Lessons in Innovation Leadership: Bob Gamgort [INSIGHT]

By Dr. Venkatesh Bala, Chief Economist, The Cambridge Group

We are proud to continue a new interview series titled Lessons in Innovation Leadership. This series showcases experienced business leaders who have led, and learned, from significant innovation initiatives. These innovators from across industries will share the major, and often difficult, strategic choices they faced and discuss the long-lasting consequences that resulted for their organization’s performance. The interviews will feature their experiences as well as summarize key lessons concerning what worked, what didn’t work and why. We hope you will find parallels between the strategic issues and approaches expressed here and within your own organization to reshape your thinking around innovation, making it more effective for growth and organizational success.

We were pleased by the opportunity to interview Bob Gamgort, the CEO of Pinnacle Foods. Pinnacle’s portfolio includes category leading brands such as Birds Eye, Duncan Hines, and Vlasic, and can be found in nearly 85 percent of American homes. Prior to joining Pinnacle in 2009, Mr. Gamgort served as the North American president of Mars, managing an $8 billion portfolio of confectionery, main meal, pet food and retail businesses in North America. Prior to joining Mars, he served as President of Major League Baseball Properties. Mr. Gamgort began his career at Kraft Foods where he served in key marketing, sales, corporate strategy and general management roles.

Q: What is your definition of innovation?

Bob Gamgort (BG): I think innovation is a new way of solving a need. It is too frequently thought of as a product innovation. So that it’s, I’m solving a problem or satisfying a need in a new way that’s not been done before, but they always think about that need and delivery in terms of a product. And I think that innovation really should go much beyond that. There’s business model innovation. There’s distribution innovation. There’s marketing innovation. I think that the default for innovation is everybody says oh, you want to talk about innovation, let me show you the new product we introduced last year. There’s a lot more to it than that.

Q: What would be an example of one or two successful innovations in your career, and what are some of the takeaways that you have from that?

BG: Fortunately, I have worked on some great brands. Let me give you an example. It’s a product, or it’s more than a product, it’s a business called MY M&M’S.

I was running the US confectionery business for Mars. There was an idea of doing custom printing on a chocolate bar. We would look at it and say, “Now what? Now what can I do with this thing? We’re in the M&M’S business. If you could figure out a way to print on an M&M, let’s talk.”

That actually started as an idea. Custom printed M&M’S sold directly to the consumer as an online business. From that idea it laddered up into: We can really do this on a faster timetable, customized, and allow everybody to customize their M&M’S. We went from being in the snack business to being in the gift business. Our biggest business source was actually weddings, and the average order there was over $1,000. Remember, the price that we charged for those M&Ms was eight to ten times per pound greater than it was for a pound of M&M’S.

Then, the innovation of that product had to turn into a business model innovation so the consumers could do their own customization work. We then had to learn how to collect payments from consumers. We were a $30 billion company, but we never collected payment from individual consumers ever. So we had to build in all of the payment systems and collection systems in all of the fraud and everything else that goes along with that. Then we suddenly got into the fulfillment business. Now we’re producing to order and shipping directly and we learned a lot in the whole fulfillment business.

It really blossomed into not only just a nice business as a stand-alone. It had a positive halo on the M&M’S brand and we learned so much about our consumers and what we could do with them that we were able to build a relationship. I think that was innovation across all models; product innovation, business model innovation, distribution innovation. We had to learn every step of the way and we got a lot better at many things that we do just by doing that one piece.

Q: That is a great example. It’s noteworthy that the team had the conviction to make such a big business leap versus focusing on its core, or a near adjacency. What was the strategy behind that conviction?

BG: You need to understand — the question I always ask is: How do you know what is far enough and how do you know when it’s gone too far? The way I always think about it is: Is your innovation idea attracting new users to your consumer franchise or is it taking your business with your current consumers into new occasions?

If you’re doing both, you’re probably too far away from your brand. I always think you have to do one or the other. And I think the other piece of it is, the most important piece, is you really need to understand your brand essence. If you have a clear definition of what that brand means to consumers, it’ll tell you where you’re right and where you’re wrong. For example, M&M’S is a confectionery product but the essence of that brand, as we defined it, was colorful chocolate fun. It’s really about color. Because the essence of the brand was about colorful chocolate fun, people were eating it as a chocolate, but they were using it as a gift. If we tried to do that with Snickers, it wouldn’t work. People look at that as a substantial chocolate bar for hunger satisfaction. We took that brand into the energy bar business. You couldn’t take M&M’S into the energy bar business and you couldn’t take Snickers into the gift business. The Snickers brand essence was about hunger satisfaction.

So if you really understand what the brand essence means and you don’t define it too tightly it will allow you to expand but not go so far that you have to step away into some territory that you shouldn’t be.

Q: Can you give an example of something where things didn’t pan out the way that you fully expected and what kind of lessons you got from that?

BG: Unfortunately, if you’re going to work in innovation you’re going to have a lot of examples of things that didn’t work out because that’s just the nature of it.

I’ll give you an example of Birds Eye. We acquired Birds Eye in 2009, and they had completely changed the trajectory of their business as well as the frozen vegetable category through the introduction of Steamfresh bags. They were able to come up with a technology for a self-venting back. You didn’t even have to open it up; it was self-venting and then you opened the bag up and the finished product came out hot. It had some tremendous advantages. First of all, the product tasted better. Secondly, it was incredibly convenient, you didn’t mess up a pot or pan that needed to be cleaned. The third thing is they never saw the vegetables in their frozen; we call them “dead state”. So when they opened the bag, they saw steaming, colorful vegetables whereas before you opened them up and they had ice crystals on them and they didn’t look very appetizing. So it’s a product innovation that was a win-win across the board and it was what attracted us to buy the company.

The next thing that they introduced was Steamfresh Meals by Birds Eye. They were complete meals heavily featured with protein; vegetables played a secondary part to it, at a very premium price point, using the steam bag technology. When we acquired the company, the business had been recently launched and we shut it down right away. It was not going to be successful. Birds Eye doesn’t stand for complete meals. Birds Eye stands for great vegetables. The other piece of it was that Steamfresh technology is a feature; it’s not a benefit. So the brand Steamfresh wasn’t really registering for anybody and consumers took a look at it and they didn’t understand why Steamfresh would have permission to get into the meal segment especially charging a premium price.

So I think the lessons are they took the brand too far. They went out of their core spot, which is about vegetables. They got enamored with a feature, which was steaming, but it wasn’t a benefit to consumers outside of vegetables, and they got out of their pricing zone.

Q: Let me ask you about the Duncan Hines Frosting Creations product, in the context of reinvigorating iconic brands. What are some of the lessons of making brands more relevant to the younger demographic, thus renewing the franchise, without alienating the older demographic? (Note to Reader: Frosting Creations is a range of fun flavors (bubble gum, caramel, etc.) frequently use as an additional frosting option for special occasions, but not a replacement for more standard frosting flavors and applications)

BG: You have to remember that your franchise, even though the brand’s been around for a long time, your franchise is constantly renewing yourself. Every year there is a new group of 18-year-olds that are being exposed to your product for the first time. The balancing act is: How do you make sure that when they see this product they don’t look at it as a product that has been around for 60 years or a product that their mother or father used but rather a product that’s relevant for them. But at the same time, that user that has been around for a long time, you have to keep some consistency and stability with that product because it’s something that they’ve known and trusted for a long time.

So you can do one of two ways. You continuously renovate the existing product. You take the core product that you sell and you make sure that you’re always delivering more benefits, better quality, whether that’s in convenience or flavor or health and nutrition. So that even people who have been with the product for a long time see it as better and better every year. You win on both fronts on that one. You win with your current user as well as with your new user.

But there are times where you decide that you actually need an innovation whether it’s a line extension or something broader than that to attract the new consumer. I think something like Frosting Creations will satisfy that need for both. It’s not a replacement for the product that we have out there right now. It’s not a mass product; it’s a product for me. Younger consumers today expect everything to be customized and personalized. So it speaks to that need. In fact we find that even our existing long-term consumers see it as an opportunity for more variety. I wouldn’t buy that all the time but I would buy it for special occasion.

Again, as long as you’re true to what the essence of your brand is, which in our case on Duncan Hines is making bakers better, enabling them to be better at what they do because baking is not only a food preparation method it’s a craft. It’s a personal expression. As long as we stay true to that, you can satisfy both the new consumer and the existing consumer.

Q. Tell me a little bit about creating a culture of innovation.

BG: There is a great saying in one of the businesses that I was on “the sales organization makes the first sale and the manufacturing and the R&D organization makes every sale after that” because it’s easy to get somebody to try something, but if they have good quality experience, that’s the manufacturing side of the group, they’ll be more likely to buy. And if they continue to see new benefits being delivered as a result of that, that’s the R&D group, they’ll continue to buy you over and over again. So our game is to try to get people to buy us once then continue because they love their experience with that.

The first thing you have to do to create that kind of culture is immerse people in the products, make sure that they’re eating them, preparing them, trying them every day because we’re consumers as well as business people. We give samples for them to give out to their friends. We give coupons for them to give out to their friends to try. Everybody in the company understands that there are a lot of internal customers and a lot of priorities but in the end it’s the consumer that pays all of our bills and employs us. That’s why we publish the reports from our 800 number, where people call in with complaints and compliments, for everyone to read.

The second part is for people to understand that change is part of doing business in this environment. Whether you’re trying for a new innovation or you are renovating your brand, what you sold yesterday is not likely to sell next year. Everybody expects more. Our consumers have the same expectation and so we’re challenging everybody with: How do you continue to add more value to our products but not have to charge more for it?

The third piece of developing the culture is making sure that all of the working patterns are cross-functional. That way the way people solve problems is not the marketing group does the analysis, the sales group sells to the customer, R&D group does the product development group with a lot of hand-offs. It’s really teamwork and cross-functionally solving an issue and we do that day in and day out. We do that by the way that we’re organized and the way that everything is transparent.

And then we do it through interventions where we have innovation boot camp where we actually have three challenges we wanted to solve. We handpicked the cross-functional teams to work on them. We get them out of the building into a field environment. We have some outside people who are academics who coach them and they’re expected within three days to come up with a hypothesis, prototype solutions, and develop a business model. Guess what? In three days, they get it mostly right in a process that could take three years.

The fourth piece is the need for a champion. Every great innovation project I’ve ever seen I can point to a person who was the champion for it. There was a person. They organized the team. They got people with very different mindsets to work together. There’s always a person that was a champion for it, and I think it was a person who can do both sides of that equation. That’s why it’s not for everybody. That’s why if it were so easy people would be doing a lot more of it.

Finally, I think the only other piece is a top-down piece. That the leadership of the company has to value innovation and they have to understand that if you really value innovation then you also have to be patient for it to work, you have to also acknowledge that the hit rate is going to be sometimes very low, and you have to celebrate it when you have a good hypothesis and it doesn’t work, not just celebrate those that succeed in the marketplace.

Q: Let’s talk a bit more about the innovation boot camp you referenced. Can you provide an example of a success that rose from that kind of effort?

BG: Vlasic would be a great example. In the context of innovation boot camp, we said here is a business we know how to do very well. We understand the full supply chain from the growing side to the distribution side. Innovation hasn’t been very successful and we find ourselves in a category where everybody looks identical to each other and the only differentiation is price.

That’s when our team started going out and exposing themselves to different consumers, different retail channels, and different markets, and they found themselves in a Farmer’s Garden. They started looking at handmade pickles, they were in Mason jars and they had this incredibly homemade organic looked at them. But when they tried the product, the product wasn’t as good as ours. Our product is actually fresher. So they came back with the idea of: What if we made a handcrafted, higher-quality pickle that didn’t have any artificial anything in it? It’s now from Vlasic, who’s the authority on pickles creating a handcrafted artisan pickle. Everything will be natural in it. The flavors will be bolder. It’ll have extra vegetables and it, not just pickles, and it’ll be visually appealing. They understood what the price points were likely to be, and we did this all in three days. We said we want to launch it.

Now here’s where innovation needs to be flexible. The belief was it couldn’t be shelf-stable, it needed to be refrigerated. So the first time we launched it, we launched it in the produce sections. We only got three percent of the country to take it because produce is a very complex distribution channel. But where it was in it sold remarkably well and the feedback that we got from the consumers, food editors, newspapers, magazines was they loved the product.

So we said we now have a great idea but we have the wrong distribution strategy and we can’t break through that. So we need to be able to develop this product and make it shelf-stable. It took us a year to do it, but now we re-launch it and we get 95 percent distributional.

Q: How do you reward innovation, whether it succeeds or fails, when you are creating the culture?

BG: When it succeeds it’s really easy to reward people. You mainly just recognize and people feel great. The reward is seeing your product on the shelf. So to me, the tougher part is how do you reward and recognize really good attempts that didn’t make it? That requires a real deliberate effort because the natural tendency of people is to bury those ideas. I think that’s where the senior management really has to step in and call those out.

First of all, admit that they were involved in it and say, “Look, we all thought this was a good idea. What did we learn from it?” And then celebrate the learning. I think as long as you reward people for bringing the learning forward and making the idea better the next time around — it’s harder, it’s a real conscious effort, but it’s really important to do that.

Q: What kind of advice would you have for a young person starting out in innovation?

BG: I think you have to be really clear. Innovation is a mix of creative skills and consumer empathy skills, but it also has to be matched up with a business model mindset and really true business skills. It’s the intersection between those two is what innovation is all about.

I think that most younger people who are studying business or thinking about coming into innovation think that it’s totally the white board side of things. There is a big part of that that’s true, but as I said before, it’s not innovation unless it actually makes it to the marketplace.

So you have to be able to understand not only where there is a big idea and where there’s a missed opportunity with the consumer, you have to be skilled at translating that into a concept and a prototype and ultimately a business that you can make money at.

People who are great at innovation are those that are really comfortable dealing with ambiguity. They are comfortable living in a space where things are unfinished, wide-open, no answers, lack of clarity, yet are able to make a shift from that space into one where they could be organized and structured.

For more information at http://www.nielsen.com