{"id":27298,"date":"2018-11-04T20:07:13","date_gmt":"2018-11-05T01:07:13","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/unilever-china-using-open-innovation-to-become-fast-fish-in-china\/"},"modified":"2018-11-04T20:07:13","modified_gmt":"2018-11-05T01:07:13","slug":"unilever-china-using-open-innovation-to-become-fast-fish-in-china","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/unilever-china-using-open-innovation-to-become-fast-fish-in-china\/","title":{"rendered":"Unilever China: Using Open Innovation to Become \u201cFast Fish\u201d in China"},"content":{"rendered":"

In Summer Davos, the annual meeting of New Champions 2017, China Premier Li Keqiang talked about \u201cChina Speed\u201d: Now is a time for speed moving fish to take slow moving fish, instead of big fish to eat smaller one.[i]<\/a><\/p>\n

Due to the rapid development of E-commerce, and the penetration of local brands, Unilever, one of the biggest FMCG firm in China started to encounter challenges from smaller competitors. On the annual E-commerce report 2017, the online sales growth are not as significant as local brands. Unilever China started to think a new way to develop their product, to fit with the \u201cChina speed\u201d.<\/p>\n

 <\/p>\n

    \n
  1. Background: China Retail Market and Unilever in China<\/strong><\/li>\n<\/ol>\n

    China has been the world\u2019s second-largest (after the U.S.A) consumer products goods market since 2014. Total retail sales of consumer goods were around 6 trillion dollars in 2017, with an increase rate of 10% compared with 2016.[ii]<\/a><\/p>\n

    Among all the different channels, online sales growth contributed to 18.1% percent of total Unilever growth, much more than the second channel discount stores (5.6%) and convenience stores (4.7%) (see Exhibit 1<\/strong>) . [iii]<\/a><\/p>\n

    Among all the global online retail sales, China contributed over half of the total sales, with a significant growth from 2015 to 2017, and with a great positive forecast toward 2020 (see Exhibit 2<\/strong>).[iv]<\/a><\/p>\n

    However, Unilever is facing challenges from smaller competitors. The offline top brands are not still top when it moves to online. Lux and SFG sales perfect offline, while Kuyura (a Japan brand) is the top of online sales (see Exhibit 3<\/strong>).[v]<\/a><\/p>\n

    To fit with the fast increasing online sales trend, Unilever must find a way to make itself catch up with the \u201cChina Speed\u201d.<\/p>\n

    \u00a0<\/strong><\/p>\n

      \n
    1. Why does Unilever China need Open Innovation?<\/strong><\/li>\n<\/ol>\n

      The average product launch time of Unilever China is around 6 months for homecare product, such as fabric cleansing product and fabric conditioner, and 1 year for personal care product, such as shampoo and body wash. While the fast product launch time in a local small FMCG company can be at least one month.<\/p>\n

      There are some reasons behind. First, Unilever, as a big company, has complicated organization framework. Different functions need to align with each other to get a final plan. Second, Unilever, as a global company, needs to get global approval for most local product launch. While due to time difference and regional policy difference, it usually cost a lot of time for international communication. Third, the product launch process is super complicated in Unilever, with 6 difference phases including idea phase, feasibility phase, capability phase, market ready phase, market deployment phase and post launch evaluation phase (see Exhibit 4<\/strong>). The process with 6 phases at least cost half of year, which made the speed lay back compared with local small firms. Unilever need to optimize the product launch process especially for online sales product to match with \u201cChina Speed\u201d.<\/p>\n

      \u00a0<\/strong><\/p>\n

        \n
      1. Open Innovation Used in Unilever China<\/strong><\/li>\n<\/ol>\n

        What Unilever did in China is open innovation with a pioneer team including outside consultants and internal customer market insight team members to form a project team, to develop a new process for China product launch.<\/p>\n

        The team runs in the following way. First, the pioneer team used brainstorming to list all the possible ways it can use, without thinking of all the potential downsides and risks. Second, the team chose some of the ideas to further select and polish it. Third, the team asked related functions, including marking, R&D, supply chain and sales to go through their idea and get alignment with the new product launch process specific for online products with low regulation challenge.<\/p>\n

        The final plan, named \u201cChina for China\u201d, meaning \u201cdo what\u2019s right for China in China\u201d, includes below keep concepts.<\/p>\n

        China Speed <\/strong>\u2013 A C4G in action, we foster an entrepreneurial culture. Speed of decision making and agile action are essential. Inner start-up is one way to go.<\/p>\n

        Designed in China <\/strong>\u2013 to delight consumers with the most relevant, localized products. It\u2019s where our global R&D scale and China-based mix development resources get hand in hand to customize our mixes to local needs.<\/p>\n

        Portfolio for China<\/strong> \u2013 We will build new businesses, both new to China or new to Unilever, as showcased in our initiatives at Air and Water Purification.<\/p>\n

        Marketing the China Way<\/strong> \u2013 We cannot use old ways to innovate or market for the future. The way out is to get comfortable with experimenting more and fast, learning \u2018in market\u2019 rather than \u2018in test\u2019, and investing in new media channels e.g. Live Stream, Content and e-Commerce, to create brand equity.<\/p>\n

        Leverage Big Data<\/strong> \u2013 Today, data is everything and changes the way of doing marketing. Big data enables campaigns to reach individuals customized to their individual lifestyle, attitude and behaviour. Be the one who masters big data to seamless the path for consumer to purchase.<\/p>\n

        With the strategic plan in hand, Unilever China decided to use the most simplified product launch process to develop E-commerce product, with a start from a homecare product – Laundry Capsule.<\/p>\n

        \u00a0<\/strong><\/p>\n

          \n
        1. An Example Product Using Open Innovation: OMO Laundry Capsule<\/strong><\/li>\n<\/ol>\n

          The laundry capsule (see Exhibit 5<\/strong>) belongs to homecare category, with the brand OMO, which is already very popular in China, with the second biggest market share in China. The largest market share owner of laundry product in China is Blue moon (a local brand), and the other biggest player is P&G.<\/p>\n

          Facing the fast launch pressure, Unilever set a target to launch the laundry capsule within 2 month. With the new strategy \u201cChina for China\u201d in hand, the process of launching OMO laundry capsule was simplified in below parts.<\/p>\n

          First, manufacturing by outsourcing company. The procurement team efficiently searched all the potential factory cooperators and found 3 potential cooperator. With quality team and R&D team, they check the factory hygiene and production standard to make sure they are qualified. And after a bidding system, one of the 3 won the bidding and became Unilever\u2019s outsourcing cooperator.<\/p>\n

          Second, the negotiation process with international team was simplified from at least 6 meeting in each phase to only 2 key meeting in the whole process.<\/p>\n

          Third, to make sure the product match with national regulation, and also shorten the application process, the Regulatory team started to apply during the idea phase, which helped to save 1 month in application period.<\/p>\n

          Fourth, to accelerate distribution, new transportation way including airplane were used after a profit and loss calculation. In addition, among all the potential online distribution channels (see Exhibit 6<\/strong>) , only Taobao and JD were involved in the first period of product launch, to save the negotiation and transportation time with suppliers.<\/p>\n

          With\u00a0 all the 4 main process optimization solutions above and efficient operation team, the OMO laundry capsule was launched within 2 months, which is a magic speed in Unilever China.<\/p>\n

          \u00a0<\/strong><\/p>\n

            \n
          1. Towards Future \u2013 Become a \u201cFast Fish\u201d in China<\/strong><\/li>\n<\/ol>\n

            It is a privilege to be in China at this dynamic period of time, for me as a previous Unilever employee, and for all the Chinese people. Because there are so many opportunities out there we can tap, so many new things we can try, and so much fun we could have when we standup to the challenge and succeed.<\/p>\n

            Unilever North Asia head Rohit wrote in his blog that \u201cIt is known that China is most advanced in e-commerce and Chinese shoppers are digitized. Our e-Commerce business has made a great leap compared to where we were four years ago. To aim high, we need to learn and move faster in the areas of expanded reach to targeted netizens, better online shopper experience, and uplifting our online business portfolio. My call to action related to Speed is to “Catch the new China’s”.\u201d [vi]<\/a><\/p>\n

            With an eye to the future, Unilever China made a solid move along the journey, and needs to spend more resource on open innovation to upgrade its speed, to catch up with \u201cChina Speed\u201d.<\/p>\n

            Notes: <\/strong>To protect company information, some of the data and information are made up by the author.<\/p>\n

             <\/p>\n

             <\/p>\n

            Exhibit 1<\/strong>\u00a0\u00a0 U Company Sales Growth rate by Channel (2017-2022 Forecast)<\/p>\n

            \"\"Data Source: U company internal report<\/p>\n

             <\/p>\n

            Exhibit 2<\/strong>\u00a0\u00a0 U Company Global online retail sales<\/p>\n

            \"\"<\/a><\/p>\n

            Data Source: U company internal report<\/p>\n

             <\/p>\n

            Exhibit 3<\/strong>\u00a0 China Shower Gel Brand Share<\/p>\n

            \"\"<\/a><\/p>\n

            Data Source: Nielsen Retail Index, and Kantar Retail E-Commerce Report<\/p>\n

            \u00a0<\/strong><\/p>\n

            Exhibit 4<\/strong>\u00a0\u00a0\u00a0 U company Product Launch Process\u00a0<\/strong><\/p>\n

            \"\"<\/a><\/p>\n

             <\/p>\n

            Exhibit 5<\/strong>\u00a0\u00a0 Laundry Capsule<\/p>\n

            \"\"<\/a><\/p>\n

             <\/p>\n

             <\/p>\n

            Exhibit 6<\/strong>\u00a0\u00a0 China E-commerce Platform Distribution<\/p>\n

            \"\"<\/a><\/p>\n\n\n\n
            <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

             <\/p>\n

            Endnotes<\/strong><\/p>\n

            [i]<\/a> Keqiang Li, Speech at Summer Davos, the annual meeting of New Champions 2017<\/p>\n

            [ii]<\/a> China\u2019s General Retail report 2018, Fung Business Intelligence, 2018<\/p>\n

            [iii]<\/a> Unilever sales report 2017<\/p>\n

            [iv]<\/a> Unilever online sales report 2017<\/p>\n

            [v]<\/a> Nielsen Retail Index, and Kantar Retail E-Commerce Report 2017<\/p>\n

            [vi]<\/a> Rohit, \u201cChina for China\u201d to manage Unilever China, blog 2017<\/p>\n","protected":false},"excerpt":{"rendered":"

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