Henry Ford

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On November 15, 2018, Henry Ford commented on Great Scott! What’s next for open innovation at LEGO? :

A very interesting take on crowdsourcing – thank you. The crowdsourcing results that LEGO have experienced to date are truly remarkable! To pick up on a point raised by HBSStudent0918, I think a balance does need to be struck between relying too heavily on consumer feedback versus novel out-of-the-box innovations. Ultimately though, there needs to be a target market for the product, and market research is often done ahead of any product launch, anyway. With that in mind, who better to inform the future viability of the product and initial market receptivity than the consumers themselves? However, I fully agree they may know what they want today, but not what they want in the future, per se.

On that note, I’d like to highlight a major concern with consumer-based crowdsourcing, given how we’ve seen mixed results with similar campaigns in the past by the likes of Mondelez, Lays, and Mountain Dew. There appears to be a clear distinction between something consumers find “novel and shiny” and something they’d actually truly buy. For example, the jury is still out on if the Cherry Cola Oreo contest winner will be a flavor that’s here to stay for the long term, or is just a fad[1]. Regardless, I am a big believer in the potential that crowdsourcing offers, because of how it can build brand equity, generate buzz, and allow consumers to feel empowered and engage with the brand in new ways.

Regarding Natasha Romanoff’s concerns around channel dynamics, I fully agree that the toy space is a challenged arena in today’s paradigm. Increasingly, consumers are gravitating towards customizable products and experiences. For this reason, I think there is opportunity to reduce reliance on brick-and-mortar by investing in virtual marketplaces that allow for digital “out-of-store” interactions with toys prior to actually purchasing. Since the purchasing of toys is so tactile, this could help drive increased traffic online and improve accessibility by lowering the barrier to trial. Taking this one step further, LEGO could even leverage the crowdsourcing model and online voting to see which out-of-the-box concept would be of most interest to consumers. This way, they can avoid embarking on the path of prototyping and testing on ideas that consumers don’t necessarily find interesting in the first place.

[1] Koman, Tess. “EXCLUSIVE: Oreo’s Newest Flavor Won Somebody $500,000.” Delish, Delish, 8 Aug. 2018, http://www.delish.com/food-news/a22662768/my-oreo-creation-winner-exlcusive/.

On November 15, 2018, Henry Ford commented on Flying High: GE’s Billion Dollar Bet on Additive Manufacturing :

Thank you for sharing your thoughts on the exciting topic of additive manufacturing. I would echo Tom Raider’s sentiments, that just because the unit economics don’t support mass production today, doesn’t mean it won’t be possible in the future. Though we’re not there yet, and it continues to suffer from limitations such as the thinness of the material it can support[1], we’ve already seen the technology advance and is now capable of making structures and of using materials that weren’t previously possible.

I think it’s absolutely critical that GE seeks to maintain its leadership in core markets. To do so, GE must be at the forefront of emerging disruptive technologies. For this reason, I think it’s a smart investment for them to be making. As GE continues to restructure and rationalize its portfolio, they should be thinking about their core market positions, assess the degree of disruption risk, and quantify the long-term franchise value of focusing R&D efforts in an area like this. The criteria I think they should use to prioritize their efforts and resources (which includes financial capital, R&D energies, and talent) should be areas for which 3D printing is the strongest: where the innovation cycle is fast, and where rapid prototyping can be a source of competitive advantage. Within their current portfolio, I’d imagine some of their healthcare device and imaging assets could prove fruitful. Along those same lines, GE should also target areas where the bill of materials is high and competitive intensity is driving pricing and margin pressures. Or, connecting back to today’s TOM class, areas where complicated and dispersed supply chains become problematic.

Overall, I believe additive manufacturing holds great promise. The one caution I’d call out is that GE should be disciplined, since first movers in emerging technologies don’t necessarily prevail in the long-term, depending on the barriers to entry / ease of replication.

[1] Bonnín-Roca, J., Vaishnav, P., Mendonça, J., & Morgan, G. (2017). Getting past the hype about 3-D printing. MIT Sloan Management Review, 58(3), 57-62. Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1885885282?accountid=11311.

Thanks for sharing – a very interesting thought piece. ModiFace’s technology is potentially quite revolutionary for the beauty industry. Increasingly in the land of consumer retail, successful companies need to find a way to accommodate the omnichannel experience, and respond to increasing calls by the consumer to provide tailored, customized, on-demand, and convenient solutions. Given the thematic alignment of this product with these trends, I am a big proponent. As we’ve touched on in our marketing class, e-commerce purchasing for beauty is typically reserved for repeat purchases following an in-store experience. However, if we can unlock the brand discovery and trialability pieces of the puzzle previously addressable for online, the effects would be profound for L’Oreal.

We see these sorts of predictive analytics platforms popping up all around the consumer world, such as StitchFix (https://www.stitchfix.com/) in fashion. To respond to your question, I see the beauty industry moving in the same direction. This technology could be a valuable source of tremendous brand loyalty (if the predictive decision-making is actually sound). Additionally, it would dramatically reduce brand marketing expenses, because the data-driven approach would lead to much more targeted marketing efforts. It will also massively disrupt beauty retailers by potentially disintermediating them from the consumer purchasing journey. The flipside though, is it might allow brands to become increasingly virtual, reduce the customer cost to trialing new brands, and further enable brand proliferation, thereby undermining brand equity (if the technology becomes more widespread). Hence, it can also be a threat to the brands themselves at the same time.

It will be very interesting to see how this all plays out. Clearly though, successful beauty brands will need to have a strong captive digital / technology platform if they want to remain competitive.

A thought-provoking read – thank you, Caitlin. I’d like to respond to the question you posited on production costs, as it’s a critical issue, as you highlight. Much like we’ve seen with other novel technologies, my suspicion is that as competition increases and firms climb up the learning curve, production costs will decrease. While that poses challenges in the short-term because adoption must increase for the learning effects to take hold, I am optimistic that longer-term, this will actually become a cost-effective solution. In fact, we’re already seeing that 3D-printed prosthetics can be produced for significantly less[1]. As you highlight, getting the FDA on-board and comfortable is key, because if it presents insurmountable regulatory hurdles, it will disincentivize experimentation.

In a world where that’s not the case and it remains a more expensive technology, I still think there could be a future for additive manufacturing in the medical device world, even in a bundled payments or fee-for-value paradigm. For me, it will hinge on the eventual cost-benefit trade-off. That is, perhaps 3D-printed devices offer cost-saving benefits, such as more durable, more precisely made equipment, which avoids downstream replacement or repair costs, or possible complications. Or, they may permit less costly, more rapid innovation, and so device companies are willing to use it to gain a competitive edge against competition and compress product development cycles. Either way, I’m a big believer in the future promise of this technology. Thank you for drawing attention to it!

[1] Pando, Alexandro. “How 3D Printing Could Change The Health Industry.” Forbes, Forbes, 17 Jan. 2018, https://www.forbes.com/sites/forbestechcouncil/2018/01/17/how-3d-printing-could-change-the-health-industry/#1decf81751ce.

On November 15, 2018, Henry Ford commented on Innovation through acquisition at General Mills :

Thanks for the interesting read, Patrick. Open innovation—particularly through incubators or venture capital arms—is a trend we are seeing more and more in the food / broader CPG landscape, of late. Having spent some time myself in food investing, I completely agree with your characterization of the challenging position the large legacy house of brands now find themselves in as consumer preferences migrate more towards better-for-you start-up brands with very different value propositions than what companies like General Mills offers.

The tradeoff between Mills choosing to simply acquiring start-up brands that have demonstrated momentum (e.g. Kellogg’s acquisition of RX bar in 2017[1]) as opposed to incubating these brands and folding them into their organization is one worth considering. By backing them first, you have the benefit of closely monitoring them, assessing performance, and having the fast-track to integration. However, it’s also not necessarily their core competency – they aren’t a venture firm. Plus, it will require buy-in from General Mills’ investors, that they are comfortable with “kissing a lot of frogs” until they find their “prince” (given many VC-backed companies will ultimately fail).

With regards to their R&D department, I think they should absolutely keep their R&D department. However, it may not need to be nearly as extensive as it was. Embracing open innovation will require new capabilities that they didn’t have before, but a key success factor in such initiatives will be the ability to manage and ultimately integrate these technology and businesses into the broader Mills engine. Though these upstart brands may exist on a standalone basis, there could be other potential applications within Mills. Plus, line extensions and incremental innovations will still need to be led by the Mills R&D team (rather than the start-up). Either way, I think there is opportunity for complementarity.
Also by coincidence, competitor Mondelez recently announced their plans to pursue a very similar approach as Mills, whereby they will be investing capital behind promising start-ups as a way of immersing themselves in the latest emerging brands, concepts, and technologies[2]. So clearly, Mills is onto something!

[1] Kellogg. “Kellogg adds RXBAR, fastest growing U.S. nutrition bar brand, to wholesome snacks portfolio.” Kellogg, Kellogg, 6 Oct. 2017, https://newsroom.kelloggcompany.com/2017-10-06-Kellogg-adds-RXBAR-fastest-growing-U-S-nutrition-bar-brand-to-wholesome-snacks-portfolio.
[2] International, Mondelez. “Mondelēz International Launches SnackFutures™ Innovation Hub to Lead the Future of Snacking.” Mondelez, 30 Oct. 2018, https://ir.mondelezinternational.com/news-releases/news-release-details/mondelez-international-launches-snackfuturestm-innovation-hub.

On November 15, 2018, Henry Ford commented on Cedar: Making Paying Doctors Much Easier :

Thank you for the thoughtful piece of work. Cedar certainly seems to bring some very interesting and impactful technology to bear, and I agree the applications of such technology can be broad-reaching. I wanted to pick up on your question regarding patient privacy, as this has routinely presented a roadblock for technology-based B2C solutions in the healthcare realm. I am skeptical that such a solution can ever be forced upon a patient against their will, even if the hospital or physician community embraces it. In the end, it will still be an opt-in/opt-out model. For me, the key will be demonstrating product efficacy, to enhance the cost-benefit in the eyes of the patient. Cedar and others will need to quantify the improved health outcomes from sharing incremental data, and convince customers that the “price” they “pay” for improved coordination of care is a tradeoff worth making. I certainly agree with your point– there are benefits to scale as well as network effects in this business. Frankly, I’m shocked that when coming to HBS, I needed to piece together my vaccination history from various disparate physicians and clinics I’ve seen over the years – there’s a clear unmet need for centralization and customization.
Of course though, this efficacy will then need to be supported by demonstrated iron-clad privacy controls and encryption capabilities, particularly in the wake of well-publicized cybersecurity breaches that have made the US population increasingly skittish of big tech. I do think we will ultimately get there as a society as more tech-savvy millennials and their descendants become a greater proportion of the population. Perhaps Cedar is well-positioned to take advantage – only time will tell.