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DPI Client Interview
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"In our industry, the brand is almost like a cult. You have to live the cult," explains Harald Stolzenberg, President of Swiss cosmetics firm Juvena/LaPrairie. The company, owned by Beiersdorf Group, is a world leader in a market that is certain to grow through the coming decades -- anti-aging facial cosmetics. Its product lines, Juvena and LaPrairie, are well known among upscale women everywhere. As in most consumer products companies the day-to-day focus is on building those brands with nearly religious fervor. In high-end cosmetics, this is especially true.
Though the company was healthy, profitable and expanding in the late 90s, management had begun to feel that its growth was becoming somewhat unfocused, with too many opportunities and projects vying for limited resources. And although its brand strategies were clear, it was time to bring the two brand groups and upper management together to create a well-defined corporate strategy.
"One group had Juvena, and another group, LaPrairie, in mind, which is what they are supposed to be doing," Stolzenberg says. "We also had people thinking about other projects. What we wanted was not a Juvena strategy or a LaPrairie strategy. We wanted a corporate strategy. We wanted something that says, apart from the needs of individual brands or projects, this is what the whole company needs. That was very important. We needed to get people away from the daily business of promoting their own brands, and for a few days step back and ask what is best for the company in the future. The hope was that in the end maybe even somebody from Juvena would say, for example, I think we should invest more into LaPrairie at this point in time. We were getting to the point where we said we have to very clearly define what we do. Do we want to develop the fragrance business? Do we want to promote certain countries more than others? What kinds of people do we need to add? We had such a number of projects and issues, arising more out of growth than out of some problem. Everybody was feeling we were doing too many things. Clearly, we needed a strategy to help us decide which of our real opportunities we should concentrate on."
The immediate question was how to go about creating this strategy. One approach would be to hire a traditional management consultant to come in and develop a strategic plan. But the company's people were "consulted out" in Stolzenberg's view.
"When we re-engineered the business and changed the whole company over to SAP, we had consultants all over the place. They take up a lot of time; you always see the same charts. So when we decided to develop this strategy we had two choices -- hire McKinsey or whatever, or find someone with a methodology to enable us to do it ourselves. The whole management team agreed that if you want to have a corporate strategy, you should be disciplined enough to do it yourself. Yet we are a very creative team, which has great advantages, but it leads to too many ideas. So we brought in Marnix Coopman, a DPI partner in Switzerland, to facilitate the Strategic Thinking Process. That gave us the method and discipline to stay on track."The company put together a team from across the business and set about preparing the basic information required in the DPI Process. Stolzenberg began to see a coming-together of the brand groups even during the prep-work before the core process sessions.
As Stolzenberg recalls, "There was a lot of cross-work, especially in the preparation time before the first meeting and the second. The crucial time was before the first meeting. There was, understandably, a kind of critical attitude among some of the people, 'Why are we doing this? Is this going to be just another consultant telling us what to do?' But after the first day when the method was explained, there was a lot of positive discussion among the people. Then I think everyone came to the meeting extremely well prepared."
The DPI Process essentially enabled the company's management to examine its resources and capabilities in detail through this thorough and disciplined analysis, and come to a unified understanding of what makes Juvena/LaPrairie a unique, distinctive enterprise. Based on those conclusions, a comprehensive strategy was developed. One of the pivotal points was the choice of what DPI calls the Driving Force, one of ten set out in the process. The Driving Force is the single most important element in the company that propels it to the well-defined set of products, customers and markets it will pursue.
Says Stolzenberg, "Before thinking it through, we all, including myself, thought we were a product driven company. After all, we spend everyday thinking about our products. This was probably the most difficult part, but Marnix Coopman took the time to help us think it out."
As a small company in a very fragmented business, the central question became -- what Driving Force has, or will, enable the company to compete and grow against competitors as large as L'Oreal and many others? Through the DPI process, the group came to the unanimous conclusion that they are not product driven at all, but rather, know-how driven. Its unique edge in the marketplace is its exceptional know-how in creating high-end skin care products, primarily in the anti-aging niche. It is this particular know-how, the team reasoned, that has resulted in its most successful products, created a loyal consumer following, and set Juvena/LaPrairie apart from other cosmetic companies. This know-how stems from an in-depth understanding of skin cells, the stresses they undergo in aging and effective treatments to counteract these damaging elements. This difference would at once define what kinds of products, markets and customers it would -- and would not -- pursue in the future.
Of Juvena/LaPrairie's unique know-how, Stolzenberg says, "It's mainly in R&D, where the D is bigger than the R. It is basically product development, including marketing, know-how. So we had to define that and say, for instance, 'Our parent is one of the leading companies in the world for basic scientific research in this area; how can we leverage that and cooperate better?' As a result, we decided to hire people, which we called hunters, who now work with our parent company to discover what new know-how we can gather in this specific area and turn into products. Instead of just saying we want to develop whatever products our competitors do, we decided to really expand our know-how to create unique new products.
"A lot of this know-how comes from discovering the thousands of ingredients that are already there, where the potential has not been recognized, or by finding new combinations that help deal with skin problems. That is because the ingredients are quite regulated and new ones do not come along very often. That is where we want to become an excellent or even unique know-how company.
"The other thing we said was we have so much know-how in our company, maybe we can use it in cooperation with other partners. Maybe we can have strategic partnerships where we are more than a third party manufacturer, which we always did because we have quite an effective factory. That has now resulted in two major companies cooperating with us where we develop, consult, produce, and sometimes even take on the logistic part. That has had an enormous effect. For instance, the R&D costs, which are very high for a smaller company, are distributed better and we can afford more highly qualified people, which again, will help our own brands.
"We have expanded our R&D as a clear result of analyzing our organization through the DPI Process and realizing what would be critical to our future. We have rebuilt the laboratories and hired four or five additional people in the meantime. We are building up the R&D know-how as part of our long-term strategy. We really said, even if we have to over invest, this is essential to our long-term survival.
"That is the core of the strategy. And that's where we have really invested. Now we are much ahead of where we were a year ago. Probably the next most important part is that everybody accepted that and stopped criticizing when we invest money there. Everybody realized that this is necessary to our survival in this environment. Everybody is behind the investment in R&D. Absolutely."Another important step in the process is the forging of a concise Business Concept. Everyone has seen mission statements which all seek to communicate what the company's all about. Most fall short of a useful definition. But the DPI Process requires the construction of a Business Concept that defines a future direction in detail and creates strategic filters for decision-making companywide.
"We could have easily written down a five page Business Concept," says Stolzenberg, "but Marnix Coopman drove us to get it down to a few sentences. When we really condensed it we saw why this part is so important. This is the precise expression of our strategy. It guides us in knowing what we have to do about it."
The Business Concept is as follows:
We will leverage our unique know-how by searching or combining technologies to produce and market innovative face care products with emphasis on anti-aging. We will do this by cascading to other care-related categories, faster and better than the competition. We will cater only to demanding women with beauty and well being needs that buy in selective distribution worldwide. We want competent and motivated people around the world to reach our objective and generate the necessary profit, to self-fund our own growth by satisfying our shareholders and our own people. We will prioritize our own brands and consider others if needed for critical mass for improving profitability. We must excel in our know-how management by continuously searching for new combinations to launch them in a surprisingly new way and earlier than the competition.
The practical value of creating such a statement of purpose is that it serves as a Strategic Filter for differentiating between essential and non-essential projects and expenditures. Stolzenberg explains, "We now have strategic filters and financial filters. The strategic filters we arrived at quite fast. For the financial filters we needed a little bit longer. Now all of our projects go through these filters. We are quite tough with ourselves. That means we are sometimes fighting with our own filters, which is good. And I personally think that the strategic filter is more important than the financial filter, because some of the things we did in the past would have never passed the strategic filter we now have. If you have that kind of self-critique of what you have done, it helps in deciding about new projects. Now when an idea comes up we ask ourselves, should we really do that, is it in line with our filter?
"I'll give you an example. We could say, 'Should we develop a new fragrance?' Some of our competitors make fragrances and it's possible for us to do, but it doesn't fit into the filter created by our Business Concept. It doesn't leverage our Know-How Driving Force. In the past we might have just done it, maybe out of enthusiasm or because competitors are doing it. There is always a reason, such as it complements the business, we can use our synergies and so on. Now we would probably say that product doesn't fit our strategic filter. And of course, from time to time we may have to review the filters. They shouldn't be dogma; they shouldn't be the Bible. On the other hand they should not be changed daily."
Since the completion of the Strategic Thinking Process, the company has been diligently working to resolve a set of Critical Issues -- the specific steps to implementing the new strategy. The action most central to the strategy was the increased emphasis on product and market development. Much of that effort is well underway. As a next step, Juvena/LaPrairie has decided to use DPI’s Strategic Product Innovation Process to "keep the hopper full" of new ideas for growth. The company's Business Concept once again will serve as a filter for determining which ideas should be pursued.
"One of the other issues," says Stolzenberg, "was changing our attitude toward classic trade. That was one of the things that we ingested for the first time within the whole group. The marketing people and some others had dealt with it before. But now the whole group knows that this is a threat and opportunity at the same time. Again, I think what you learn is very often just two sides of the same coin. For example, concentration of trade can run in your favor or can run against you. Last year we had the abolishment of the Duty Free business in Europe. It was considered a Critical Issue and we have learned how to take advantage as a growth opportunity."
As the company continues to work the Critical Issues, Stolzenberg now feels that Juvena/LaPrairie's people are far more united in their focus than before.
"One of the advantages of this Process is that the people who were present and those they have spread the word to are taking a more corporate view of where we should go and invest. They now can look at the company as a whole, not just at their own brand. I can say, very clearly, that has happened. That alone was worth the effort.
"We are doing well at cooperating and seeing our interdependence," Stolzenberg states. "We all know that if you want to reach a common goal, all the brands have to do well and everybody has to do something for the other. Very obviously the formulation of the strategy did a great job of that. We can’t put it into numbers yet, but there's a general feeling that we all know where we want to go and that has made many things much easier."
