Innovation Management: Critical Evaluation of Unilever - Research Paper Example

Innovation Management: Critical Evaluation of Unilever History of the Company The company that we have chose for the critical analysis of their innovation management activities is Unilever. Before we move towards the actual analysis, we would discuss a brief history of the company. Unilever came into being in 1930 and has its roots in Britain and Denmark. It was the result of the merger of British soap-maker ‘Lever Brothers’ and Dutch producers of margarine, ‘Margarine Unie.’ The merger happened because of a commonality between the two companies, which was Palm Oil; a raw material used in the making of both margarine and soap and it was more efficient to import it in large quantities. There was no looking back since the merger; the company launched numerous new ventures and most of them turned out to be very successful for the company. In 1980, soaps and edible fats contributed to only 40% of the total profits as compared to the original 90% profit. Hence, in 1984, the company bought the brand Brooke Bond. It went on to acquire Chesebrough-Ponds who manufactured Ragu, Pond’s, Aqua-Net, Cutex Nail Polish and Vaseline in 1987. Similarly, the company acquired Calvin Klein cosmetics in 1989 that were later sold to FFI Fragrances in 2000. In 1996, Unilever acquired the Helene Curtis industries that gave the company a strong presence in the shampoo and deodorant market in USA. The acquisition brought brands like Suave and Finesse as well as Degree deodorant under Unilever (Collins, 1996). The company has kept on acquiring other brands and companies turning itself into a multi-brand company holding numerous well-known brands under its umbrella (Unilever.com, n.d.). Company Profile Unilever is a dual-listed company comprising of Unilever N.V. in Rotterdam, Netherlands and Unilever PLC in London, UK. The companies do not work in isolation and both the companies have the same directors and work as a single entity. The two main competitors of Unilever besides numerous local competitors that are subjective to particular local markets are P&G and Nestle. Unilever also gets tough competition in some areas from companies such as ConAgra, Danone, General Mills, Henkel, Mars Inc., Pepsi Co., Reckitt Benckiser, and S.C. Johnson & Son. Company Mission One central mission very important for the company is to become a multi-local, multinational organization that has products and services touching the lives of people on a daily basis. The corporate vision and mission consists of four basic pillar that are responsible for shaping the long term strategic direction of the company, i.e. the goals they want to accomplish in the future and how they are going to achieve them: “We work to create a better future every day We help people feel good, look good and get more out of life with brands and services that are good for them and good for others. We will inspire people to take small everyday actions that can add up to a big difference for the world. We will develop new ways of doing business with the aim of doubling the size of our company while reducing our environmental impact.” (Unilever.com, n.d.). Corporate Social Responsibility The company has a strong sense of responsibility starting from the time of its establishment in the 1890s. The social mission of the brand has always been a core part of their strategic direction. Remaining true to its core, the company launched the Unilever Sustainable Living Plan in 2010 that consists of a set of targets that have been designed to help the company in delivering their objective of growing their business while reducing their overall environmental impact. The corporate strategy of the company has always revolved around the theme that a business has a responsibility towards its consumers and the communities it operates in. Unilever wants to have a business that is sustainable at every aspect of its product life cycle and in order to do that they work with their suppliers continuously and promote responsible agricultural methods. The company also tries to learn from the examples of NGOs and other organizations to make the best of their situation and plan effectively for a sustainable future. Innovation Innovative procedures and promoting innovation has always been at the heart of the company. They have utilized technology and scientific research to enhance their brands, for example in the case of food brands, they have tried to improve the nutritional properties, taste, fragrance or functionality of the product. The company invests €1 billion annually on research and development and have set up laboratories around the world where scientists research on new approaches, beliefs, and techniques while continually enhancing current products while coming up with new ones (Unilever.com, n.d.). Critical Evaluation This section of the paper is dedicated towards the critical evaluation of innovation management at Unilever and it has been divided into 4 major parts. Unilever is a truly global company and it employs more than 250,000 people in 150 countries around the globe. One interesting aspect is that 2.5% of the annual turnover is spent on research and development as well as innovation to existing products. Consequently, the company also files more than 400 patent applications on a yearly basis. Context - Organization The company understands the significance of knowledge as the main provider of competitive edge for the company. Having realized the importance of knowledge and innovation, the company has invested heavily in IT over the past few decades. However, it is important that innovation translates to top-line and the bottom line. One problem with this was that the knowledge in the organization was tacit, i.e. it was implicit only for a particular employee. Moreover, as innovation and changing work environments, procedures require continuous restructuring, very important tacit knowledge is lost. Transfer of tacit knowledge is not easy as the people holding the knowledge are unaware of it because they have also earned it with experience. Similarly, innovation is not a static process. It is the continuous process of creating new knowledge and learning. It is important to manage innovation and knowledge and transfer it and do not allow it to be static, only then it would be able to produce a sustainable competitive advantage. An analysis of the company reveals that Unilever took perspective of a learning organization as a starting point and started activities that manage innovation and manage the knowledge. The company organizes several knowledge workshops on a regular basis. The knowledge workshops at Unilever help the organization through presentations by industry experts and practitioners. Moreover, being an innovation based company, Unilever invested further into innovation and R&D programs to eradicate the problems identified during those workshops. Context - HR The knowledge and innovation management workshop helped in developing experts who were responsible for a specific domain of knowledge and innovation to avoid hassle and confusion within the company and among the people and their roles. Unilever’s main goals has been to achieve sustainable growth for its brands globally and they have always driven their growth through large scale innovation. Unilever spend around 1.2 billion Euros on R&D in 2002. Approximately 8,000 members from the human resource are involved in the R&D programs. In order to manage innovation and make it a continuous process, the company has set up Global Technology Centers, Regional Innovation Centers, and Unilever R&D organizations. The company has always worked towards managing the innovative energy of its people. In order to manage and understand innovation and creativity, the company tried to answer questions like where do new ideas come from? What are the necessary habits? How to encourage a culture that allows employees to come forward with ideas that lead to innovation? The Creative Awareness Program (CAP) was designed within Unilever to find the answer to such questions (Mostert, & Frijling, 2001). In 1998, the company initiated the Creative Pathways Program so that they can manage the creativity of the people. It is an excellent example of managing innovation and encouraging it. Not only the company encourages its employees to think out of the box, and with programs such as Creative Awareness Program it manages the innovation of the people so that it does not go out of hand and still contributes to the bottom line. Companies, teams, individuals, departments, who want to manage innovation and still keep it alive should definitely adopt the CAP. In the CAP, participants are provided with tools to use their own creativity and that of the team to implement their findings. It also harnesses a creative problem-solving approach, which eventually leads to innovation in product development and enhancements, patents, as well as changes in the behaviors and mentality of the human resource. Another important part of the CAP is the Creativity Awareness Model through which the company teaches its employees on not only coming up with innovative ideas as well as managing it. They have describes five basic factors that can influence the creativity of a person: attitudes, behavior, skills, structures, and environment (Rao, 2005; pg 259). Attitude – Attitude is an employee’s own perception regarding their creativity. They need to understand their own flexibility, sharing of creative ideas in a manageable manner, and an understanding of the mental maps. Behavior – Unilever has also invested in instilling the right kind of behaviors towards innovation and its management in its human resource. Skills – Obviously, the company hires the best of the best and that is why the employees are competent enough to think unconventionally and come up with innovative ideas. Structures – This is an integral part of the model as managing innovation is as important as the process itself. The model through this attribute tries to keep a control and check on the innovation and creativity in the human resource. Environment – The environment of Unilever has been designed to support innovation at the company. The attitudes of the top management, long-term strategy, process of decision-making all are supportive of new ideas and creativity. Anther interesting thing that the organization indulges into is the Creativity Awareness Training Modules. Under this technique, the employees that have been identified as being too conventional and lacking innovation are trained to discover their own creativity and how it could be most profitable and well-managed (Mostert, & Frijling, 2001). . The reason behind the importance of innovation at Unilever is due to the belief that the long-term profitability of the firm depends on innovation. Globalization of economy, increased competition, availability of substitutes, has resulted in shortening the product lifecycles. Moreover, the consumers have also become more informed, matured, and now they do not just look at the product, they look at the value for money, quality, sustainability. The result is that Unilever needs to come up with products that fulfill the value proposition of the consumer in a better manner than the existing products. The best method of doing so is through managing innovation and formulating a strategy for filtering and selecting ideas for product development and innovation. Context – Innovation Strategy In order to manage innovation, Unilever adopted the Innovation Process Management (IPM) in 1996 (Kahn, 2002) as a methodology not only for doing things in the right manner but also doing the right things as well. Unilever adopted a very simple strategy for choosing to do the right things, they started mapping each innovation project on a consumer /technology matrix. One axis on this matrix explains the value perception of the consumer starting from ‘new core product’ to no change. The other axis describes the technology that can enable the change starting from ‘radical’ to ‘base’ technology. The position of a project in the matrix is used as a selection criterion for the implementation of the project and it helps the company in managing an effective portfolio. In order to do things in the right manner, the company monitors all innovation activities undertaken as projects through a stringent review procedure. The review procedures are the very core of the Unilever IPM and it has been broken down into a number of phases and gates of the project lifecycle. There are three main pillar on which the innovation strategy of Unilever has been formulated on: Critical Analysis - Four Part Process Building new understanding (Search) – the company works hard in obtaining consumer and technological insight to lay the foundation of innovation on solid grounds. We can also call this as well managed innovation because it would result in ideas that have consumer insight in them and they would also help in taking important management decisions. Finding new angles (Select) – An organization and its employees need to keep on looking for new angles in this fast changing competitive environment and this is exactly what Unilever focuses on. Search for new angles helps the company in getting new ideas and plans of implementation. Nurturing new ideas (Implement) – It often happens that new ideas are born and die very easily. At Unilever, the organization takes care that ideas are nurtured and not treated as risky, costly, or irrelevant and this is why we see so much innovation in the company and such long living brands. (Rao, 2005; pg 258) Unilever Ventures We can see the completeness of innovation management at Unilever through the fact that they have covered it with every angle. Organizational context is one context of managing it. Organizational support has been incorporated into Unilever Ventures. Unilever Ventures was launched in 2002 as a small endeavor to identify and formulate business opportunities that emerge both externally and internally. The company encourages businesses to come up with business development ideas that can provide businesses with competitive advantage or could help in leveraging Unilever Intellectual Property. Search – Unilever Ventures asks businesses to search for business opportunities and try to consider all possibilities that might be fruitful for the organization Select – The owners can propose one or more than one business opportunity that they have realized during their search to be implemented. Implement – The next phase is an analysis that reveals if the business opportunity has the ability to provide competitive advantage and help it in achieving profitability. The project that has the highest profitability and competitive advantage gets picked. One aspect of this venture that I think is missing is the ‘Capture’ stage of innovation management scheme. Although, Unilever Ventures seems like an excellent opportunity for new businesses as they can get associated with Unilever, however, the firm does not manage the part where the businesses drive benefits from their endeavor leaving it vulnerable to loopholes in the business strategy (Unilever Ventures Ltd., n.d.). Unilever Idea Management System Another endeavor on the organizational level that helps us indentifying the brilliance of innovation management at Unilever is the idea management system. It is a series of events that requires research employees to come up with various ideas for a product or a process by experiencing the particular brand in question. All of the above mentioned activities help Unilever manage its R&D activities while continuously innovating and managing innovation. Moreover, managing innovation also allows the company to have continuous stream of ideas that would bring sustainable profitability and competitive advantage (Rao, 2005; pg 259). If we critically analyze the venture through an innovation management system we can see that: Search – The basic theme is to search for new ideas for a product or a process by experiencing different brands Select – Once the employees have identified all possible ideas regarding a product or a process, the management can select the best one out of them. It allows them to manage innovation and R&D activities One negative aspect of such a system is lack of emphasis on implementation and ‘capture’ phase. Another point worth mentioning here is that these systems usually restrict people on who can build ideas and who can access the ideas, which is similar to old Black box mentality of suggestion programs (Turrell, 2003; pp 3). Recommendations As we have identified some major loopholes within the processes used for innovation management, there are a few that only come forward when we take a holistic view. We have already discussed that employees and the organization is encourage to come up with innovative ideas regarding existing and future products and processes. However, as everybody works in independent project teams, it might make them unaware of the complete picture and the circumstances faced by other products and processes. The organization should allow free flow of information, problems, solutions, people, and decisions should be known by all so that people are innovative and informed. Similarly, each project goes through set number of phases in its lifecycle. There is the initiating phase, definition phase, design, preparation, realization, and closure phase. The point at which most amount of innovation and creativity is necessary is the initiation phase. Initiation does not necessarily begin with the implementation of the project, it might be from the research procedure. Unilever’s innovation management needs to further develop the research skills of its human resource so that they can identify and search for possibilities. The company understands that innovation is there to bring out consumer oriented products to the markets as soon as possible. Innovation should always consumer focused. Involvement of the senior management is also very necessary as they should be managing, allocating, and guiding resources. The company should also have a regular meeting mechanism so that they can monitor and control the innovation process. Generalization of innovation processes should also be carried out as it would help in managing risks and assessing opportunities. It would also promote continuous learning. The critical analyses talked about how Unilever’s innovation management strategies at all levels of the organization helps in ensuring the structure and culture of the organization. Moreover, the idea management system of the company explains how ideas are born and are profitable if implemented when young. The company has a very strong innovation management structure that helps in knowledge sharing and creativity within the team, towards management, and to other brands and projects. Conclusion The globalization of economy along with flattening of the world in terms of business has resulted in intensifying the competition. Businesses today can no longer compete solely on the basis of a product or service or its attributes, they need to be different, and innovative. The only sustainable competitive advantage in today’s business world is continuous innovation. Innovation could be either in processes, HR, products, or in all three. It would depend on the competency, experience, and knowledge of the organization in question. With innovation, an organization also needs to focus on managing it as we saw in the case of Unilever. Unilever started off with innovative practices both in its products, processes and its people from very early on. However, they have been so successful because not only they concentrated on innovation, they also focused on managing it. We cannot say that they were perfect in it as we did identify some loop holes, but they did a pretty remarkable job. Table of Contents History of the Company 1 Company Profile 2 Company Mission 2 Corporate Social Responsibility 3 Innovation 3 Critical Evaluation 4 Context - Organization 4 Context - HR 5 Context – Innovation Strategy 8 Critical Analysis - Four Part Process 8 Unilever Ventures 9 Unilever Idea Management System 10 Recommendations 11 Conclusion 12 Table of Contents 13 References 14 References Collins, Glenn (1996). Unilever Agrees to Buy Helene Curtis. The New York Times, February 15, 1996. Retrieved on April 11, 2011 from Unilever.com. Our History. Retrieved on April 11, 2011 from Unilever.com. Our Vision. Retrieved on April 11, 2011 from < http://www.unilever.com/aboutus/ourmission/?WT.GNAV=Our_vision> Unilever.com. Introduction to Unilever. Retrieved on April 11, 2011 from < http://www.unilever.com/aboutus/introductiontounilever/?WT.GNAV=Introduction_to_Unilever> Rao, Madanmohan (2005). Knowledge management tools and techniques: practitioners and experts evaluate KM solutions. Retrieved on April 14, 2011 from Kahn, M. (2002). The global approach in innovation: Making it happen, Russell, J., Ed., London: Caspian Publishing Ltd., and IBM UK Ltd., pp. 27-31. Frijling, L.H., & Mostert, N.M. (2000). Creativity Climate Questionnaire, Unilever Research: Vlaardingen, The Netherlands, ISBN 90 64 96 169 7. Unilever Ventures Ltd., (n.d.). Why Unilever Ventures? Retrieved on April 14, 2011 from < http://www.unileverventures.com/Why-Unilever-Ventures-content-17/> Turrell, Mark (2003). Idea Management ROI: Quantifying the returns for advanced idea management. Imaginatik Research, White Paper. 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