerate their growth. Then there is our Unilever Foundry, where we help start-ups and social entrepreneurs scale up their ideas for greater positive impact. Unilever Foundry also enables our brands to collaborate and experiment with evolving technologies. And then our Mergers and Acquisitions strategy is geared to finding innovative brands like air purification company Blueair, or Seventh Generation, a cleaning products company in the US that thinks seven generations ahead.

"Our M&A activity is for us an incubator for innovations as well. We are trying to find smaller companies and then make them bigger by leveraging our size and scale. But the main driver is the passion of our people. It cannot come from anywhere else. It is our people who go out there and want to make this a better world. They stay connected, they see what is needed. They see the challenges that consumers struggle with. It boils down to the people and their purpose.

Sustainability as Opportunity: Unilever’s Sustainable Living Plan

First Online: 08 March 2018

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Joanne Lawrence 4 ,
Andreas Rasche 5 &
Kevina Kenny 6

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Sustainability, as it relates to both social and environmental issues, is treated very differently among companies that incorporate the subject into their business strategies. In this case, we explore sustainability at Unilever whose management addresses it not as a risk to be managed or cost to be avoided, but as an opportunity for competitive advantage and growth. With emerging markets as the backdrop, we learn about Unilever’s Sustainable Living Plan, and what the company has done to integrate sustainability principles into its business model and build on its core competencies, such as innovative product development and marketing expertise, to realise the potential of the fast-growing emerging markets (57% of its 2014 revenues came from emerging markets compared to less than 17% of most multinationals). Issues considered are the role of corporate culture and competencies, the importance of committed and courageous leadership, the willingness to set ambitious goals, and the challenge of creating internal and external alignment around strategic goals.

This case was developed with assistance from Hult EMBA student Kevina Kenny and with the generous help of Gail Klintworth, former Chief Sustainability Officer at Unilever and Karen Hamilton, Vice President of Sustainable Business, who kindly shared their unique perspectives and keen insights with us. Developed originally as part of an Executive Series intended to initiate discussions by Boards of Directors, such as those participating in the UN Global Compact LEAD/PRME Program, and senior managers on critical issues of the day, both the original (2013) and its revision (2015) are published by Hult International Business School. Used with permission.

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Introduction: The Sustainable Development Goals and the Future of Corporate Sustainability

Sustainable Business Models: Theoretical Reflections

CSR Europe: Sustainability and Business

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Joanne Lawrence

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Andreas Rasche

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Kevina Kenny

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Appendix 1: Unilever’s Business Model: A Virtuous Circle of Growth

Our virtuous circle of growth describes how we generate profit from our sustainable growth business model.

Making sustainable living commonplace for our consumers is helping to drive profitable growth. By focusing on sustainable living needs, we can build brands with a significant purpose. By reducing waste and material use, we create efficiencies and cut costs. This helps to improve our margins. By looking at product development, sourcing and manufacturing through a sustainability lens, opportunities for innovation open up. And we have found that by collaborating with partners including not-for-profit organisations, we gain valuable new market insights and extend channels to engage with consumers.

Source: http://www.unilever.com/Images/uslp-Unilever-Sustainable-Living-Plan-Scaling-for-Impact-Summary-of-progress-2014_tcm244-424809.pdf (p. 14).

Appendix 2: Unilever’s Governance of Sustainability and Corporate Responsibility

Committee	Description
Unilever Leadership Executive	The Executive, led by the CEO, has responsibility for operational leadership of the business. The Executive has also overall responsibility for sustainability and corporate responsibility.
Corporate Responsibility Committee	Board committee consisting of Non-Executive Directors. This committee ensures compliance with the Code of Business Principles and oversees progress and potential risk regarding the Unilever Sustainable Living Plan. One of its priorities is to ensure that the Unilever Sustainable Living Plan is maintained through appropriate business strategies. The committee feeds back to the Board.
Unilever Sustainable Living Plan Steering Team	Chaired by the Chief Marketing Officer (CMO), contains senior leaders from a variety of corporate functions supporting the Unilever Leadership Executive. The team meets five times a year and is accountable for driving sustainable growth, and keeping the Board informed of emerging trends and potential risks associated with sustainability issues.
Unilever Sustainable Living Plan Council	Group of six independent external experts who advise and comment on progress regarding the Unilever Sustainable Living Plan and strategy.
Audit Committee	Board committee overseeing independent assurance with regard to the Unilever Sustainable Living Plan.
Global Code and Policy Committee	Chaired by the Chief Legal Officer, this committee oversees the implementation of Unilever’s Code of Business Principles.
Specialized Group: Sustainable Agriculture Steering Group	This group promotes sustainable supply chains and takes advice from Unilever’s Sustainable Sourcing Board of external experts.
Specialized Group: Safety and Environmental Assurance Centre (SEAC)	SEAC provides independent scientific evidence to help Unilever manage risk and environmental impact, including the development of relevant metrics and baseline measures (e.g., for environmental assessments).

Source: Unilever Annual Report, 2014, p. 66

Appendix 3: The Unilever Sustainable Living Plan: From Seven (2010) to Nine Commitments (2013)

Commitment	Goal	Progress (2010–2014)
1. Health and hygiene	By 2020 we will help more than a billion people to improve their hygiene habits and we will bring safe drinking water to 500 million people. This will help reduce the incidence of life-threatening diseases like diarrhea.	397 million people reached through handwashing, sanitation, safe drinking water, oral health and self-esteem programmes (e.g., Lifebuoy handwashing campaign helped to reduce diarrhea and respiratory diseases, reaching 257 million people in 16 countries).
2. Nutrition	By 2020 we will double the proportion of our portfolio that meets the highest nutritional standards, based on globally recognized dietary guidelines. This will help hundreds of millions of people to achieve a healthier diet.	33% of portfolio by volume met the criteria for highest nutritional standards. (e.g., salt, saturated fat).
3. Greenhouse gases	Halve the greenhouse gas impact of our products across the lifecycle by 2020.	Greenhouse gas impact per consumer use increased by around 4% since 2010.
4. Water	Halve the water associated with the consumer use of our products by 2020.	Water impact per consumer use reduced by 2% since 2010 (e.g., laundry, washing).
5. Waste	Halve the waste associated with the disposal of our products by 2020.	Waste impact per consumer use reduced by around 12% since 2010.
6. Sustainable sourcing	By 2020 we will source 100% of our agricultural raw materials sustainably.	55% of agricultural raw materials sourced sustainably by end 2014 (e.g., 100% of palm oil; 87% of Lipton yellow tag tea sourced from Rainforest Alliance certified growers).
7. Fairness in the workplace	By 2020 we will advance human rights across our operations and extended supply chain.	85% of 200 key suppliers meet company’s mandatory responsible sourcing criteria.
8. Opportunities for women	By 2020 we will empower 5 million women.	Empowered 238,000 women, including training 70,000 Shakti micro-entrepreneurs in rural India to sell Unilever products.
9. Inclusive business	By 2020 we will have a positive impact on 5.5 million people.	Working in partnership, 800,000 smallholder farmers gain access to training and support.

Source: http://www.unilever.com/Images/uslp-Unilever-Sustainable-Living-Plan-Scaling-for-Impact-Summary-of-progress-2014_tcm244-424809.pdf p.20–21; https://www.unilever.com/Images/ir_Unilever_AR14_tcm244-421557.pdf , p.11
Note: In 2013, Unilever’s management increased the original seven Commitments of the Unilever Sustainable Living Plan to nine. The orginal seventh Commitment – Enhancing livelioods – was expanded to encompass more human rights issues, such as ensuring fair compensation, healthy and safe working conditions, and employee development, to more specificaly target women by upholding diverity and offering them opportunties, and to focus on bringing more people into the economy by helping to train and support smallholder farmers in particular.

Appendix 4: Unilever Sustainable Living Plan and the ESG Value Driver Framework

The ESG (Economic, Social and Governance) Value Driver Framework was developed by the Principles of Responsible Investment Management and the UN Global Compact to help companies communicate how sustainability- related actions link with business benefits. Following are examples from Unilever’s Sustainable Living Plan Reports for 2012–2014.

Growth	New markets and geographies	Gain access to new markets and geographies through exposure from ESG programmes	In 2012, efforts to save greenhouse gases by reducing hot water usage led to the successful rollout of dry shampoos in ten countries; use of “green”’ refrigeration won over major new retail customers in Denmark to carry Unilever products.
	New customers and market share	Use ESG programmes to engage customers and build knowledge of expectations and behavior	Oral health campaign reached 50 million people between 2008 and 2012 and has led to increased toothpaste sales: e.g., Signal toothpaste up more than 22% since 2008, and helped to introduce the toothpaste into new markets, such as Cote d’Ivoire.
			Dove soap’s “Free Being Me”’ campaign to build girls’ self-esteem grew from 20 countries to more than 70 in 2014, increasing brand loyalty and revenues.
			In emerging markets, brands integrating sustainability such as Dove, Lifebuoy and Domestos grew faster than average.
	Product and services innovation	Develop cutting edge technology and innovative products and services for unmet social or environmental needs	R+D efforts to reduce consumers’ water usage in water-stressed areas led to Lifebuoy Foam Handwash and Comfort One Rinse for laundry; to reduce waste and emissions, new packaging materials developed (bi-modal resins) that lighten weight and save shipping costs; waived exclusive rights to package-saving technology for Dove bottle that uses 15% less plastic to encourage other companies to use the technology; re-engineered aerosol spray system so that new compressed deodorant cans use half the propellant gas and 25% less aluminum than traditional cans, reducing carbon footprint by 25%.
	Long-term strategy	Develop long-term strategy encompassing all ESG issues and shape material ESG communication based on value-driver framework	Unilever Sustainable Living Plan encompasses ESG elements and is integrated into strategy, operations and governance; human rights recently integrated more explicitly; company has a zero tolerance policy on forced labour, and trains employees on human trafficking prevention. Progress against financial and non-financial targets are included in annual report.
Return on capital	Operational efficiency	Enable bottom line cost savings through environmental operations and practices (e.g., energy, water, waste efficiency, less raw materials used)	Eco-efficiency programme addressing water, waste, energy and materials has avoided costs of €400 million since 2008; coordinating transport, managing logistics and using lower emissions vehicles has resulted in additional savings. By January 2015, greater focus on eco-production led to all 240 factories achieving zero non-hazardous waste to landfill.
	Human capital management	Attract and retain better and highly motivated employees by positioning company and management as ESG leaders	Ensures that “employer brand” has sustainability at its core: voted No.1 FMCG employer of choice among graduates from 32 countries.
			Facebook global careers page has attracted 100,000+ likes. Third most in-demand employer on LinkedIn’s global in Demand index, only behind Apple and Google. Two million job applications received in 2014.
			Engages employees regularly: 2014 Global People Survey had 75% engagement score – in line with high-performing employers in class.
	Reputational pricing power	Develop brand loyalty and reputation through ESG efforts that garners customers’ willingness to pay price increases or premium	In consumer marketing, the effect of multiple touch points helps to create pricing power. Unilever seeks ways in which its holistic activities–, of which sustainability is a key part – are affecting consumers’ loyalty. E.g., Kissan ketchup focused Indian consumers on its 100% real ingredients, propelling the brand to market leadership; Knorr s first ever ‘on pack’ sustainability logo improved its brand equity in Germany.
Risk management	Operational and regulatory risk	Mitigate risk by complying with regulatory requirements and industry standards by addressing ESG issues in policies, systems and standards and engaging with employees	Unilever helped found industry wide initiatives such as the Roundtable on Sustainable Palm Oil and Marine Stewardship Council to set standards for these critical resources. It ranked first of 152 companies in combating deforestation by the Carbon Disclosure Project (CDP), securing its supply chain.
	Reputational risk	Facilitate uninterrupted operations and entry into new markets using local ESG efforts and community dialogue to engage citizens and reduce local resistance; avoid negative media publicity and NGO boycotts by addressing ESG issues	Unilever engages with local constituents regularly, building trust and reputation (e.g., partnering with governments and NGOs in its “Help a Child Reach Five” handwashing campaign; with UNICEF and water and deforestation initiatives.) Sector leader in the Dow Jones Sustainability Index (DJSI); ranked No. 1 by Globescan/SustainAbility as sustainability leader for the fifth year.
	Supply chain risk	Secure consistent and long-term access to high-quality raw materials and products by engaging in supply chain community welfare and development	Working with smallholder farmers and local distributors to develop sustainable agricultural practices; ensuring traceability of raw materials (e.g., palm oil, soy, tea and cocoa) helps to secure supplies; its Responsible Sourcing Policy requires suppliers to comply with such principles as fair compensation, voluntary employment, and health and safety standards, and, in some cases, to submit to third party audits.
	Leadership and adaptability	Develop leadership skills and culture to adapt to fast changing political, social and environmental situations	The Sustainable Living Plan is incorporated into management training and compensations programmes; the company offers flexible working hours, job sharing, maternity and paternity leave (women up to 43% workforce in 2014) to attract and retain women.

Source: Unilever Sustainable Living Plan Report 2012; Annual Report, Sustainable Living Report, 2014

Appendix 5: Consolidated Income Statement and Key Indicators Since USLP Launch

Statement of comprehensive income	2010	2011	2012	2013	2014
Turnover (€ million)	44,262	46,467	51,324	49,797	48,436
Operating profit (€ million)	6325	6420	6977	7517	7980
Core operating profit (€ million)	6017	6276	7050	7016	7020
Profit before tax (€ million)	5951	6066	6533	7114	7646
Net profit (€ million)	4465	4491	4836	5263	5515
Diluted earnings per share (€)	1.42	1.42	1.50	1.66	1.79
Core earnings per share* (€)	1.31	1.37	1.53	1.58	1.61

Key financial performance indicators
	2010	2011	2012	2013	2014
Underlying sales growth (%)	4.1	6.5	6.9	4.3	2.9
Underlying volume growth (%)	5.8	1.6	3.4	2.5	1.0
Core operating margin (%)	13.6	13.5	13.7	14.1	14.5
Free cash flow (€ million)	3365	3075	4333	3856	3100

Non-financial indicators	2010	2011	2012	2012 (1)	2013 (1) (2)	2014 (1) (2)
CO2 from energy (kg/tonne of production)	133.59	118.31	99.97	104.23	98.85	92.02
Water usage (m3/tonne of production)	2.68	2.4	2.23	2.27	2.12	2.01
Total waste sent for disposal (kg/tonne of production)	6.48	4.96	3.85	3.94	2.27	1.19
Total recordable accident frequency rate (TRFR) per 1,000,000 h	1.63	1.27	1.16	1.17	1.03	1.05
(1) In 2013 we adjusted our reporting period from 1 January – 31 December to 1 October – 30 September. We also show the prior 12 months to enable a like-for-like comparison, presented as 12(1). (2) PricewaterhouseCoopers (PwC) assured
For details and the basis of preparation see:

Source: http://www.unilever.com/Images/charts_2005-2015_ar14_tcm244-416973_en.pdf

Appendix 6: Share Price Versus Market Index

2 graphs and 2 tables. The share versus market index presents two lines in each of the graphs with an increasing trend. Table 1 plots the N.V. and P.L.C. share prices in New York and London, respectively, in two tables of 11 columns. Table 2 plots the share price versus the market index.

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Lawrence, J., Rasche, A., Kenny, K. (2019). Sustainability as Opportunity: Unilever’s Sustainable Living Plan. In: Lenssen, G.G., Smith, N.C. (eds) Managing Sustainable Business. Springer, Dordrecht. https://doi.org/10.1007/978-94-024-1144-7_21

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How Technology Makes Continuous Innovation Possible: A Case Study with Unilever

Imagine a world where all silos of supply chain function work in unison on the same platform, where most decisions are made automatically considering competing objectives of various functions and results are optimized using cost versus service trade-offs, and the partnership model allows for continuous evolution of the model, user interface and analytics as business needs change. This world isn’t a distant dream; it’s the reality crafted by the synergy between Unilever , a global consumer goods giant, and Solvoyo , the norm-busting partner in end-to-end supply chain planning.

Watch the partnership achievements here.

In the corridors of Unilever, a team of dedicated supply chain planners from demand to supply to transportation embarks on a daily journey empowered by Solvoyo’s platform. Their day doesn’t begin with traditional routines but with diving deep into a digital universe where data alerts serve as guiding stars. With the E2E exception-base autonomous planning, the system automates decisions from demand forecasts, production plans, and order fulfillment strategies to delivery with minimal need for manual intervention.

This is not eliminating the planners entirely but focusing their attention where it’s best. Planners are empowered with more free time to focus on more value-adding strategic and tactical decisions by evaluating Key Performance Indicators (KPIs) dashboards, and when their attention is required, the system will alert them automatically.

The Three Core Assets of Unilever & Solvoyo Project

At the core of this transformative tale lie three indispensable assets: Digital, the foundation of the platform providing a single source of truth for the entire organization; Intelligent, the infusion of AI and machine learning, transforming raw data into actionable insights, empowering Unilever to predict market trends, anticipate demands, and stay ahead of the ever-shifting market landscape; and Autonomous, the pinnacle where end-to-end supply chain decisions are made seamlessly, free from human touch.

End-to-End Supply Chain Planning Platform

The end-to-end process begins with data. With automatic data diagnostics, Solvoyo Digital Platform ensures the quality of the data it receives, fixes the inconsistencies where it can, and alerts the planners in case their attention is required. The result is an end-to-end planning process operating on the highest quality data possible.

Then, Demand Planning , driven by AI, predicts market fluctuations by analyzing demand drivers, including weather, market dynamics, and new products, providing forecasts that minimize the need for overrides and provide insights to enable data-driven decisions. Supply Planning crafts production plans that optimize available capacity and resources, not just optimal but synchronized with operational constraints, ensuring the right product mix at the right time and cost.

Customer Service Fulfillment becomes an art of efficiency, with real-time data optimizing replenishment, allocation, and truckload fill. The system allocates stock based on various parameters, enhancing service and volume maximization, enabling 100% autonomous planning!

Transportation Planning streamlines the intricate web of logistics by ensuring efficient truck planning, reducing fulfillment time and the carbon footprint. With such a level of sophistication and precision delivered by automated recommendations, 90% of them are executed as is, and planners focus only on exceptions.

Achievements

Through this transformation, Unilever has achieved multiple milestones.

Centralized Demand Planning became the cornerstone that streamlined operations, leading to not just efficiency but an alignment across functions across the entire organization. Advanced Analytics provides the Unilever team with automatic insights, enabling Unilever to gaze into the future with clarity, foreseeing market trends, and preparing for every twist and turn in the market landscape.

Real-time Visibility gives the team a bird’s-eye-view of the entirety of the operations, allowing for faster decision-making, erasing data silos, and fostering collaboration among teams previously isolated in their individual silos. End-to-end synchronized Planning ensured every cog in the machinery moved in perfect unison, creating a workflow so seamless that it felt like a choreographed dance.

Finally, for the cherry on top, Unilever adopted Goal Programming. The proprietary mathematical engine balances the total cost to serve and service levels. It allows the company to set multiple objectives, model constraints simultaneously as opposed to a pre-selected order, and generate an optimal plan that considers all objectives. This process prevents the functions from working against each other and considers the impact of every decision on the whole chain.

Continuous Innovation Is the Core of Successful Partnerships

What sets this story apart is not just the technology but the support of the dedicated customer success team of Solvoyo that propels it forward. Ultimately, if the environment for continuous improvement and proactive innovation is not present, even the best of technologies lose relevance in today’s dynamic setting.

The key here is high user acceptance rates, streamlined workflows, reduced manual intervention, and enabling Unilever to achieve the holy grail of supply chain management: exception-based, no-touch planning. It’s a testament to the power of collaboration, innovation, and unwavering dedication to efficiency. It’s not just about machines and algorithms; it’s about the people who understand the soul of the supply chain, who breathe life into every line of code, transforming it from mere instructions into a symphony of efficiency.

End-to-end decision automation is not a distant vision for giants like Unilever but also for mid-market companies. You, too can make innovation a way of life, not just a buzzword 🌟

Solvoyo Planning and Analytics

Vendor Collaboration: How to Thrive in the Face of Volatility

Vendor collaboration is a joint effort that creates a competitive advantage for every stakeholder. It reduces overall costs, errors, and inefficiencies for everyone involved. A collaborative supply chain lets businesses grow together with vendors while improving efficiency and visibility of the supply chain.

AI-Powered Inventory Planning for Better Sleep

Recent statistics have revealed a surge in sales across the United States, indicating a growing trend that has caught the attention of both consumers and retailers alike. Retailers must reassess their inventory strategies to adapt to rapidly shifting market demands driven by trends.

Fresh Demand Planning: How AI Empowers Retailers

There are various use cases of AI/ML for demand planning of fresh products, from producers to large grocery chains and even small delis in the suburbs. In this blog, we’ll discuss the use of AI/ML demand planning for fresh products to help maximize sales and reduce waste.

Start your journey now

Learning center.

77 Franklin Street Boston, MA 02110 +1 617 642 1338

INNOVATION LABS & OFFICES

Istanbul Technical University ARI2 Teknokent B1-3, 34467 Maslak, Istanbul +90 212 286 6061 – Kolektif House 1071 Ankara Çankaya, Ankara – Logothetidi 34, 11524 Attiki, Athens

Unilever Global Change location

How AI and digital help us innovate faster and smarter

Published: 4 April 2023

From the launch of the very first digital tool to the recent formulation of the world’s first green carbon detergent, Unilever R&D experts have been using digital technologies to remain at the forefront of superior innovation for years. And we’re just getting started.

Vaseline’s premium Gluta-Hya innovation can reduce dark spots to give even-toned skin.

As consumer expectations of our products and brands continue to evolve, we’re working to meet their demands against a backdrop of supply chain disruption, cost inflation and the impact of an escalating climate crisis.

Digitalisation allows us to respond to all these challenges by unlocking radical new levels of collaboration, capability and consumer centricity.

Unilever R&D teams have been innovating for over 100 years to create superior brands and products. Today, our experts are keeping us at the forefront of that process by applying the latest digital technologies to our ‘discover–design–deploy’ approach.

Changing how we discover

We’re discovering new ingredients and new science in a way that was never imaginable before digital.

We’re making huge discoveries about human biology and how the body interacts with our microbiome which is only possible because of access to large-scale data, machine learning and high-performance computing, making connections the human brain would never even be able to achieve by itself.

We’re on the cusp of industrialising biotechnology together with our partners to commercialise plant-based, sustainable palm oil alternatives for use in everyday cleaning and personal care products.

And bringing together the very best in technology, data and people, we’re identifying and predicting consumer trends before they even happen.

Progressing how we design

To turn people’s needs into sustainable, cutting-edge innovations, we map, model and experiment virtually, designing and simulating process flows before these innovations go on to be manufactured at scale in our factories globally.

This way of designing products ‘in-silico’ (using computational models) allows us to understand the effect and interaction of molecular compounds – to determine how our formulations evolve, react and even biodegrade – faster and more effectively than ever before with virtual simulations.

Thanks to in-silico, we can test millions of recipe combinations in seconds which helps us design products to suit regional taste preferences. With Hellmann’s, for example, we make gravy and coronation variants of our mayonnaise for the UK market, and sriracha and lime sauces for US consumers.

It’s also at the heart of our work on non-animal testing. We don’t agree that animal testing is necessary to assure the safety of ourproducts or the ingredients in them, and support calls for a worldwide animal testing ban on cosmetics by 2023 , working with government authorities, NGOs and our suppliers across the world to increase the use of non-animal approaches for regulatory compliance purposes. For example, using AI, we can predict the response of the biological process when the skin is exposed to certain chemicals or ingredients.

Transforming how we deploy

We’re combining R&D and Supply Chain data with manufacturing simulations to optimise how we deploy our products to 3.4 billion daily consumers worldwide through our global supplier base and manufacturing presence. Being able to respond to real-time trends and market changes more quickly, we can make our innovations more effective and desirable, scaling them faster than ever before.

That said, it’s not enough just to design better-performing products. We need to innovate in a responsible, future-fit and sustainable way to keep on serving the needs of our consumers while protecting the planet for future generations of consumers.

As Alberto Prado, Unilever R&D’s Head of Digital & Partnerships, says: “I firmly believe that science and technology will play a central role in helping innovate for a better future. The combination of digital and leading-edge science is empowering our teams to progress their fields not by years, but by decades.”

Improving operational efficiency

We’re using AI to help identify alternative ingredients that can strengthen the resilience of our supply chain, making our formulations more sustainable and cost-efficient, and simplifying them by reducing the number of ingredients without impacting a product’s quality or effectiveness.

By optimising our design and manufacturing processes through virtual simulations, automated workflows and data-led decision making, we’re unleashing new levels of efficiency in our operations which is in turn freeing up our experts to focus on delivering impactful innovations.

“We have been scaling the use of digitaltechnologies to work smarter for years,” says Alberto. “The game-changing digital tools we use today strengthen our insights and capabilities to power next-level innovation, product reformulations, scientific discovery and portfolio simplification. And we have just scratched the surface of what’s possible.

“Digital is helping us become much more effective at satisfying the needs of consumers, but also those of the planet by creating increasingly sustainable products.”

The secret to helping dry skin heal itself

Through AI-powered data analysis, we researched the microbiome – the 100 trillion+ microbes in, on and around our body – and its role in stimulating our immune system and keeping the skin healthy. We discovered how the skin microbiome population and skin ceramides can both be managed with products to help resolve issues in skin quality and hydration.

To understand the interactions between the microbiome and external forces, we had to dive into 12 terabytes of data and extract unique insights, much of which has gone already into everyday products such as Dove, Pond’s and Vaseline to create revolutionary, patented technology, delivering healthy-looking skin for consumers.

A close-up of the spheres that represent the lipids in our skin’s microbiome.

The deodorant powered by artificial intelligence

Axe A.I. Body Spray was developed using 46 terabytes of data, 6,000 ingredients and 3.5 million potential fragrance combinations to create one unique scent.

The new limited-edition fragrance was developed to tap into Gen Z’s fascination with the world of tech and crypto, and drive excitement into the deodorants category.

We created the product in collaboration with Swiss fragrance company Firmenich, who combined modelling, formula prediction and optimisation with Axe’s consumer trends knowledge and expertise to come up with the unique scent combination.

Advertising banner showing cans of the new Axe A.I. deodorant.

The advanced tech at the heart of a beauty revolution

Over recent years, we’ve developed more than 40 technologies for our Prestige Beauty business, which is growing fast, with a turnover of €1.2 billion in 2022. One of our most recent innovations is Hourglass Red 0. This is the first vegan alternative to the most commonly used red pigment in colour cosmetics – red carmine, which is derived from female beetles and can take 1,000 beetles for one single lipstick.

We reformulated the whole thing using computational models. It took our scientists three years to develop but we’re planning to make the process open-source so others can apply the same technology. It’s a perfect fit with Hourglass’s ongoing commitment to animal welfare.

Hourglass Red 0 Lipstick, an example of Unilever Prestige Beauty’s trendsetting innovation.

The machine learning behind clothes care

Comfort Ultimate Care fabric conditioners contain patented technology that protects garment fibres so they retain their as-new colour and shape for up to 20 washes. But it’s a tricky business to work out what’s the right balance of active ingredients to achieve that in different parts of the world when you have to consider things like variances in water hardness and quality.

So the Comfort R&D team designed experiments using machine learning to work out the best product formula based on the local conditions in each market. If they ever need to tweak a formula, they simply re-optimise to new conditions and can change the formula within hours.

Person pouring Comfort fabric conditioner into bottle cap ready to put in washing machine.

The way we improve the nutritional quality of our products

To help people enjoy healthier diets, we’re continuously improving the nutritional quality of our food and beverage portfolio globally, by reducing sugar, salt and saturated fat, and also fortifying our products with micronutrients.

For more than a decade, we have used our own nutrient profiling model to assess the levels of nutrients and healthiness of our products. But there are many other models in use worldwide, which often arrive at different conclusions. So we now use our model alongside six others.

Our digital capability was crucial to achieve this in a short time. We were able to assess more than 600,000 pieces of data about the ingredients and recipes of all our products globally.

Jar of Hellmann’s Light Mayonnaise next to a plate of salad with a pepper mill and salt pot in the background.

The smart cabinets keeping ice cream lovers happy

In our out-of-home ice cream business, we’re using more and more data from the millions of cabinets we have across the world. This allows us to monitor the quality of the products delivered and also ensure the store offers the optimal range of products that we know its local shoppers want.

These ‘smart freezers’ identify when the stock of a particular product in the cabinet is running low and send a message to the store team that suggests a quantity to reorder. These are then dispatched automatically, drastically reducing the chance of the store running out.

Overhead view of various Magnum and Cornetto ice creams in a freezer cabinet.

The new Domestos Power Foam Spray bottle sits on the edge of a white toilet

Premium innovation from Domestos will grow the toilet cleaning market

27 March 2023

When research showed that shoppers want a toilet and bathroom cleaner that kills germs more effortlessly in hardest-to-reach places, Domestos came up with its biggest innovation in a decade: one that’s set to continue the brand’s commitment to leading the growth of the category.

Three reasons America’s No.1 body wash is better than ever

24 February 2023

Dove Body Wash has been a bestseller in the US for years. Now this hero product has a science-led new formula to provide lasting care for longer.

Unilever employee using scientific machinery.

Unilever joins new collaboration to advance alternatives to animal testing

15 February 2023

We’re a founder member of the International Collaboration on Cosmetics Safety, working with NGOs and industry experts to accelerate global use of animal-free safety science.

Technology and Operations Management

Mba student perspectives.

Assignments
Assignment: RC TOM Challenge 2018

The Unilever Foundry – bringing innovation to 400 brands, under one roof

Can a 90-year old company learn to behave like a start-up? Slow growth, ever-changing consumer tastes and the rise of digitally native upstarts are threatening the traditional consumer-packaged goods industry. Unilever’s significant investment in open innovation intends to challenge this trend by collaborating with start-ups to infuse new ideas and practices into the company.

The CPG sector is enduring a challenging period especially in the US where “the organic-growth rate…has declined…and shareholder returns have lagged the S&P 500.” [1] Consumer profiles and habits are continuing to rapidly morph depending on life stage, socio-economic status and location, which means a “one size fits all” strategy is destined to fail today more than ever before. [2] The internet has fueled the growth of upstarts that sell direct to consumers and pose a threat to traditional categories. These brands, small and large, are growing at speed: according to Nielsen, the “16 largest CPG manufacturers…saw their collective share of the US brick-and-mortar market decline to 31% whereas 16,000 smaller manufacturers…with combined sales of $145 billion, saw their total share of the market rise to 19% from 17%”. [3] These upstarts are at an advantage due to their agile structures that allow them to develop deeper relationships with consumers. As a result, large CPG companies are starting to partner up with these very entrepreneurs to influence how they do business through the use of open innovation, defined as the process of “relying on outsiders both as a source of ideas and as a means to commercialize them.” [4]

Unilever launched its own innovation system called The Foundry in 2014: a “global platform for partnering with the world’s best startups to accelerate business innovation on a global scale.” [5] Startups are invited to submit ideas across enterprise tech, social & sustainability, marketing & e-commerce and the very products & ingredients that could evolve Unilever’s product portfolio. [6] A select number then enter into a pilot program with one of Unilever’s 400 brands. [7] For startups, it provides the unique opportunity to have access to million-dollar brands and their budgets, along with mentorship from experienced marketers and the opportunity for funding through Unilever Ventures. For Unilever, it allows them to crowdsource ideas to help their brands reach customers in new ways. Projects include inviting customers to personalize their own jars of Marmite via their Facebook page and using AI chats to help them create more meals using Knorr products. [8] Unilever’s focus is now on scaling select projects in other markets. Since launch, The Foundry has accomplished its short-term goal and worked on over 100 pilot projects, scaling 48% of them. [9] A longer-term priority is to ensure that open innovation is integrated in its internal working culture and Unilever has created co-working spaces to physically bring these startups together with its brand managers. [10]

The majority of partnerships to date appear to be marketing-driven with a goal to form deeper connections between Unilever brands and their target audiences. However, true future-focused will need to address Unilever’s core business models; for example, supply chain development and the creation of cutting-edge products and services. The Foundry also has a key role to play in CSR initiatives: Unilever’s Sunlight laundry soap partnered with Altered in developing economies to enable families to conserve up to 98% of water used in everyday activities. [11] Prioritizing these efforts will be key to making sure The Foundry does not remain siloed as a source of gimmicky marketing campaigns. Unilever also needs to focus on longer term partnerships, versus one-off executions, in order to validate external open innovation as a true business advantage. [12] This requires ensuring consistency in how start-ups are evaluated and how their solutions are escalated internally to achieve buy-in given the operational intensity of ideas that are truly disruptive. The ability to successfully scale pilots around the world will also depend on how partnerships are managed and nurtured on an ongoing basis and therefore will rely on the remit of Unilever employees. What is also key is how Unilever will begin to internalize these capabilities and start cultivating entrepreneurialism from within. This will evolve superficial collaborations with entrepreneurs to provoking a fundamental shift in thought and approach at the core of the organisation. For instance, Unilever should amend recruitment practices and hire managers who have had start-up experience as well as consider putting together integrated teams of Unilever employees and startup partners to evolve the internal development processes that govern how ideas go to market.

Is The Foundry really the answer? It begs further questioning. Can external sources truly drive business transformation or should this only be fostered from within? How can Unilever act like a start-up without compromising the consistency and quality that has brought it success?

Pathways to Just Digital Future

[788 words]

[1] McKinsey & Company, “Agility@Scale: Solving the growth challenge in consumer packaged goods” (PDF file), downloaded from McKinsey & Company website, https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/agility-at-scale-solving-the-growth-challenge-in-consumer-packaged-goods , accessed November, 2018.

[2] McKinsey & Company, “The consumer sector in 2030: trends and questions to consider,” https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/the-consumer-sector-in-2030-trends-and-questions-to-consider , accessed November, 2018.

[3] “Five Challenges for the CPG Sector in 2018”, E-marketer, https://retail.emarketer.com/article/five-challenges-cpg-sector-2018/5a4537eeebd40008a852a266 , accessed November, 2018

[4] K. Boudreau and K. Lakhani. “How to manage outside innovation.” MIT Sloan Management Review 50, no. 4 (Summer 2009): 68-76

[5] The Unilever Foundry, “About Us,” https://foundry.unilever.com/about-us , accessed November, 2018

[6] The Unilever Foundry, “Opportunities,” https://foundry.unilever.com/opportunities , accessed November, 2018

[7] The Unilever Foundry, “Opportunities,” https://foundry.unilever.com/case-studies , accessed November, 2018

[8] The Unilever Foundry, “Opportunities,” https://foundry.unilever.com/case-studies , accessed November, 2018

[9] The Unilever Foundry, “The State of Innovation” (PDF file), downloaded from The Unilever Foundry website, https://foundry.unilever.com/documents/12788/92070/The+State+of+Innovation/7c946425-8316-4323-8ed3-8011f9d3dfef accessed November, 2018.

[10] “Unilever launches its first co-working space to encourage collaboration with startups,” The Drum, https://www.thedrum.com/news/2017/02/14/unilever-launches-its-first-co-working-space-encourage-collaboration-with-startups accessed November 2018

[11] The Unilever Foundry, “Articles,” https://foundry.unilever.com/blog/-/blogs/innovation-in-water-multiple-solutions-for-multiple-challenges accessed November, 2018

[12] “Bringing David and Goliath together: Inside Unilever’s startup incubator,” Digiday, https://digiday.com/marketing/bringing-david-goliath-together-inside-unilevers-incubator-foundry/ accessed November, 2018

[Cover image] “Unilever Foundry Seeking 50 New Stellar Marketing Tech Startups,” Google Images, https://goo.gl/images/rvfSoa, accessed November, 2018

Student comments on The Unilever Foundry – bringing innovation to 400 brands, under one roof

Hi M. Interesting article. I’m fascinated with the topic of how established companies are dealing with the tech revolution, and I think this is a good example (or at least starting point) on how to embrace change within an organization.

My biggest concern, as you mention, is how real is this change? Would Unilever be OK with scaling a direct to consumer soap brand that poses a real challenge to Dove? If the answer is that they would, or that they would at least acquire the startup and incorporate its management to Dove’s executive team I’d be bullish on Unilever’s future. If they only focus on pushing companies that don’t disrupt their business then they’ll have a problem… because someone else will come and disrupt it!

This is a well-written piece that illustrates the tension a company struggles with when it tries to break old habits in order to adapt and stay competitive. I worked at a start-up that was acquired by a large corporation, and the impact to our culture was incredibly palpable. Despite its attempts to adopt the practices of a nimble start-up, our parent company was slowed down by its many layers of bureaucracy and legacy business practices. It was akin to trying to steer the Titanic. While I give Unilever a lot of credit for experimenting with methods of innovative product development, I think this grassroots approach will have little impact. I agree with your recommendation that, in order for this strategy to have real legs, Unilever must make some bold, top-down organization changes like changing up their core business models.

I appreciate the perspective you have shared here. I am fascinated by how quickly the consumer goods space is evolving. Behemoths in the space like Unilever and Procter & Gamble have been faced with new brands attacking from all angles – its a true test of agility and poise to see how these companies are reacting to these threats.

I find The Foundry to be a great concept. It seems that Unilever has created a program that has benefits for both sides of the platform – which, as we have learned in TOM, is critical for sustainability! Given this, I find the program itself to be positive. Given that, I do think your follow-up question is very important: Can external sources truly drive business transformation or should this only be fostered from within? It seems to me that unless Unilever finds a way to “infuse” the spirit and freshness of the start-ups deeply into their own innovation processes, it may be hard for them to garner any tangible competitive advantage that can’t just be copied by competitors.

The Foundry seems like an interesting solution to a problem that is plaguing the CPG industry. I wonder whether this will be the long term solution to Unilever’s problems with market decline or if this is just a band-aid solution that is delaying the inevitable. I agree with your assessment on making long term partnerships to help them stay innovative, as opposed to one off projects. As a large consumer goods company, I would be primarily concerned with how to stay innovative long term either from an aquisition of a innovative small company or by changing the culture within. If they do not make any changes, I could see a well-funded creative and innovative company stealing more market share in the future.

This is an attempt for Unilever to keep up with nimble consumer goods startups especially in the direct to consumer space. Unless these initiatives become significantly commercially viable, the open innovation effort remains similar to a marketing or PR stunt. Another question I would ask would be how Unilever can absorb an entrepreneurial culture via the Foundry. The current efforts all seem like Unilever providing one way assistance to budding entrepreneurs, but not necessarily absorbing learnings on how to make its own end to end business processes more agile. I would question whether learning how to innovate further in a company like Unilever is better done by the Foundry or by the Ben & Jerrys or Dollar Shave Club acquisitions.

I think there are a lot of opportunities to be captured from the Foundry. Through the program, Unilever can benefit from ideas that may not have been obvious to them. I agree with you that Unilever needs to ensure they develop long term partnerships with start-ups to ensure that the ideas have a long-lasting impact on Unilever’s top-line. Based on the marketing class we did yesterday, I also think that there could be an opportunity for brand builders in different regions to source ideas from start-ups in their local markets, collaborate with them and present the ideas to brand managers at the head office as those ideas may be applicable to other markets that Unilever operates in as well.

Very interesting article M! I wonder how attractive this model is for startups though. I understand that Unilever provides guidance and potentially an actual budget if it approves the idea, but how does this model compete with VCs that actually invest in these projects. Also given that entrepreneurs are usually very attached to their ideas and prefer to be autonomous when running their company, I am not sure how interested they will be in participating in this program. Could Unilever possibly offer something else? Perhaps this program could lead to partnerships as opposed to actual integration of the startup’s idea with Unilever’s brands?

A guide to open innovation (with case studies)

Daniel Saunders

Chief executive officer.

The following guide delves into what open innovation means and the different models available to your corporation. We’ll analyse why you would choose to pursue an open innovation solution over a closed innovation approach and examine innovation case studies from P&G, Metro Bank, United Utilities, and Nivea.

What is open innovation?

Open innovation is primarily about partnerships and collaboration. It’s about identifying and connecting with innovative ideas, solutions, people, or companies to drive value, solve problems or explore new opportunities.

The term open innovation (OI) was coined by Henry Chesbrough , a professor at UC Berkeley. He described it as trading ideas in and out of an organisation to accelerate innovation and open up the organisation to using more external ideas.

The definition suggests two important aspects that characterise open innovation;

The “outside-in” aspect brings external ideas into a company’s innovation process.
The “inside out” aspect is where ideas from within the company are shared externally.

Types of open innovation

Open innovation means companies seek collaborators to innovate and co-create alongside. Types of open innovation include open innovation labs , accelerators, incubators, M&As, and hackathons. Often the most fruitful open innovations involve unconventional partnerships.

Advantages of open innovation

When you want to develop a new idea via open innovation, you have two main options; buy or partner.

Buy an existing innovation. Buying a company that owns an innovation is much faster than trying to build something yourself, sometimes by decades. The other advantage of buying is you usually own the innovation and any IP outright and can customise it as necessary. C orporate Venture Capital can be an alternative to a full takeover, allowing companies to test the waters with smaller investments into potential acquisition targets, whilst also bringing in additional revenue from the investment.
Partner to implement an innovation. Partnering is the quickest and cheapest option, but the compromise is that you don’t fully own the idea. That’s why finding the right company to partner with and validating their ideas for your use cases is essential. This is where corporate innovation labs and accelerator programs add immense value—scouting for global ideas, assessing the fit between businesses and use cases, leading agile development and validation phases, etc.

Case study: P&G shifts from a $2bn annual spend on internal R&D to open innovation

Proctor and Gamble (P&G) are one of the world’s largest FMCGs businesses. Their market position as a global leader can be connected to their long history of innovation, starting with the launch of their R&D department in 1890 to launching Connect + Develop , their open innovation program in 2002.

But after generations of internal closed innovation, what prompted the shift to open innovation?

Former P&G CEO A.G. Lafley spearheaded the change in 2000 after realising that the business couldn’t meet its growth objectives by throwing more money at R&D (at the time, they were spending more than $2bn annually on R&D).

But Lafley had noted that over the decades, many of P&Gs most successful innovations came from “unlikely connections, approaches and ideas.” Such as technology invented for one industry enabling innovation in entirely different industries. Or how company acquisitions allowed P&G to form strategic external connections that lead to “commercially successful products.”

Based on these insights, Lafley set an internal company goal that 50% of all future product innovations should be developed with one or more external partners. At the time (2000), only 10% of product innovations involved outside partners.

P&G managed to exceed the target before the end of the decade. The result of increasing open innovation to 50% had a massive impact on the corporation, which Lafley himself summarises;

“…company sales more than doubled, profit tripled, free cash flow quadrupled, and P&G’s stock price nearly doubled in a decade when the S&P 500 index was actually down.” A.G. Lafley

What’s needed for open innovation to succeed?

Corporations’ biggest mistake is seeing a cool idea and shoehorning it into their business. Inevitably this approach fails.

While there’s no set open innovation model, one thing is always essential, and that’s structure. Innovation means change; incorporating a new idea or process into an existing system requires the system to change to meet it (or the idea to change to meet the system), e.g. changing your current processes, people or mindset. That’s why any new idea must be tested and validated to ensure it’s the right fit before incorporating it into business as usual.

Three open innovation case studies

1. united utilities found innovation success through a structured open innovation approach .

Since 2017, L Marks has run the Innovation Lab for the UK’s largest listed water company, United Utilities, which manages the water network for more than seven million people.

The innovation lab comprises a 12-week program that moves through several stages to advance the innovation. For example, all the teams participating in the innovation lab run live trials in real business environments to validate their ideas and over 90 United Utilities employees are called upon to mentor the teams based on their subject matter expertise.

Applying their tried and tested program meant the L Marks scouting team got in front of 1500 businesses, received over 400 applications, and accepted over 30 teams into the program from France, Portugal, Canada, Australia, India, and the UK.

This structured approach to open innovation meant that United Utilities made framework agreements with over half of the program participants.

Kieran Brocklebank, Head of Innovation at United Utilities, explains why their Innovation Lab brings about such novel innovations; “Interestingly, all the suppliers we are working with would label themselves as small or startup, and five of them had never worked with a UK water company before. They all have a completely different energy to a large corporate like United Utilities, which is exactly what you need to disrupt the status quo.”

2. Nivea co-created a best-selling deodorant with customers

Nivea used “netnography”—mining online customer reviews and comments—to gain insights about how customers used their products. They realised that customers had two major gripes when using their deodorant,

Yellow stains on white clothes
And white deodorant stains on black clothing.

Before diving into product development, Nivea contacted customers online and asked for their feedback about which new product characteristics would be most important to them. This co-creation work led to customers providing additional ideas, which were also incorporated into the product development.

T he Nivea R&D team then partnered with specialist chemicals company Evonik, and experts at the textile research centre Hohenstein institute, to develop a new patented technology that protected dark fabric and minimised staining on white clothes. Nivea’s “Invisible Black and White” deodorant became the company’s best-selling deodorant in its 130-year history.

3. Inside-out and outside-in knowledge sharing by Metro Bank

Metro Bank runs the Magic Makers program, which includes Fusion , a 3-day competitive corporate innovation workshop . Fusion is open to external start-ups and internal Metro teams. Both have to compete to earn a place at Metro’s 10-week innovation lab to develop their ideas further.

This program exemplifies open innovation. The Metro Bank team are heavily involved in the programme to share their knowledge with external startups. And by involving internal and external teams, knowledge, views, working practices, and ideas are passed inside-out and outside-in.

In the 2022 Fusion program, three winners were chosen, one of which was an internal Metro Bank team, ‘Return of the Hack’, whose idea will enable customers to access more information digitally. The team will work alongside other external startups to develop their idea in an agile manner during the 10-week innovation lab.

Faisal Hussain, Chief Technology Officer at Metro Bank, explained the impact;

“Innovation Lab brings out the very best in our colleagues as they compete internally to come up with MAGIC – literally Making A Great Idea Count. They also evaluate how we can embrace and embed the start-up propositions into the practical day to day running of the Bank to realise real results that benefit our customers. The spirit of innovation is so strong in Metro Bank that an entirely internal team of colleagues has been selected over an external start-up.”

No company can survive in today’s world without some form of open innovation.

The collaborative approach characteristic of open innovation models gives companies access to innovative ideas and solutions across the globe. It provides a clear advantage over innovating internally and in isolation, especially considering the breadth and speed of today’s technological advancements.

But rather than a silver bullet, open innovation requires structure to access it in any material way. Structure in terms of international scouting to leading agile development and market validation phases to ensure the program is a commercial success.

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Role modelling co-innovation between industry and academia

Unilever is a world-leading supplier of fast-moving consumer goods, with hundreds of instantly recognisable brands, from Persil to Vaseline. It creates products and experiences that improve people’s health, confidence and wellbeing and delivers innovations that positively impact people and planet.

Committed to fostering the most innovative R&D team in the industry, Unilever joined forces with the University of Liverpool in 2017 to found the award-winning Materials Innovation Factory (MIF)

The MIF is a state-of the-art facility that enables innovation ecosystems to unlock faster routes to scientific discovery through data and robotics.

The challenge

Unilever R&D’s mission is to innovate boldly for people and planet, using leading-edge science and ground-breaking digital technologies to deliver purpose-led innovation with sustainability at heart - and the MIF plays a key role in Unilever's next generation capability development.

By taking advantage of one of the highest concentrations of automated equipment for materials chemistry anywhere in the world, Unilever is using MIF’s leading-edge tech to build its innovation capability, improve resilience and increase speed, value and competitive advantage.

The solution

The ability for robotic testing and analytics to generate robust and reproducible data significantly faster than traditional methods frees up researchers’ time from repetitive lab work and unlocks more time to focus on the next generation of new ideas.

Unilever has already used the MIF in this capacity, with its Home Care division accessing one of the facility’s most advanced robots to develop laundry products that meet diverse consumer needs in a number of markets around the world in a matter of days and weeks, instead of the usual months.

With robots running 24/7 and capturing data centrally as they go, information is instantly available to all R&D staff globally, allowing Unilever to apply data and digital technology to deliver extraordinary products, services and experiences to market, with speed.

Utilising MIF facilities and expertise has also allowed Unilever to branch out beyond new product formulations into emerging areas of scientific research, such as the human microbiome. This has paved the way for Unilever to launch a ground-breaking toothpaste, Zendium, built around the oral mouth microbiome. It’s next generation oral care that targets bad bacteria without harming the good.

The open-innovation approach championed by MIF partners is also driving progress on some of Unilever’s key sustainability commitments, such as plastics, leading Unilever to redesign the material used within some of its shampoo bottles to generate a 25% reduction in plastic waste. Unilever is also pioneering leading-edge research, alongside MIF academics, into innovative new materials with a range of sustainability uses.

The Materials Innovation Factory is a pivotal tool in the competitiveness of our R&D. It enables speed and agility and is a catalyst for digitising R&D across Homecare and Beauty and Personal Care. We have seen the rate at which we generate intellectual property using the facility jump in recent years. We expect that to accelerate further as the capability develops in partnership with the University of Liverpool. Jon Hague, Vice President of Science and Technology for Unilever’s Homecare business

Back to: Digital innovation with the University of Liverpool

Unilever—A Case Study

This article considers key issues relating to the organization and performance of large multinational firms in the post-Second World War period. Although foreign direct investment is defined by ownership and control, in practice the nature of that "control" is far from straightforward. The issue of control is examined, as is the related question of the "stickiness" of knowledge within large international firms. The discussion draws on a case study of the Anglo-Dutch consumer goods manufacturer Unilever, which has been one of the largest direct investors in the United States in the twentieth century. After 1945 Unilever's once successful business in the United States began to decline, yet the parent company maintained an arms-length relationship with its U.S. affiliates, refusing to intervene in their management. Although Unilever "owned" large U.S. businesses, the question of whether it "controlled" them was more debatable.

Some of the central issues related to the organization and performance of multinationals after the Second World War can be illustrated by studying the case of Unilever in the United States. Since Unilever's creation in 1929 by a merger of British and Dutch soap and margarine companies, 1 it has ranked as one of Europe's, and the world's, largest consumer-goods companies. Its sales of $45,679 million in 2000 ranked it fifty-fourth by revenues in the Fortune 500 list of largest companies for that year.

A Complex Organization

Unilever was an organizational curiosity in that, since 1929, it has been headed by two separate British and Dutch companies—Unilever Ltd. (PLC after 1981), and Unilever N.V.—with different sets of shareholders but identical boards of directors. An "Equalization Agreement" provided that the two companies should at all times pay dividends of equivalent value in sterling and guilders. There were two head offices—in London and Rotterdam—and two chairmen. Until 1996 the "chief executive" role was performed by a three-person Special Committee consisting of the two chairmen and one other director.

Beneath the two parent companies a large number of operating companies were active in individual countries. They had many names, often reflecting predecessor firms or companies that had been acquired. Among them were Lever; Van den Bergh & Jurgens; Gibbs; Batchelors; Langnese; and Sunlicht. The name "Unilever" was not used in operating companies or in brand names. Lever Brothers and T. J. Lipton were the two postwar U.S. affiliates. These national operating companies were allocated to either Ltd./PLC or N.V. for historical or other reasons. Lever Brothers was transferred to N.V. in 1937, and until 1987 (when PLC was given a 25 percent shareholding) Unilever's business in the United States was wholly owned by N.V. Unilever's business, and, as a result, counted as part of Dutch foreign direct investment (FDI) in the country. Unilever and its Anglo-Dutch twin Royal Dutch Shell formed major elements in the historically large Dutch FDI in the United States. 2 However, the fact that all dividends were remitted to N.V. in the Netherlands did not mean that the head office in Rotterdam exclusively managed the U.S. affiliates. The Special Committee had both Dutch and British members, and directors and functional departments were based in both countries and had managerial responsibilities without regard for the formality of N.V. or Ltd./PLC ownership. Thus, while ownership lay in the Netherlands, managerial control was Anglo-Dutch.

The organizational complexity was compounded by Unilever's wide portfolio of products and by the changes in these products over time. Edible fats, such as margarine, and soap and detergents were the historical origins of Unilever's business, but decades of diversification resulted in other activities. By the 1950s, Unilever manufactured convenience foods, such as frozen foods and soup, ice cream, meat products, and tea and other drinks. It manufactured personal care products, including toothpaste, shampoo, hairsprays, and deodorants. The oils and fats business also led Unilever into specialty chemicals and animal feeds. In Europe, its food business spanned all stages of the industry, from fishing fleets to retail shops. Among its range of ancillary services were shipping, paper, packaging, plastics, and advertising and market research. Unilever also owned a trading company, called the United Africa Company, which began by importing and exporting into West Africa but, beginning in the 1950s, turned to investing heavily in local manufacturing, especially brewing and textiles. The United Africa Company employed around 70,000 people in the 1970s and was the largest modern business enterprise in West Africa. 3 Unilever's total employment was over 350,000 in the mid-1970s, or around seven times larger than that of Procter & Gamble (hereafter P&G), its main rival in the U.S. detergent and toothpaste markets.

A World-wide Investor

An early multinational investor, by the postwar decades Unilever possessed extensive manufacturing and trading businesses throughout Europe, North and South America, Africa, Asia, and Australia. Unilever was one of the oldest and largest foreign multinationals in the United States. William Lever, founder of the British predecessor of Unilever, first visited the United States in 1888 and by the turn of the century had three manufacturing plants in Cambridge, Massachusetts, Philadelphia, and Vicksburg, Mississippi. 4 The subsequent growth of the business, which was by no means linear, will be reviewed below, but it was always one of the largest foreign investors in the United States. In 1981, a ranking by sales revenues in Forbes put it in twelfth place. 5

Unilever's longevity as an inward investor provides an opportunity to explore in depth a puzzle about inward FDI in the United States. For a number of reasons, including its size, resources, free-market economy, and proclivity toward trade protectionism, the United States has always been a major host economy for foreign firms. It has certainly been the world's largest host since the 1970s, and probably was before 1914 also. 6 Given that most theories of the multinational enterprise suggest that foreign firms possess an "advantage" when they invest in a foreign market, it might be expected that they would earn higher returns than their domestic competitors. 7 This seems to be the general case, but perhaps not for the United States. Considerable anecdotal evidence exists that many foreign firms have experienced significant and sustained problems in the United States, though it is also possible to counter such reports with case studies of sustained success. 8

During the 1990s a series of aggregate studies using tax and other data pointed toward foreign firms earning lower financial returns than their domestic equivalents in the United States. 9 One explanation for this phenomenon might be transfer pricing, but this has proved hard to verify empirically. The industry mix is another possibility, but recent studies have suggested this is not a major factor. More significant influences appear to be market share position—in general, as a foreign owned firm's market share rose, the gap between its return on assets and those for United States—owned companies decreased—and age of the affiliate, with the return on assets of foreign firms rising with their degree of newness. 10 Related to the age effect, there is also the strong, but difficult to quantify, possibility that foreign firms experienced management problems because of idiosyncratic features of the U.S. economy, including not only its size but also the regulatory system and "business culture." The case of Unilever is instructive in investigating these matters, including the issue of whether managing in the United States was particularly hard, even for a company with experience in managing large-scale businesses in some of the world's more challenging political, economic, and financial locations, like Brazil, India, Nigeria, and Turkey.

The story of Unilever in the United States provides rich new empirical evidence on critical issues relating to the functioning of multinationals and their impact. — Geoffrey Jones

Finally, the story of Unilever in the United States provides rich new empirical evidence on critical issues relating to the functioning of multinationals and their impact. It raises the issue of what is meant by "control" within multinationals. Management and control are at the heart of definitions of multinationals and foreign direct investment (as opposed to portfolio investment), yet these are by no means straightforward concepts. A great deal of the theory of multinationals relates to the benefits—or otherwise—of controlling transactions within a firm rather than using market arrangements. In turn, transaction-cost theory postulates that intangibles like knowledge and information can often be transferred more efficiently and effectively within a firm than between independent firms. There are several reasons for this, including the fact that much knowledge is tacit. Indeed, it is well established that sharing technology and communicating knowledge within a firm are neither easy nor costless, though there have not been many empirical studies of such intrafirm transfers. 11 Orjan Sövell and Udo Zander have recently gone so far as to claim that multinationals are "not particularly well equipped to continuously transfer technological knowledge across national borders" and that their "contribution to the international diffusion of knowledge transfers has been overestimated. 12 This study of Unilever in the United States provides compelling new evidence on this issue.

Lever Brothers In The United States: Building And Losing Competitive Advantage

Lever Brothers, Unilever's first and major affiliate, was remarkably successful in interwar America. After a slow start, especially because of "the obstinate refusal of the American housewife to appreciate Sunlight Soap," Lever's main soap brand in the United Kingdom, the Lever Brothers business in the United States began to grow rapidly under a new president, Francis A. Countway, an American appointed in 1912. 13 Sales rose from $843,466 in 1913, to $12.5 million in 1920, to $18.9 million in 1925. Lever was the first to alert American consumers to the menace of "BO," "Undie Odor," and "Dishpan Hands," and to market the cures in the form of Lifebuoy and Lux Flakes. By the end of the 1930s sales exceeded $90 million, and in 1946 they reached $150 million.

By the interwar years soap had a firmly oligopolistic market structure in the United States. It formed part of the consumer chemicals industry, which sold branded and packaged goods supported by heavy advertising expenditure. In soap, there were also substantial throughput economies, which encouraged concentration. P&G was, to apply Alfred D. Chandler's terminology, "the first mover"; among the main followers were Colgate and Palmolive-Peet, which merged in 1928. Neither P&G nor Colgate Palmolive diversified greatly beyond soap, though P&G's research took it into cooking oils before 1914 and into shampoos in the 1930s. Lever made up the third member of the oligopoly. The three firms together controlled about 80 percent of the U.S. soap market in the 1930s. 14 By the interwar years, this oligopolistic rivalry was extended overseas. Colgate was an active foreign investor, while in 1930 P&G—previously confined to the United States and Canada—acquired a British soap business, which it proceeded to expand, seriously eroding Unilever's market share. 15

The soap and related markets in the United States had a number of characteristics. Although P&G had established a preponderant market share, shares were strongly contested. Entry, other than by acquisition, was already not really an option by the interwar years, so competition took the form of fierce rivalry between incumbent firms with a long experience of one another. During the 1920s and the first half of the 1930s, Lever made substantial progress against P&G. Lever's sales in the United States as a percentage of P&G's sales rose from 14.8 percent between 1924 and 1926 to reach almost 50 percent in 1933. In 1930 P&G suggested purchasing Lever in the United States as part of a world division of markets, but the offer was declined. 16 Lever's success peaked in the early 1930s. Using published figures, Lever estimated its profit as a percentage of capital employed at 26 percent between 1930 and 1932, compared with P&G's 12 percent.

Countway's greatest contribution was in marketing. During the war, Countway put Lever's resources behind Lux soapflakes, promoted as a fine soap that would not damage delicate fabrics just at a time when women's wear was shifting from cotton and lisle to silk and fine fabrics. The campaign featured a variety of tactics, including washing demonstrations at department stores. In 1919 Countway launched Rinso soap powder, coinciding with the advent of the washing machine. In the same year, Lever's agreement with a New York agent to sell its soap everywhere beyond New England was abandoned and a new sales organization was established. Finally, in the mid-1920s, Countway launched, against the advice of the British parent company, a white soap, called "Lux Toilet Soap." J. Walter Thompson was hired to develop a marketing and advertising campaign stressing the glamour of the new product, with very successful results. 17 Lever's share of the U.S. soap market rose from around 2 percent in the early 1920s to 8.5 percent in 1932. 18 Brands were built up by spending heavily on advertising. As a percentage of sales, advertising averaged 25 percent between 1921 and 1933, thereby funding a series of noteworthy campaigns conceived by J. Walter Thompson. This rate of spending was made possible by the low price of oils and fats in the decade and by plowing back profits rather than remitting great dividends. By 1929 Unilever had received $12.2 million from its U.S. business since the time of its start, but thereafter the company reaped benefits, for between 1930 and 1950 cumulative dividends were $50 million. 19

Many foreign firms have experienced significant and sustained problems in the United States. — Geoffrey Jones

After 1933 Lever encountered tougher competition in soap from P&G, though Lever's share of the total U.S. soap market grew to 11 percent in 1938. P&G launched a line of synthetic detergents, including Dreft, in 1933, and came out with Drene, a liquid shampoo, in 1934 both were more effective than solid soap in areas of hard water. However, such products had "teething problems," and their impact on the U.S. market was limited until the war. Countway challenged P&G in another area by entering branded shortening in 1936 with Spry. This also was launched with a massive marketing campaign to attack P&G's Crisco shortening, which had been on sale since 1912. 20 The attack began with a nationwide giveaway of one-pound cans, and the result was "impressive." 21 By 1939 Spry's sales had reached 75 percent of Crisco's, but the resulting price war meant that Lever made no profit on the product until 1941. Lever's sales in general reached as high as 43 percent of P&G's during the early 1940s, and the company further diversified with the purchase of the toothpaste company Pepsodent in 1944. Expansion into margarine followed with the purchase of a Chicago firm in 1948.

The postwar years proved very disappointing for Lever Brothers, for a number of partly related reasons. Countway, on his retirement in 1946, was replaced by the president of Pepsodent, the thirty-four-year-old Charles Luckman, who was credited with the "discovery" of Bob Hope in 1937 when the comedian was used for an advertisement. Countway was a classic "one man band," whose skills in marketing were not matched by much interest in organization building. He never gave much thought to succession, but he liked Luckman. 22 This proved a misjudgment. With his appointment by President Truman to head a food program in Europe at the same time, Luckman became preoccupied with matters outside Lever for a significant portion of his term, though perhaps not to a sufficient degree. Convinced that Lever's management was too old and inbred, he dismissed about 15 percent of the work force soon after taking office, and he completed the transformation by moving the head office from Boston to New York, taking only around one-tenth of the existing executives with him. 23 The head office, constructed in Cambridge by Lever in 1938, was subsequently acquired by MIT and became the Sloan Building.

Luckman's move, which was supported by a firm of management consultants, the Fry Organization of Business Management Experts, was justified on the grounds that the building in Cambridge was not large enough, that it would be easier to find the right personnel in New York, and that Lever would benefit by being closer to the large advertising agencies in the city. 24 There were also rumors that Luckman, who was Jewish, was uncomfortable with what he perceived as widespread anti-Semitism in Boston at that time. The cost of building the New York Park Avenue headquarters, which became established as a "classic" of the new postwar skyscraper, rose steadily from $3.5 million to $6 million. Luckman had trained as an architect at the University of Illinois, and he was very involved in the design of the pioneering New York office.

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How Unilever Is Preparing for the Future of Work

How should the consumer goods company upscale its global workforce for the future?

Apple Podcasts

Launched in 2016, Unilever’s Future of Work initiative aimed to accelerate the speed of change throughout the organization and prepare its workforce for a digitalized and highly automated era. But despite its success over the last three years, the program still faces significant challenges in its implementation. How should Unilever, one of the world’s largest consumer goods companies, best prepare and upscale its workforce for the future? How should Unilever adapt and accelerate the speed of change throughout the organization? Is it even possible to lead a systematic, agile workforce transformation across several geographies while accounting for local context?

Harvard Business School professor and faculty co-chair of the Managing the Future of Work Project William Kerr and Patrick Hull , Unilever’s vice president of global learning and future of work, discuss how rapid advances in artificial intelligence, machine learning, and automation are changing the nature of work in the case, “ Unilever’s Response to the Future of Work .”

BRIAN KENNY: On November 30, 2022, OpenAI launched the latest version of ChatGPT, the largest and most powerful AI chatbot to date. Within a few days, more than a million people tested its ability to do the mundane things we really don’t like to do, such as writing emails, coding software, and scheduling meetings. Others upped the intelligence challenge by asking for sonnets and song lyrics, and even instructions on how to remove a peanut butter sandwich from a VCR in the style of King James. But once the novelty wore off, the reality set in. ChatGPT is a game changer, and yet another example of the potential for AI to change the way we live and work. And while we often view AI as improving how we live, we tend to think of it as destroying how we work, fears that are fueled by dire predictions of job eliminations in the tens of millions and the eradication of entire industries. And while it’s true that AI will continue to evolve and improve, eventually taking over many jobs that are currently performed by people, it will also create many work opportunities that don’t yet exist. Today on Cold Call , we welcome Professor William Kerr, joined by Patrick Hull of Unilever, to discuss the case, “Unilever’s Response to the Future of Work.” I’m your host, Brian Kenny, and you’re listening to Cold Call on the HBR Podcast Network. Professor Bill Kerr is the co-director of Harvard Business School’s Managing the Future of Work initiative. His research centers on how companies and economies explore new opportunities and generate growth, and he is a fellow podcaster. He hosts a show called Managing the Future of Work . Bill, thanks for being here.

Bill Kerr: Thanks for having us.

BRIAN KENNY: And Patrick Hull is Unilever’s VP of Global Learning and Future of Work. He goes by Paddy. Paddy, thanks for joining us.

PATRICK HULL: Thank you very much for having me.

BRIAN KENNY: It’s great to have you both here today. I think people will really be interested in hearing this case and how Unilever is thinking about the future of work. So why don’t we just dive right in. And, Bill, I’m going to ask you to start by telling us what the central issue is in the case, and what your cold call is to start the discussion in class.

Bill Kerr: Well, Brian, I think your introduction clearly outlined the central issue, which is technology is really transforming the world of work. And that means, companies must learn how to do things different than what they’ve done over 50 or a hundred year history. And it also means they must transform the skill base in how they’re approaching employees and talent. I think we can simply say: that ain’t easy, and it’s also going to introduce significant challenges and tensions for organizations. A big company like Unilever is going to really want to appeal to employees, put the purpose of the company in front of employees, embrace that, but it’s also going to have to make challenging decisions regarding employees and their transition of skills and what’s the future workforce going to look like. So the most common cold call is a really simple question, which is: has Unilever, through its Future of Work Program, resolved the paradox of profit and purpose? And pretty quickly, the answer to that is, “no.” It hasn’t fully resolved that. I will occasionally get maybe one person that goes all the way there. So then we’ve got to start unpacking, okay, how close is it to resolving that? And are we very near the end point or are we farther away?

BRIAN KENNY: Yeah. Simple question to you maybe, but probably not to others who are listening. That sounds like a pretty complex question. I mentioned your involvement with the Managing the Future of Work initiative here. So I know you think a lot about this. This is on your mind all the time. How did you hear about what Unilever was doing, and why was it important to you to write this case?

Bill Kerr: Well, it’s interesting. The history of the connection came through another case that we wrote. Very early in our project on Managing the Future of Work , we’re always very deliberate about putting the “managing” in front of the future of work, and that we want to think about how leading companies are reacting to the forces that are shaping the future, like digitization and demographic changes and so forth. So, we’ve written a case about Vodafone, which we did a Cold Call a while back. With Vittorio Colao. And Vittorio was on Unilever’s board and said, “You have got to go and meet this organization and see what they’re doing,” because they have one of the most comprehensive, well thought out programs for the future of work that he had come across. And in fact, that was the connection that then followed on. And yes, for a sector that Unilever’s working in that has end-to-end change going on from the manufacturers, all the way down through the consumers or the products, to be able to have an organization that’s thought very deeply about what pillars do we need to put into place to make the change occur is great. The other thing that was delightful about Unilever and writing this case study is that, a lot of times, companies want to talk about their programs, only after they know that it was a success. They would prefer to wait until they’ve… They’re like, wait another two years and then we’ll write the case study about this transformation. But Unilever’s been very upfront in saying, “The future of work’s a big challenge. We have to get in front of that. Here’s what we’re doing. We haven’t necessarily figured it all out yet, and some of this will prove wildly successful. Others may be challenging, but this is where we’re going.” And that’s been a great thing to really spark a lot of executives and students a conversation about, what will the future of work require, and how can we get there?

BRIAN KENNY: Yeah. So, Patty, I have to ask, I have to start by asking you, what’s your job? Because your title’s very lofty. It basically calls you a visionary. You are the VP of Global Learning and Future of Work. So what do you do?

PATRICK HULL: I’ve got a funny answer to that question. Since the pandemic, and obviously, been working a lot from home, and I work in a slightly open area, so my wife gets to hear a little bit of what I’m talking about. She seems to think that what I do is laugh a lot and chat a lot to people. So that’s what-

BRIAN KENNY: Kind of like we’re doing today. So, she’s listening in…

PATRICK HULL: She says, “When do you do some real work?” But yes, I guess what I do is work with a really passionate, dedicated team of people who are looking at how are we preparing our organization, and our people in particular, for a future that is very different to what we’ve been experiencing in our traditional work models up to this point. You mentioned ChatGPT as well. I mean, that really is the talk of the town at the moment. And I guess we’ve been thinking for a bit of time, as Bill mentioned, about the impact of things like that on our business, and trying to get on the forefront of what’s our response to that. So I wouldn’t quite say visionary. I think, at this stage in business and what’s going on, it’s quite hard to be truly visionary, but trying to stay one or two steps slightly ahead of what’s going on in the world of work, that’s, I guess, what my job’s all about.

BRIAN KENNY: Yeah. That’s great. For our listeners who… I think most people have heard of Unilever, but for people who aren’t really aware of the scope and scale of Unilever, can you describe the business for us a little bit?

PATRICK HULL: Yes. So we’re a fast moving consumer goods business. So most of you will probably interact with one of our brands or products every day. In fact, we say that we serve 3.4 billion people every day. That’s how often someone buys one of our products or uses one of our products. We’ve got about 400 brands in 190 countries across the world, ranging from global brands like Dove, Sunsilk, Hellmann’s, Rexona, all the way through to what we call local jewels like Marmite in the UK, which is one of those brands that you either love it or hate it.

BRIAN KENNY: How big is the workforce at Unilever?

PATRICK HULL: The workforce is about 149,000 people who are directly employed by us. But we always often speak about how we have an extended workforce of around 3 to 5 million people, who if you ask them who they work for, they would say Unilever, even though they’re actually employed by someone else.

BRIAN KENNY: Yeah. So we know Unilever well at Harvard Business School. We’ve had lots of cases written on over the years by our faculty, and we’ve actually talked about it on Cold Call before, particularly, the focus on sustainability. Unilever really stands out in this regard. And I wonder if you could talk a little bit about how important this is to the culture at Unilever.

PATRICK HULL: It is. I can’t tell you how important it is. In fact, when Paul Polman, previous CEO, came into the organization in 2009, he launched the Unilever Sustainable Living Plan in 2010. And he did this beautiful job when he launched it of reminding us that sustainability has been part of Unilever since day one. When Lord Leverhulme started selling Sunlight soap, his mission was to make cleanliness commonplace. That was back in the late 1800s. And what Paul did beautifully is he then simply shifted that a little bit and said, “We are now here to make sustainable living commonplace, because now we impact so many more people and so many more homes. If we can help every consumer out there make more sustainable choices with how they eat, how they clean, how they use plastic, how they use water, then we can have a massive impact, positive impact, on the planet and society, and that’s good for business.” That was the business model that we’ve ascribed to. So we hire on it. We are tracked on it. We develop on it. It’s definitely part of the way things get done here.

BRIAN KENNY: Bill, let me turn back to you for a second. The FMCG sector is fast moving, as it indicates. What are some of the forces that are putting pressure on that particular sector these days?

Bill Kerr: Yeah. The case outlines three forces, and let me walk through those and also say a little bit of, before I do that, why we think this sector’s amazing to watch. If you want to have a kind of front row seat as to how the future of work may play out in other sectors, I often direct them towards the fast moving consumer good sector because the technology forces, the demographic forces, the gig workplace force that we’ll talk about are all happening already. They’re deep into this sector, so we can learn a lot from it. So, the first one is clearly technology that links through all the way to our opening conversation. There’s many ways in which the touch points between consumers and the outlets and last mile delivery and drones possibly dropping off future packages reverberates all the way up through the supply chain to Unilever and its suppliers above. A simple kind of easy metric is, think about the speed that we now demand or expect of our package delivery. It’s no longer that we’re going to go to the store and pick this up and the store can replenish itself over a week-long horizon. It’s going to be, I just pressed the button in the app and I’m expecting it in the next five minutes to be handed to me. That puts a lot of demands on how an organization needs to function, and also increase the expectation about the customization and the personalized products that consumers will require. So, the technology requires Unilever to think differently. The second is a broader force, but equally as impactful, and even more predictable for the future, which is the role of aging populations and demographic change in the workplace that is quite different than the workplace of the 20th century, where many of the large companies today kind of got their grounding. One of the early kind of points that it makes is that, in the UK, about a third of the workforce currently is over the age of 50, and that’s true in most every advanced economy, as well as also, increasingly across East Asia and elsewhere, that we have older populations. We have workforces that are going to span many more generations in the workplace. And then the third one, which in our project, Managing the Future of Work , we think of as kind of an outcome of tech and demographics coming together is the gig workplace. Paddy talked about the extended workforce beyond Unilever, and the case tries to unpack some of the ways they’re approaching bringing people to work that aren’t the traditional full-time jobs that most companies got built up around. And the gig workplace is activated by that technology that lets us schedule and involve people in gig works. And also, as we think about low unemployment rates and older populations and tacked out and so forth, the degree that we can, as a company, attract in people that are currently not working or at the edge of working and tempt them to come work for us on projects is a very valuable labor supply to these organizations.

BRIAN KENNY: Paddy, you’re in it, literally. So what are you seeing as some of the things that have shifted over time?

PATRICK HULL: So, when I started, I’m going to give my age away here a little bit, but back in the 1990s, I remember us talking a lot about, how could we get direct to the consumer? Back in those days, we sold everything through big box retail, and it was all about maintaining those relationships, making sure you had great store shelf positioning and great relationships with those buyers. One of the most massive shifts is that direct to consumer is the channel now. Bill spoke about how we all just order stuff off Amazon directly. We don’t have any advantage anymore in terms of getting to consumers. You and I, any little startup, can throw some ads on Instagram, speak to a few influencers and start sending their products out. So the whole game has changed in terms of how are we reaching people.

BRIAN KENNY: And I can already imagine, just based on the examples you’ve both given, I’m already seeing areas where there would be churn in the workforce around some of these developments. So let’s talk a little bit about Unilever’s Future of Work plans. And there’s a framework that goes along with it. I wonder if you could describe that and talk about the three pillars that support that framework.

PATRICK HULL: Yes, our three pillars are: change the way we change, ignite lifelong learning, and redefining the Unilever system of work. And I’ll explain a little bit about each of those. So changing the way we change. The first one is, what we’ve realized is that change is continuous. Disruption is continuous in our organization. It’s not about standalone moments where we see that, oh, we need to shut down a factory or change something because of a dramatic shift. Change is happening all the time. All of our factories are rapidly automating all of our office processes, so we can’t stick to the old traditional model of change, which was a very slow moving consultative approach, and also, where management held its cards close to its chest until sort of the last moment and then announced, “This is happening.” We’ve realized that, really, to be true to our purpose around making sustainable living commonplace, we need to enter into a far more open, early, proactive dialogue with our people around the change that’s affecting our organization, and how to help start preparing them well in advance of any actual impact on them in terms of how they can prepare for that change. So that’s the first one, changing the way we change. The second one around igniting lifelong learning is about engaging with our people to make sure that they’re all equipped to thrive, both now and into the future, and that we are showing them a bit of what that future looks like and where they need to be focusing their attention. And then the third, redefining the whole system of work is a bit of what Bill was mentioning earlier. Here, we really want to embrace this notion of accessing talent rather than owning talent. We’ve felt that if we just keep on trying to hold onto all our FTEs and compete against everyone else with talent, we are never going to have the people and the skills in our organization that we need to take us forward into the future. So we really want to redefine new models of working, so it’s not just you’re either fixed or you’re a gig worker, but how can we find some flex in the middle that helps people transition out of this traditional life cycle of work, the kind of 40-hour, 40-week, 40-year traditional employment pattern, and help get them future fit for a hundred year life, where they may want to slowly move into retirement, where they may want to spend some time looking after their kids, where they may want to set up their side hustle. How do we create that sort of flexibility?

BRIAN KENNY: There’s definitely, and understandably, a lot of emotion involved with some of these things. And I’m wondering if maybe you could give our listeners a sense, based on all the research you’ve done in the initiative, about what kinds of jobs are going to go away, and what kinds of skills you think are going to be most important for people to think about in the future?

Bill Kerr: Well, Brian, I come back with, that we don’t think of jobs really going away. And I think it’s important to instead think of jobs as a collection of tasks. And certain tasks will be taken over by the machine and require less human input, as the technology gets more advanced. And that could be in a very manual kind of sense. It could also be with ChatGPT in a more cognitive relationship. And perhaps, the thing that we’re experiencing right now that’s very front and center in the world of work is, lots of ways that technology is coming in towards more cognitive tasks that are complex, they’re non-routine. They were not able to be done by the computer before, but artificial intelligence machine learning and so forth are able to take those off. So if you think about how supply chain forecasting will happen at Unilever, that’s going to be done in a fundamentally different way than it would’ve been even 10 years ago.

BRIAN KENNY: Sure.

Bill Kerr: But we always think about new tasks emerging, and it’s hard to predict exactly what those tasks will involve. When you think about the skills, we know that having digital fluency and also social skills are the two biggest things that you can put money on, bank on, those being important enough for the future. But there’s also going to be judgment, and there’s going to need to be innovativeness. So even if the computer starts to do a really good job at predicting about how salespeople should arrange the shelves or how they should approach consumers, you still have to think about, as an organization, what data are we feeding into the system? And where could Unilever develop a proprietary data advantage? And how would we collect those data streams and put them into it? So the technology will be there, it’s going to take over evermore parts of work as it has been for 150 years at this point, but there’ll also be places where humans will be complementing and helping to achieve the goals of the company.

BRIAN KENNY: So that’s an optimistic viewpoint, Paddy. And I’m wondering what the response is from people when you start to talk about these ideas with them. And how do you move them beyond just their own insecurity and concern for themselves, to really embrace learning new skills and thinking about a different way of working in the future?

PATRICK HULL: This is a fundamental dilemma facing us, Brian. I’m so glad you asked me that question. And whilst I don’t know if we’ve cracked it, I think we’ve got a really good hypothesis around what helps this. One of the things we know is, the way not to motivate people to learn new skills is to tell them, “You better re-skill or the robots are going to take your job away.” So we’ve taken the view that if we can help people to discover their purpose, what makes them unique, how do they approach work in their own way, and then start from that point and say, “Okay, when you are at your best, you are doing these things. How do we make sure that you are developing the skills in line with that, that are going to keep you future fit in an environment that is changing around you in terms of the nature of your job and how you work?” And we’ve found that when people come from that place of purpose, they do feel far more agency over it. They are far more motivated to learn new skills, to continue to be relevant, but it’s coming from a much more positive place. It’s not coming from that fight or flight or freeze sort of mode. It’s coming from a place of agency. And in fact, we partnered with some academic institutions to measure the impact of starting people thinking about purpose and then creating future fit plans from there. And we’ve found that it does lead to people being 25% more engaged in thinking about the future, in going the extra mile, in having this intrinsic motivation to take it on. And they’re 22% more productive, which is another great benefit to us.

BRIAN KENNY: Yeah. So, Bill, we’ve been through situations like this before. If you look back over the long arc of history, we’ve had movement from an agrarian society to an industrial society. We’ve had manufacturing sector turned on its head when a lot of manufacturing jobs have gone overseas. And I think each time we’ve done that, there’s been a portion of the workforce that’s just not been able to make the leap to the new mode of doing things. Unilever is talking about ensuring that 80% to 100% of their workforce can be transitioned in the right way. Is that too big of a promise to make?

Well, to their credit, I believe they stayed at the pretty top end of that range so far. And I think the workshops and so forth that Paddy just outlined are best in class for trying to stay up there. I do think, Brian, you see organizations, and I’m spanning out from Unilever at this point, that are trying to set a new contract with workers, both explicitly and implicitly, that says, “Our part of the bargain is, we’re going to give you great clarity as to what roles we see the company needing in the future, and help you kind of think about where you are today and what you would need to acquire skill-wise to get to that future point. And we’re going to give you the platform to acquire those skills. But your part of the bargain has to be to put the time and the investment in to be having those skills when that time comes.” And so I think we’re seeing a shift in a bit of the, we want to be a great place for you to have worked and developed your career, but we’re not going to be guaranteeing a lifelong employment. We’re going to focus on the skills that are needed and help you make the investments and choices that should be made.

BRIAN KENNY: Yeah. And what does that start to look like at Unilever, Paddy? What are some of the ways that you’re sort of redefining the systems of work there?

PATRICK HULL: So, one of the big initiatives that we’ve undertaken was this whole idea of, how do we help people create more flexibility in their roles, so that they can discover new ways of working, discover new skills, grow in new and different ways? And I mentioned to you earlier that we thought there’s this sort of gridlock that, on the one hand, you’ve got full-time employees, you’ve got lots of security, but no flexibility in terms of how and where they work. And on the other hand, you’ve got gig workers, freelancers, lots of flexibility, but not much security in terms of guaranteed income. And we’ve set ourselves a challenge of, how do we create this responsible alternative to the gig economy? And our idea was something called U-Work. U-Workers no longer have a job title. They work on gigs and projects in Unilever, but they are still 100% Unilever employees. They are not gig workers, so they’re not contractors or anything. In fact, they’re an internal pool of contractors, if you like, but they remain Unilever employees. They get a guaranteed retainer. They get a package of social care, pension benefits, healthcare benefits. And they get a learning stipend. But in return for that, they then only need to work on projects. They can set up their own business on the side. They can look after their kids or aging parents, or they can gradually move into retirement. And I think it’s this kind of thing that we need to continue to explore, as we see in the impact of automation and digitization, and also this trend or this desire for people to have more flexibility to choose how and when they work.

BRIAN KENNY: Yeah. It actually sounds kind of appealing. So you also get variety that goes along with that. You get to move from one project to another, and you’re not sort of locked in on the same kinds of things, all the time.

PATRICK HULL: And, Brian, the one thing, just to emphasize on that, people get very locked into the thing of, ah, does someone have the skill I need for the job? In fact, what we found is, one of the most important skills is knowing the organization. So U-Work is great because they are Unilever employees. They know the organization. They know how to get things done in Unilever. And we must never underestimate the power of that skill

BRIAN KENNY: Bill, it seems like anytime that we enter into one of these huge labor market transitions, manufacturing jobs, take it on the nose. And so I’m wondering, as you think about the implications for jobs in the future, what are the implications for manufacturing specifically?

Bill Kerr: Well, I think, Brian, we’re already been seeing that in motion for a while. Manufacturing has been at the forefront of technology adoption for decades. I think time will tell how it will continue to evolve. I would anticipate more skilled, more advanced, more technology enabled, but there could also be some interesting twists. It’s not the current case study that we’re talking about, but there’s another case study at Harvard Business School, done by Raj Choudhury, our colleague, with Unilever that’s about remote manufacturing. So how can the remote workforce be connected into the manufacturing sector? So we’ll see a lot of innovation towards the future.

BRIAN KENNY: And how is Unilever thinking about that, Paddy?

PATRICK HULL: So actually, the whole genesis of this future of work framework was done together, well, co-created together with our European Works Council actually, so our manufacturing representatives coming together with management to think about, how is the future of work impacting the manufacturing environment? So actually, our whole framework came from them. So, we very much see this as a critical way of addressing the impact of digitization and automation in the manufacturing environment. We’ve found some fantastic examples where we’ve started people thinking about their roles in future. And what we’ve found is, there’s quite a strong correlation between some of the skills our manufacturing workers have and lab assistants in our R&D labs. And funnily enough, we tend to have quite big R&D centers right next to our factories. So we’ve seen quite a bit of movement of people being able to re-skill from manufacturing environment into R&D labs in a way, a more sustainable future environment, all because they’ve identified, what’s the work that they really enjoy doing, what are they really good at, and then what are the skills required to go into the future?

BRIAN KENNY: Yeah. That’s a huge win-win, right? For the worker and for the firm.

PATRICK HULL: Correct.

BRIAN KENNY: This has been a great conversation. I’ve really enjoyed it. I’m wondering if… I’ve got time for one question for each of you left here. So, I’m going to start with you, Paddy. How is Unilever going to know if they’re succeeding in this? Is there a sort of an end game in mind here?

PATRICK HULL: The big goal is obviously that we are proving that our sustainable business model is more effective than others in terms of driving superior performance. So the big number is still, how are we doing as an organization? I would say the key input metrics are things like, how well are we able to re-skill our people for the future? We really believe that re-skilling is the way forward. We know it’s cheaper than recruiting from outside. It’s better for our people. It’s a way of getting people who know our business to continue to do good things. So we do measure that. How many people are we helping to transition? And then it’s about, how attractive do we continue to be as an employer for new recruits and for the people within our organization? So we’ll track the traditional input metrics like engagement, attrition, our employer brand, how well people are collaborating going forward.

BRIAN KENNY: Yeah. It sounds like you’re off to a fantastic start. Bill, I’ll give you the last words, since you wrote the case. If there’s one thing you’d like people to remember about this case, what is it?

Bill Kerr: Well, let me go back. We started with the cold call, so let me tell you how I end the class. There’s a video of one of Paddy’s colleagues, Nick Dalton, who is quoting President Kennedy, who was in turn quoting an Irish writer named Frank O’Connor. And Kennedy was speaking about the space mission, and Frank O’Connor was describing, as a kid, when they would come to this orchard wall that was too high for them to climb over. They had no idea how they were going to do it. They would take their hats and they would throw them over the orchard wall, so that they just committed themselves to figuring it out. And Nick basically thought of the Unilever program as a bit of, “We’re throwing our hat over the wall. We don’t know exactly how we’re going to climb over this future of work wall, but we know we must do it. And this is our public commitment to making that happen.” And the thing I’d come back to listeners around this is, the future of work is scary. And we talked about job transitions and how quickly the new technologies are coming. This time last year, we had no thought of ChatGPT as being part of this Cold Call podcast, but now, it’s what we lead with. And so, hopefully, people can unfreeze a little bit and can start thinking about, regardless of what the twists and turns may lie ahead, they need to begin a journey with their employees. And Unilever is showing, here’s how we’re approaching that. Now, let’s all work on it together.

BRIAN KENNY: Yeah. Well, I suspect I’m not alone when I say we’re rooting for you. We hope that you get this right. There’s a lot at stake.

PATRICK HULL: Thanks, Brian.

BRIAN KENNY: Thank you both for joining me.

Bill Kerr: Thanks.

BRIAN KENNY: If you enjoy Cold Call , you might like our other podcasts, After Hours , Climate Rising , Deep Purpose, IdeaCast , Managing the Future of Work , Sk ydeck , and Women at Work . Find them on Apple, Spotify, or wherever you listen, and if you could take a minute to rate and review us, we’d be grateful. If you have any suggestions or just want to say hello, we want to hear from you. Email us at [email protected] . Thanks again for joining us. I’m your host, Brian Kenny, and you’ve been listening to Cold Call , an official podcast of Harvard Business School and part of the HBR Podcast Network.

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Unilever aims to grow through volume, not price

31-Jul-2024 - Last updated on 31-Jul-2024 at 10:46 GMT

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Unilever's volume growth in some areas has improved since Q1. Image Source: Augustus Bambridge-Sutton

In Unilever’s half-year results, the multinational’s food segments saw a slight increase in volume growth, complementing its aim to let volume drive growth. Conversely, commodity deflation in some areas has seen Unilever reducing price growth significantly compared to previous years.

Uptick in volume

Overall volume growth for the half-year was 2.6%, compared with a 2.2% volume growth in Q1 . According to Hein Schumacher, Unilever’s CEO, the company hopes growth to be driven by an improvement in volume sales.

Nutrition, which in Q1 saw a decline in volume growth by 0.4%, has now reached a flat volume growth, with sales driven by ‘power brands’ Knorr and Hellman’s, collectively representing two thirds of turnover for the category.

However, growth in ice cream was ‘clearly below our ambition’, said Unilever’s COO Fernando Fernandez. It had an underlying volume growth of -1%, even more significant than the negative 0.9% underlying volume growth of Q1. Growth has been negatively affected by shortfalls in China due to tougher market conditions, and shortfalls in Europe due to poor weather at the start of the summer season. Unilever’s separation from ice-cream will be completed by 2025.

Europe also returned to volume growth from its -1.5% volume growth in Q1. Now, Europe has seen a volume growth of 0.5% in these half-year results.

Unilever's results in numbers

- Turnover was €31.1bn

- Unilever saw an underlying sales growth of 4.1%

- It saw a volume growth of 2.6%

- Underlying operating profit increased by 17.1%

- Nutrition saw an underlying sales growth of 3.2%, a 3.2% underlying price growth, and a flat volume growth

- Ice cream saw an underlying sales growth of 0.6%, an underlying price growth of 1.6% and a -1% underlying volume growth.

Innovation growth

Unilever aims to focus on innovation. The company has increased capital in brand and marketing investment to 15.1% of turnover, or €0.7bn.

“When it comes to innovation, there we have made a bit of a change,” said Schumacher. “First of all, we want to make sure the average size of our innovations will double this year, so that means doing fewer, bigger and better.” Secondly, it aims to grow a ‘select set’ to platforms of more than €100mn.

A pricing deceleration?

According to Schumacher, ‘pricing continued to moderate’ in the first half of 2024. Price growth has indeed decreased significantly.

In Q2 2024, pricing grew by 0.6% in ice cream and 2.2% in nutrition, compared with 11.8% in nutrition and 12.1% in ice cream in Q2 2023 (in Unilever as a whole, Q2 2023 saw an 8.2% compared with 1% in Q2 2024). Why is this?

“Where we have seen real commodity deflationary impact, we have adjusted price accordingly to give back to the consumers,” said Schumacehr, “and to focus on our competitiveness, and ensuring that volume-led growth story that we’ve talked about.” The company are even implementing negative pricing in some pockets of the business.

Much like Nestlé , Unilever expects inflation to return to more ordinary levels after recent inflationary spikes. While Unilever has seen anomalies such as the increase in popularity of private-label brands, Schumacher suggests that things will ‘settle there a bit’ when inflation levels normalise.

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How AI and digital help us innovate faster and smarter. Published: 4 April 2023. From the launch of the very first digital tool to the recent formulation of the world's first green carbon detergent, Unilever R&D experts have been using digital technologies to remain at the forefront of superior innovation for years.
Innovation at Unilever: The Foundry DO NOT COPY
No part of this case study may be reproduced, stored in a retrieval system, or transmitted in any form or by any means electronic, photocopying, recording or otherwise without written permission of London Business school. Innovation at Unilever: The Foundry . In January 2016 Jeremy Basset, Global Marketing Director and Head of Unilever Foundry,
The Unilever Foundry
Unilever also needs to focus on longer term partnerships, versus one-off executions, in order to validate external open innovation as a true business advantage. [12] This requires ensuring consistency in how start-ups are evaluated and how their solutions are escalated internally to achieve buy-in given the operational intensity of ideas that ...
Managing co-innovation partnerships: the case of Unilever and its
The Unilever case study also showed that the ability to ensure commitment of senior management of all the firms in the co-innovation partnership is an important element in this phase. ... The role of technology in the shift towards open innovation: the case of Procter and Gamble. R&D Management, 36 (3) (2006), pp. 333-346. CrossRef View in ...
Corporate Open Innovation Portals, Part II: Two Successful Case
Unilever is a large multinational company with over 100 years of history and recognizable brands and products around the globe. The company's 2013 annual report stated revenues of €49.797B. Unilever are so committed to Open Innovation that 55% of the company's product pipeline comes from Open Innovation activities.
A guide to open innovation (with case studies)
Case study: P&G shifts from a $2bn annual spend on internal R&D to open innovation Proctor and Gamble (P&G) are one of the world's largest FMCGs businesses. Their market position as a global leader can be connected to their long history of innovation, starting with the launch of their R&D department in 1890 to launching Connect + Develop ...
Role modelling co-innovation between industry and academia
Unilever is a world-leading supplier of fast-moving consumer goods, with hundreds of instantly recognisable brands, from Persil to Vaseline. ... The open-innovation approach championed by MIF partners is also driving progress on some of Unilever's key sustainability commitments, such as plastics, leading Unilever to redesign the material used ...
Industry 4.0 and Open Innovation: evidence from a case study
The objective of this paper is to investigate the topic of Industry 4.0 under an Open innovation lens. Specifically, based on a systematic literature review conducted on 50 papers, three thematic areas have been identified namely, innovation, smartness, sustainability.
Unilever—A Case Study
Unilever—A Case Study. As one of the oldest and largest foreign multinationals doing business in the U.S., the history of Unilever's investment in the United States offers a unique opportunity to understand the significant problems encountered by foreign firms. Harvard Business School professor Geoffrey Jones has done extensive research on ...
How Unilever Is Preparing for the Future of Work
Details. Transcript. July 04, 2023. Launched in 2016, Unilever's Future of Work initiative aimed to accelerate the speed of change throughout the organization and prepare its workforce for a ...
Unilever aims to grow through volume, not price
Unilever's half-year results showed a decline in pricing growth due to deflation in some markets. Instead, the company wants to grow through volume. ... Innovation growth Unilever aims to focus on innovation. The company has increased capital in brand and marketing investment to 15.1% of turnover, or €0.7bn. ... Study: Natural Preservation ...