For the exclusive use of Y. Sunitiyoso, 2015. e HARVARD |BUSINESS|SCHOOL ~ 9-614-042 Januany 24, 2014 Nivea (A) “Is now the time to tell my marketing and research colleagues about my undercover project on identifying and solving a major consumer need?” wondered Dr. Stefan Bicl, scientist and leader of Beiersdorf’s Deodorant Prototyping research group. He was about to participate in a joint marketing and research and development (R&D) meeting on the next major need gap that Beiersdorf’s flagship consumer brand, Nivea, should address in the highly competitive deodorant category. Ihe meeting, tun by Hilde Cambier, Strategic Business Field Manager for Worldwide Deodorants, was going to be an opportunity for marketing personnel to discuss their Tatest findings about the key customer problems that K&D had to solve for the next generation of deodorant products. ‘These findings were based on months of deep ethnographic and consumer research in several European and South American countries, ‘Over the past two years, Bicl, deviating from the usual work process of the R&D group, and with lacit support from his supervisor, Dr. Ralph Schimpf, had undertaken a stealth project to solve his, own need for yellow staining on white shirts. Rather than just come up with a technological solution to his problem, Biel had followed an unorthodox path by undertaking an extensive digital consumer insight study to confirm the need. R&D scientists did not typically engage in discovering consumer insights for new producis, and historically, generating the insights required lots of focus groups, customer panels, surveys and in-home studies. However, Biel had gone ahead and engaged in discovery activity solely on the internet. Bolstered by consumer data from blogs, specialized forums, custom social media tools and advanced analytics, Biel was convinced that the next major thrust for Beierscorf had to be the radical innovation of inventing, the “anti-staining” deodorant, Not only had he identified this important need, he had already worked closely with the prototyping team and several outside partners and had actually created a working solution In preparing for the meeting, Biel thought through two key questions that might be asked of him if he announced his project. He had tried to argue for an anti-staining deodorant before, but could not convince the intemal stakeholder groups of the relevance for consumers. Surely, Cambier, the powerful head of marketing for deodorants, would. ask what was the basis for his assertion that an anti-taining deodorant is what consumers worldwide would want. Had he met any of these consumers face-to-face at all? Did he spend time in their homes? Did he travel to different key markets around the world? The truth was that he had not mt any of the average consumers that marketing typically relied on for their studies. Instead he had orchestrated getting feedback from {IRS Profesor Karim Rakion Trofesor Jofonn Tle [Universigy of Tnrsbract), independent rasarcer Volker Bilgram (RWTTT Aachen Univers) and Rowan Assoclte Greta Friar pepe ths cass Is reviewed approved Before plication ty company dedgate Fundieg forthe development af thsease was prvidel by Harvsd Busnes Schoo and ot by Une compet. Prfess: Fuller te cofoundee {nd CHO ot VE an Vole Beam ia escarcher at HYVE HYVE has worked closely th Beret i implementing open innovation Project, HS cases are developed solely asthe basi fr clas dition, Cases ae not intended to serve a endserrent source fry Copyeyht ©2014 Present and Feiws Harvard Colles To ander copies o equetpermilon reproduce mata call 1A 58.768 ‘ent Harvand Baines Schoo! Publishing Bost, MA 2163, oro to worm ep harvard. /sdcators, This publication may note digit ‘Tis dacument is authored fe use aly by Yos Suntoso 2016For the exclusive use of Y. Sunitiyoso, 2015. suo Nivea (A) ‘more than 2200 online consumers and participated in ideation and problem solving workshops with a few dozen lead users. All of these activities were done stealthily and quietly as he was not granted extensive budgets from the R&D leadership. Fqually as important would be the question of if this “anti-staining” need should be addressed by Nivea atall.. Nivea, a8 a brand, was positioned as a leader in skin care categories. Would associating staining with skin care adversely affect brand positioning? Besides, most consumers evaluated deodorants on the basis of efficacy (e.g. anti-perspirant and anti-oder), so would staining simply confuse the issue for them? Would they start to blame existing deodorants for the staining problem? Beiersdorf background Beiersdorf, founded in 1882, was a cosmetics company based in Hamburg, Germany. In 2012, it «generated €6.04 billion in revenue and employed approximately 17,000 people worldwide (Exhibit 1). While it had a presence across all continents (Exhibit 2), Europe was its most significant market, generating 57% of its revenue in 2012 (Exhibit 3). Its product portfolio included three global skin care brands: Nivea, which targeted the mass market; Fucerin, a dermocosmetic; and Ta Prairie, a range of premium products. in addition, Beiersdorf’s portfolio included brands such as Labello (lip care], 8x4 (deodorants), Hansaplast (wound care) ard esa (self-adhesive technologies and products) lhe largest share of revenue within Beiersdorf was generated by Nivea. ‘Ihe brand and product were launched in 1911 by Dr. Oscar Troplowitz, co-founder of Beiersdorf. The product was the first stable skin cream based on 2 water-in-oil cmulsion, using Beiersdorf’s patented emulsifying agent Fucerit. The skin cream was named Nives, meaning “white as snow’. Nivea became the biggest skin care brand in the world and was regarded as the most trusted and highly-regarded skin care brand in Europe for twelve consecutive years.+ Beiersdorf enicred the deodorant market in 1951, ton years after the first modern formulation of deodorant was patented. Beiersdorf introduced first deodorizing soap under the newly developed deodorant brand 8x4, The soap inhibited the growth of bacteria that created sweat. In 1991, for the first time, Nivea offered a deodorant in its product portfolio. ‘The deodorant suited Nivea’s key strategy and - inaddition to efficacy ~ put skin care in the focus of deodorants’ benefits. Tn 2008 and 2011, consumer goods giant Procter & Gamble showed interest in taking over Beiersdorf, and in particular its global brands, when German insurance company Allianz offered 40% of the Beiersdorf stock. Eventually, however, an alliance of the city of Hamburg and the Herz family ensured that Beiersdorf was not sold to a competitor. At the time of writing, the majority of shares were held by the Maxingvest holding belonging to the Herz family. The Deodorants Business AAs of mid-2013, the global deodorant and antiperspirant market was worth more than $16 billion? In the deodorant market, Unilever, Procter & Gamble, Colgate-Palmolive, Henkel and L/Oreal were Beiersdorf’s main competitors (Exhibit 4). When the first antiperspirant, Everdry, was launched in Euromonitor International Limited; by brands in the categories face, body and hand care; retail sales 2011; Ittp,//www-handelsblat com, marken-desjahrhunderts/ unternchmensportnet-nivea-cichautereme/7536328 hen, accessed November 20,2013 2 Heauty and Personal Car: Euromonitor from tadesources/ national tts 2 ‘Tis dacument is authored fe use aly by Yos Suntoso 2016For the exclusive use of Y. Sunitiyoso, 2015. Nives (A) oson 1903, efficacy wes the major driver in deodorant development. However, this utilitarian personal care product had a sluggish start as many people were uncomfortable discussing perspiration or any other bodily functions in public. In later years, demand for deodorants was created by aggressive and angst-inducing advertising. Fxcessive sweating was presented as a medical issue and advertising played on people's embarrassment and insecurities. In the 1980s, Rexona (in some countries known under the brand Sure), a leading deodorant brand of Unilever, achieved great success as a deodorant that was marketed to protect against sweat and odor for 24 hours. Over time, an upward spiral of technological innovation was initiated. Today, deodorants claim 72 or even 95 hours of protection against sweating and odor. Efficacy has been the dominant value proposition of deodorants and therefore the center of attention for R&D in this category Needing to differentiate their products in the marketplace, many players attempted to go beyond the original focus of deodorants as a means to reduce sweating and odor, and shifted toward secondary benefits. Opportunely, the steady increase in efficacy had precipitated the emergence of new problems to address, such as stains caused by the proliferation of active ingredients needed to raise performance. Rexona was the first brand to successfully address an issue beyond efficacy when it brought its Crystal product range to market. This new deodorant technology promised to prevent white steins on dark clothes. Nivea decided to diverge from the efficacy-driven innovation path and started to consider other innovation trajectories in 2005. ‘They soon followed Rexona with a similar deodorant protecting against white traces on black clothes. From that point on, more and more of Nivea’s deodorant innovations featured secondary benefits, which became central marketing messages and part of the naming of the products. These included skin regeneration (Nivea Calm & Care) and preparation for 3 closer shave (Nivea Double Effect). These innovations tumed the spotlight on secondary benefits of deodorant that were higher up the need pyramid. In 2012, Nivea was the second biggest deodorant rand in the world and number one in the category of skin care benefits of deodorant in more than 30 countries? Creating New Products at Nivea Product development and innovation at Nivea occurred in a linear four-stage process. Ihe initial “Discovery” phase for consumer insight identification and prototyping was followed by the “Concept and Feasibility” stage in which the idea was fleshed out into a concept. For concepts that passed muster, product development was commenced in “Development and Scale-up” before the product was eventually produced and marketed in the “Production and Roll-out” phase. ‘Ihe entire process took between four to seven years. At Nivea, new product development traditionally had to be based on a clear consumer insight as. the starting point for any innovation efforts. “Putting the consumer first” had boen Nivea’s motto for years, and was prominenily put into action by the Consumer Connectivity Unit (CCU). The CCU was central unit that collected, analyzed and interpreted consumer data across product categories and countries in order to detect major changes in consumer needs, So when a “brand challenge” emerged {from strategic considerations, the CCU started its work by analyzing data from existing sources and by collecting new data by means of surveys, group discussions and interviews. In the “Discovery” phase, the goal was to forecast generic trends and need gaps early on in the process and condense these to “consumer insights”. In onder to do 90, all infermation was accrued SAC Nielson, MAT December 2012, ‘Tis dacument is authored fe use aly by Yos Suntoso 2016For the exclusive use of Y. Sunitiyoso, 2015. suo Nivea (A) and structured in a so-called “incident room’, Based on industry, attitudinal and behavioral date, clusters and connections were developed, hypotheses were derived and gradually knowledge was built ang an understanding of the corsumer evolved. Grounded in this deep understanding, Nivea’s consumer experts tried to sce the “big picture” and craft a fresh, inspiring and consumer-centric insight. Eventually, an insight was put to the “SEED Test”. Four main requirements needed to be met by any insight. A good insight had to spark recognition, ie. resonate with the consumer, and must be easy to understand, almostas if the consumer had said it in their own language. Further, it should ecto and extrapolaie, which means the insight was built on what consumers have done, said, felt or scen. Last, insights were required to be directional and thus provide stimulus for projects at Nivea that would alter consumer behavior. Besides the “SEED Test” requirements an insight had to meet, it also must fit the brand and provide a point of differentiation. Taking into consideration their specific brand challenges, experts of cach brand then translated these general insights into market research questions. To answer these brand-specific questions and operationalize the universal consumer insights, market research experts came into play. A wide set of market research methods such as surveys, interviews and group discussions were applicd to address the rescarch questions from different angles. One prominent research technique used to uncover global consumer trends wes focus groups. This established esearch method was conducted in groups of approximately 8 selected persons fitting the specific target customer profile. ‘hese consumers were recruited by panel providers with a large database of potential research candidates. They sat together to have a moderated group discussion and were observed by qualitative rescarchers through a mirror. By holding group discussions, the market researchers gained direct feedback and answers to their questions. Focus groups are most useful when observed live, so the brand specialists traveled to each of the markets which needed to be investigated. Nivea managers sometimes even initiated “Bathroom Studies” to observe consumers! ‘behavior in a bathroom setting. Participants from a pool of presclocted candidates meeting Nivea’s target group criteria were invited to use proclucts in a test studio that looked like a typical bathroom. When the research questions had been sufficiently answered, consumer researchers, brand specialists and prototyping managers tried to find product ideas that might fill the need gap. Creative techniques, such as brainstorming, were applied to gencrate ideas. At the end of “Discovery” phase, an internal committee then had to determine the quality of the ideas. Key decision criteria were strategy- and consumer insight-fit as well as competitive advantage and financial potential, Once ideas were admitted to the “Concept and Feasibility” stage, marketing further developed them into concepts. There were certain requirements for an idea to be considered a concept in terms of detail and proof of feasibility. The most crucial point in the process for any concept was the “Sprinter Test”, 2 quantitative concept test evaluating customer acceptance and sales potential within 1 group of target customers. Information on demographics, attitudes and usage were considered to select a representative sample of the target merket. The testing was highly standardized and allowed for benchmarking with previous concept evaluations, ensuring, comparability and standard testing, quality. After these creative iterative stages, the concepts that were deemed successful were kept in a “freezing zone”. When a concept got the go-ahead, the actual development and production of the product followed in the “Development and Scale-up” and “Production and Roll-out” phases. Finding the Next Big Thing Ever since she took over the worldwide strategic business field for deodorants at Beiersdor!, the hunt for major need gaps and disruptive innovations for Nivea deodoranis had been on Cambier’s mind, Cambier joined Beiersdorf in 1991 as a Product Manager and took on new roles every three to 7 ‘Tis dacument is authored fe use aly by Yos Suntoso 2016