Embedding an open innovation strategy in
emerging markets:
The case of Natura the largest Brazilian cosmetics company
12th Annual Open and User Innovation Conference
28th to 30th of July, Harvard Business School
Henry Lopez-Vega
Linköping University
Wim Vanhaverbeke
Hasselt University
Adriano Jorge Leonardo Garnica
Natura Cosmetics
1. Research background
• Inbound open innovation (OI) entails search strategies to: 1) acquire from
technology markets and 2) source from scientific– or market-based
communities (Dahlander and Gann, 2010; Boudreau and Lakhani, 2009)
• Acquisition is presented through collaborations with upstream and
downstream partners, alliances, etc. to conduct more “local search” (cf. Du et
al., 2014, Laursen and Salter, 2006)
• Sourcing from communities facilitates “distant search” (Jeppesen and Lakhani,
2010).
– Use of intermediaries e.g. NineSigma, InnoCentive (Jeppessen and Lakhani,
2010; Sieg et al. 2010; Lopez-Vega et al., 2012; Sawhney et al., 2003)
– Proprietary platforms e.g. Connect+Development (Huston and Sakkab, 2006),
GE’s Ecomagination (Chesbrough, 2012)
– Crowdsourcing, innovation contests (cf. Afuah and Tucci, 2012; Terwiesch and Xu,
2008)
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1. Research background (cont.)
• The shift from Closed to Open Innovation entails changes in formal and
informal practices that could facilitate the shift from a closed innovation to an
open innovation mindset (Chesbrough and Brunswicker, 2013)
• Limited research explains how firms implement an open innovation strategy
– Unfreezing, moving, institutionalizing (Chiaroni et al., 2010)
– Climate for innovation, partnership capacity, internal process (Enkel et al., 2010)
In this paper, we explain:
How firms’ proprietary platforms are used to embed open innovation into their
innovation strategy?
• How firms create and integrate an open innovation platform into their
innovation strategy?
• How does the adoption of an open innovation strategy changes the practices
of managing firm’s proprietary platform overtime?
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Research strategy
Methodological considerations
•
•
Most open innovation research is at technological firms; in
emerged markets; cross-sectional
Innovation in the cosmetics industry (Jones, 2011)
–
Fast growth, differentiation, competitiveness
Research setting
•
Single-case study of a multinational cosmetics MNC
– Natura Cosmetics S.A. founded in 1969; 6300 employees;
Revenue US$ 3 billion; Business model: Direct selling
– Among the 10 most innovative companies in the World (Forbes,
2013)
Data collection
•
•
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22 Interviews with Natura employees
Archival and confidential information from Natura
Information around Natura’s innovation platform :
–
–
Natura Campus Program
iQuicar
Analytical approach
•
•
Mapping the strategy implementation
inductive identification of stages to interpret the learning processes
involved
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OI platform: Natura Campus Program
2001 – 2005
–
–
–
–
Specific participation in R&D activities with universities, local gov. funding agencies named Natura Campus
Context: Early investments in research; first approach to academia; no clear direction or intention to start
with OI
Building blocks: No formal structure for open innovation; scientific based initiatives
1st interaction of Natura with local scientific community to contract 9 projects
2006 – 2010
–
2006 Natura Campus program is launched to maintain a permanent channel to receive ideas from
Brazilian’s scientific community
•
–
–
–
Context: Federal innovation law; OI as strategic choice for research
Building blocks: Dedicated team; partnership policy (academia); use of intermediaries and consultants
Four main pillars:
•
•
•
•
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Natura seeks for more radical results to gain the attention of scientists as results do not achieve the expected results
Register Brazilian scientists based on their scientific competences and interest to collaborate with Natura
Proposals to collaborate with Natura
Possibility to conduct research within Natura’s R&D offices
Award and prize for the best scientific initiatives
Connection with academia: 104 project proposals, 33 acquired projects; collaboration with 20 different
universities/R&D institutions, 205 groups connected to Natura Campus Program; 2 patents and 1 license;
etc.
4
OI platform: Natura Campus Program
(cont.)
2011 – 2013
– More interaction and deeper relationship with scientists to obtain more radical solutions and
proposals from Brazilian and international partners
– Stronger connection between R&D units with business units
•
Culture changing: +60 employees involved in OI
– Context: Radical expansion of the OI model; change in the structure for OI team; OI strategy –
ecosystem; OI management system
– Building blocks: Relationship model; orientation team for partnerships
– New challenges to manage partnerships lead to the creation of other platform IQlicar
– New forms of collaboration to interact with clients i.e. co-creation, Hackaton
– Projects approved 13; 450 received proposals, interaction with over 100 institutions, 2 call for
proposals and 5 innovation challenges i.e. sustainable packaging, new ingredients for tree
phasic oil
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Acquiring platform: iQlicar
•
In 2011, fast increase in demand (OI strategy), small specialization team acting as
internal consultants for IP and partnership modes, complex and long process,
collaboration with more and distant partners lead to numerous problems:
– Who are our partners?; what are they doing?; how are their deliverables?; how to
improve their contribution?
•
The response was to create a partnership orientation team that:
–
–
Decreases time to establish partnerships
Increase closeness to internal R&D teams getting positive feedback
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4) Results generation
3) Discontinuous
4) Low rate
2) Global innovation
3) Create identity
4) Differentiate and
accelerate
1) Integrated
2) International
3) Engaged and
connected in research
4) Multi-tool: Science
and market driven
Activities
3) Ecosystems approach
2) Brazil
1) Program
2016 – 2013
2) Geographic range
1) Fragmented
2006 –2010
Key elements
1) Relationship
Strategic drivers
Progress between 2006 to 2013:
Natura’s open innovation program
1) Different partners
(beyond academia with
multi-channel
systematic connection)
2) Connection with
international partners
3) Communicate R&D
created within Natura
4) Innovation challenges
and open calls
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Conclusions, contributions and
limitations
•
In emerging markets where collaborations with scientific– and market–based partners are new or nonexistent
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While platforms from large MNCs can attract a large pool of solvers (Huston and Sakkab, 2006, Sieg et al., 2010; Boudreau et al., 2011)
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–
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MNCs from emerging markets need to attract the interest of local actors and international actors
Managers are key to involve internal R&D units and external national players onto MNC’s OI strategy
Improvements in processes need to be designed to progressively learn how to launch ‘calls for projects’, evaluate and integrate solutions
Previous research highlighted OI can be implemented ‘unfreezing’ the organizational structure,
process (Chiaroni et al., 2010; Enkel et al., 2010)
–
–
•
firms initiating open innovation could use platforms to progressively embed open innovation into its strategy
A sourcing platform is necessary to search and select technologies and solutions from local and distant scientific fields
An acquiring platform is necessary to co-ordinate the acquisition of external solutions and maintain the relationship with external partners
A platform can help in the implementation of an Open Innovation strategy without significant changes in the org. structure
MNCs need to create a specific innovation management unit responsible to co-ordinate open innovation
The search of solutions from:
–
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Local actors i.e. Amazonian universities provide more explorative solutions. Yet these are easier to obtain and more valuable to
extend and accelerate project portfolio i.e. new fragrances, components.
International actors tend to provide mode radical solutions to solve highly technological problems
Limitations:
•
•
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The study of one firm and one market which does not include MNCs from other (similar) emerging markets i.e. BRICs
Other OI measurement variables i.e. IP issues, performance of acquired solutions
Compare different modes to embed OI i.e. platforms, market transactions, university-industry collaborations
Compare with other Cosmetic companies in Brazil and other international MNCs L’oreal as well as the role of
subsidiaries
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Embedding an open innovation strategy in
emerging markets:
The case of Natura the largest Brazilian cosmetics company
12th Annual Open and User Innovation Conference