Arla Foods has shed more light on the way it is revamping the way it innovates, with the dairy giant arguing “we have to disrupt ourselves or we will be disrupted”.
The owner of Lurpak butter and Castello cheese is trying to get products to market more quickly, while still improving their chance of success, by changing its innovation process and by talking directly to consumers more often.
“We’re looking at how can we create a completely new innovation model within Arla that allows us to deliver quicker, faster and better products,” Dr Cecilia Lindström, the head of product and process design at Arla, said.
Speaking at the Arena International Dairy Innovation Summit in Amsterdam, Dr Lindström argued large food manufacturers were too slow at developing and launching products and, faced with the evolving demands of consumers and customers, needed to change.
“Our consumers are expecting products made for them, products that need to be a mouse-click or a finger-swipe away. The products need to be personalised,” Dr Lindström explained. “What we’re doing in large companies today is we’re looking at cost-reduction and especially at complexity-reduction. We’re trying to push larger volumes more efficiently all the time. That doesn’t really match what’s out there when people are asking for products that they don’t want to share with others.”
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She added: “Our customers are also changing. Before when we were doing private-label products, our customers took what we gave them. Now they have their own innovation agenda. They expect us to help them deliver on their innovation agenda. They want, for example, the latest sugar-reduction solutions. How do we manage that? That’s really a challenge.”
Dr Lindström set out how the size of large companies could hamper innovation. “The problem in Arla – and maybe in a lot of other bigger companies as well – is that we’re too slow, we’re producing products that nobody wants and that fail when we launch [them],” she said.
“Why are we slow? Because we’re big, we have to be responsible. We have a procurement department telling us what suppliers we can work with. We have a CSR office, telling us how to behave in a responsible way. That is blocking us sometimes. We have a huge supply chain with maybe not so much up-to-date equipment and it’s taking really a long time to upgrade and get capex approvals and new machinery. We’re working as a very big, slow machine and cannot react to consumer changes or demands that are changing all the time.”
The Arla executive, who has held roles working on innovation at the Denmark-based cooperative since 2014, said the company was testing different ways of innovating, pointing to concepts used by other businesses such as “design thinking”, “lean start-up” and “agile”.
She explained: “Design thinking is very good when you might not even know what problem you have to solve. You take a consumer-centric approach at the very early stages of innovation. With lean start-up, you use it maybe when you’re trying to see if there is a market-fit for your new product, getting your product out to customers to get feedback. And agile is very good to use when you have a solution that you need to then implement within the company. It’s a methodology coming from the IT world. The pieces we have taken out of it is the way they plan things. They normally run a ten-week process divided up into two-week sprints. Every two weeks, the group meets and plans the coming two weeks. As part of the plan, you show your stakeholders what you have produced, so it’s easy to talk about the solution and find out if we’re in the right direction. If we’re not, we’ve only spent two weeks working in the wrong direction.”
One facet common to each of the three methodologies, Dr Lindström explained, is seeking feedback from consumers more quickly, enabling a business to rapidly make changes to early product ideas. Using parts of the methodologies has meant Arla has reduced its use of agencies, especially in its home market of Denmark.
“We are able to look the consumer in the eye and get their feedback. That helps a lot,” she said. “The way it works with Arla and maybe other big companies is our marketing people write a brief, that brief is sent to agencies and the agencies are doing these processes behind locked doors. A few weeks later, we get the result back, we get a bunch of concepts or a category strategy but, because it happened behind locked doors, we have no idea what happened and how they got to that conclusion. When we receive those results, a concept and have to create a product to fit that concept we don’t even know the rationale behind getting there.
“By bringing this in-house and ourselves looking the consumer in the eye, we understand how we get to this concept, this category strategy or this brand identity. A lot of big companies are using agencies to do these things and we’re bringing it in-house and that really makes a difference.
“By using this process and engaging ourselves into it, we are doing it very quickly, over five to ten weeks, we get somewhere and because we collect consumer feedback all the time, there’s a higher chance of launching a successful product.”