The major industrial groups in the food sector are facing a wave of disruptive trends driven by digital transformation (which we summarize here). They have to react quickly to the unexpected, a bit like in boxing, which explains our choice to quote Mike Tyson as a title. Faced with these disruptive trends, major industrial players are determined to organize their breakthrough innovation around platform strategies. The whole question is how to achieve this goal, in detail. To do this, let’s turn to those who have experience in this area, such as Alain Dufossé, with whom we recently spoke.
Alain Dufossé is well placed to measure both the importance and the difficulty for a large group to undertake and innovate outside its comfort zone. His career at Pernod-Ricard led him to manage the Travel Retail cluster for Asia, and then to head the German and Austrian branch of the famous wine and spirits group. Then came the big turning point. He believes in breakthrough innovation and, as readers of the book Innovation Intelligence know, in 2011 he founded Pernod Ricard’s Breakthrough Innovation Group (BIG). A company that is emblematic in some ways of the first wave of corporate open innovation in 2010.
Naming the levers of breakthrough innovation
From this experience, in which everything had to be built, and which came to an end in 2019, he first drew three major lessons concerning the levers likely to push disruptive innovation projects upwards:
Lever #1: diversity and complementarity in teams
Large groups are equipped to come up with high-potential breakthrough innovation ideas based on data that only they can establish. They have internal access to excellent resources for analysis, conceptualization, and forecasting. What they lack are the entrepreneurial profiles required to develop the good ideas thus generated. In other words: a startup focused on breakthrough innovation can greatly benefit from the ideas, knowledge, and data available to a large group. However, it is in its best interest to integrate external profiles into its disruptive projects. And these projects themselves usually have to evolve, during the development phase, outside the organizational framework of large companies.
Lever #2: shelter the seedlings from processes and perfectionism that are inoperative at their scale
There are indeed several reasons why the organizational framework of large companies is generally unsuitable for disruptive innovation projects. Alain Dufossé draws attention to two of them, which constitute as many obstacles:
- Oversized processualism: industrial groups aim for operational excellence on a large scale and, to achieve this, impose heavy constraints on all their activities. This hinders the acquisition of good entrepreneurial reflexes and, on the contrary, encourages false priorities.
- Inoperative perfectionism: the concern to protect brand image leads to delays in the market launch, yet it is the feedback from the market launch of a first version of the product that provides entrepreneurs with the information they need to orient their development work, and/or to revise their business model. This problem is well illustrated by the experience of the company 10-Vins.
It is easy to understand that the two aspects mentioned by Alain Dufossé are intimately linked to the habits and culture of large groups, which cease to be assets as soon as they tend to inhibit the entrepreneurial dynamic of breakthrough projects. They can even become cannonballs preventing the speed and efficiency of execution that are often indispensable to the success of this type of project.
“In a constrained world, the entrepreneur is obliged, if not to limit his ambitions, then at least to adapt them over time according to the resources and maturity of his business”. – Alain Dufossé
Lever #3: high visibility with senior management
It is not enough to be autonomous to be successful. On the contrary, according to Alain Dufossé, it is essential to ensure that autonomy is complemented by a strong involvement of the general management of the large group at the origin of the startup. Without visibility and involvement with the general management, autonomy becomes ineffective. You need someone next to, or above, the entrepreneur to permanently challenge him or her by giving him or her the eyes of the organization.
Integrating the three keys to success: the startup studio
The notion of a startup studio is currently in vogue in the world of industrial innovation. Rightly so, as it incorporates the lessons of the first wave of corporate open innovation.
What is a startup studio?
A startup studio is defined by its dual mode of operation. Its team elaborates the foresight chooses the battlefield and develops the concepts around it. It then recruits the entrepreneurs who pick up the concept that has been elaborated, and then develop it as they would if they had had the idea themselves. In other words, the investment is more about people than ideas.
According to Alain Dufossé, the structure Kamet Ventures, created by AXA, is a good example of a startup studio.
Legal and financial framework of a startup studio
This delegation of operational execution presupposes an appropriate legal and financial framework. A large group is then only an investor in the balance sheet of a studio startup. The legal constraints that affect it, and which make it particularly difficult to recruit entrepreneurial profiles, can thus be lifted, by allowing an equity remuneration. According to Alain Dufossé, this is also the condition under which intrapreneurship can work: by taking the risk of leaving a position and investing 100% in an entrepreneurial project. Otherwise, the risk is to keep the advantages of salaried employment, without gaining the characteristics of the entrepreneur – who lives fundamentally in insecurity.
Reintegration into the corporate world is not the only horizon!
Reintegration into the group only comes much later, when the business has sufficient critical mass and maturity. Once these conditions are met, and insofar as the business is complementary to the company, the question arises. But it would be a mistake to think, from the outset, that a startup’s exit is limited to reintegration. A startup from a large group must first of all be a startup and develop as much as possible as a startup. On the side of the industrial group, the project is a participation in a young company, the execution of which is fully in the hands of the entrepreneur. The group is not operationally in charge of developing the business.
What about the future of food in all this?
Two contradictory trends
The demand for transparency on origins and fair compensation for producers, supported by consumers, has been working in the sector for a long time. With the digital transformation, this requirement is reinforced by new traceability instruments. In reality, this field is still far from having reached its maturity and will continue to develop. On the other hand, the industry is innovative in the synthesis of alternative, highly processed food products: for example, non-animal meats. According to Alain Dufossé, one of the central questions of the future of food is to know which of these two trends (transparency vs. substitute products) will eventually impose themselves on the other.
Spirits: alternatives to ethanol?
Among the molecules present in cannabis, THC could constitute a lead in the development of an offer of alternatives to ethanol: a matter to be followed.
LVMH: a consumer-centric model ahead of its time
The big problem for brands today, in the food industry and elsewhere, is direct access to the consumer to develop rich and data-generating links. To solve this problem, they have, according to Alain Dufossé, no choice but to develop their own platform. In this, they can draw inspiration from the case, quite unique in its prescience, of Louis Vuitton, whose strategy has long been based on a strong investment in the control of its distribution network. Indeed, at the time of the acquisition of Louis Vuitton, Bernard Arnault chose to reinvest in the company’s distribution network. This was a founding act of its ongoing strategy thereafter.
The question was how to organize disruptive innovation around platform strategies. Alain Dufossé provided important elements of an answer, based on his experience of the first wave of industrial innovation in the digital age. The startup studio is thus, according to him, the new answer to the challenge of disruptive innovation. During our next We Are Resilient webinar, we will have the opportunity to come back with him on these questions, and also on the future of food, where the digital transformation is also an opportunity to confront multiple and diverse requirements and trends.