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Innovating by Tapping Startups

Many consumer products firms are fueling their digital transformation by investing in startups

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Reva: You’re listening to Next in Consumer Products from Publicis Sapient. The podcast that shares insights on unlocking what’s next in digital and consumer products.

Reva: Over the course of the past several years, all industries have seen rapid shifts in digital transformation. The consumer products industry has certainly been no stranger to these seismic changes. To keep up with the disruption in competition, many consumer products companies have worked to build internal capabilities through agile teams and incubators or the acquisition of startups. However, many have instead opted to fuel their innovation engine by partnering externally with startups. Building a consortium to port over learnings and best practices at scale. One of the most recent examples, Colgate-Palmolive, Coca-Cola, and Unilever have joined ABInBev Sustainable Supply Chain Accelerator to find the next sustainable solutions for the CP industry. In this episode, we’re going to discuss how established companies and startups can form a better collaboration and working relationship together.

Joining in today’s Publicis Sapient CP industry lead for EMEA and APAC, Scott Clarke, and VP of Innovation and Business Development, Oded Lavie. I’m your host for the session, Reva Bhatia. Now let’s dive in.

So, Scott, I’m gonna kick things off today with a question for you. Why are consumer products companies turning to innovative startups more than ever to generate new thinking and solutions?

Scott: I think it’s a great question, Reva. I think to a large extent the shift towards startups reflects a broader trend across the industry of moving from doing digital, with digital is really just about technology, to being digital where there’s ultimately a paradigm shift in how organizations think and and how they act both inside the organization and externally. And being digital is really about embracing new forms of collaboration and openness and transparency, a test and learn agile mindset, the willingness, if not ingrained, desire to make decisions based not on intuition and experience, but rather on facts and figures.

I think really being digital more than anything else is about humility, and it’s recognizing that if you want to lead in your category and drive change and drive impact with speed and scale, those solutions don’t always sit within your organization that there’s tremendous intellect, tremendous ability, and creativity and intuition that sit outside your organization. How do you bring that together with the many great people that sit within to drive that change and that innovation with speed and scale?

And in many ways, the collaboration that is now taking place between large CP organizations and startups is a very logical progression. And the large corporates bring that scale and budget and marketing to the table while the startups bring that innovation and new ways of working, new approaches. It’s a marriage made in heaven in many ways because we’re pointing out that for the fact that there are really more than 1000 big companies worldwide that have invested in these new venture initiatives spreading their bets by taking stakes in multiple startups. There is no single formula. There is no one size fits all way to work with these startups and we’re seeing many different variations across the industry.

We’re seeing a number of CPG’s who are bringing in startups on an ad hoc basis to tackle very specific problems, often ideas or business problems that are defined or identified within the organization. We’re seeing instances where large CPG’s are creating their own standalone startups and then hiring entrepreneurs to come and run those startups within the organization. We’re seeing many instances where CPG opening standalone incubators and accelerators or joining existing ones with multiple players. We’re seeing CPG’s invest in hackathons and competitions to be able to create new innovation and new thinking against very specific problems. And we’ve seen many instances of CPG’s partnering with universities or tapping into to labs within universities to be able to identify new thinking and then often taking a stake in in the companies that spin out of that. So again, no one size fits all but some great examples of how CPG’s are looking outside the organization to co-create value and co-create impact to the industries in which they belong.

Reva: It’s fantastic Scott, and you know, certainly, it goes without saying that a lot of the CPG’s that we do business with and that are out there have been around for often 100 plus years and so that notion of the juxtaposition between, you know, they’re being a very well established organization partnering with a startup is certainly been fantastic to see come to fruition and so that being said, Oded, I want to kick it over to you with a question. So, what are some of the key areas or white spaces you see with the ripening need for innovation and disruption in the CP industry? So what have you largely seen as the area that a lot of CP firms, if there is one, if you could pick one, have been leaning into? 

Oded: That is a hard question, but I think that I wanna focus on on three topics. The first topic that I think that CP right now is struggling with and are trying to find their hands and legs between is the data part. Everybody is aggregating data. We got data coming from here and data coming from there. And how do I enrich this algorithm and is this predictive algorithms and all of this data, and then when you top it with AI and machine learning and NLP and computer vision, all of these topics generate huge opportunities for CP. And it’s very hard to understand what to do over there. 

Now a company can decide I’m going on this route. And it makes a bet eventually - it chooses to invest money to hire talent to go on this route in the data space. But what about all of the other opportunities in data? All the other opportunities and options that they can do using AI using machine learning? So, I think data is very well positioned to be that “Thing” that CP are looking for. There’s a company that I’ve been working with called Explorium. They do automatic enrichment of data, so think about a CP company. It has its first party data, but it’s like buying a house. You know what you’re paying for based on the number of rooms and based on the location and based on the age of the building. But what about the neighborhood? What about the crime rates in the neighborhood? What about the schools? What about how close it is to the hospitals and to transportation and public transportation? So, companies need to enrich their data. That costs a lot of money because the talent is very expensive and the time that it takes. So, CPs can’t just decide to do that on their own, and these companies give CPs an option to experiment cheaply and fast before they decide to commit to something. If it brings value, let’s expand the pilot to a bigger one. If that brings value, let’s see how we scale it to a country. Let’s see how we scale it to a region. Let’s see how we sign the global contract. So, data, definitely one place.

The second thing that I want to talk about is growth of digital assets. Companies today need amounts of digital assets, designs, videos, images, descriptions, translations, e-retailors, marketplaces, DTC and it’s just exploding, and it doesn’t matter how large or how many people sit on your studio, if you don’t put automation in it, you won’t be able to finish it. You won’t be able to be in time. You won’t be able to adapt to changes. Your competition just did a promotion and you wanna now spread your promotion to 100 marketplaces, your DTC, all of your social and it needs to be today. Not in a week from now. It needs to be today, so all of the growth of the assets needs automation. And again, data-driven AI.

And here comes the third topic, synthetic media. There are a bunch of companies growing that create media from nothing. They generate the media on the go, they generate images, you tell them what you want, then they generate it for you. They generate the video they generate talking heads based on virtual influencers because, with the amounts of assets that you need, you can’t sign up influencers all the time, presenters, celebrities, you need to start creating media from nothing, so I think that these three topics: data, growth of assets and synthetic media which are all related, are the biggest opportunity today for CP with the startups.

Reva: Yeah and, Oded, that’s bang on that they’re all related, and it’s interesting that you started with data because we’ve chatted in prior episodes of this podcast series about the data challenge that a lot of CP firms have right for, you know, I I mentioned earlier, the 100 years or so that they’ve been around, they’ve often not owned the consumer data. And so, partnering with third parties and startups who can help them continue to crack that case certainly seems like an appealing proposition. 

So, transitioning now to my next question, and this is for both of you. You know. Obviously these three areas you’ve outlined, Oded, are exceptionally median and Scott, you did a great job at teeing up the broader digital call to action for many CP firms. You know, my question is, how can CP firms really make the most out of the relationships with these startups? What have you seen really work in these types of setups?

Scott: Well, I think there are a number of inherent challenges that have to be overcome. First and foremost, it doesn’t always work well because this is, as I said before, a new paradigm for a lot of big corporates working with entities outside the organization who may have very different working styles and cultures and and ways of measuring success. I think the the lessons learned from companies who have leapt forward in collaborating, the way that Oded and I’ve been describing is, first of all, make sure you are addressing key business challenges. You understand the problems that you’re trying to solve for through that innovation through those startups and why, rather than simply falling in love with a particular technology. Right? Fall in love with the problem, not the solution. Fall in love with the use cases that you’re trying to enable. We often say to our clients, when thinking about where to invest in innovation, ask the very simple question: “How does this impact the lives of the people that matter to you? How is this driving human impact?” If it’s not driving human impact, chances are it’s the wrong innovation or you’re going after the wrong problem. So that’s the first, is to ensure that you are defining the business challenges and problems you want to prioritize and understand the reasons why.

Second of all, you’re often operating in a very challenging, very complex environment. Provide that single point of contact for the startup coming into work with you. Help them understand how your organization functions. Take away that unnecessary bureaucracy so that they’re able to work in a much more seamless way with people inside the organization. Be very clear. Be absolutely clear on the components that the startup is expected to deliver and and why. ‘cause there’s a role for the startup so often it’s many startups working together, working with people inside the organization understand what they’re delivering to this overall ecosystem. Set very clear objectives and KPI’s for that startup working on a particular problem. What does success look like? And I think because this is essentially a movement. It’s a paradigm shift as said before, find ways to inspire internal organization on leveraging startups in a more scalable way. In other words, celebrate the successes, demonstrate how these startups are bringing real opportunity to organization. Don’t underestimate the importance of organizational change management in how you collaborate for success with these startup organizations.

Oded: I totally agree with everything and to elaborate, change management, culture. You also need a way to make people not afraid of failure, because if people are afraid to fail, they won’t take risks, if they won’t take risks, they won’t innovate. So yeah, you don’t need to take huge risks, you can take baby steps, we’re not risking too much, but we learned from it. Then we make it a bigger one. We’re risking a little bit more, you get people comfortable with stepping out of the comfort zone, checking things.

It is a mental issue as well. How can I trust this company who moves at the speed of light? Where to get a meeting for me is a month in advance. How can I trust them so you don’t give them your biggest risk today? You start small. You build a roadmap. If this is successful and this is the expectation of what success looks like, we will grow it, and this is what success looks like as well. So, it’s getting people to mentally feel comfortable with failure building on successes, understanding that it’s baby step.You don’t start running from the get-go. You start crawling, you start walking, then you start running.

It’s understanding and that you need to kiss a lot of frogs. There are a lot of frogs out there which might be amazing startups, but they might not be the right fit for your company. And sometimes that takes time. You need to be willing to put in that time, and if you are not willing, hire somebody who can hire companies who do this and have kissed already a lot of frogs to recommend you which frog were prince, in this case, you should be working with. It’s the understanding that you need to commit. Sometimes a startup will commit to you all the way, but when they start and Scott mentioned it, when stakeholders start to fight between among themselves and there’s too many silos, the startup can get lost. And if he doesn’t feel somebody who’s committed to him, he will stop working with you. And by the way, that reputation can go along as a company that isn’t nice or isn’t startup-friendly? There are so many challenges along the way and there are solutions. It’s been done, it’s not something from the scratch, but it is a paradigm shift and every company, every CP needs to find its best way to build that innovation pipeline internally that it’s good for it, scalable, that matches the culture, and drives results of course.

Scott: I think what’s important to note just building off of what Oded laid out, as well, as many of these startups have a very specific product or very specific innovation that they’re known for, that they’re they’re famous for and, and solutions are often problems often require solutions that are far more complex than any one startup themselves can solve.

And the real opportunity see for the CPG’s we work with is bringing many of these startups together in a more curated way. So, integrating those different innovations, there’s different ideas to create much bolder and and more impactful solutions, right? That’s where the magic really exists. Are bringing technologies together in new innovative ways to solve those emerging problems and I think for all the talk about technology and the innovation that sits under it, we can’t forget that ultimately and first and foremost. Innovation is is around the art of human ingenuity. It’s humans that come up with great ideas, not machines, and I think that’s one of the great tragedies of digital disruption as the technology has become much more magical and solving problems, we as humans have become much more complacent in identifying the problems we want to solve for and why.

Right, so unleash the power of the people that sit in the organization, because that’s where the great thinking, the great creativity really exists, right? And then you know, master, the art of possibility, breakdown barriers, right? Think in a borderless way about what you might do or what you could do rather than being constrained by conventional past precedent, right and master the art of perseverance. Because Oded said, yes, you’re going to fail many times along the way, but learn from those failings, right? Fail often, fail fast, test and learn. Those things working in tandem start to bring that technology to light in an entirely new way.

Reva: And I love that you are both articulated that, like cultural paradigm shift, that needs to happen within a lot of these organizations that openness and willingness to try quickly and fail quickly and move on to the next. It is certainly something that’s of critical import to scale and have success in this type of a model and and so that being said, I wanted to actually wrap with a bit of a question to help contextualize this for our audience a bit more so, you know, I’d love for both of you to maybe rattle through some interesting examples you’ve seen where you’ve seen a partnership between an innovative startup or an innovation tech firm and a CP company that you think really draws on the best of both worlds, so to speak. So not sure which one of you wants to go first, but feel free to dive right into some of the more compelling examples to help bring this to life.

Oded: Sure, I want to talk about one company from the partnership that we created with the SAP.io Foundry around CP companies. It’s company called Algopix. And it’s a company in the commerce space for marketplaces and CP and its solution is when I heard it, I was like this is brilliant. They built 12 free tools for sellers of all sizes to connect with and once they connect, they get access to their Amazon account, to their eBay account or to the Walmart account or whatever marketplace they connect to. And Algopix analyzes what happens there and gives them. Here are missed opportunities. Here are products that you can add that will gain you more revenue. Here is why you lost revenue yesterday because her competition did this or that. And they have today around 80,000 sellers on their platform, about 50,000 categories of E commerce and about 1 billion to 1 1/2 billion SKUs. Now yes, our client, wouldn’t use a free tool and give all of its data to a startup, but small sellers do because they don’t have the money to use that tool. So Algopix anonymize the data and then it goes to clients like Unilever, Nestle, L’Oréal tells them: This is why you lost revenue yesterday on your store because somebody selling the same product just did a promotion. Or your competition just did this, and they have it in real time, not in near real time, not aggregated once a day or once a week. In real time they can show you loss of revenue or what would bring you increased revenue.

So that’s one way they work with the CP, real time market share and opportunities and causality of these opportunities or losses. And they also work with the other side. For example, think about Facebook Marketplace. Somebody uploads a product, a camera, and that somebody, me, writes the description of the camera, writes the name, but that’s it. Facebook uses Algopix to bring all of the data enrichment about that product to add all of these specs about the camera, all of the size the product page, if you will. And it then also asks Algopix : “What is the market share for this camera? Are people buying it?” Because Facebook wants to show on top the most sought after products. So, Facebook algorithm for what to show on top for cameras uses Algopix for the marketplace? And they also work with Walmart and other marketplaces, so here’s a company with opportunities for CPs and marketplaces using data. And again, we talked about data, we talked about growth, exactly an example that I love.

Reva: Awesome, thank you, Oded. That was great. Scott, care to give your latest example and most interesting example?

Scott: I think you discovered from Oded’s passion that asking he and I this question is a bit like asking us to choose from a sweet shop, we love everything that’s sitting before us and and we’re not, we’re not even sure what good it provides us, but we just love the technology and we love the opportunity, but I think if we can answer the question a bit more broadly, I think when when I start looking at innovation today and where it’s really driving impact, I think there’s three areas that really excite me.

The first is innovations for helping to really bridge the gap between the physical and virtual worlds, and we’ve certainly seen a lot of that in the beauty and personal care industry with accelerations around 3D augmented reality mirrors. For instance. Our ability to have our skin conditions read in a virtual way and have products recommended to us based on that detailed computer vision. I think that’s pretty remarkable. We’ve seen it with Sephora, we’ve seen it with L’Oréal, we’ve seen it with Ulta in the US as well. All investing in technologies provided by companies like ModiFace for instance, increasing those beauty mirrors that allow us to reach very personal solutions in a virtual world and certainly helping to empower the consumer to make more confident purchases on the basis of that. Virtual try-ons within it in the fashion industry. As well, the ability for people to interact with a smart mirror in a dressing room and have clothing recommended to them based on their 3D body image and so forth. I think being able to close that gap between the physical and digital is remarkable. The second is is personalization and Oded touched on it. I think we’ve really just scraped the surface on ways in which we can continue to create a much more personalized and interactive experience with consumers. We’re seeing the power of AI and natural language processing ability to actually customize solutions, not just based on the things we we say, but how we say it. Our tone and sentiment in our voice, the urgency conveyed in a voice through natural language processing allows us to curate content in an altogether new way.

Really, personalization is about the convergence of content and context. A deep, intimate understanding of the why of the interaction of how consumers, not only not only what they want to do, but how they want to feel in each point of interaction and using AI in real time to give consumers that really powerful, exciting experience. I’m seeing some really exciting innovations there, particularly set in natural language processing and AI, and the third, which really I think stands above all others, is how we’re using innovation to help consumers accelerate to better solutions around health and wellness and and sustainability. In sustainability, with so many startups emerging to find more sustainable clothing, textiles as a company I’ve worked with in the US called Bolt Threads and Bolt Threads, have actually created clothes coming out of the DNA of a spider’s web, it’s remarkable. The power of this innovation. So, we take something like that, and we marry it with computer vision. We married with the AI to create these new integrated solutions. I think really, we’re we’re just very much at the beginning of this journey, and it’s a very exciting one for sure.

Reva: Something for all those, arachnophobias out there.

Scott: Yeah, absolutely.

Oded: I have to add something which builds on what Scott said. The amazing opportunities of the future is exactly at the intersection between these technologies, people’s needs, culture and the business challenges. And by the way, this is exactly where companies like us can come in because we, as having a broad knowledge base of innovations of challenges of people’s behavior, of research, can stick together three or four different solutions which might from first view, seen “these are not connected.” But we would know how to connect them to create that experience that would wow people that would magically bring a solution from an app to scan skin all the way to the E commerce and personalization and testing and digital sampling to collect the feedback for example. And this is four different startups that you can combine into one solution. And that is what I love about innovation, connecting dots that others don’t say and bringing new meanings into these connections, these intersections.

Scott: Absolutely.

Reva: That’s awesome, Oded. And that’s a fantastic note to end on. Those are all the questions I had lined up for you both today.

Thank you for a really invigorating conversation and hopefully we’ve given a lot of our friends in CP some food for thought for how they should tackle this immensely growing space. So, appreciate you both taking time.

Oded: Thank you.

Scott: Thank you, Reva. Thank you, Oded.

Reva: Awesome, thanks. Cheers.

Reva: Thanks for tuning into Next in Consumer Products. Be sure to subscribe so you don’t miss a beat on the future of digital in the CP industry.

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