Creating value from collaboration with …

1 delivering agile innovation Creating value from collaboration with entrepreneurs in consumer products and retail June 2014. Introduction: agile . innovation . Digital. Realized. The prime objective of every innovation effort is to create disruptive delight. Disrupt old systems of engagements & patterns of business. Delight consumers, stakeholders and employees. Disrupt Improve Delight traditional lives consumer patterns Page 2 delivering agile innovation The Age of innovation ' is upon us Over the last 100+ years in business, the way companies create value has evolved . Age of Manufacturing Age of Distribution Age of Information Age of Experience Age of innovation 1900 1950 1950 1980 1980 2000 2000 2015 2015 ? Mass manufacturing Global connections and Connected supply chains Companies compete on Companies that place enables industrial transportation systems and the introduction of the quality of experience innovation at the heart powerhouses to rise make distribution key PCs means those that and an ability to engage of their purpose, control information flow consumers transforming experiences, dominate processes and business models win Page 3 delivering agile innovation innovation , fueled by digital.

2 Has forever changed the cadence of business First internet Nokia Napster Napster taken Term Spotify Twitter Facebook hits Facebook ordering releases first founded offline by Web founded passes 1m 500m users passed system phone with federal judge coined Tweets per 1b users MOSAIC - created by internet sold for 80k AOL buys Twitter quarter iPad Google Glass first web Pizza Hut access Netscape bubble bursts as Apple Facebook launched launched launched browser Netscape Google NASDAQ peaks launches founded YouTube iPhone Foursquare Google+. released goes public founded at 5, App store launched launched founded launched 39%. Zipcar airbnb Google Zappos Worldwide Internet penetration Apple Spotify Google App Glass store Netflix 20%. Web Web Essentially Digital Napster Face- book Block- buster Nokia Circuit 4% City Kodak 2%.

3 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013. Years to reach 50m users 6 Google Napster Facebook iPhone iPad Google+. Examples of companies that were agile have thrived the waves of technology Examples of companies/business units that lacked foresight, were rigid in approach and didn't adapt the wave of technology have ceased to exist Page 4 delivering agile innovation Traditional approaches to innovation are no longer fit for purpose The irony is that innovation is probably the area that hasn't been innovated by many companies for a very long time. consumer products entrepreneur Consumers today are Innovating is just not always on, forever connect enough to meet demands and highly demanding Expectations for Speed to market and differentiated experiences agility have become the agile is much more key mantra for leading innovation Patience for a product Innovator's launch is dying First movers are gaining the market Page 5 delivering agile innovation In the age of innovation , formula for survival has changed.

4 Formula until the Age of Experience: Formula in the Age of innovation and beyond: agile innovation Minimize mistakes and maximize Encourage experimentation, collaboration , and productivity maximize learning Strive for repeatable processes Strive for agile and innovative processes Eliminate uncertainty and variations Don't sweat uncertainty Increase efficiency with best practices Increase efficiency but do not just focus on and standard operating procedures best practices and standard operating procedures Page 6 delivering agile innovation What is agile innovation ? agile innovation is the art of making hard things easy and Creating new viable business offerings faster Page 7 delivering agile innovation How is agile innovation different than traditional innovation Traditional innovation agile innovation Varies Cost Implications Low to medium Low to medium Leadership - acceptance to change High.

5 Accepts change even late in the project Low to medium collaboration outside of firm High Rigid and directed Project Planning and Management Fluid and self-organizing Page 8 delivering agile innovation Embrace collaboration collaboration is the most important ingredient for agile innovation Retailers and consumer products companies are collaborating with entrepreneurs to: Sixty eight% of CP executives Plug capability voids and 64% of retail executives agree that collaboration with smaller Accelerate cross-pollination entrepreneurial firms has become Prompt quick fixes increasingly important for them to Build energy around ideas achieve their strategic goals. Source: EY Survey on delivering agile innovation 2014. Inspire teamwork Enable rapid prototyping Help stakeholders have fun Page 9 delivering agile innovation Few companies feel confident in their ability to collaborate Our collaborations are somewhat ad hoc; somebody ran into somebody, they thought it was a good idea, they read an article, they saw an application with another company and thought we might want to talk to them, so it was happening, but it was unorganised, unstrategic and unplanned CP executive Percentage of respondents that were very effective at Percentage of respondents that were very effective at realizing the working with smaller entrepreneurial firms on innovation at: potential benefits of collaboration with smaller entrepreneurs: Source: EY innovation survey results, 2014.

6 Page 10 delivering agile innovation External collaboration at a glance Enterprises collaborate with specialized firms to plug voids ~ technology, resources, data analytics, etc. They rely on the existing capabilities and platforms of specialized firms either to create, incubate or activate ideas Enterprise + Specialized firm 1. Enjoy the benefits Plan for the challenges Provides speed and agility Data and intellectual property sharing Adds efficiency Enterprise will have to share data and relevant intellectual property with external collaborators Helps to anticipate future trends proactively Conflicting culture and organizational structure: Reduces enterprise cost Entrepreneurial organization structure is ill-suited for management and culture style of large hierarchical firms Page 11 delivering agile innovation Internal collaboration at a glance.

7 Incubator model Enterprise and start-up entrepreneurs with specialized offerings collaborate together as one' to accelerate and scale existing innovations, Specialized Specialized firm 1. Enterprise firm 2. and/or incubate brand new ventures at rapid speed. Enjoy the benefits Plan for challenges Fosters the culture of intrapreneurship' Involvement of multiple entities may lead to conflicting agendas, unless a clear goal is set Helps to anticipate future trends proactively upfront Adds efficiency Loss of centralized decision making; if multiple Provides speed and agility projects are running at the same time Develops a risk taking culture and foster out of Challenge to scale up experimentation with the box thinking limited resources may lead to misalignment of necessary skills Conflicting culture and organizational structure Page 12 delivering agile innovation Executing agile innovation requires the following to expedite the journey from conception to commercialization Create Incubate Activate 1.

8 Make the case for 1. Identify the right team 1. Adapt processes and being agile break rules as necessary Bring together the right Lead courageously internal team members Avoid rigidity in project planning with the right external partners 2. Cultivate an agile culture 2. Determine the appropriate 2. Define and measure success of experimentation framework for each collaboration Encourage ideas and Understand the asymmetries Set parameters to conduct embrace failure and apply lean governance innovation health checks but don't obsess about perfection 3. Think simple, act fast 3. Maintain open, frequent 3. Iterate and work communication Incrementally Set clear and Align expectations and Embed mechanisms to quickly transparent objectives set rules of engagement learn from the experience and failure and be prepared to course correct and pivot Page 13 delivering agile innovation EY's agile innovation flight map ---------------------------- 90-day sprints Page 14 delivering agile innovation Fireside chat with Ed Kaczmarek Profile Current: Co-founder and Managing Director of Brand Accelerator Previously: Ed was Director of innovation & Emerging Technology at Mondel z International (formerly Kraft Foods Inc.)

9 One of the 10 Most Creative People in Food - Fast Company, 2009. One of 25 Trendsetters to Watch - Chief Marketer magazine, 2012. Page 15 delivering agile innovation EY's agile innovation flight map ---------------------------- 90-day sprints Page 16 delivering agile innovation Thank you Contact: For more information: David Jensen Global innovation & Digital Strategy Leader Visit Ernst & Young LLP Follow us on Twitter EYConsumerGoods 725 South Figueroa Street Los Angeles, CA 90017. Tel: +1 310 869 9500. Email: INTERACTIVE PRINT Download the free Scan this page Discover Layar App interactive content Page 17 delivering agile innovation EY | Assurance | Tax | Transactions | Advisory About EY. EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over.

10 We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit How EY's Global Consumer Products Center can help your business Consumer products companies are operating in a brand new order, a challenging environment of spiraling complexity and unprecedented change. Demand is shifting to rapid-growth markets, costs are rising, consumer behavior and expectations are evolving, and stakeholders are becoming more demanding.