NIVEA: Leveraging Open Innovation to Drive Product Development in a Race to be the World’s Leading Skincare Company
Utilizing open innovation to drive product development at NIVEA
“When it comes to creativity, we recognize that good ideas can come from anywhere. So we’re reaching outside of our normal approach to creative development and are involving the very communities who use our products to tell us what we should do” – Matt Marlow (Head of Global Digital Activation at Beiersdorf for NIVEA).[1]
The personal care industry is highly competitive and rapidly evolving, with a typical product life cycle lasting four years.[2] With shorter product market cycles, companies can no longer afford to rely on superior internal R&D to drive innovation. “Expenditure on R&D has had to double every 13 years just to maintain the same level of growth in the economy as a whole, with no industry managing to innovate in a cost-effective manner,” argued Adi Gaskell, writing for InnoCentive.[3] In order to increase speed to market while keeping costs at a reasonable level, NIVEA has turned to open innovation in order to foster idea generation and product development.
In the short term, NIVEA has focused on co-creation with the consumer to create new and improved products. One example is the launch of the Company’s Black & White Deodorant. NIVEA looked externally for idea generation, and conducted netnography research to determine consumer pain points regarding deodorant. After reviewing hundreds of consumer conversations, NIVEA concluded that customers were concerned with antiperspirant stains on their clothing. The Company responded by creating initial product designs, and invited consumers to evaluate and modify its products.[4] NIVEA then partnered with Evonik, a specialty chemicals company, to jointly develop the anti-stain technology.[5] The result was the best-selling deodorant in the Company’s history.[6] By working closely with the end consumer, NIVEA was able to create a disruptive product, increase its speed to market, and reduce internal R&D spend. Engaging the consumer also created buy-in and increased word of mouth, which doubled as marketing for the product.[7]
Figure 1: Consumer Insight – “Stain Manual” [8]
Longer term, NIVEA is working to expand its approach to open innovation, in an effort to spur new product creation while strengthening customer relationships. This has been demonstrated most recently with the launch of NIVEA’s Co-Lab, a crowdsourcing initiative that invited individuals from the UK, Korea, and Brazil to take part in an ideas pitch. The Company challenged people to submit technology-based products that aimed to bring the NIVEA community together in a meaningful way. Finalists were financially compensated and given the opportunity to work with NIVEA strategists to execute on their ideas globally.[9] This creative approach to crowdsourcing led to new product ideas while reinforcing the perception that NIVEA cares about forming close connections with its customers.
As a result of these efforts, NIVEA has made tremendous strides towards incorporating open innovation in its product development process. According to the former VP of R&D, Dr. Martin Rudolph, “It is more important to find the right ideas and take them to market quickly. This implies that especially the front end of the innovation funnel is nowadays a more ‘porous system’ than a streamlined process.”[10] Consequently, in the short term I would encourage NIVEA to drive innovation from scratch by taking a broad approach, employing both crowdsourcing and netnography tactics. Simultaneously, I would suggest that the Company focus on specific customer pain points, rather than asking more general questions of its consumers. This strategic combination will allow NIVEA to increase its speed to market and respond more effectively to market needs.
Taking a longer-term approach, I would recommend that NIVEA extend collaboration beyond the consumer. One suggestion is for NIVEA to seek contributions from suppliers and independent specialists. Beiersdorf, NIVEA’s parent company, has taken initial steps towards this goal by hosting a supplier fair in order to share ideas with raw material, active ingredient, and packaging partners.[11] The Senior VP of R&D at Beiersdorf commented, “Cross functional discussions on inspiring new technologies and concepts pave the way to future innovation.”[12] This level of partnership would lead to the enrichment of ideas and product generation beyond what the consumer is able to contribute.
While open innovation has allowed NIVEA to create new products in a faster and cheaper manner, the key to this model hinges on the Company’s ability to keep consumers engaged. In situations where the Company will ultimately own the IP, how will NIVEA continue to attract motivated external individuals and companies that are willing to participate in co-creation? How will the Company maintain a cohesive vision so that external partners do not develop their own products that compete with NIVEA?
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Sources:
1 Beiersdorf. “Let’s Create Together.” August 22, 2018. https://www.beiersdorf.com/newsroom/press-news/local/en/all-news/2018/08/22-lets-create-together, accessed November 2018.
2 Regan, Charlie. “Nivea’s Invisible Black and White – Social Media Synergy.” Social Media for Business Performance, February 16, 2015. https://smbp.uwaterloo.ca/2015/02/niveas-invisible-black-white-social-media-synergy/, accessed November 2018.
3 Gaskell, Adi. “Why Open Innovation Makes Sense.” InnoCentive Innovation Blog, November 14, 2017. https://blog.innocentive.com/why-open-innovation-makes-sense, accessed November 2018.
4 Bartl, Michael. “Getting Closer to the Consumer: How Nivea Co-Creates New Products.” The Making-of Innovation, February 18, 2011. http://www.michaelbartl.com/article/getting-closer-to-the-consumer-how-nivea-co-creates-new-products/, accessed November 2018.
5 Evonik. “Black & White Protects Against Staining.” https://corporate.evonik.com/en/products/product-stories/pages/black-and-white-protects-against-staining.aspx, accessed November 2018.
6 Regan, Charlie. “Nivea’s Invisible Black and White – Social Media Synergy.” Social Media for Business Performance, February 16, 2015. https://smbp.uwaterloo.ca/2015/02/niveas-invisible-black-white-social-media-synergy/, accessed November 2018.
7 Regan, Charlie. “Nivea’s Invisible Black and White – Social Media Synergy.” Social Media for Business Performance, February 16, 2015. https://smbp.uwaterloo.ca/2015/02/niveas-invisible-black-white-social-media-synergy/, accessed November 2018.
8 Bartl, Michael. “Getting Closer to the Consumer: How Nivea Co-Creates New Products.” The Making-of Innovation, February 18, 2011. http://www.michaelbartl.com/article/getting-closer-to-the-consumer-how-nivea-co-creates-new-products/, accessed November 2018.
9 Beiersdorf. “Let’s Create Together.” August 22, 2018. https://www.beiersdorf.com/newsroom/press-news/local/en/all-news/2018/08/22-lets-create-together, accessed November 2018.
10 Mattes, Frank. “Skin Care Giant Launches New Open Innovation Approach.” InnovationManagement, July 4, 2011. http://www.innovationmanagement.se/2011/07/04/skin-care-giant-launches-new-open-innovation-approach/, accessed November 2018.
11 Beiersdorf. “Beiersdorf Raised Open Innovation to a New Level.” December 22, 2016. https://www.beiersdorf.com/newsroom/press-news/all-news/2017/01/09-beiersdorf-raised-open-innovation-to-a-new-level, accessed November 2018.
12 Beiersdorf. “Beiersdorf Raised Open Innovation to a New Level.” December 22, 2016. https://www.beiersdorf.com/newsroom/press-news/all-news/2017/01/09-beiersdorf-raised-open-innovation-to-a-new-level, accessed November 2018.
I believe that this open innovation approach for established beauty companies such as Nivea can be a strong way to counter the collection of new entrants to the market that are seeing success with a direct to consumer model. One of the reasons these smaller companies have been successful to date is their ability to tweak the product based on customer feedback and the speed with which they launch those amended products [1]. As your review demonstrates, the open innovation approach shows Nivea has the same intentions in terms of rapid new product launch. I do question their, and other large beauty products company, ability to do this as well as a startup and wonder whether it is as effective as incumbent companies acquiring startups as “sources of product innovations, new markets, new customer connections, and community-building – an energy source for constantly rejuvenating the parent organization. [2]”
Sources:
[1] “A New Class of Startup Is Upending America’s Consumer-Goods Industry.” The Economist, The Economist Newspaper, 16 Nov. 2017, http://www.economist.com/business/2017/11/16/a-new-class-of-startup-is-upending-americas-consumer-goods-industry.
[2] Sobkowiak, Roger T. “Corporation Start-Up Dynamics: How the Parent Corporation and the Start-Up have to Change.” HR.Human Resource Planning, vol. 25, no. 3, 2002, pp. 18-28. ProQuest, http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/224571272?accountid=11311.
Nice post! In regards to your last question, NIVEA needs to be very careful as they filter through the noise, only adopting crowdsourced ideas that meet stringent requirements set by the NIVEA brand identity/positioning. It can be very tempting to get caught up in the latest trends or innovative solutions, but without taking caution, NIVEA may find it starts confusing customers with diverging products and messages. I like your idea about incorporating supplier feedback as well, but again, NIVEA needs to ensure it has processes in place that help the brand management navigate its increasing number of data points.
Thank you for sharing! I was surprised by Nivea’s choice to focus on specific pain points to narrow the range of crowd-sourced ideas. This almost seems counter-intuitive to the value of open innovation. However, I see how imposing these boundaries would help Nivea to maintain its ultimate value proposition, propelling innovation just within that defined space. I like your idea of inviting open innovation from beyond the consumer. Do you think this route bears any risk of losing connection with the consumer, especially if a supplier and an end-user generally have different incentives for what should make up a Nivea product?
Nice post! On your question around continuing to attract motivated individuals to continue co-creation, I think this is an area that will require significant collaboration between the R&D and sales and marketing departments to make sure that consumers continue to be engaged and resonate with your products and continue to feed not just the sales engine, but also the R&D engine.
This raises an interesting questions around how the organizational structures of a company need to change in order to be successful at open innovation. As we have learned in our LEAD classes, changing one aspect of an organization’s hardware or software has implications on all the other parts. Taking an organization that has been primarily hardwired for “closed innovation” and transitioning it to one that includes significant aspects of open innovation will likely create strain in parts of the organization that they might not have fully thought through.
It will be interesting to see how organizations that truly embrace open innovation look and feel relative to those that do not and how this transition evolves over the short and medium term.
This is a terrific example of open innovation, and exciting to see such an established company take such a novel approach to product development! I agree that NIVEA needs to maintain strong consumer engagement and involvement in order to sustain this type of development in the future. Their brand has allowed them to successfully engage with customers to date, so maintaining their image as a dominant player in skincare will be important moving forward.
Unfortunately by opening up R&D, they expose their processes and risk competitors or incumbent copycats stealing valuable IP and acting on consumer demand before they can change their own products. As mentioned in the article by the former VP of R&D, taking the ideas to market quickly will be crucial. As a result, in addition to maintaining a strong brand image to attract customers, NIVEA will need to pair any open innovation with speedy turnarounds on product improvement and delivery. This will ensure they can get their before their competitors do, and reap the benefits from an open innovation system. I think this will help with the question you posed around ensuring external partners do not develop their own ideas to compete with NIVEA. Clear vision is important, but ultimately getting their vision out first will be the best way to succeed in this type of market.
Great post! Your idea about collaborating with suppliers is fascinating. For example, the customers may come up with ideas- but they need to be feasible and implemented tactfully. To this point, Nivea can take a specific idea from the crowdsourcing with customer exercise, and then do a second crowdsourcing with suppliers – to understand how to produce this new product most efficiently and effectively, while still achieving the customer’s goals.
To your second question, “How will the Company maintain a cohesive vision so that external partners do not develop their own products that compete with NIVEA?”- I believe collaboration with suppliers can help mitigate this risk. By collaborating with external partners, Nivea is forming a relationship with them and signaling to them that Nivea values their opinions and work. Through this relationship, the suppliers may be less inclined to vertically integrate to sell products themselves, or less inclined to work with (or as closely with) Nivea competitors. In such a competitive industry, high quality ingredients reliable suppliers are key advantages.