Kraft Foods Crowdsources its Innovation Process to its Customer

Innovate with Kraftmuch publicity about its open innovation strategy. Now also Kraft Foods, a competitor in some markets, announced its new source of inspiration for new ideas: its customers, as the Wall Street Journal reports today.

Kraft is the largest food company in the US. Like many large packed goods retailers, it was pretty much disconnected from its individual customers for a long time (although the company did a number of pilots in mass customization, namely custom Kraft Lunchables, lunch boxes for kids). But for innovation, the old thinking ruled: We know what customers want.

Kraft's SVP for Open InnovationOf course, like all other consumer goods companies, Kraft has an open line to its customers, toll free numbers where customers can call with questions, complains – or ideas for new products or improvements. In the past, however, nothing happened with this input. The WSJ quotes Mary Kay Haben, Senior Vice President for Open Innovation (sic!) at the company, „we would have said, `Thank you, but we’re not accepting ideas.‘ “

This has changed now with the launch of a new consumer web site where everyone can submit ideas for new products, processes, advertising or whatever. Kraft in the moment is in the desperate move to re-invent itself. While the company owns some of the best known brands, including Oreo cookies, Philadelphia Cheese, Milka chocolate, and Jell-o, it has struggled in the last years to generate the profits it used to have in the past.

And like many companies, after a first stage of heavy cost cutting, Kraft is now focusing on innovation. And realizes that it will miss too many opportunities by just relying on its internal resources. So it is turning outwards, starting first to engage professional solution providers from its periphery. The first effort to open its innovation process was designed to swap ideas with outside partners, even competitors, to improve products, packaging and business systems. Open Innovation, in this understanding, has wide parameters and includes licensing deals and new technology. For example, Kraft today is one of the clients of Innocentive, a company that helps solution seekers to broadcast problems to its network of 90,000 solvers around the world (see here or here for a report on Innocentive).

As Promo Magazine reports, this kind of cooperation is nothing new per-se for Kraft. In marketing, partnering with other brands to establish new product categories has been established since a long time (for example, Kraft has a license from Starbucks for its coffee products, and, well, one of Taco Bells for Mexican Food). But the open innovation strategy should bring this to a new level.

„We rely on our own R&D folks for their ideas, but also are looking outside our own walls, like Procter & Gamble does. Kraft New Product Development will continue to focus on organic growth and product extensions, while Open Innovation will primarily focus externally.“, the magazine quotes a company spokesman.

The latest step in open innovation of Kraft is opening its company walls to its largest resource base: its customers and users of its products. A new (still pretty basic) web site facilitates the submission of ideas. There is also a nice phone number (credits to Kraft to get this vanity number): 1-800-OPN IDEA.

Kraft_open_innovation
Their web site (http://www.kraftfoods.com/innovatewithkraft) is an example for a simple toolkit for customer idea competitions, a method for new product development that I have described with my co-author Dominik Walcher in a recent paper (published, by the way, in a great special issue of R&D Management, an academic journal, on open innovation; you find a pre-version of our paper also on userinnovation.mit.edu).

But before you can submit your idea, you have to accept a long list of rules. Quite annoying, as also the folks at Kraft have realized:

„At Kraft, our Innovations Team welcomes new ideas, and sincerely hopes that you choose to share your ideas with us. That said, we want to make sure you fully understand Kraft’s process and rules about receiving such ideas. While we understand that these rules might appear strict, they are necessary to protect both you and Kraft. Therefore, we ask you to carefully review all the information provided below and only send us your idea if you are comfortable with our rules.“

(Note: If you take open innovation seriously at your company, engage a professional agency for the copy texts, as you do it with all your advertising materials).

And what are they looking for?

„Kraft is accepting ideas under this policy for new products, packaging, and business / processes / systems only. We are most interested in ideas that are more that a concept, in particular new products & packages that are ready to be brought to market (or can be brought to market quickly).“

An existing patent of the information provider is a plus in this regard. When the idea is protected — or protectible — by a patent or copyright, they may negotiate with the provider appropriate license rights. If Kraft is interested in an idea that it is not protected (or protectible) by a patent or copyright, but new to Kraft, the company may grant a nominal award. But: „In no case will that nominal award exceed $5000.“

So you better speak to your patent lawyer before contacting Kraft! And in case you are reading this posting and want to submit your bright idea (I am just dreaming of Instant Sushi), you better are a resident of the United States: Even if Kraft opens its innovation process, its openness end at the borders of the US. Only US residents can submit ideas.

But what can we expect. While the web site may look simple and the rules restrictive, this is the very first attempt of a company, that was internally focused for its entire existence, to open its boundaries for input from its periphery. It took Kraft many decades to get its internal innovation management organized and optimized. It will also take them a wile to experiment and learn by trial-and-error to create a proper infrastructure and organizational framework for open innovation with their customers and users. But it is great that they have started.

About the Author:

Frank T. Piller is a Co-Director of the MIT Smart Customization Group at the MIT Media Lab, Massachusetts Institute of Technology, USA, and a chair professor of management at the Technology & Innovation Management Group of RWTH Aachen University, Germany, one of Europe’s leading institutes of technology. Before entering his recent position in Aachen, he worked at the MIT Sloan School of Management (2004-2007) and has been an associate professor of management at TUM Business School, Technische Universitaet Muenchen. Frequently quoted in The New York Times, The Economist, and Business Week, amongst others, Frank is regarded as one of the leading experts on strategies for customer-centric value creation, like mass customization, personalization, and innovation co-creation. His recent analysis of the crowdsourcing business model “Threadless” (co-authored with Susumu Ogawa), an innovative crowdsourcing business model in the fashion industry, has been elected as one of the Top-20 articles in MIT Sloan Management Review.