The frozen yogurt kiosks cropping up in convenience stores during the past year are proof of the power of collaboration in innovation.
The kiosks were the brainchild of a frozen yogurt machine manufacturer, Argosy Group International, which tweaked its earlier froyo model after it learned a single machine offering two flavors wasn't enough to create a memorable experience for consumers. But that's changed with a new kiosk configuration offering more flavors of the product, which carries a profit margin of 75 percent to 80 percent, or about 41 cents per ounce, says Dan Doromal, vice president of marketing at Argosy Group International in Orlando, Fla.
"This is a collaboration between us and convenience stores. We tried something and it didn't work out, so we asked for their thoughts," Doromal says.
When the equipment manufacturer went back to the drawing board, it realized, "We have to make it seem like this is a frozen yogurt store," Doromal says. The company also provides branding for the kiosks, which offer a total of nine flavor varieties, including six distinct flavors and three combination twists, in about 27 square feet of space.
Whether it starts as an informal partnership between a manufacturer and retailer or as an alliance between a brand and a marketing agency, collaborative innovation often can result in a product or solution that neither party would have come up with on its own.
"For innovation to work, it has to solve some type of problem. To get people involved, you almost have to identify who is impacted by that problem and then who are the players you pull in," says Morris Sneor, vice president of Paradigm Productions Inc., an Internet marketing agency that works with large corporations.
New research suggests executives increasingly are looking to collaborate with suppliers. According to a September 2014 report from SCM World, 54 percent of chief supply chain officers cited "extremely relevant" value from suppliers who provided innovative ideas to them ahead of the competition, while 35 percent cited co-development of new products and services, and 30 percent considered supplier collaboration on new customer propositions to be extremely relevant to their competitive advantage. Other extremely relevant benefits of supplier engagement included faster problem-solving and time to market, quality improvements and cost efficiencies.
Most consumer packaged goods companies and retailers determine, "If we're truly going to be customer-centric, we're going to have to collaborate together," says Matt Davis, senior vice president of research at SCM World in London, a supply chain talent development partner for major corporations, including Procter & Gamble, Unilever, Nestlé and Walgreens.
Some retailers consider suppliers' willingness to collaborate as a factor when rating them, and the rating a vendor receives can determine whether the retailer continues to do business with the company.
A focus on collaboration also correlates with a company's reputation as a leader, according to the Aberdeen Group. Its research suggests 83 percent of industry leaders have a business-to-business collaboration in place, and for many it has been a recent development. The research also suggests the focus on collaboration provides leaders with an advantage in innovation, while followers often continue to rely on existing ways of doing business.
But collaboration often requires a concerted effort from all parties involved. While leaders were more likely to understand the value of collaboration, followers lacked that awareness and often were overly reliant on off-line technologies that would make joint efforts more difficult.
Besides a willingness to collaborate, companies must be open to change in order for collaborative innovation to take place, experts say. "To be innovative in the end, you're breaking the pattern. You're doing something different," Sneor says.
Procter & Gamble is often recognized for having a culture that embraces open innovation. About a third of the company's new products are co-developed with a partner, according to Kimberly Watson-Hemphill, president of Firefly Consulting in Austin, Texas, and co-author of "Fast Innovation." Procter & Gamble frequently relies on InnoCentive.com, an Internet platform headquartered in Waltham, Mass., that announces industry "challenges," or requests for ideas and solutions, and facilitates responses, to spur collaborations with external partners.
"We sought out InnoCentive because we wanted an opportunity to address solutions from the front end without the bias of historical perspectives or relationships," says Chuck Pettrigrew, a senior scientist at Procter & Gamble, in a testimonial on the InnoCentive website.
By putting a request for ideas on public platforms, which also include Facebook and Twitter, brands can garner far more submissions than a company would collect from its research and development department alone. This approach also helps to engage consumers by allowing them to participate in the process.
Frito-Lay's new Lay's Kettle Cooked Wasabi Ginger flavor, announced in October, was the result of a well-publicized consumer contest that also served as a marketing campaign, Watson-Hemphill says. A nurse from New Jersey named Meneko Spigner McBeth won the $1 million grand prize for the Wasabi Ginger flavor after the company received more than 14 million submissions, more than three times the number of submissions in the "Do Us a Flavor" contest's U.S. debut year, the company says.
"The response to this year's contest has absolutely blown us away. It is clear our fans are not only passionate about flavor, they are also eager to weigh in and share their ideas for the flavors we bring to market next," Ram Krishnan, senior vice president and chief marketing officer, Frito-Lay North America, said in a statement.
The cost to Frito-Lay of developing the new product is far more than the prize money, Watson-Hemphill says. "They have to commercialize it. So it's a long way from done," she says. But the company picked up significant publicity from the process.
The move toward allowing the public, or at least external experts, to participate in the call for new ideas has largely come about because of the Internet's ability to easily connect people, she says.
The challenge many large CPG companies face in developing products or solutions in-house is eliminating the silos that present obstacles, Watson-Hemphill says. Those in customer-facing positions often don't interact with research and development. "Companies in every business are under market pressure to come up with innovative new products," she says. But the process also has to be cost-effective.
Using a platform such as InnoCentive can help a large company contain research and development costs, Watson-Hemphill says. "On the innovation platform, if Procter & Gamble can get a solution, or Eli Lilly can get a solution, for the rates right here on the website, that can be a real cost savings," she says. The site lists awards ranging from $5,000 to $1 million for the winning solution providers.
As social media has expanded, new collaborative marketing techniques have emerged. With increasing evidence that social media users can persuade others to try a new product, marketing firms are employing so-called influencers to tweet or blog about a product marketing campaign. But to find those influencers, they often turn to agencies, such as Swap Group, a social media agency that boasts a network of more than 75,000 influencers.
When CVS wanted to reach women ages 18 to 24 to generate awareness of Procter & Gamble beauty products available at its stores, the company hired Sway Group in conjunction with the CVS MTV Video Music Awards #LooksThatRock campaign. Sway held a 60-minute Twitter conversation immediately in advance of the Video Music Awards, where tweets were devoted to the different beauty looks on the red carpet. It resulted in 17.6 million impressions, 3,700 tweets and 7,200 comments on Instagram images that garnered 115,000 likes, Sway says.
"Our primary focus is helping influencers and communities tell stories for brands," says Allison Talamantez, president of business development at Sway Group. About 80 percent of the company's work is with agencies that specialize in public relations, advertising or shopper marketing. The other 20 percent involves working directly with brands, Talamantez says.
Sway's value stems largely from identifying "the right influencers paired with the right tactics paired with the right behavior" to meet the brand's goal. When PAM cooking spray hired Sway to drive awareness of the brand's 99% Less Residue product line, the agency recruited 100 influencers, most of whom were independent contractors, to generate buzz about the product and its uses. Each influencer delivered a sponsored post about the product and helped to amplify it using social media. The result was more than 172,000 blog post impressions, more than 8.2 million Twitter impressions and more than 3,000 repins on Pinterest, Sway says.
Achieving that breadth of results would have been far more difficult for the brands without Sway's connections. "It's a full-time job to find and connect with these influencers," Talamantez says.
While giant brands can connect with the public for ideas and then bring them in-house, smaller brands often collaborate with multiple players to get a product to market. Cascadia Managing Brands LLC in Ramsey, N.J., is in business to assist other companies in bringing products to market. It recently worked with Molly's Milk Truck to develop and market almond milk iced coffee in four flavors, says Bill Sipper, managing partner at Cascadia. In about 12 months, Cascadia helped to get the product into more than 150 stores in the New York City area, including Whole Foods and Fairway.
Hoda Mahmoodzadegan, founder of Ramsey, N.J.-based Molly's Milk Truck, came to the company with a single almond milk iced coffee product, and Cascadia encouraged her to develop several additional flavors. "You always want to get that billboard effect on the shelf," Sipper says.
Mahmoodzadegan credits Cascadia for speeding up the product's development time in part by helping the startup avoid missteps that could otherwise lead to failure. "When you make a mistake early on, it is very, very costly. Those mistakes add up," Mahmoodzadegan says.
"Our value is that over 25 years, each of us have made so many mistakes that our clients don't have to make those same mistakes. Therefore, we save them a lot of money and a lot of time," says Sipper, who previously served in leadership positions at Ultimate Juice Co., Nantucket Nectars, Chatham Beverage Co., and Evian Natural Spring Water.
"For [Cascadia], it's not their first time at the rodeo, and for us, we didn't know what to expect in terms of not knowing who actually is giving us advice based on their own self-interest versus what's best for the company."
Molly's Milk Truck
A common mistake, and an issue that often results in resistance to collaboration, is not knowing whom to trust, Mahmoodzadegan says. "For [Cascadia], it's not their first time at the rodeo, and for us, we didn't know what to expect in terms of not knowing who actually is giving us advice based on their own self interest versus what's best for the company," she says. "We would have ultimately gotten to the same place, it's just we did it much faster, much more diligently with the help of Cascadia."