Impact of COVID-19 on Innovation

Expert Profile

Section 1: Immediate Impact

1.1. How would you describe the innovation process within Beiersdorf pre-COVID?

For the overall Beiersdorf business, so big corporate, it is a very standard stage gate driven, rather slow, globally focused process with lots of gates engaged with meetings, preparation meetings and similar elements. Actually, incubating and generating an idea and finally bringing it to the market for real innovation was very tedious and not very often a successful mission which is partly driven by the fact that the cosmetics industry needs to innovate very regularly in order to have new consumer attractive offerings.

At the same time, this means innovation can very easily be just a new packaging and new fragrance or a new marketing story and not so focused as much on a new “real” innovation. The second element is that we are listed at the German stock exchange, however, more than 50% of the business belong to a family, which means that our supervisory board also has a very strong and significant stake in these processes.

That’s the overall view on the pre COVID-19 innovation processes. The bottom line is it was slow, very process driven, very structure driven, and definitely nothing that would’ve enabled us to react fast on any movements or any market dynamics.

1.2. What has been the impact of COVID-19 on your innovation processes? How has it changed?

Well, we still have this process in place and it’s still running as it was running before. If you look at the Beiersdorf financials, we are very well settled. We are in the fortunate position of having good capital available and are still rather successful in the cosmetic markets. In terms of business threat overall, we’re better off than many other businesses are.

However, at the same time, there was the need to innovate on aspects that we didn’t have time to really discuss. One example on innovation, from the base of working innovation, was that we had Microsoft teams sitting on the shelf for a couple of years already and a few groups working on this software, but everyone else was rather working in service structures with VPN clients and face-to-face meetings.

Within two days Beiersdorf prepared for the lockdown, we got teams running for everyone, and now we have more or less completely moved to Microsoft Teams with all the impact of videoconferencing, stopping travel, stopping personal meetings and having a completely different setup for doing work tasks than we had before. This was established within a couple of weeks and would have taken a couple of years, under normal conditions.

From the product side, we donated a huge amount of disinfectant to hospitals, employees, public organizations, and these products haven’t been out there before. This product has been developed when the crisis started as a product, without the regulatory aspect but with all the legal aspects and everything else behind it.

The products have been shipped six weeks after the first idea popped up. I would say a tenfold speed increase versus the same product being run under normal conditions. Moreover, we still have lots of initiatives like this that we simply need to cope with and fix, under the given circumstances, challenges, where there is no time to endlessly discuss and look at all the pros and cons and invite every stakeholder and go up and down the hierarchy for approval. Suddenly when your backs are against the wall, people are kicked out of their comfort zone and start doing instead of talking.

1.3. What have been some of the key challenges around altering the processes during the height of the pandemic?

The Beiersdorf culture is very much driven by cooperation involvement of everyone and making sure that everyone is aligned and on board. If you speed up processes, it’s impossible to do it like you did before, so the main challenge is the cultural stretch for the people between pre COVID times and the now within COVID times.

Funnily enough, many things became much easier because they have been escalated much quicker and people have taken much more responsibility than they were used to. Honestly, what I see as the biggest challenge also with regards to the future is that Beiersdorf is a company that usually has a tool for everything and what we are now developing is a couple of different approaches for fixing problems very quickly, which means we’re not ending up with one screwdriver, one hammer and one pair of scissors, but a couple of screwdrivers and a ton of hammers. Making employees understand that this is okay and that it’s not about the perfect hammer for every nail but that it’s about us getting the nail into the wall very quickly is very important.

In my opinion, perfect is a 20th century KPI that made Beiersdorf very successful. So, the NIVEA brand never had big issues and it’s the perfect brand in terms of consumer safety. However, at the same time, it’s a perfect example for being boring, being a compromise and not being courageous and brave going to market.

COVID forced us to be brave, to take risks, to be courageous and that’s okay. It’s also okay to have been cautious and to have been perfectionists and the future needs people to understand that there’s a time for any of these attitudes and that there’s not the one and only way of doing things.

1.4. How have mental health services changed their provision to facilitate men’s issues?

The biggest challenge I see currently, is getting the current way of working on innovation and on everything else is much more exhaustive than it has been in the past. If decisions cannot be made for a month but only for a day, it means that every workday has a different level of emergency and urgency and not losing people, burning people, losing commitment and driving people into frustration. This is the problem that now everybody’s so tremendously dedicated towards surviving COVID, fixing all the issues, getting the company pushed through. This is a fire fighting mode, and you cannot be firefighting forever.

The whole speed up needs to be transformed and converted into a more sustainable approach, which will partially cost probably speed. It partially will mean we need different people at the right levels, and we need people that are greater risk takers and are more decisive. If we take more risks, we obviously need to change our KPIs.

The current Beiersdorf career model, I would say is still built on making no mistakes instead of doing successful projects. If making no mistakes survives as the KPI, firefighting mode is not a good way of getting through it. I see a tremendous expectation towards changing our culture, changing the way of how we measure success and changing how we deal with failure for the future.

1.5. What have been some of the unexpected innovation success stories during this pandemic?

Honestly, again, if you look at how the cosmetics market evolved and how Beiersdorf has been acting, I see the pandemic as a huge opportunity space for Beiersdorf. The cosmetics market growth in the past five years was significantly and mainly driven by the rise of many very small and very edgy brands. Most of them not being very successful, but each of them taking away market share from Beiersdorf in many countries. Many of these small businesses won’t survive COVID and it will clean out the market and it will significantly clean out the market segment where we haven’t been very good in the past.

Secondly, as I said before, in terms of our reserve capital, available for acquisitions, we are in a very good position. If any of our competitors will fail, I hope that we will be there to take whatever we can and to buy whatever we can in order to be stronger after the crisis and be a winner.

Thirdly, we really need to learn and understand what is possible if we simply focus on getting work done instead of constantly just discussing it. I hope that this learning will really evolve and develop the company further.

The whole discussion around home office, video conferencing, business traveling, and all this will probably make everybody’s workday more efficient and more effective. I also hope with regards to innovation that some of the projects we have started now to play with changes of market segments in the crisis will be successful and will teach us that a prompt reaction with new products on market development is something we should do much more often than we did in the past.

I’ve been working in innovation now for roughly 20 years. Personally, I see COVID as a social crisis and an economic crisis; in terms of innovation, all the big developments that mankind made, usually were driven by crisis and driven by situations such as this. COVID will lead to a different world that will probably be better in many aspects and that would have never been developed in a linear way.

Section 2: Lasting Impact

2.1. Could some of the changes made to the process as a result of the pandemic last? Which changes will last? Why?

Yes, definitely. Let’s take Microsoft Teams as a really good example. Beiersdorf Germany switched to 100% home office within all the marketing units, for example. Hamburg is a 2 million people city, and the standard commuting time is one hour per day, so I found the Teams meetings being shorter and more effective at the same time.

Basically, I can do more meetings with a better output of each meeting and can sleep one hour longer and work one hour longer. So, it’s a win-win situation for me and the company. There’s no reason for me to dare go back to the office and sit with people in the same room as it can be done on video conferencing.

The same is true for all the team members; when we offered everyone the opportunity to go back to office, the response was close to zero. Nobody really felt like they should be doing it apart from those who have a very small flat, share with others or have kids where they cannot have their own space for doing home office. From a company perspective, we are currently building a completely new headquarters, with a planning space for 85% of everyone employed for the business.

I don’t think that’s necessary for the future anymore. You can probably do it with 60% or maybe 50% if capacity and there’s cost savings there for the business. There’s a comfort zone for the employees as well and it will probably not be the same level of home office as it is currently, but it will never fall back to the close to zero level of home office we had before the crisis.

2.2. What profound affect will the pandemic have on the innovation process?

Definitely people will revert to being slower as before, that’s for sure. Pressure is something that increases speed. However, again, I believe that because the board sees what is possible under certain pressurized circumstances and the management sees it, they will find ways of keeping a different pressure level in order to get more out of the organization than before and in order to not let it quickly fall back to the old comfort zone. Then if there is no crisis for the next 20 years to come, probably in five to 10 years’ time, everything will be back to where it has been in terms of comfort zones. However, at this time, I strongly believe that first of all, COVID will really take a while and be out there for the next 12 to 18 months at least. This will keep that pressure level up and then the next crisis is probably already out there, whether it’s China, the US or changes in the UK. I think that we were very lucky to be living in times without not many crisis in the past 30 years and I would anticipate the number of crisis increasing in the future.

2.3. Will future innovation processes be increasingly based around a “fail-fast approach”? Could this be the case with yourself?

Well within our specialized unit, within the Beiersdorf universe, this is what we are currently trying to establish, which is not primarily being driven by COVID, but has become much easier to establish due to COVID. This is because many discussions are now different than they have been before. For me, this is a cultural element that I feel for big corporates, will obviously be a challenge to act like this. I’ve spoken before and used the analogy of football to explain it.

If you have a couple of 16-year-old boys playing football they have their unwritten rules of how to play. They have the unwritten agreement of what is a foul and they have their agreement of what a goal is, whether they play offside, where the field starts and where the field ends. It makes it very easy to just get together wherever you want and play a round of football and the results will be clear.

The bigger the group gets; the more people want to play. The more difficult it becomes to agree on all of these rules, and you start writing down rules in stone and defining them. As soon as you have these defined rules, you need a referee, and as soon as you have a referee, you need a bar that discusses whether the referees are right or wrong.

All of this process slows it down and if you transfer this to innovation, if you are a small unit, you can be fast, you can fail fast and change fast. The bigger you get, the more successful you are, the more people you have being part of that innovation road, automatically it all gets much slower. The more people want to be heard; the more opinions have to be considered and that’s the main problem. It’s not so much about mindset, but it’s about size of organization in my opinion..

2.4. Will the process be more externally or internally driven?

I think it has to be a combination of the two. If you have the group perfectly set up for internal innovation, it’s very difficult to use this group to really push for mergers and acquisitions, because for most of the ideas, at least in a non-rocket science industry like ours, the standard argument is that we could do it on our own as good as or even faster.

If you have a group that is good on M&A, it’s completely different people. It’s controlling people, it’s businesspeople and there’s the other group that is creative people or R&D employees. You need both and you need to have them sitting in separate buckets. Which way is the most successful, probably very much depends on the people you buy and the people you have in the different departments.

In the end, it’s a very old statement, but it still keeps true, keep in mind that 99% of the smartest people of the world probably do not sit in your company, but somewhere outside. It’s always clever to look where you can buy these people in. However, they’re still the remaining 1% of smart people that could sit in your company. If you use these people the right way, you do not necessarily have to look for outside innovation. Ideally, you have people on board who care whether it’s inside or outside innovation, and look at, does it deliver added consumer value and really grow our business.

2.5. Will innovation processes become more imbedded into Beiersdorf’s culture in the next 3-5 years? What might this look like in practice?

The very naked truth, what I believe is that people need process handbooks, and definitions of how to do faster innovation and that we probably will have, and that’s something that has started already before COVID, smaller units with very different rule sets and setups being responsible for innovation popping up locally, regionally, and within different departmental silos.

What I hope will happen, and that is something we have agreed on, is that we have a very strong culture of not doing it like this. What I hope to happen is that we become much better in escalating pending decisions to the right level in order to get them quickly done. Going back to the disinfectant example, some decisions had to be taken by the board in order to get it done and usually before people bring it to the board, they discuss it for weeks and months. Whereas for the disinfectant, they simply took it there within one day. So, a better management of escalation is something I really hope for. What I also hope for is a better understanding of the philosophy that a process is not a value of its own, but this is a means to get something delivered and that the process is not helpful to simply forego and do it differently.

Currently we have people that if they have to do something and you don’t follow the process, they simply will not do their job based on the fact you didn’t follow the process. Getting people to understand that this is not the right way of doing things, although it is a very German way of doing things, is also something that I hope for and something we agreed on.

The third thing is, and that’s for sure a hope because it has been discussed but not yet agreed, is the fact that if you go for 80:20 as an approach or a 70:30, it does not only mean you become faster and you take more risks, but it also means that using 80:20, one out of five projects will fail just by the definition of 80:20. One out of five decisions will be wrong and one out of five investments will be gone and yes, you become faster, but not necessarily on every project. This way of looking at risk in a different light, shows that risk is not something that needs to be mitigated till the end, but that risk is something that means a process will happen and that it’s okay when it happens and not the failure of single individuals necessarily.

I really hope for this because otherwise, if you’re not getting these three elements fixed as a business, we could be the next Kodak or Nokia because we haven’t understood that what brought us where we are today is not necessarily the way that we have to behave in the future as well.