Business Insights from Entrepreneurial Companies—Part 2

“Managing Innovation: From Entrepreneurial Startups to Going Mainstream” offered attendees of the 2019 Protein Trends & Technologies Seminar a practical “how to” guide for innovators. It exposed pitfalls and proffered practical solutions to the challenges that plague those struggling at the leading edges of food and beverage development. The second half of the panel on managing innovation continues below (Click here to return to Part 1):

Part 2:

Moderator:
Kara Nielsen, Vice President of Trends and Marketing at Emeryville, California-based CCD

Panelists:
Didier Toubia, CEO of Aleph Farms
Anthony Brahimsha, Founder and CEO of PROMMUS Brands, LLC
Umaima Merchant is the Director of Innovation and Growth at Premier Nutrition
Scott Mandell, Founder and former Chief Executive Officer of Chicago-based Enjoy Life Foods
Mark Haas, Founder and CEO of The Helmsman Group
Note: See Part 1 of “Business Insights from Entrepreneurial Companies” for more in depth biographies

Interdependency
Can innovation start-ups go it alone? Every situation is different, and many considerations come into play, such as the availability of capital, technical and management resources, and infrastructure.

Toubia views his company’s venture as part of an “ecosystem” of alliances with other companies. “It would be very difficult for start-ups, if we didn’t have alliances with other companies to help us build market strategies and to optimize our products and technologies.” Other artificially grown animal protein companies also operate in alliances with large CPG companies.

Brahimsha noted that his current business partner, Mike McCloskey, disrupted the dairy category when he and his spouse, Susan, introduced ultra-filtered, low-lactose, protein- and calcium-concentrated milk to the market in a joint venture between his company, Chicago-based Fairlife, LLC, and The Coca-Cola Company. Fairlife provided the innovation and technology, while large CPG-company Coca Cola provided the distribution.

“What about working with business and innovation incubators,” prompted moderator Nielsen. “Are they a fad or are they here to stay?”

Haas maintained: “They are here to stay.” The terms of such relationships could be tough on small entrepreneurs, he allowed, but “from a big company perspective, it allows them to place a lot of inexpensive bets and retain some control over those companies.”

Mandell demurred, saying, “While I agree that the terms may look good from the venture capital side, they are not always so from the founders’ perspectives.” He cited sub-optimum mentorship support and significant equity grabs exchanged for relatively small investments made by corporate patrons.

Brahimsha suggested that a more important consideration than the capital investments themselves were the values represented by a CPG patron. “While cognizant of the capital contributed by your venture partner, one must also consider the importance of ensuring that your brand values and principles mutually align.”

Innovation Cultures
Then, there are business cultural considerations. Can high-risk, unstructured innovation cultures survive or coexist with highly structured CPG environments? What is innovation culture, and what are its key attributes?

“Innovation culture demands a number of things,” said Mandell. “A big part of that is finding the right people and giving them the right resources to succeed.” Enjoy Life, he continued, scanned the industry to find people with the right mindsets. And then, he emphasized, “we gave them the right to fail;” this is a quality that may not be as tolerated inside highly political CPG corporate cultures. “You can’t expect 100% success 100% of the time…that would be insane,” agreed Haas.

Merchant recalled her time working at Clif Bar. The company was run by the founders’ shared vision for their company. “They went where their passions took them.” They were OK with failure. They were also highly successful. A “scary statistic,” noted Merchant, is that “about 80-85% of new products in CPG markets fail in their second year after launch.”

Given the large up-front investments necessary to launch new products, large CPG companies accountable to investors are seldom in a position to assume large innovation risks. Consequently, large CPG companies tend to groom risk-averse cultures, while start-up companies attract more innovative and risk-friendly employees.

So, adjustments must be made. Mandell explained that, following his company’s acquisition by Mondelez, for high-risk innovation, its parent ran Enjoy Life as a quasi-independent unit—in order to protect its innovation culture. Properly siloed, it seems that competing corporate cultures can coexist.

Building an Authentic, Compelling Narrative
Given that innovation cultures must by tolerant of failure, are there any upsides to failure? Nielsen raised the need for start-up brands to create compelling “innovation stories.” She stated: “Millennials and other consumers like brands about which they can get excited and champion.”

Virtually all start-ups are the outcome of trials, tribulations and failure, agreed Haas. He observed, “Consumers are more attached to brands that reflect a creation story to which they can emotionally connect.”

One need only look back at the compelling “struggle and success” narratives of successful U.S. food and beverage industry icons, ranging from Colonel Sanders’ Kentucky Fried Chicken to Steve Demos’ White Wave Foods (now part of Danone North America), to recognize the truth in these words.

Brahimsha added that, to be effective, a narrative must be absolutely authentic. “Consumers can see right through a product narrative that was developed in a board room, vs. one developed in someone’s garage,” he said.

Merchant added, “While an innovation story is very important for consumers, it is also important for internal customers.” It motivates their efforts to know that they are part of a bigger story.

“Authenticity is huge,” agreed Mandell. One way that Enjoy Life built authenticity with its customers was by constantly interacting with them through social media. “We even asked them whether they would like to participate in our innovation process by letting them evaluate our new innovation products through SurveyMonkey.” For example, “Our number-one selling product, Mini Chips, was the result of moms calling us to ask that, given that kids could eat our allergen-free chocolate chips in chocolate chip cookies, could we just bag the chips separately? Well that was pretty easy!”

So, asked an audience participant, given all the information discussed, “Should innovation focus on following consumers’ stated needs, or should it focus on leading consumers toward specific, not-as-yet identified opportunities?”

Merchant replied: “You do both!” Meeting identified consumer needs or leading them to discover unmet needs are the two great pillars of successful innovation. “But leading lets you venture into the unknown.”

The “Managing Innovation: From Entrepreneurial Startups to Going Mainstream” panel at 2019 Protein Trends & Technologies Business Strategies program

This presentation was given at the 2019 Protein Trends & Technologies Seminar. To download free presentations and the Post-conference summary of this event, go to https://www.globalfoodforums.com/store/protein-seminars/

See past and future Protein Trends & Technologies Seminars at https://www.globalfoodforums.com/store/protein-seminars/

Posted on:December 4, 2019

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