Innovation . Innovation Advisor from Innovate2Succeed Programme gives lecture at LSE
Innovation Advisor from Innovate2Succeed Programme gives lecture at LSE
Article by Oxford Innovation | 02.12.2016
Innovation Advisor from Innovate2Succeed Programme gives lecture at LSE
The London School of Economics and Political Science (LSE) hosts the largest undergraduate Summer School Programme in Europe. The programme is led and mostly taught by resident LSE faculty with occasional guest lecturers. With a variety of different academic courses representing the breadth of subject fields at the LSE, the Programme attracts hundreds of students from around the world each year.
At the 2016 LSE Summer School, Dr Eric Wood – an advisor with Oxford Innovation Services – was invited to give a lecture on the Innovation Management stream which forms part of the Business and Management course. Dr Wood is an Innovation Advisor on the EM3 Innovate to Succeed Programme.
Prior to joining Oxford Innovation Services, Eric’s career straddled academe and business as an entrepreneur, investor and consultant. He was Professor of Innovation and Entrepreneurship at the University of Cape Town, served on the boards of several young tech business and consulted widely to the private and public sectors.
Dr Wood’s topic was “Creating value from innovation in developing economies: An African perspective”. The session began with a reminder that innovation can result in extraordinary value creation as well as large-scale value destruction. Eric contrasted the value created by the iPhone – arguably the most valuable innovation in history – with the billions of dollars destroyed in projects such as Bing and Xbox.
The spread of innovation outcomes in Africa is no different. mPesa – said to be Africa’s most significant innovation – has touched the lives of millions of the poorest Kenyans by enabling them to access basic financial services at vastly reduced cost and is highly profitable for Safaricom owner Vodafone.
However, mPesa’s success has eluded most similar projects elsewhere in Africa. The field of mobile-based financial services has witnessed a number of high profile failures including Vodafone’s mPesa project in South Africa which was shut down in June 2016 after generating losses since its launch six years previously.
As African innovations have achieved significant success globally it’s crucial to understand what sets the most valuable African innovations apart from the rest.
Bridging African and UK Innovations
Bio-Oil, a scar and stretch-mark treatment, and among the top-selling individual skin care products in the world is an African innovation. The formulation contains a breakthrough, trademark ingredient. But on its own, this was insufficient. Bio-Oil’s market entry was unspectacular.
Several years after its development and launch, the product was languishing. Annual sales were under £100,000 and the company was barely profitable. In fact, the inventor decided to throw in the towel and sold the business. Eight years on, the new owners – the Letschert brothers – have transformed Bio-Oil into a £100m a year global business.
Perhaps surprisingly, Bio-Oil is not a listed multinational company, but an independent family business solely owned by the two brothers. It has only 30 employees.
Initially they considered external finance but then decided against it. The business is very much an SME, focusing solely on R&D, marketing support and supply chain management. Manufacturing is outsourced, along with much of its research. Sales are handled through a global network of distributors.
So what did the Letschert brothers do to transform the business? The answer lies chiefly in smart, focused marketing and support. Advertising is critical to building a skin care brand, but the Letscherts knew they had limited resources to invest in advertising.
Their goal was to achieve market expansion with the minimum of advertising spend. They concluded that the best way to keep the required advertising spend down would be to maximise the word-of-mouth effect to adopt brand ambassadors.
Creating Brand Awareness
The brothers recognised that many skin care products on the market ultimately failed to live up to the manufacturer’s claims. They concluded that they needed to do everything possible to ensure that Bio-Oil customers were not disappointed; if not, they would pass on the good news to their friends.
The key to achieving this was to avoid making any claims for the product which were not supported by research, and so the company shifted all R&D efforts away from product development to research on how and why Bio-Oil worked.
Several other innovations have helped to keep marketing costs down. For example, the company avoided any marketing materials which couldn’t be used across all its international markets, reducing the duplication of effort.
Another important decision was to keep the product line to only two stock keeping units. The company has been highly systematic in its approach to each new country launch. Great care is taken in the selection of each new market and research and preparation for the launch. Selection of the distribution partner is paramount; the company will not proceed toward launch until it is convinced that it has the right distributor on board.
The results speak for themselves. Bio-Oil has achieved 298 skincare awards. It has become the top-selling scar and stretch-mark treatment in 23 countries. The total sum invested in building this global brand is thought to be the lowest of any skincare brand in history.
For the first decade, most of the innovation effort went into improving the marketing, sales and supply chain functions. The company focused on building what may be the leanest model for skin care product sales in the world. It was a full twelve years after launching that the company launched its next product.
So, what has made Bio-Oil the success that it is? Is it the breakthrough ingredient which is said to bestow unique benefits? Is it the research into actual benefits for different skin conditions? Or its network of international distributors? Or is it an extraordinarily focused, systematic, lean marketing and sales support function? Or a highly efficient supply chain? Or is it a combination of all of these?
Clearly this is a company that has paid careful attention to managing its innovation value chain; prioritising exploitation over exploration. Only when it had exploitation down to a tee did they launch a new product.
Bio-Oil certainly benefitted from the dedicated focus of its team. For twelve years, it was their one and only product. However, the road for Bio-Oil has not been smooth. In fact, its first international launch nearly came unstuck. The UK had been selected as its first market and a well-known UK pharmacy chain had been selected as its sole retail outlet. After almost £1m was invested in the campaign, the outlet became concerned that a claim regarding the efficacy of the product may not be consistent with legislation.
The launch was pulled, yet with the advertising space booked, Bio-Oil stood to lose not only the investment but its reputation too. A quick decision was taken to seek alternative retail outlets and with only days to spare, arrangements were made with independent pharmacy groups. The campaign went on to be a huge success.
To add to the achievement, a year later, the UK pharmacy outlet changed its mind and took the production, with the same wording on the packaging. Clearly, Bio-Oil benefitted from the team’s persistence and focus.
Although, no other product success will be exactly like this, there may be elements which are relevant to a wide variety of SMEs, including:
- Is the product portfolio working for us or against us?
- Do we have the expertise and resources to exploit the full potential of each of our products?
- Or are we investing too heavily in extending or improving the product portfolio, perhaps at the expense of the exploitation of the existing portfolio?
- Have we given sufficient consideration to what the appropriate split would be between exploitation and exploration?
- On the exploitation side, what is our recent track record of launches into new markets?
- Is there room for improvement? Could we be doing more thorough research or preparation?
- Are we consistently able to identify and win over the right partners?
- Are we giving enough time to reviewing each launch in order to identify the areas for improvement and make the necessary changes next time round?