June 2, 2010

54) Hotel Chocolat

危 wēi  danger

Hotel Chocolat, the upmarket confectioner, was founded by Angus Thirlwell and Peter Harris in 1993.  I’ve always been a fan – not least because the company has consistently turned its challenges to opportunity.  For example, when it struggled to maintain quality cocoa supply it bought an Estate (Rabot Estate in St Lucia) – this in turn became a phenomenal provenance story.  Or, when it couldn’t muscle its way into big retailers it direct sold through catalogue.  It also grew a Chocolate Tasting Club (a subscription service which currently has about 100,000 members) which has created a community of evangelists and made demand more predictable.

It’s a great business, since its launch 20 years ago it has been profitable every year bar one and has continued opening stores during the downturn.  The company has been self-financed to date but its recent successful US store launch has revealed the global potential.  It’s time to expand before competitors enter the local markets but surely the team will have to give up its 200% ownership to fund expansion?

机 jī opportunity

As always Hotel Chocolat has approached the problem creatively.  Instead of raising expensive equity or debt it announced a very different approach – the company plans to raise £5m by selling “chocolate bonds” to its most loyal customers, taking advantage of rock bottom interest rates.  The investment opportunity will be marketed to the members of Hotel Chocolat’s Tasting Club – ‘Investors’ can subscribe for a three-year, £2,000 bond, which will deliver a “tasting box” of chocolate worth about £18 every two months — equivalent to a 6.7% yield.   The money raised will help to expand the high street chain from 42 to 72 shops, enlarge the Huntingdon factory, develop a new cocoa plantation in St Lucia and expand the business overseas.  Angus Thirlwell, co-founder, said: “We would rather pay interest to our customers than a bank. Many who have money sitting in the bank getting a low interest rate may prefer to be paid in chocolate.” The company is on track to deliver a 20% rise in turnover to more than £50m this year.

How About…

  • Fundraising from less obvious sources, e.g. your most loyal customers?
  • Using the fundraising process to bring in a community of evangelists?

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February 2, 2010

34) Mars

Mars Logo

危 wēi  danger

In 2000, Dan Michael, then R&D director for Mars‘ M&Ms brand, and his team had the idea to make customizable M&Ms printed with a word of the customer’s choosing.  The team had experimented and found a way of printing the text but when they took the idea to senior management it was met with some concern, mainly because no marketing plan or consumer feedback existed.  They may have also feared that allowing Michael and his team to pursue the opportunity would distract them from business as usual and the proposed direct sales approach might alienate Mars’ largest retailers.

机 jī opportunity

Unperturbed, Michael’s team of 12 entered the innovation into a recently launched Mars initiative called Pioneer Week.  The concept won and the team received a modest budget with specific targets attached – building a production line within 90 days and marketing the innovation to all of Mars’ 60,000 employees (bypassing many of Mars’ conventional procedures which would have slowed the process at best).  The potential became self-evident – the team received orders for 800 pounds of custom-printed white M&Ms on the first day (the only option offered initially).  The team also solicited feedback as to why purchases had been made and used the trial to experiment with pricing.  The initiative was subsequently rolled out through a small link on the M&Ms public website (with no additional marketing) with continued success (and learning by the team).  In 2006 the trial was formally launched as Mars Direct and it is estimated that shortly thereafter ‘sales surpassed $10m and continued to accelerate’.

How about…

  • Allowing teams to initially develop ideas in Skunkworks (a small group of people given a high degree of autonomy and unhampered by bureaucracy)?
  • Inviting teams to initially market a simple version of new products and services to your own employees or your partners’ employees to assess interest and learn?
  • Adopting a ‘discovery-driven’ approach to investigating new business ideas, minimizing investment and maximizing learning?

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Source: BusinessWeek article here

January 14, 2010

28) Shell

shell_logo

危 wēi  danger

Shell, the multinational petroleum company, was listed as the world’s largest corporation by Fortune in 2009.  Its revenues and profit in 2008 were $458bn and $26bn respectively, making it one of the most profitable companies in the world.  However, Shell is highly aware that its business is being disrupted by new energy sources and its leadership recognizes the need to innovate.  Shell’s challenge has been identifying the right ideas – in part because of its success the company is highly risk-averse and slow to change.  The Head of R&D for the Exploration and Research division wanted to devote 10% of his budget to projects with ‘game-changing potential’ but was conscious that he and his senior team were not best placed to select the ‘right’ ideas, how could he ensure that his organization didn’t revert to business as usual?

机 jī opportunity

Instead of relying on senior management, Shell harnessed some of its more creative thinkers from lower down the ranks. Shell brought together a small but eclectic group of mid-level employees who were known to be creative.  That team helped design a clear process to fund opportunities that the senior management might have rejected for being too disruptive.  Firstly, the team peer reviewed potential projects – successful ideas were then sent to an “innovation lab” where teams helped each other build out their ideas. Projects that survived the innovation lab moved into the “action lab” in which the goal was not to evaluate idea but to design an experiment to test the idea in a risk-controlled, real-world setting.   Once an approach to test the hypotheses was designed the project received seed funding, subject to results subsequent rounds of funding were available. Since the programme’s creation, about 150 ideas from a total of 1,500 have turned into successful projects – just over one a month on average – in fields as diverse as developing oil and gas wells and alternative fuels. Game Changer has also recently begun soliciting ideas from the public.

How About?

  • Creating an internal marketplace for ideas inside your company?
  • Formalising and communicating a process for seed funding ideas using peer review?
  • Designing experiments to test the ideas fast and cheap?

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