Fonterra’s strike rate on innovation

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The milk price, the profit and the CEO’s salary were top of mind in the coverage following Fonterra’s annual results yesterday, but how did the organisation perform in terms of innovation?

Fonterra, in common with large commercial entities around the world, has established internal programmes that ape the way start-up incubators operate (even down to a ‘venture capital board’), as a means of encouraging and rewarding entrepreneurial thinking from its own staff.

Last year Fonterra established the Disrupt programme, which it describes as “a platform that challenges our people to create new sources of revenue for our Co-operative and leverages the diversity and creativity of our global business to deliver the best results.”

So how successful was Disrupt? Here is the scoreboard according to the Annual Results, with additional comment provided to The Foresyte Report by a Fonterra spokesperson.

  • 1400 people contributed their ideas, aged from 21 years to 60, evenly split between men and women.
  • 189 ideas generated for potential new consumer and customer-facing business models.
  • Two ideas received investment and have been launched as major ventures (with more in the pipeline). Fonterra says due to commercial sensitivities it can’t reveal many details about the projects, however it says they involve e-commerce and cloud-based solutions to reach new customers and consumers in China and both have the potential to create significant revenue.
  • $3.4 million in revenue was generated by these two ideas in the first six months.

Fonterra spokesperson says Disrupt began as a pilot in Australia, China and New Zealand and it has now become an annual programme run over a six-month period, and now open to all employees across 30 markets. “We’ve decided to invest in a further two initiatives, which are going through due diligence at the moment. The objective is to have one venture commercialised each cycle.”

The organisation has judged Disrupt a success based on meeting these objectives:

  1. Generate future revenue streams through new business models
  2. Provide a platform to achieve results through diversity & inclusion
  3. Build entrepreneurial capability and culture through the organisation
  4. Identify and develop a talent pipeline.”

In addition to Disrupt, Fonterra runs a separate programme called Velocity NXT, which is about optimising the way the organisation operates through the use of emerging technology.

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