“Brewing a Better World” with Open Innovation: Heineken’s Innovators Brewhouse
Heineken engages in co-creation with its global consumers as a core part of its innovation strategy.
To put its mantra “Brewing a Better World” into practice, Heineken runs crowdsourced competitions on its Innovators Brewhouse online platform, seeking the best solutions related to sustainability and product design. Heineken’s commitment to open innovation has paid off; within just three years of launching its “Brewing a Better World” strategy in 2010, over $1.1 billion in revenue was traced to new innovations.1
Open innovation can be messy and logistically challenging.2 So why does Heineken remain so committed to it?
The first reason open innovation is important to Heineken is category-specific; consumer-packaged-goods companies oftentimes find it difficult to change their fundamental product (a new Heineken “recipe” wouldn’t make it Heineken anymore), so instead innovate through packaging “makeovers.”3 Second, within a fiercely competitive/overcrowded beer market, Heineken views co-creation as a powerful “marketing tool” to build customer loyalty and keep Heineken top of mind.4 In fact, marketing products as “customer-ideated” has been found to enhance the product’s market performance by up to 20%!5
Last, but not least, this megatrend is important because of the economic implications; Heineken’s Innovators Brewhouse helps collect ideas for the fraction of the cost (and time) that it would traditionally take. Other CPGs are realizing these tangible benefits; Colgate-Palmolive paid a mere $17,000 for ad campaign ideas for Speed Stick, one of these which became its submission for a $4 million Super Bowl buy.6
What Heineken is doing:
Heineken’s open innovation development process holds true to their statement that “great ideas and innovative solutions can come from anywhere.”7
In its 60+ Design Competition, Heineken invited collaborators to reimagine the drinking experience for the 60+ consumer. The top six candidates traveled to Heineken Headquarters in Amsterdam to fine-tune their ideas with innovation experts at a two-day workshop.
One of the top three submissions, called the Easy Star Bottle, made it easier and simpler for older folks with limited dexterity (and many suffering from arthritis) to open and share a Heineken8:
The top three ideas (out of 150 submissions) came from innovators in Finland, Australia, and the USA,9 validating that the best ideas can indeed come from anywhere. Believing deeply in transparency in its product design process, Heineken makes everyone’s submissions viewable.
While many of Heineken’s open innovation processes thus far have focused on packaging design, longer-term Heineken will increasingly incorporate novel technologies. For example, Heineken’s FutureBottle, a crowdsourced idea, uses new temperature-sensing inks that indicate when a beer needs to be refrigerated.10
Heineken will increasingly combine open innovation with another megatrend, machine learning. BruVue, the winner of the 2018 Innovators Brewhouse Challenge, provides a data feedback loop to track beer volumes inside draft systems.11 This IoT solution will benefit many different stakeholders in the beer retail ecosystem, such as bars that can now track their beer inventory, and also distributors who can see customers’ inventory real-time and practice just-in-time supply. It’s particularly interesting that this innovation also helps Heineken’s competitors as they can get feedback on consumer product preferences. This is open innovation and co-collaboration at its finest.
Further Recommendations:
A near-term recommendation is for Heineken to rethink its open innovation process. Under the idea generation vs. selection framework, most of Heineken’s Innovators Brewhouse competitions currently fall in the “Innovation Tournament” bucket:12
I would recommend that Heineken crowdsource more idea selection to collaborators as well. This will send a signal that consumers, not only Heineken executives, can have a voice in building the future of Heineken.
Additionally, I would recommend creating unique crowdsourcing challenges distinct from competitors who are also doing open innovation. A few years ago Budweiser developed a new beer called Black Crown crowdsourced from consumers.13 To differentiate itself, Heineken could support opportunities for in-person co-collaboration such as local community meet-ups hosted by passionate collaborators. As Heineken continues seeing high ROI on its open innovation efforts, they may be more likely to invest in new co-creation strategies like this.
In the longer term, I would also recommend that Heineken encourage more open innovation through bearing more of collaborators’ costs and risks of submitting a design. This could mean Heineken provides open access software to mock-up designs, or grants monetary awards for participation (rather than just to the competition winners). This would result in even more contest entrants and help Heineken generate the best possible ideas and solutions.
Open questions:
A couple open questions remain for me:
- How can Heineken tailor its open innovation processes more locally/regionally in the midst of growing competition from craft brewers?
- The Heineken brand is only 15% of Heineken’s volume14; should Heineken leverage its Innovators Brewhouse platform to innovate their 300 smaller portfolio brands? If so, how?
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Sources:
1 Heineken. “Annual Report: 2013.” Heineken Website (2013).
2 King, A. and Lakhani, K. “Using open innovation to identify the best ideas.” MIT Sloan Management Review 55, no. 1 (fall 2013): 41-48. https://sloanreview.mit.edu/article/using-open-innovation-to-identify-the-best-ideas/
3 Hurley, R. A. “Cracking open packaging innovation.” Packaging World (September 2018). https://www.packworld.com/article/package-design/strategy/cracking-open-packaging-innovation
4 Drew, P. “Can crowdsourcing really crack corporate sustainability?” The Guardian (April 2012). https://www.theguardian.com/sustainable-business/crowdsourcing-crack-corporate-sustainability
5 Schreier, M., Nishikawa, H., Fuchs, C., and Ogawa, S. “Crowdsourced products sell better when they’re marketed that way.” Harvard Business Review (November 2016). https://hbr.org/2016/11/crowdsourced-products-sell-better-when-theyre-marketed-that-way
6 Boudreau, K. and Lakhani, K. “Using the crowd as an innovation partner” Harvard Business Review 91, no. 4 (April 2013): 61-69. https://hbr.org/2013/04/using-the-crowd-as-an-innovation-partner
7 Heineken. “Heineken unveils Ideas Brewery winners.” Heineken. https://www.theheinekencompany.com/media/features/heineken-unveils-ideas-brewery-winners
8 Steeman, A. “Heineken’s Ideas Brewery.” Best in Packaging (July 2013). https://bestinpackaging.com/2013/07/14/heinekens-ideas-brewery/
9 Bark, E. “Ideas Brewery 60+ challenge workshop.” Youtube video
10 Reynolds, P. “Heineken finds package designs through crowdsourcing.” Packaging World (August 2013). https://www.packworld.com/article/package-design/strategy/heineken-finds-package-designs-through-crowdsourcing
11 “BruVue raises 1 million in seed funding, wins Heineken Innovators Brewhouse Challenge as company gains momentum with its revolutionary beer ecosystem technology.” Business Wire (February 2018). https://www.businesswire.com/news/home/20180219005115/en/BruVue-Raises-1-Million-Seed-Funding-Wins
12 King, A. and Lakhani, K. “Using open innovation to identify the best ideas.” MIT Sloan Management Review 55, no. 1 (fall 2013): 41-48. https://sloanreview.mit.edu/article/using-open-innovation-to-identify-the-best-ideas/
13 Hines, A. “Budweiser Black Crown: stodgy brand’s crowdsourcing play for hipster cred.” Huffington Post (November 2012). https://www.huffingtonpost.com/2012/11/08/black-crown-budweiser-crowdsourcing-beer_n_2094434.html
14 Trentmann, N. “Heineken’s strategy in a stagnant beer market.” Wall Street Journal (August 2018). https://www.wsj.com/articles/heinekens-strategy-in-a-stagnant-beer-market-1533826082
The question of whether or how to bring an “innovators Brewhouse” initiative to the 300 smaller portfolio brands that make up 85% of Heineken’s volume is an important one. To your point, changing the product itself may take away from the smaller individual brands, which may feel an even greater impact than the more recognizable Heineken brand, may be too drastic for the smaller portfolio brands. One approach to bring in more innovation would be to create a new brand that is known for being open source created, but owned by Heineken. With this brand, in person communities could be created, per your recommendation for improving Heineken, but without the worry of diluting a pre-existing brand. This brand would likely get more awareness for being the first beer brand to operate on the external spectrum for both idea generation and selection.
I’m really intrigued by this article, because I would assume that Heineken’s motivation for creating innovation is to patent those ideas, or at least to protect them as trade secrets. I wonder how Heineken can enforce control over such innovation which is coming from non-employees who seem to be coming up with the ideas on their own and somewhat before contracting with Heineken. Do the innovators get some monetary compensation for ideas which are successfully implements, and if not, how will Heineken be able to keep convincing people longer-term to give them their innovative ideas for free.
While I love the concept of the Innovators Brewhouse platform, I think that the ~300 smaller brands likely already have plenty of brand ambassadors and evangelists. As someone who is always excited to try new beers, it is much less so about the packaging than it is about the taste of the beer and setting in which I try them. I can definitely see why the crowdsourced method would work great for their largest brand, and I would appreciate the novelty there, although I don’t know if it would add any points to a brand that I was less familiar with.
I found your discussion of Heineken’s “Idea generation” vs. “Idea selection” innovation framework to be very helpful for understanding how a large company like Heineken can capitalize on open innovation opportunities. However, I disagree with you recommendation that Heineken devote a greater share of its innovation efforts to the bottom right quadrant of the matrix, “Approval contests” in which ideas are generated internally by Heineken and then subjected to some sort of popularity contest among consumers.
As a Food & Beverage/CPG company in mature market, I consider Heineken’s primary challenge to be innovating outside of its current product categories and into new or adjacent categories in which there is more opportunity to gain market share. The problem with internal idea generation is that you limit the scope of possibilities a priori before you engage with the outside world — you pick the options first and then present them to consumers. In my opinion, the primary advantage of open innovation is that it allows a company to field ideas that are far outside its previously conceived realm of possibility. These kinds of ideas provide the basis for the kinds of groundbreaking innovations that could enable Heineken to achieve step-function growth in the face of a maturing market.
Just want to lead by saying I planned on commenting on this post even before Yael’s shout out in class. And I entirely knew “Banana Bread” was your alias 🙂
Any who, fantastic job on the post! Really enjoyed the analysis and felt appreciated the use of imagery. In your intro, you mentioned that the “Brewing a Better World” strategy has generated $1.1B in incremental revenue in just three years. That number is eye-popping! I’m really curious to know what percentage of those new sales were related to the Innovators Brewhouse platform, versus institutional innovations that Heineken developed internally through traditional R&D processes. It seems like the “Brewing a Better World” strategy is an overall company initiative, which makes me wonder, how much value are the crowd sourced ideas really generating?
Additionally, is the value from the Innovators Brewhouse coming from true innovation through the product/ packaging design, or is it this platform primarily a marketing asset used to engaged the most valuable Heineken customers?
Regardless, I love the platform and think they are executing very well — and could do even better if they incorporate your recommendations! Thanks for the thoughtful breakdown.
I love this overview of how Heineken has been using open innovation. I believe they have done it the right way by only “innovating” on the margins and within more operational capacities. Large, well-established brands can certainly benefit from crowd-sourcing ideas, but they need to stay true to who they are to not alienate their customers and to avoid dilution of the brand. Through similar logic, I do not think that Heineken should experiment with open innovation with their smaller brands as it is a lot easier to these smaller more niche brands.
This was a great post, and previously I had not spent much time researching and analyzing what open innovation is. I loved the idea of allowing externals to come up with the idea selection. There are only so many individuals in the R&D department at Heineken, and most of the time people are afraid to push the boundaries of what they think would be a great new product, design, and so forth given corporate pressures to “stay within the boundaries” in a general sense. Different regions across the world have different preferences in regards to beer. I think Heineken should utilize open innovation to come up with beers that consumers want. While this would be marginally higher in cost vs. a different label or bottle cap, consumers will build an even stronger brand affinity.
Thanks for an interesting glimpse into innovation in the world of Heineken! I have toured Heineken’s main brewery in Amsterdam, and it seems that they really are implementing the cutting-edge of technology from machine learning to IoT solutions. With the introduction of open innovation, Heineken has done an excellent job of giving power to its customers and helping them become more involved and invested in the brand and its products. As you said, this has reduced costs and the amount of time invested in research and development.
One major drawback of this approach, however, is that consumers do not always know what they want. Henry Ford famously stated that “if I had asked people what they wanted, they would have said faster horses.” Similarly, Steve Jobs built much of Apple with the idea that people don’t know what they want until you show it to them. While having local competitions can improve regional brand identity, or distributing open innovation among its 300 portfolio brands may reduce overall costs, this may not actually help Heineken lead the market. Overindexing on crowdsourcing ideas and selection processes may have the unintended consequence of hampering innovation in the long run.
I agree that Heineken can probably benefit from using external idea selection instead of just doing it internally as it is doing right now. This will create a greater buzz amongst its beer fans and create greater brand loyalty. That can be done either through contests, or by testing products in the market and deciding the “winner” based on sales over a few months.
To your question on competition with craft brewers, Heineken can greatly benefit by crowd-sourcing ideas as it will create greater engagement from consumers, and will help create local beers- it can potentially organise local competitions amongst smaller craft breweries to do this. The breweries get the benefit of having their product sold globally, while Heineken benefits from having them under its own umbrella. However, the question remains as to whether craft breweries will be interested at all in selling through a large brand- many of them are solely focused on the local communities.
Thank you for this article and pointing out that product innovation in the CPG space really is all about non-product specific innovation (e.g. re-packaging of products or changing the consumption experience). This really opened my eyes!
The Easy Star Bottle Opener and temperature-sensing inks are interesting innovations but more evolutionary than revolutionary and thus are likely going to remain niche and will not significantly impact Heineken’s beer sales. However, the combination of IoT bottles and machine learning to enhance just-in-time delivery and reap supply chain efficiencies appears very promising. I am looking forward to hear more about this.
I disagree with your recommendation that Heineken should crowdsource the selection to collaborators as I believe that the “dreamers” shouldn’t act as “critics”. Innovation selection is driven by what product changes are actually economically viable and in line with the product and marketing strategy for the product. Consumers are unlikely to be able to assess this appropriately. Consequently, I am concerned that Heineken would commit to innovation that would damage the beverage’s positioning or product experience.
With regards to your second question, I would not recommend them using the Innovators Brewhouse platform for their 300 smaller brands. The innovation resulting from those smaller beers will be very similar to the Heineken brand bottle innovation because it is non-product specific as you have mentioned earlier (Easy Star Bottle Opener and temperature-sensing inks). Instead, I would recommend driving further awareness of the Heineken Innovators Brewhouse platform as a marketing tool to enhance Heineken beer sales. Any strong innovation coming out of this could then be adopted across its 300 beer brands.
Fantastic design, and quite interesting topic, Miss banana bread.
I like the design that the picture shows, it will make beer easy to open, and can be distinguished from others significantly on the shelf. For brand, it might start a new trend for beer bottle. However, the downside might be some heavy beer drinkers enjoy the feeling of opening beer bottle, which makes them feel ” this is real beer”. So I just wondering maybe a consumer survey could help on next step.
For the open question, I think Heineken can leverage its Innovators Brewhouse platform to innovate their 300 smaller portfolio brands. Since there is a big volume, they should think about a way to innovate several new product at the same time.