FDIN. Fuzzy Front End of Innovation Seminar Roundup 10th Feb 2015 160 delegates turned out to experience this seminar, with lots of new (and younger) faces in the audience. For the first time in a while I was presenting, and chairing as well as taking notes, so this roundup may be a little less comprehensive than usual, (especially towards the end) and is certainly being posted later. Forgive me. It's also a little difficult to comment on my own presentation, but what I tried to do was to open the thinking on the Fuzzy Front End with a framework that's based on best practice. I've observed plenty of reasons why the innovation process is slow, inefficient, and wasteful, and over the years I've researched and developed tools and techniques to improve the front end in the hope that the back end will follow faster if you start from the right place. So idea generation based on insight, followed by clear concept development, and early stage concept screening stages are key to straightening out the creative chaos of the fuzzy front end. Some of this may already be known to audience members and readers who have been around for a while and are experienced in innovation management, but I hope that what I said gave everyone a useful framework for the rest of the day and a toolkit that can be applied and adapted to many businesses. I'm happy to discuss any of the questions raised that we didn't have time to cover if you email me. I then introduced Adam Leyland, the Editor of the Grocer, to the stage. Adam has a long career in business journalism generally and is a fountain of wisdom on the UK grocery trade, so it was another Jeffrey Hyman coup to have him on the panel. He said that I was "hard core" for an opening presentation, by which I think he meant there was a lot to take in, and he may well have been right. Anyway he promised to take a wide-ranging view of the state of Grocery, and used his perfect hindsight as a clue to the future. The troubles of the big 4 multiple players are all well known and documented, and Adam used the Grocer's "Higgins" cartoons to illustrate and remind us of the stories we have all heard from Tesco, Asda, Morrisons, and Sainsbury in 2014. Again using a series of cartoons he illustrated how Aldi and Lidl took off in 2014 but pointed out they had been around for a while before that, and growing for years. What was happening during the year to drive this? Among other things, the big 4 were becoming more expensive especially in fruit and veg. And what were the "discounters" doing? Not just concentrating on price but developing product and range too. Adam took the humble burger as an example. His personal search for the right brioche bun led him to M&S first, then Aldi, then eventually Waitrose, who in time stocked the Heston version. His point- the discounters are on top of trends, not necessarily ahead, on top. Unlike some of the multiples. quality in Aldi and Lidl is excellent, especially of Aldi Panettone apparently. According to Leyland Junior, "the trouble with Lidl is everything’s got truffles in!".

Adam took a framework of "4D's" to explain his view of the world of Grocery, and the first D was for Discounters. Value is of course at the heart of their success but it's not the full story- Aldi charges less for 4 brioche buns than M&S and Waitrose charge for 2. Offering these new introductions at value prices they call "the democratisation of innovation". The causes of carnage are "cheap change convenience". Consumers have spent more in discounters, and shopped in more outlets, but not shopped more overall. There have been plenty of self-inflicted issues with the big 4; inflation, a blizzard of promos, high low pricing, micro management, and too many pointless products. Plus the space race- supermarkets have done too much "sticking pins in maps"- the race for space has led to market saturation. Asda has resisted joining in the race to some extent, but Waitrose and M&S are still expanding. The 2nd D is for Distinctiveness Aldi, Lidl, M&S have stuck by distinctive advertising, but the big 4 have been stuck in an amorphous mass of price advertising. The focus on promotion has, typically, eroded the brand values in the major multiples’ advertising. So who to back for 2015? There's lots going on, and the recovery strategies need to be watched carefully. Tesco especially. It's the biggest and they are cutting cost and complexity using Dunhumby data and external consultants, (BCG) and talking about reinventing shopping. 3rd D is for Delisting 2015 will be the year of delistings. Less is more. Even the biggest manufacturers will find it difficult. The front ending of margin, and moving away from overriding, will make it challenging to get NPD away. Talking about the in-store experience and predictions of what will matter in 2015, Adam pointed to: • Queues in discounters - some Aldis and Lidls are too busy. • Range - the right range is essential, and supermarkets need help to develop the right model of

ranges between 30,000 and 2,000 items. • Service- good service and availability are fundamental of course, but not always delivered. • Theatre- misty vegetables, that touchstone of Morrisons instore revamp, hasn't worked.

Consumers want trials, tastings, something more meaningful and tangible in store. • Uniqueness- winners will need distinctiveness • Variety- Adam thinks the novelty of Aldi and Lidl will wear off, people will get bored. Many will say

"let's hope he's right" Adam's 4th D was for "depressing". Or maybe not? Should we be optimistic for 2015 and beyond? There's still cause for optimism as Sainsbury, Tesco, Morrisons and Asda are all looking at the core offer and innovating, albeit perhaps within a narrower range, and there is still a need to develop ways of delivering customer excitement. The Omnichannel approach means category management is not dead, of which more later. Consumers are of course changing, and external factors like the war on sugar, food scares, etc all present opportunities for innovation. Changes in consumer behaviour like the caveman diet, social media use, laziness, the multi racial society, etc. all present opportunities. In closing, and having painted a picture of radical and lasting change in the retail grocery, Adam challenged us all to confront and shape the future, taking advantage of all the dynamics in the market and in society around us.

Meabh Quorin, CEO of the Future Foundation, (FF) was the next high calibre speaker, and she took a pretty high altitude view of consumer behaviours and attitudes to help us make sense of the innovation environment around us for 2015. The consumer is demanding more control. FF call this Cruise Control. Driven by mobile, one example is professionalised budgeting. We increasingly use technology and access to data to help control and manage our own lives and budgets. The volume and availability of information helps us to reduce risk in our decisions. Price sensitivity is hardwired into us. FF see the rise of Personalised Pricing - real time bartering and reward systems enabled by technology. We welcome control as individuals- we are taking the control back from brands (this is a pretty fundamental point that deserves further exploration). But what use is control if we can't benefit from it? It primarily means consumers manage budgets to afford things they can enjoy. Meabh herself has a busy lifestyle- 3 kids, 3 locations, and 3 pastimes. She asked; what would a woman like me look for in a brand? As an example of how to get women to reconsider a brand she showed us (via a video) how Pantene approached the task by joining up the disparate elements in our lives. This has strong appeal for consumers. The mechanism here is an App developed with the Weather Channel and Walgreens. Moving from control freak to using chic, fascinating technology, with discrete help from brands, helps consumers to achieve more control and mindfulness. Another example is "Keep" - a mobile app that uses gaming rewards from brands. Brief Encounters: FF observe the need for consumers to inject a little brief fun into their lives, whilst staying in control. This seemed to be about the transient natures of some propositions being their inherent appeal. Examples are "Click Enjoy Discard" apps, like TT, Blink, and Confide. The application in food is extreme indulgence- short, delicious experiences. Other examples include Nike shoes that self-destruct after 100km of use, and edible packaging for "Fro Yo Wiki Pearls". In this trend, functional beats durable, to deliver a heightened experience

Surprise Me We like to try new experiences, for example Iceland stopovers for long haul flights with IcelandAir, Heston's Hidden Orange Xmas puddings, and French sexy food- insects in cans(!!). It is harder to find something genuinely surprising with tech. See the "Random" app. It helps explore the web but only gives one option and never repeats it. Jeffrey then performed his first successful temperature check of the day, followed by the old "can I just check there's a green form on each table?" routine, which produced more groans than usual, which was another signal that there were quite a few "newbies" in the audience. Giles Quick from Kantar then took to the stage, and in his introduction claimed responsibility for introducing the table change routine to FDIN. I have no reason to doubt him. He talked about habits- making and breaking them. He doesn't chew his nails but he did lose weight. Giles' view is that the top innovations of last year solve problems, using examples of Birds Eye Inspirations and Kingsmill. He used the example of relationships and the conversation between a guy and girl to illustrate the point of asking the right questions. In terms of Habits, typically a household buys 1% of a store's range. So the theory goes, if we know what was bought on the last shop we can predict next shop with 50% accuracy. A behaviour has to be repeated 66 times to form the average habit- and must have a goal to ingrain it. Food and drink only takes 20 times interestingly. On the subject of promotions, they don't improve brands they become a goal themselves - "Sell me stuff that improves my life". Habits are formed in a context- they are context dependent. Think of Pavlov's Dog (famous experiment), and tea and

biscuit. One way to break a habit is to change the environment. Being "In Play". This is the goal; physical and mental availability - being in stock, in home, is the key ambition. The Gondola End in the home is the fridge. Coke's fridge dispense pack is the best example of this. But just being in stock isn't enough- the goal is to convert "in stock at home" to "in use". Herbs and spices might be in stock but are rarely used. The challenge is to trigger use, especially of ambient long shelf life products. Kantar think of the home as a store, and they research it in that way. Turning to In-store, Giles' top line take on the current situation was that Tesco are back in growth, and the Big 4 are converging - price is the biggest noise but price matching tends to negate the efforts to differentiate on price. Some price promotions work though. Kantar reckon the average price of a meal is £1.76, so a meal deal promotion at £10.00 is a significant upsell. Consumers are moving from ownership to access, buying solutions not products. See decorating services. Retailers just sell stuff but increasingly we buy access. Eg Catchup TV Interesting stat- 46% of us watch TV on our phone. Emotion The Heart vs Head. We are more loyal when driven by our heart. When a shop has a high emotional investment, Tesco loses its fair share; Tesco underperforms on emotion. In 16 of the last 20 years we've had higher disposable income, and in 19 of those 20 years, we've had less time. And retailers talk about price! Giles returned to slightly dodgy ground of gender stereotypes when he illustrated the point that emotional investment equals financial investment by referencing "The Romantic Meals Premium". Enough said. The Q&A was preoccupied with topical issues of Tesco, Discounters, and range reduction. The most insightful question I thought was from a delegate from Benelux who wondered why we Brits are not concentrating more on the difference between Aldi and Lidl, rather than keep referring to them both as an entity? Wise words.

After lunch David Turner from Mintel brought some facts to the table. He asked - What's a fad? The answer is, apparently, a short-lived phenomenon. But how do you know when you're in one? For example, Atkins and the low carb "trend" was really a short-lived fad and it peaked in 2004/5. Some companies will have entered fast and got out fast, but many will not have had a payback. "Sugar as evil"/ reduced sugar claims are growing, gluten free is still increasing, but coeliacs are still the same number. Protein; Chobani Greek yoghurt has been a dramatic success and grown fast on the back of the protein trend but is not overtly claiming protein. Ask what's underpinning the trend; if it's dietary concerns that won't disappear, it's more likely to be a trend than a fad. Fads tend to have high profile backers but are based on longer term trends. There are 3 real trends shaping our diet: Positive nutrition - being in control Personalised Nutrition- intolerances, vegetarian diets Raw Nutrition- less processed, inherent goodness Taste is what drives all food. Modern consumers drive innovation. They want choice, experimentation, and as an example, Giles pointed to the depth of understanding of chillies and spices being significant in US. It's not just about heat. Plotting flavour trends moving from the U.S. to the UK, Giles pointed to Sriracha, a Thai hot sauce. It's been around since about 2000, and started to break out of just "menu watching reports" at the end of 2012, then in 2013 it went mainstream via Quick Service Restaurants. It then jumped from condiment to its own category, then from US, it's now starting to appear in Europe (with Grey Goose) but is jumping straight to its own category from condiment. US trends are driven by Millennials, who aren't affected so much by the memories of the credit crunch- (surely it wasn't that long ago?) Millenials also want different eating solutions and tastes, see for example the rise of vinegar style soft drinks and the trend towards sour tastes generally. Richard Savage the founder of “Retail in Action” took over, with his presentation on "Keeping your Omnichannels open". He anchored our thinking in a Shopper's perspective- shoppers being promiscuous, but increasingly savvy. He showed a busy video showing a typical shopper, Claire, navigating the complexity of a shopping trip.

Richard's point was that despite the tons of stuff in shoppers’ heads, getting "cut through" is not impossible. Omni channel is a multichannel approach to sales and marketing that seeks to provide the customer with an enhanced and seamless shopping experience (between online, in store, and on the move). There is one fundamental (and common sense) point in the complex path to purchase - do they or don't they buy? Richard gave an example of a frustrating journey for a consumer attempting app and online purchases to get the key ingredients for a special dish, only eventually get the ingredients in store. The result for the shopper was eventually great and got shared widely on social media. We should focus on the good, the stages in the journey There is an uneasy tension at retail; the retailer wants to sell more product, the brand wants to get noticed, and the shopper wants value. But there is massive confusion at the shelf, with too many offers, that drown out brand messages. The key to managing Omnichannel is to identify and solve shopper missions. "Click and collect" is a good example- as Richard said, who would have thought it would take off to the extent it has? There were lots of other examples of good practice- the Primania site/app,the Illy shop and experience, Gin, Tonic and lemons being merchandised together in Tesco, and Morrisons new Sheldon store, with occasion based ends, and events. There are opportunities from NPD inside and outside the store: Mixing up the categories, occasional merchandising, exploit your own media, and content creation to create dialogue. Richard's view is "The Future is Personalisation", and his parting plea to us all was "Play nicely together!". Martin Oxley from Buzzback was next, to talk about Millennials and Nutrition. He's not a millennial, he admits. By which he amusingly means, "He doesn't spend lots of time on his appearance to make it look like he doesn't give a shit"! He's more interested in Millennials' attitudes. Go to the Pew Research Centre to discover how millennial you are. The generally accepted definition of Millennials is that they are born between 1981& 2000. They are the largest generation since Boomers, born in the 40s and 50s. Millennials are digital natives, they have huge spending power, and they check their phones 43 times a day. (The mobile phone is the new cigarette). There are 1.7bn Millennials worldwide, and companies are starting to take notice of them. There’s plenty of rich data on Martin’s slides.

Paul Jenkins, the master of the packaging innovation hub, had the last slot, and he ran through 6 trends with plenty of pictorial examples, (again, see all his slides, which gave some great and varied pictorial examples of all the main trends- I’m afraid I was focussing on the summary of the day by this point). Paul gave some advice on how to "ignite" these trends- take advice from elsewhere, listen to experts, and look at other categories- Cadbury mini eggs, Pringles, and the Heinz Beanz fridge pack were all flashed up as examples. Beyond that, we were advised to "find that unmentioned consumer need", test small, work on appeal to encourage investment, and have lots of ideas. Finally, get all the ducks in a row- which is a pretty good summary of what I was trying to say in my opening presentation. I just managed to give a summary of what we had heard during the day before Jeffrey regained the microphone, awarded the tenacity award, and then dismissed us all. Hopefully the front end isn’t so fuzzy now as it was before! Tim Nicol Independent Marketing and Innovation Consultant and part time scribe for FDIN. tim@mihcentre.co.uk e: tim@mihcentre.co.uk w: www.mihcentre.co.uk tw: @nicoltim li: timnicol