Barriers of Integration
Marketing and R&D in the front end
of New Product Development at Unilever
Thesis Business Development
University of Groningen
Faculty of Management and Organisation
Author: Frans Larmené
1272888
First supervisor RUG: dr. J.L. Miedema
Supervisor Unilever: dr. F.L.M. Smeets
Second supervisor RUG: dr. K. Zoethout
© The author is responsible for the content of this thesis. The copyright of this thesis rest with the author. No part of this paper may be reproduced without the prior permission of the author or Unilever.
Preface
This research is conducted to finalize my study business administration at the University of Groningen. Some people I like to thank for their help and support during this research.
First I want to thank Jan Vaessen, Nel Mostert and Aard van Beuzekom from the department of Innovation Process Facilitation of Unilever Vlaardingen. They were always open to help me and answer all my questions. Especially, Nel Mostert for bringing me in and helping me out at the start of the research.
Special thanks goes to my supervisor at Unilever Frans Smeets. He gave me the opportunity, guidance and all support to do my research during the 7 months at Unilever and finalizing my thesis in the months after.
From the University of Groningen I like to thank my first supervisor Mr. Miedema and second supervisor Mr. Zoethout for their guidance and critical support. In addition, I like to thank Bob Kijkuit, from the University of Rotterdam, for the open discussions about the research topic.
Also I like to thank my housemate Kees van der Vliet for the discussions about both our researches at Unilever. Our bicycle trips from Rotterdam to Vlaardingen (and back again) were never boring.
Finally, I like to thank my dad for reviewing my thesis and my mom for taking good care of me during the two weeks I was at home. And last, my girlfriend Karin as mental coach en my sister for arguing that I have to graduate because it costs my parents to much money.
Frans Larmené Rotterdam, July 2007
Executive summary
Unilever is a multinational Fast Moving Consumer Goods Company. It produces and sells 400 brands on foods and home and personal care products all over the world.
Unilever’s goal is to realize the top line of growth through product innovation. To accomplish this goal, and catch up with big competitors like Proctor & Gamble, improvements are necessary in the product innovation process of Unilever.
This product innovation process or New Product Development (NPD) process is structured in different phases and gates. Only the (fuzzy) front end of NPD cannot really be structured by its complex and informal processes of idea generation, development and evaluation. Little is known about these processes at Unilever. For this reason knowledge and information about the (fuzzy) front end is required to improve the performance of the NPD process.
The research is divided into two parts. An explorative research to define the research problem and a survey research to investigate the problem in practice at Unilever.
Part 1. exploration of fuzzy front end: Part one of this research concerns an exploration of the
fuzzy front end of NPD to define the research problem. The goal of this exploration is to give
higher management a clear presentation / insight of the fuzzy front end at Unilever and the problems that occur during this front end process of NPD to define the main organisation problem of the fuzzy front end at Unilever.
Four main problems are identified in the fuzzy front end at Unilever:
• No formal process of idea generation and development and evaluation;
• A lack of communication and cooperation between Marketing and R&D in the front end of new product development;
• No time and support of higher management to develop totally new ideas;
• A lack of knowledge sharing and storage to conceptualize ideas.
Analyzing these problems found a lack of integration between Marketing and R&D as main research problem. Marketing and R&D do not frequently communicate with each other to create, develop and evaluate new product ideas, which negatively influence the performance of the front-end process.
A further exploration of this problem, by literature research and practical case study, identified 3 causes of the lack of integration. These 3 causes or barriers to integration concern:
• Different thought worlds of Marketing and R&D managers (thought world barrier): the departments of Marketing and R&D make different sense of the technology-market linkages in a qualitatively manner;
• Different languages of Marketing and R&D managers (language barrier): the departments of Marketing and R&D use their own technical terms in the communication process with each other;
• Different work locations of Marketing and R&D managers (physical distance barrier): Marketing and R&D have physical separated work locations, which negatively influence the frequency of communication with each other.
Part 2. survey research: By identification of these three barriers of integration the goal of the second research is to formulate recommendations to improve the integration of R&D and Marketing in the fuzzy front end of the New Product Development (NPD) process of Unilever by analyzing the thought world barrier, language barrier and physical distance barrier of integration of Marketing and R&D. These barriers are analyzed in an online survey at Unilever to investigate
if Marketing and R&D managers experience these barriers in functional and cross-functional contacts in the fuzzy front end and if there is a difference between Marketing and R&D in experiencing these barriers in contacts with each other.
The results showed that Marketing did experience a thought world barrier in more than 50% of all cases. The same fact occurred with R&D. Between the 20% and 40% of all cases showed a language barrier with Marketing contacts and also with R&D contacts. The physical distance barrier showed a difference in frequency of communication with different contacts with different work locations. No differences occurred between Marketing and R&D in experiencing the thought world barrier and physical distance barrier with each other. But Marketing did experience in 15,2% of all cases “often” a problem with the language of R&D. Against 2,5% for R&D.
Concluding, the thought world barrier, physical distance barrier and language barrier can be identified as possible causes of poor integration of Marketing and R&D in the fuzzy front end at Unilever. Both Marketing and R&D do experience the measured barriers of integration. A difference occur in the language barrier: Marketing do experience more language barriers in R&D contacts than R&D in Marketing contacts. Finally, reducing these barriers will improve the cross-functional integration of Marketing and R&D in the fuzzy front end of NPD at Unilever.
For this reason, the research recommends to reduce these three barriers by: • Relocation of Marketing and R&D and physical facilities
• Temporary job rotations of Marketing and R&D managers • Encouraging of cross functional network relations
• Create formal integrative management processes
Finally, a number of possible directions for further research are suggested, which influence the performance of the fuzzy front end and the integration of Marketing and R&D.
Contents
Chapter 1
Introduction
1
1.1 Unilever: a description of the organisation 1
1.2 Reason for research 4
1.3 Contribution of research 5
1.4 Structure of research 6
Chapter 2
Part 1: exploration of Fuzzy Front End
7
2.1 Description of the fuzzy front end 8
2.2 Problems in the fuzzy front end at Unilever 17
2.3 Main problem description 20
Chapter 3
Exploration of the research problem
22
3.1 Cross functional integration at Unilever 22
3.2 Causes of lack of integration 27
3.3 Conclusions part 1 33
Chapter 4
Part 2: survey research
34
4.1 Main Research Objective and questions 34
4.2 Research framework 35
4.3 Scope of research 36
4.4 Constraints 36
4.5 Assumptions 36
4.7 Definitions 37
4.8 Research method 38
Chapter 5
Data collection
40
5.1 Measuring method 40
5.2 Data collection method 42
5.3 Design of the survey 43
5.4 Sample design and responses 44
5.5 Measurement of differences 45
Chapter 6
Results
47
6.1 Respondents 47
6.2 Results cross-functional and functional contacts of Marketing and R&D 50
6.3 Results integration Marketing- R&D 59
6.4 Results closing questions 66
Chapter 7
Conclusions
68
Chapter 8
Recommendations
70
Chapter 9
Limitations and further research
73
9.1 Limitations 73
9.2 further research 73
Appendix A: CSI Method
78
Appendix B: TRIZ method
81
Appendix C: Insight Activator Tool:
81
Appendix D: Survey
82
Appendix E: survey questions barriers
89
Appendix F: Invitation survey
90
Chapter 1 Introduction
This research was conducted for the department of Innovation Process Facilitation (IPF), part of Unilever Research and Development (R&D) Vlaardingen. The department supports different product innovations teams in project and innovation management on a global scale. The research focuses on the front-end process of the new product development (NPD) process of Unilever and will provide recommendations to improve the performance of the fuzzy front end at Unilever.
This introduction chapter will define the main research area. First, paragraph 1.1. will briefly review the organisation of Unilever where this research was conducted. Next, the reason for this research will be described in paragraph 1.2. Paragraph 1.3. will discuss the theoretical and practical relevance of the research. Finally, paragraph 1.4 will briefly review the overall structure of the research.
1.1
Unilever: a description of the organisation
Unilever is one of the world’s largest consumer goods companies with a turnover of nearly €40 billion and more than 200,000 employees. Unilever produces and sells 400 brands on foods and home and personal care products all over the world. It is one of the biggest multinational companies in the world, with famous brands like Axe, Becel, Knorr and Magnum. The different products have divided into two categories: Home and Personal Care (HPC) (43%) and Foods (57%) (Unilever, 2005). With the head offices in the UK and Rotterdam the global organisation is divided into three zones; America, Europe and Asia & AMET (Africa, Middle East and Turkey). Unilever’s roots lie in the UK and the Netherlands. Originally, Unilever is a merger between the British soap-maker “Lever Brothers and the Dutch margarine producer “Margarine Unie” (1930). For this reason Unilever had two parent companies; in Rotterdam and London. The company expanded in different directions the years after. Several business markets like agriculture, distribution and chemicals, where strongly dictated in different countries. After 1990 a lot of these businesses were sold because they were not considered as being part of the fast-moving consumer goods market. Unilever focused the strategy to the business, building on big core-brands like Lifebuoy and Knorr.
1.1.1 Strategy
Unilever’s mission is: add vitality to life. For Unilever this means to grow in their business by addressing health and nutrition issues. The focus is on children and family nutrition, cardiovascular health and weight management. Overall, the strategy, implemented in 2004, is
building on the trend of a healthy and vital live of people. With products like Knorr Vie and Becel Pro-activ Unilever is putting the strategy into practice.
The strategy of Unilever is also multi-local orientated. Knowledge of local cultures, suppliers and entrepreneurs is used to anticipate on local markets. In this way Unilever offers locally customized products, under global brand names. The knowledge about local markets gives Unilever an advantage to it’s competitors.
1.1.2 Organisational structure
Unilever has changed the organisational structure in 2005 with the purpose to further strengthen competitiveness and innovation. The structure was described in “the One Unilever Operating Framework” (Unilever, 1995). The framework was built around the three main pillars of the organisation: categories, regions and functions (=Marketing, supply chain, R&D). The global categories are responsible for the product categories and brand development and innovation process. The regions are responsible for the market operations in local areas. The 5 supportive functions (Finance, HR, IT, Communications and Legal) add value by strategic support and competitive services to the whole business. These three pillars are directed by an unified board with a non-executive chairman, a group chief executive responsible for the day-to-day management of the business and a streamlined executive team (see figure 1.1.)
The big change made in Unilever’s organisational structure is the centralisation of the core business functions: from 12 business groups to two global categories (HPC and Food) and three regions, more global innovation projects and more business partners in key supportive functions. Unilever has almost completed the implementation of this new structure into the organisation.
Figure 1.1: Global organisation structure Unilever (Source: Unilever Portal, 2006)
The organisational structure of Unilever can be defined as a matrix structure. It is multi-focused: both product and function or product and geography are emphasized at the same time and technical expertise and product innovation and change are important for meeting the organizational goals of Unilever. The matrix structure meets these criteria’s. The unique characteristic of the matrix organization is that both product division and functional structures
(horizontal and vertical) are implemented simultaneously (Daft, 2001). Figure 1.1 gives a picture of the (matrix) organisation structure at Unilever.
1.1.3 FMCG business and product innovation
It is universally recognised that the single most important determinant of a company's shareholder value is its perceived ability to grow its future profits. Today, perhaps no industry has to confront this challenge more powerfully than the Fast Moving Consumer Goods (FMCG) business. The circulation of fast moving consumer goods is high. Innovations in products rapidly follow each other in a short time. Consumers can choose out of a broad range of products and easily shift from one brand to another. To enable fast moving consumer goods companies, like Unilever, to survive and outlive the competition, the global pressures from low-cost economies and supermarket chains who wield absolute power, they must invest in innovation and deliver the next generation of sustainable and disruptive product innovations.
Unilever as a FMCG company has the same goal to realize the top line of growth through product innovation. However, the company has struggled to manage its large portfolio of brands and Unilever’s is trying to catch up with big competitors like P&G. As it commences with the second phase of restructuring activities, the group strives to integrate its global operations, streamline its processes and regain the market leadership position that it once enjoyed (Datamonitor, 2006).
As pointed out in paragraph 1.1.2. the categories (HPC and Foods (products)) are responsible for the innovation process or New Product Development Process (NPD) at Unilever. The steps taken in the process can be explained by the “innovation funnel”. This is a concept originally designed by Professor Kim Clark of Harvard University as a means of deciding which innovations should be pursued and how best to pursue them (Clarke, 1996). The funnel gives an overview of the different stages and decisions that are made to develop a product from idea until it is launched in the market. Figure 1.2. gives a process overview of the funnel at Unilever (see next page). Unilever uses the stage-gate process to make decisions in the different phases of the funnel. The stage-gate process can be defined as the activities conducted by multifunctional teams, followed by decision “gates” manned by a multifunctional senior management group. The phased-review workflow processes that cut across functions to improve the development of new products have at each gate predetermined inputs, decision criteria and outputs (O’Connor, 1994).
Unilever identified 4 phases and gates in the funnel process. These include:
• The Idea phase and Charter gate; new product ideas are created, developed and approved to a project team in the charter gate.
• The Feasibility phase and Contract gate; a business case is made about the new product idea and resources are allocated in the contract gate.
• The Capability phase and Market ready gate; the product or solution is built with all capabilities and time (period) and investments are agreed in the market ready gate. • The Launch and Preparation phase and Launch gate; the preparation is made for
implementation into the market and approved in the launch gate.
After the launch gate, a post launch evaluation phase can be defined. In this phase, the implementation has conducted and reviewed to make changes and improve the product.
The circle in picture 1.2 indicates the context of the research: the (fuzzy) front-end process of the funnel. The front end is the process during which ideas are born and developed further, ending with the go/no-go decision for the start of a project (Khurana and Rosenthal, 1998).
The idea phase is the current (fuzzy) front-end stage of Unilever. The reason for this research lies in this process (see next paragraph).
Figure 1.2: The innovation funnel at Unilever (source: Unilever, 2006).
1.2
Reason for research
As pointed out in paragraph 1.1.3. Unilever have organised the NPD process in a structured way to realize successful product innovations and ultimately profit and growth. Only one phase can not really be structured: the idea phase or fuzzy front end of the funnel. The informal basis for idea generation and idea development and evaluation of NPD, can, should, and does occur even when formal processes may be in place. Ideas are informally shared, developed and evaluated by different people in different departments.
The approval decision at the end of the fuzzy front end is the first formal go/no-go decision. Though each decision throughout the NPD is important, the decision at this point is particularly critical, as it determines whether Unilever will invest and if primary human resources will be
allocated to start a project. The fuzzy front end can be seen as the access gate to the NPD process.
Managing the process of the fuzzy front end effectively, will faster provide new innovative products that fit the portfolio of Unilever and will direct contribute to the performance of the NPD process and the success of new products.
Because of the informal nature of the process little is known about the fuzzy front end at Unilever. Ideas are created, developed and evaluated in the phases before the charter gate. Ideas become formal new projects at the charter gate. Unilever has a variety of approaches and processes that are being applied in this (fuzzy) front end. Little is known about these informal processes and how different people and departments are involved. Knowledge and information about the fuzzy front end is required to improve the performance of the NPD process. For these reasons the research should provide an answer to the next question:
What can be improved in the performance of the NPD process of Unilever by focusing on the informal process of the fuzzy front end?
1.3
Contribution of research
This thesis is written for higher management at Unilever. They are, in the first place, responsible for improving the NPD process by current and future decisions. This research contributes to the development of knowledge about the fuzzy front end of NPD which can support higher management in making future decisions about improving or (re)developing the front end of NPD. Unilever’s higher management can use the recommendations to manage the fuzzy front more effective and efficiently which improves the performance of the NPD process and ultimately the innovations success of the firm.
Second, the department of innovation process facilitation relies for a great part on knowledge produced by research into innovation- and project management. This research contributes to the development of knowledge that can be used to improve the training of project teams that are working in the NPD process of Unilever. Additionally, this will also indirectly contribute to the overall performance of the NPD process of Unilever.
Because the front end of the funnel is an informal and complex phase of the NPD process, scientific research focuses on identifying a basic structure. However, difficulties occur in studying the FFE as it is dynamic, often unstructured and has traditionally been characterized by low levels of formalization. The research contributes to the NPD and IPD (Integrated Product Development) literature and the dynamic, unstructured process of the fuzzy front end by providing specific knowledge about integration of Marketing and R&D in the fuzzy front end of NPD.
1.4
Structure of research
The overall research in divided into two parts. Part 1 is an explorative research in the fuzzy front end at Unilever. Part 2 will further research the problem definition from part 1 by an online survey.
Higher management at Unilever do not exactly know how the informal process of the fuzzy front end is organised. A description of the front end process and the problems that occur will clarify the current organisation of this informal process to higher management at Unilever.
For this reason, part 1 will explore the front end process of NPD and formulate a concrete problem definition by identifying the problem and its causes (chapter 2 and 3).
Part 2 will further investigate the problem by survey research. The hypotheses, the (sub)questions, assumptions and scope of this survey research are reviewed in chapter 4. Chapter 5 explains the measurement of these concepts by an online survey. Finally, conclusions and recommendations are formulated from the results of the online survey. These recommendations concern improvements in managing the fuzzy front end of NPD and especially the integration of Marketing and R&D.
Chapter 2 Part 1: exploration of Fuzzy Front End
Chapter 2 and 3 will discuss the first exploration of the fuzzy front end at Unilever. The goal of this exploration is to give higher management more insight into the fuzzy front end at Unilever and the problems that occur during this front end process of NPD. The vague question presented in paragraph 1.2 will be analysed, to get a clear representation of the real, concrete problem which influences the performance of the fuzzy front end of the NPD process.
As the Leeuw (2000) points out: “we have to look multiform otherwise we do not understand the ambiguous reality.” For that reason information is collected by explorative interviews with different key managers (are working with or in the fuzzy front end) in the organisation. In addition, information is collected by reading documents and literature concerning the fuzzy front end (desk research).
Four research questions are formulated to describe and differentiate the fuzzy front end and the problems that occur:
• What does the process of the fuzzy front end at Unilever look like?
• Which tools, supportive systems and culture values are involved in the fuzzy front end at
Unilever?
• What can be stated from literature concerning managment of the fuzzy front end?
• Which problems occur at the fuzzy front end at Unilever and what is the status of these
problems?
Paragraph 2.1 will give an description of the fuzzy front end at Unilever, which give answers to the first three questions. Paragraph 2.2. will review question 4 concerning the problems that occur
in the fuzzy front end at Unilever. This will lead to a main problem description of the fuzzy front end at Unilever which is described in paragraph 2.3.
2.1
Description of the fuzzy front end
The fuzzy front end phase, contrary to the development phase, is intrinsically non-routine, dynamic and uncertain (Kim and Wilemon, 2002). In the early front-end, fuzziness or ambiguity about the quality (commercialization potential) of an idea prevents an opportunity from proceeding to the development phase (Kim and Wilemon, 2002).
Smith (1991), who first popularized the term, defined the fuzzy front end as the earliest stage of the NPD process and roughly is meant to denote all time and activity spent on an idea prior to the first official group meeting to discuss it, or what is called “the start date of team alignment”. Moenart et al. (1995) note that during the fuzzy front end an organization formulates a product concept and determines whether or not it should invest resources to develop the idea.
Based on these NPD literature definitions (Murphy and Kumar,1997; Boeddrich, 2004; Khurana and Rosenthal,1998; Alam, 2005) and the creativity literature (Lubart, 2001) the current research defines the fuzzy front end as the process of idea generation and development / evaluation.
Authors focusing on these activities advocate that the front end process is geared towards reducing the uncertainty surrounding an idea to point where it meets with a firm's set of predetermined selection criteria (Kim and Wilemon, 2002,: Moenaert et al., 1995; see figure 4.1). Uncertainty is defined as “the difference between the amount of information required to perform a particular task, and the amount of information already possessed by the organisation (Galbraith in Herstatt, 2006). The more risk or uncertainty can be reduced during the front end of this process, the lower the deviations from front end specifications, during the following project execution phases and hence, the higher the product development success (Herstatt, 2006).
As explained in Chapter 1, little is known about the fuzzy front end at Unilever. The charter gate is the first formal meeting where ideas will be compared, judged and approved to projects. The process before the charter gate is informally organised. A description of the front end process gives higher management at Unilever more insight in the departments, tools and informal processes of the fuzzy front end and the problems that occur.
For this reason, the next 4 subparagraphs will give a description of the front end process of NPD at Unilever.
2.1.1 Idea generation
The most important activities in the idea generation phase are problem identification, problem structuring and idea formulation (Khurana and Rosenthal, 1998). Problem identification and structuring can be seen as activities taken to give guidelines for the creation of ideas. These activities are market analysis and technology appraisal that support the generation of ideas (Khurana and Rosenthal, 1998).
At Unilever ideas are created in two ways:
• From a business need;
• From a creative insight.
Figure 2.1: ideas created from a business need Figure 2.2: Ideas created from insights
Ideas from a business need
In most of the cases new product ideas at Unilever are created from a business need. It starts with the strategy of Unilever (vitality) that is directed into the categories. Every product category has a program which is based on the company and category strategy (see example CSI: appendix A). Questions that occur from a strategic point are: What do we want in the short and long term and why and how do we compete? Answers are given in both technologies (Research
& Development (R&D)) and consumer insights (Marketing = Brand Development). The two functional departments of R&D and Marketing have their own way of answering these questions. The answers to these strategic questions are directed to platform programs. The platform programs identify the opportunity area and screen this area for priority market options, which are directed to operational projects.
Unilever plans these projects into the annual calendar year and makes the strategy operational. All operations are planned into the whole year and every project has its own deadlines and goals. From these goals, ideas have to be created to convert the goals into new products. Every product category has their own ways to create the ideas that fulfil the goal. The pressure to manage these projects in time is very high. Less time is available for ideas that do not fit into the projects directly.
Figure 2.1 gives an overview of the process. Overall, four process steps can be identified: 1. Define strategy and business need;
2. Define area of interest and define opportunities;
3. Understand consumer insights for that area and set priorities and goals; 4. Conceptualize products (projects).
Ideas from insights
Another way in which ideas are created at Unilever is more creative and out of the blue: a creative insight of a person can lead to an idea which can be used in the business. These creative insights can come from problems that arise during work or at home. It can be end solutions or part solutions for a problem (Herstatt, 2006). A lot of these ideas do not fit the opportunity or interest area of Unilever or are too vague to be well understood. The creators have to find support and resources to develop an idea and make it conceptual so that it fits the program and portfolio of Unilever.
At Unilever, creative insights can come from ideation sessions. Ideation is used to create and develop new product concepts. In 2003 the concept of ideation is developed at Unilever R&D Vlaardingen. The method of ideation operationalizes the formulated problem/ opportunity. People from different backgrounds are selected to be part of a well-organised ideation session.
There were three important organisational reasons to develop ideation at Unilever:
• Everybody had there own method to create and develop ideas;
• Different people did not know they were working on the same topic / projects (technology for ingredients/ products)
• No organisation memory. Data and ideas about past projects are not stored in a database or the available database is not up-to-date.
In the past year, ideation sessions are organised at a category level (at the end of the first phase in figure 2.1). From these sessions, many ideas have to be selected, clustered and evaluated to define a top list that can solve a problem or is a big opportunity that is fitting the current strategy of the category.
Getting support or ownership from people who manage the portfolio of a product category proves to be extremely difficult because their current portfolio of projects is being overfilled and time consuming.
Beside the creation of ideas by ideation, which have no real problem owner, ideas at Unilever are created by creative sessions of one or two days. These creative sessions are used as method to solve a particular problem confronting the development/conceptualization of an idea or during the feasibility phase to overcome more specific problems of a new product(for example: reaction of ingredients in a package).
The outcomes are total solutions or part-end solutions, which have possibilities to solve the formulated problem. These alternatives or solutions are further developed by the core-team (technical project leader and Marketing project leader) of the project (see paragraph 2.2.3.).
These creative sessions encourage the process of defining alternatives and solutions (Lubart, 2001). And can be defined by literature as creativity by “problem solving” (Herstatt, 2006;). These problems can occur at Unilever during the idea phase or when the goal of a problem is narrowly formulated and only brainstorming or another technique is needed to come up with new product ideas.
2.1.2 Idea development and evaluation
During idea development and evaluation, an idea is made concrete. In the organizational context, making an idea more concrete should ensure that there is a fit among end users, technology and strategy. If there is more than one idea, the ideas are screened on the same criteria. Given these criteria, the idea originator may not have all the requisite knowledge for concretization and, thus, may require support from other individuals within the organisation (Griffiths-Hemans & Grover, 2006).
No formal steps are identified in the process of idea development and evaluation at Unilever. Only the charter gate format and gate keeping process give some direction to the selection, development and evaluation of ideas.
Before the idea is judged by the gate keeping commission it will be developed in an informal way. In this informal process of the fuzzy front end two main departments are first involved in the
selection and development (and evaluation) of new product ideas: Marketing (=Brand Development) and Research and Development (R&D).
These two departments have their own roles in the fuzzy front end. From an uncertainty reduction perspective (as explained in 2.1.1), these roles consist of the informational agenda through which the individuals must work in order to reduce uncertainty (Souder and Moenaert, 1992). R&D project-members are primarily responsible for the uncertainty reduction regarding the technological resources to complete a project. Marketing is involved with uncertainty reduction regarding user needs and the marketing strategy (Moenaert et al., 1995).
Moenaert et al. (1995) point out that reducing the consumer and technological uncertainty is best achieved by encouraging closer communication between R&D and Marketing during the idea phase of the NPD process. Dougherty (1989) explains this process as “need linking”. She developed an overview of linking technological possibilities and market opportunities.
In addition, Marketing and R&D share the responsibility for setting product development goals, identifying opportunities for product improvements, resolving engineering design and customer need tradeoffs, and understanding customer requirements (Griffin and Hauser, 1996). But in practice, Marketing often has dominant responsibility for finding and assessing new applications for products and technologies, trouble-shooting customer problems, producing accurate product literature and selecting advertising claims (Griffin and Hauser, 1996).
This fact is also seen at Unilever: Marketing is in most cases the leading department in building new product concepts because they understand the consumer needs and have the power to do research in consumer insights. Unilever is also (from a historical point of view) strongly Marketing driven and gives priority to building on current and new brands.
In this leading role, Marketing at Unilever communicates new product ideas/concepts to R&D by asking to develop the ingredients for new products (see figure 2.3 A). R&D will then give feedback to Marketing about the technological possibilities (see figure 2.3 B).
It is also possible that technological ideas from R&D are communicated to Marketing (see also figure 2.3 B). This means new scientific findings/substances or ingredients for current or new products. Marketing decides if these ideas fit the current business and should be further developed. No formal decision tools are used to evaluate the ideas.
These ideas from R&D can be defined as creative insights, because in most cases they are not created from a business need but a technological finding/insight. In the perception of R&D, these ideas are often rejected by Marketing because they have no conviction that the idea can be a success.
Also other functional departments can be involved in particular the development of new product ideas. These functional departments are in most cases directed by Marketing or R&D. For
example, Supply Chain is contacted by R&D to find out the possibilities for distribution or production. Or Marketing contacts Market Research to measure consumer needs.
Figure 2.3: The process of idea development and evaluation
2.1.3 Higher management and the process of the fuzzy front end
Interviews indicated that higher or senior management has an important role in the fuzzy front end at Unilever. First, because most ideas are created from a business need or strategy point of view as explained in paragraph 2.1.1. Second, because senior management (gatekeepers) decide which product-ideas pass the charter gate or not. Decisions are based on the question whether the idea fits in the current strategy and business orientation.
Higher management at Unilever want to make the process of idea generation and development more formal and reduce uncertainty. Ideation and creative sessions take too much time to create, develop and evaluate ideas. Many of the same ideas are created which all have to be removed. Higher management want to make ideation more measurable and less time consuming. The pressure from the many projects that are running is very high and not much time is available for ideation sessions. It would be better, according to higher management at Unilever, to use ideation to solve problems that are faced at the execution of new product projects. In this way, ideation and creative session are used as tool to solve specific content problems.
The charter gate is now the first formal stage in the whole funnel-process. Created ideas are first formally checked at the charter gate. Unilever was working, at the time of execution of the research (October 2006), on an idea gate which comes in front of the idea phase. This idea gate should make the process of idea creation and development measurable. This idea gate has two goals:
• Catch new (radical) ideas inside (and outside) the organisation:
• Select them: Good structural ideas will be selected. A search is identified for consumer liking, technological options / capabilities and risks that can occur. Second, exploratory resources are allocated.
The period of the idea phase lasts a maximum of 6 months. A balance is needed between radical and incremental projects. The idea gate should catch more radical ideas or capabilities. Open innovation can be identified as a source of catching and developing more radical ideas outside Unilever in partnership with other companies. In addition, the timeframe of 6 months supports the possibility to develop concrete product concepts that fit the portfolio / strategy of product innovation of Unilever.
2.1.4 Tools and systems in the fuzzy front end at Unilever
Unilever has developed different systems in the past that support the process of innovation and idea generation and development and evaluation. These systems are based on the funnel and the stage-gate process and integrate tools, processes and decision-making. All systems are lead by IT-systems that capture information about new ideas and support managers to take the right steps and make the right decisions.
Inopad
Inopad is a suggestion box on intranet which is being used worldwide. Ideas can be posted on a server and directed to projects. The tool is now mainly being used as a data base for new product ideas. Most ideas that are posted are never evaluated or read. The system is also not supported by the main group of employees in the organisation.
Besides this worldwide tool, every establishment of Unilever has their own tool and system to capture and develop ideas. Innotrack, for example, is a system developed by R&D Vlaardingen to capture and develop technological ideas.
Even between departments, differences occur in using tools and systems. TRIZ (see appendix B for an explanation) is an example of a tool set used at different departments at R&D Vlaardingen. The Insight Activator (see appendix C for an explanation) is used by Marketing. These tools are not integrated and information sharing does not occur cross-functionally. Consequently, R&D people less report their findings from scientific research in an overall report or database and are limited in finding the right information to solve particular technological problems. Information about science areas from R&D is not accessible for Marketing and consumer insights from Marketing are not directly accessible for R&D.
Inoplan
A new system has been developed at Unilever which integrates all innovation processes and tools: Unilevers IPM (Innovation Process Management) is now the common set of process disciplines, terminology and IT tools by which Unilever brings innovation to the market. The earlier described stage-gate process and selection criteria are part of the system.
The most important part of IPM is the IT tool Inoplan. Inoplan supports project managers in managing the whole project during the different stages of the funnel. All information about the project and its members is stored in Inoplan. Gatekeepers use the tool to evaluate the project and give an go or no-go to the next stage of the funnel.
The first Inoplan had the Inopad database to collect ideas, but the use was not supported in all categories. Inoplan2 (2006) integrates Inopad with Teamwork and Portfolio management and has a new interface. However, people are still reluctant to use Inoplan to store all the data concerning new product development projects. A lot of information is stored on paper and local computers and is submitted by email to the persons that need the information.
Unilever Ventures
Unilever Ventures is an idea management organisation, but it does not really fit in the row with Inopad and IPM. Unilever Ventures is a system for bringing forward ideas which do not fit the core business of Unilever. It provides entrepreneurs and employees from Unilever a way to create successful business in a start-up organisation outside Unilever. It provides capital funding and management skills to start-up businesses and expansion capital to companies looking to accelerate growth. The focus is on consumer-facing and technology-based businesses across the globe.
Unilever Ventures is not directly feeding the funnel of Unilever. Nevertheless, with the new topic of ‘open innovation’ it has an important role in capturing capabilities outside the organisation and combining it with (radical) ideas inside the organisation.
2.1.5 Cultural values in the fuzzy front end at Unilever
A culture is built in the past and has values that influence the way organisation do business. This paragraph will review the culture values that have consequences for the way people in the fuzzy front end do their job.
A firm's 'culture' resides in the shared values and assumptions which evolve over time, and are typically taken for granted. Unilever has three values which were and still are central to the company's functioning. These are integrity, local autonomy and human relationships (Jones, 2005). These values influence the performance of people in the fuzzy front end.
Integrity and Local autonomy
in the past 'Making money' per se was not seen as the exclusive goal within Unilever (Jones, 2005). Making money was necessary but the ultimate satisfaction was doing a meaningful job, and doing it well. Integrity was an important value in the culture of Unilever, which was rooted in the founders of the organisation. But with this image, Unilever people had an image of being world leader and trendsetter in business. The result was an inward-looking orientation.
Nowadays, being competitive and making money is more important. However, an inward-looking orientation still occurs when solving problems in managing the NPD process and the fuzzy front end. Product ideas and solutions to specific problems are often sought inside Unilever, while collaborative innovation (open innovation/ partnerships) can often bring better and faster solutions or capabilities.
Second, Unilever uses local autonomy to respond to local markets. Many projects were for this reason locally or regionally orientated. A competitor like P&G is also a highly marketing-oriented company, but it differs from Unilever in placing more emphasis on technology-based solutions to consumer requirements, and being more inclined to see similarities between markets and cultures (Jones, 2005). P&G's ability to use 'strong control' to achieve faster transfer of technologies and brands around the world is on occasion grudgingly admired.
In the past a high variety of products and choices was produced by Unilever, which supported local autonomy. Only by focusing on the fast moving consumer goods today, many products are developed on a regional or global scale. The lack of experience in doing business in a more directive, standardised way like P&G is making the whole process of NPD slower. Decisions about new product concepts are approved on a higher level of management, but local autonomy still occurs in the process.
Human relationships
The culture of Unilever is also formed by the belief that the strength of relationships is more important than bureaucratic rules to hold management together. Having relationships to get the resources to fulfil a job or project in the organisation is very important. In this sense, Unilever can be seen as a highly network-orientated organisation: knowledge circulates around through countless webs of personal networks. This ‘core’ corporate culture coexists with numerous subcultures or networks in the operating companies, enabling Unilever to function across so many product groups and countries (Jones, 2005).
The networks of people at Unilever are also important in the decision making process. By personal networks, new product ideas spread around the company and find the people for consensus. If consensus is reached by a group of contacts and also people with influence (higher management), a decision has already been made. The charter gate is only to agree in a formal way. The negative effect is that it takes a lot of time to communicate and promote an idea within and often outside your own network. In addition, if people cannot find the right network relations the idea will not be developed and approved even if it had the potential to become a new product development project.
2.2
Problems in the fuzzy front end at Unilever
The descriptions from paragraph 2.1 indicate different problems. Ackoff (1987 cited in De Leeuw, 2000) pointed out that, in practice, problems never stand alone. In reality, there is no clear situation of a problem owner and a problem(s). Most of the time there is a system of problems and problem owners (De Leeuw, 2000). To understand the system of problems four practical problem perspectives are identified from descriptive research in the fuzzy front end at Unilever.
The perspectives are:
• No formal process of idea generation and development and evaluation;
• A lack of communication and cooperation between Marketing and R&D in the front end of new product development;
• No time and support of higher management to develop totally new ideas;
• A lack of knowledge sharing and storage to conceptualize ideas.
2.2.1 No formal process of idea generation and development and evaluation
The process of idea creation and development and evaluation is informally organised. Consequently, different departments use different techniques (Insight activator, ideation, brainstorming), different process steps and different selection criteria. All contribute to the creation and development of ideas but in different ways. No formal main process for idea generation, creation and development is available.
Information from other departments is often necessary to find solutions for problems that occur during the development of an idea. With the informal process it is difficult to get support from other departments/people that use other criteria and tools. They develop ideas in a different context and judge ideas on other criteria. Consequently, ideas are not shared and developed to concrete product concepts that fit the portfolio of Unilever. They stay in the context of the creator, which often means a vague idea that is not written down on paper or developed by a general tool like the BOSCARD (Background, Opportunities, Scope, Capabilities, Assumptions, Resources and Deliverables; of an idea) Many people know this tool but do not use it to conceptualize ideas. The information that is collected during idea development depends on the network of relations of the creator and the senior manager of the creator. If information is collected by these networks of people the idea can be developed to a concrete product concept. Otherwise, the idea stays vague and will not be developed and evaluated by different people, which often means the end of an idea.
To overcome these problems many researchers (Boeddrich, 2004; Kim and Wilemon, 2002) argue that some structural process is necessary. Unilever’s higher management recognizes these problems in the informal process of the fuzzy front end and is working on a formal stage and gate (as described in paragraph 2.1.4) to overcome these problems. This formal process, in front of the charter gate, should support the creation and development and evaluation of new product concepts. Interviews with Gatekeepers and Senior Managers at Unilever found that these systems and processes only can be supportive if there is understanding of the communication and cooperation process of Marketing and R&D in the fuzzy front end. With knowledge about these processes, the systems and processes can be (re-)developed / changed to stimulate communication and cooperation between Marketing and R&D.
2.2.2 A lack of communication and cooperation between Marketing and R&D.
Ideas at Unilever are mainly created in the functional department of Marketing or R&D. People from both departments at Unilever have their own way of working in the fuzzy front end. Each department has their own ideas in their own context. Cooperation between the functional departments of Marketing and R&D is less effective and it depends on the person and the informal relations if an idea will be translated.
The literature also identifies these problems. Many studies have concluded that one of the most significant causes for new product failure is the lack of integration of R&D and Marketing early into the innovation process (Gupta and Rogers, 1991). People from two opposite functional departments, who have different experiences, interests and knowledge need to work together to deliver successful product ideas or concepts. Integration is necessary because the responsibilities of Marketing and R&D in new product development are neither independent nor static; they cannot be analyzed separately (Souder, 1992). Responsibilities evolve as new technological solutions become available, as customers need change, as competitors offer new products, and as governmental and environmental constraints shift (Souder and Moenaert, 1992). Money, materials, information, and technical expertise flow across the boundaries between the functional areas to continue developing products (Griffin & Hauser, 1996).
Managing these human interactions, commitment and the transfer of technology and ideas among individuals and functional groups can be the most challenging aspect of new product development (Jassawalla and Sashittal, 2000).
At Unilever, formal commitment for this cooperation is made at the charter gate. But often there are still communication and cooperation problems with each other that negative influence the work process in the fuzzy front end and the next stages (feasibility phase etc.) of NPD.
Problems occur with cross-functional communication. If ideas are shared between the departments of Marketing and R&D they are pushed through, without good cooperation and communication. The absence of a formal process does not support the need for cross-functional communication and cooperation because informal contacts in the fuzzy front end are often not cross-functional.
Consequently, Marketing and R&D often do not understand each other's purpose of an idea. This leads to a lack of sharing information about new products, disapproval of ideas by one of the departments, loss of good ideas, and ultimately can cause a delay of the whole NPD process.
2.2.3 No time and support of higher management to develop totally new ideas
A familiar and main statement that is made by different managers at Unilever is; time. Managers at Unilever have not much time to create and develop new product ideas. Formally, it has been agreed that 15% of the time that you work at Unilever, in particular R&D, is directed to creation and development of new ideas. In practice, less time is available to work on real new product ideas. In addition, senior managers who have the power and the ability to develop new ideas have no time and take no effort to involve in the conceptualisation of ideas. Their function concerns mainly the management of the current portfolio of projects.
The cause lays for a big part in the short-term strategy of the programs and projects at Unilever; pressure to deliver new products on short term, that have enough scale to produce profit is very high. These projects are measurable facts, that in time you can manage step by step in a structured way. Only the first phase, before the execution of a project, is not really structured and is not directly measurable. For that reason, not much time is spent on totally new ideas because the pressure from day-to-day projects is too high and takes all time of work. Totally new ideas, which are ideas not formulated from a business need but are created by managers out of the blue, have no direction or environment where they fit into. The result is that these ideas cannot be directed to a current project and have little chance to survive. Flexibility is low concerning these new ideas.
Higher management explained in interviews that without a clear product strategy and a well-planned portfolio of new products front-end decisions become in effective. The NPD literature supports this concept (Khurana and Rosenthal, 1997). Paragraph 2.1.1. has described this as reducing uncertainty to a point where it meets the criteria of the organisation. To reduce uncertainty, information from both Marketing and R&D is necessary to meet the criteria formulated in the charter gate (see next perspective).
To overcome the problem of catching and developing radical ideas the new idea-gate is formulated. With this new idea-gate, higher management wants to support building an
environment where more and radical ideas can be developed with the constraint of building up conceptual ideas that can be judged by front-end criteria.
2.2.4 A lack of knowledge sharing and storage to conceptualize ideas
Records about R&D research subjects have been drastically reduced in the last years. Researchers do not report all their findings from research in a database and Marketing does not share their consumer insights with R&D. Consequently, the overall memory of the organisation and its knowledge is shortened and the same topic or item is reinvented at different departments at different times. In addition, knowledge that is stored in people’s heads is difficult to catch. Marketing and R&D have an important role in sharing and storing information and knowledge about projects and new product ideas. If Marketing and R&D do not communicate in an effective way less knowledge is shared and stored and ideas will no be developed.
IT-tools like Inoplan can support them in finding, developing, storing and evaluating knowledge about product ideas. The combination of the IT-system Inoplan as main tool and IPM as innovation management procedure is improving the process of knowledge sharing and storage. With Inoplan there is a main database, but most people don’t use it yet for the creation and development of ideas. Because of the newness of the whole integrated system, people still have to learn to work with Inoplan and make it part of their day to day work. For this reason problems in storing and sharing knowledge still occur.
Unilever is aware of these problems and promotes the use of Inoplan and IPM towards project managers. In addition, changes in the interface of Inoplan are made and improvements concerning the usability. It only takes time to make IPM and Inoplan part of the way of working.
2.3
Main problem description
By identification of the different problem perspectives, the main organisation problem can be identified. The perspective of “a lack of communication between Marketing and R&D” can be seen as the organisational problem of the fuzzy front end. There are several reasons for this implication.
First, the literature identifies that integration (=communication) problems between Marketing and R&D are most critical in the performance of the fuzzy front end (Griffin and Hauser, 1996; Souder, 1988; Gupta and Wilemon, 1986). The ultimate goal of the fuzzy front end is to reduce consumer and technological uncertainty, which involves the communication and cooperation between Marketing and R&D (Moenaert et al., 1995). In addition, the lack of communication in the fuzzy front end can be identified by literature as a problem of disharmony that negative influence the performance of the NPD process (Souder, 1988).
Second, Unilever is already building a system (Inoplan and IPM) and processes (new idea gate) to support the creation and development and evaluation of (radical) ideas. These structured processes should overcome the problems of a differentiated informal way of working in the fuzzy front end (paragraph 2.2.1) and give people more time to develop new product concepts (paragraph 2.2.3). For these reasons, improvements are not necessary in the process steps of the fuzzy front end.
More important, Gatekeepers and Senior Managers at Unilever argue that these systems and processes only can be supportive if Marketing and R&D effectively communicate and cooperate with each other. With knowledge about these communication processes the systems and processes can be (re-)developed / changed to stimulate communication and cooperation between Marketing and R&D and ultimately the effective management of the fuzzy front end of the NPD process.
Third, the bad storage and sharing of knowledge can also be explained by the ineffective cooperation and communication of Marketing and R&D. To get hold of ideas on new products (ideas that are kept close to the heart) people should communicate to different persons in the organisation to share and develop knowledge about ideas. If Marketing and R&D do not communicate in an effective way less knowledge is shared and stored and ideas will no be developed.
To conclude, the Category R&D Director Spreads & Cooking products Category (SCC) gives in an interview (Unilever Corporate news letter, 2007) an overview of the main problem in perspective:
Our new operating framework should help to focus more on the real opportunities, as there are now people who’s job it is to do just that. The role of programme is to define the innovation strategy and to stimulate new projects to realise strategic opportunities. But the real innovation arena is in the project teams, where people have to work together. Beside the necessary skills, these teams require the right attitude, behaviour and support to make it happen. R&D should be able to talk with Marketing, Marketing should be able to talk to R&D. These people often do not understand each other. The issue is not technology but a difference in values. Talking across these boundaries means talking across value boundaries. People need to realise and valorise the differences in their team.
The next chapter will further clarify the problem of a lack of integration (communication) of Marketing and R&D in the fuzzy front end.
Chapter 3 Exploration of the research problem
Chapter 2 reviewed the fuzzy front end at Unilever and described which problems occurred the informal process. The lack of integration between Marketing and R&D is identified as the main organisation problem. This chapter will further diagnose the lack of integration of Marketing and R&D by exploring the relation between Marketing and R&D (in the fuzzy front end) and identifying the possible causes of the lack integration. Identification of these causes will further explain what can be improved in the fuzzy front end at Unilever.
Two research questions are formulated:
Paragraph 3.1 How do Marketing and R&D integrate in the fuzzy front end of NPD at Unilever? Paragraph 3.2 Which causes of poor integration can be identified which possible influence the
integration of Marketing and R&D in the fuzzy front end at Unilever?
3.1
Cross functional integration at Unilever
This paragraph reviews the explorative interviews with R&D and Marketing project leaders from the SCC (Spreads and Cooking Category) as a case-review of the integration of Marketing and R&D in the front end of the NPD-process. Examples are given from past projects at Unilever. From these descriptions and literature research the possible barriers of integration of Marketing and R&D at Unilever are identified in paragraph 3.2.
3.1.1 R&D and Marketing in the fuzzy front end
It is not a lack of ideas. We have loads of ideas. We simply don’t bring our good ideas to the market. We had Actimel (probiotics drink) 15 years ago. Why did we not launch? At the time, I did not believe that the drink would work; in my opinion the bugs would not survive the journey through the digestive system. But did we (R&D) push the opportunity hard enough? Were we daring enough? We were all so tied up with the day-to-day management of our job and our people that we did not see this opportunity, did not dare to push it (Unilever Corporate Newsletter,
2007).
A great example of how the relation between Marketing and R&D occurs in the fuzzy front end is, besides the statement above, the development of Blue Band white bread.
From the strategy the consumer needs are identified: Parents want to feed their children the healthier brown bread during breakfast and lunch. But children like white bread (nice taste), which
is less healthy and nutritious as brown bread is. The marketers from Blue Band identified these “consumer problems” and went to create ideas. By informal meetings and communication with other colleagues from the same department the idea of a white bread with the healthy ingredients of brown bread was created. The only problem was: how do you get these healthy ingredients into white bread? R&D was brought in at this point to give Marketing a solution. In this case, the informal contacts of the Marketer supported the communication with R&D which have lead to a successful launch of Blue Band Bread on the market (Boudewijn, 2006)
For R&D at Unilever it is hard to present an idea to Marketing. Scientific technological ideas are difficult to explain to Marketers. Marketing does not understand the technical terms of R&D and R&D do not understand the business terms of Marketing. Often ideas are still vague, not well explained and not written down on paper. An integrated way of presenting ideas is not available. A Marketer explains: “within your project team you listen. You know their expertise and skills and you develop a relation. Ideas outside your “context” are difficult to catch, because you do not understand these ideas”. A relation to the person who has created the idea is missing together with the expertise and information. For this reason, many ideas from both Marketing and R&D will never enter the charter gate.
3.1.2 Tools of Marketing and R&D
To make the step from business need to real product ideas and concepts the Marketing departments use the Insight activator tool (see appendix C). This tool is familiar with most Marketers. The tool also supports the need for contacting different cross-functional departments and supports the communication between Marketing and R&D, because technological questions have to be answered. In well-integrated project teams the Insight Activator Tool is used to discover together (= Marketing and R&D) trends in the business/consumer needs. Marketers only argue that the tool is too detailed and extensive to support the conceptualisation of an idea. Less time is available to use the whole tool during the fuzzy frond end of NPD.
Another tool that is both used by R&D and Marketing is the BOSCARD (Background, Opportunities, Scope, Assumptions, Resources, and Deliverables). The tool is less time consuming and gives a good overview of an idea. It is a good first step to conceptualize an idea. The BOSCARD is more generally used by different people at different departments. However, the Insight Activator is more suitable in further development of the idea when integration already occurs.
Brainstorming is used as a cross-functional method to create and develop ideas within projects or at the execution of projects (also part of insight activator tool)
