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‘Fast and cheap’: How AB InBev is driving innovation

By July 23, 2019No Comments

Stella ArtoisA thriving innovation strategy should be at the heart of any business looking to stay ahead of disruption. And while there are many ways to approach innovation, Pedro Earp, AB InBev’s global CMO and innovation lead, suggests the only way brands can ensure they remain relevant is by being customer-obsessed.

“The main driver of innovation in any company is consumer-centricity,” he tells Marketing Week. “When you are obsessed about consumers it’s much easier to identify what’s broken or missing, and what consumers are looking for.”

Earp has led innovation at AB InBev since 2015, when the business launched ZX Ventures, a separate entity designed to drive growth. At the time, the drinks giant, which owns brands including Stella Artois, Budweiser and Corona, felt it was “very hard to drive innovation from within”.

This was particularly true for longer-term projects because “if you let them compete in terms of resource and people with things that are more short-term they end up losing”.

But having proved itself as a successful growth driver, responsible for generating more than $1bn (£803m) in sales “almost from zero”, AB InBev decided to bring marketing and ZX Ventures together under Earp’s leadership in January.

“Last year, ZX was responsible for more than 10% of the growth of the whole of AB InBev, so we realised it was time to bring some of the capabilities of ZX into the core business,” explains Earp.

The new rules of innovation

By integrating the two organisations, the hope is AB InBev will learn how to work more closely with startups, innovate faster and become more creative, while ZX will benefit from being part of a large organisation and the capabilities that brings.

The “fast and cheap” ZX model has enabled AB InBev to shorten its innovation timeline from a typical two years to just 36 days. That means it can test up to 40 products a year, rather than just two or three.

Organisations are very pressed for short-term results but the marketing organisation needs to be the guardian of the long-term health of the brand.

Pedro Earp, AB InBev

“If you take a look at traditional innovation in consumer packaged goods, usually you identify a consumer need that is unattended, then you brainstorm some ideas and check those ideas through research. Then you spend one or two years in development, do national launches of the product and spend a lot of money in media,” he explains.

“The problem there is you don’t learn very early and you don’t learn cheap. The launches are so massive in terms of the amount of resource you put behind them that you cannot do a lot of them. ZX Ventures is a way of getting a lot of learnings fast and cheap, so if we fail we can move on to the next thing.”

Lead times are also shortened as the company does a lot more testing at the prototype stage. That means rather than going to market with a fully-developed product it tests out new ideas on a smaller scale, say in one city or one channel, before ramping it.

“That way you learn fast whether it’s going to work or not,” he adds.

Creating an environment for innovation

Working in this way requires a different mindset, though, meaning teams must be made up of both creators and operators in order to succeed, according to Earp.

“Creators are usually great at identifying a problem, coming up with a solution and putting it out to market really fast. The operators are the guys that take things that are already working and make them even bigger and better over time,” he explains.

“The capabilities are very different; the creator is more about having the consumer obsession, being able to design solutions and being able to prototype really fast, while the operator is more about having operational excellence and being great at sales and marketing at scale.”

AB InBev has historically been very strong on the operation side, so in recent years it has focused on bringing more of the “creative muscle and creative mindset” to the business, especially at ZX.

Nurturing this creative side is crucial to driving innovation, suggests Earp.

“Creativity impacts business results. It’s proven. But creativity requires originality. You must do something new in order to trigger emotions in people,” he suggests.

In order to do that AB InBev has been very focused on creating an environment where creativity can flourish.

“The things that stifle innovation are usually risk aversion, trying to be too process driven, or being very short-term oriented,” he explains. “The trick is to have this deep belief that creativity drives the business and to set a fertile soil where creativity can flourish. Then it’s about taking things out of the way so the creative ideas and creative people can shine.”

AB InBev launches in-house agency to help ’embrace creativity’

AB InBev measures the effectiveness of creativity in a number of ways, including the use of a creative council, which is made up of people outside the organisation who are “recognised by the industry to be amazing creative people”. They are used pre- and post-launch, from the insights stage right through to execution.

The risk of not having processes such as this in place to measure effectiveness is that companies get hung up on chasing short-term results, he says. “Organisations are very pressed for short-term results but the marketing organisation needs to be the guardian of the long-term health of the brand.”

That doesn’t mean creativity can’t be used to help in the short term, Earp observes, but marketers should be responsible for ensuring the longevity of the brand and the business, even when there is pressure to show immediate results.

Creativity impacts business results. It’s proven. But creativity requires originality. You must do something new in order to trigger emotions in people.

Pedro Earp, AB InBev

“A lot of the growth in CPGs is coming from small brands, so there is a short-term pressure for results and a lot of companies are focusing on efficiency versus effectiveness,” he says.

Earp believes AB InBev can accomplish both, and has processes in place to ensure marketers don’t chase short-term gains at the expense of long-term results. That includes if marketers try to cut their marketing investment to boost profitability.

“In some companies you might see people cutting marketing investment for the last quarter of the year to deliver the short-term expectations of Wall Street or whatever it is, but in our company that doesn’t apply. We are very long-term orientated,” he says.

A two-pronged innovation approach

AB InBev drives innovation in two ways, either by developing and launching brands internally, as it has done with Argentinian craft beer Patagonia, or by working with startups and other external partners, which it did for the launch of canned wine Babe Rosé.

The brand was launched by an influencer in the US called The Fat Jew following a rosé shortage in New York holiday destination the Hamptons. The brand saw initial success but given its founder had no prior experience running a wine company, he contacted AB InBev to help him scale the business.

“There are many brands and ecommerce businesses that gain lots of traction and then need some of the operator capabilities and mindset [that we have internally],” he says.

AB InBev is now migrating some business divisions that have grown within ZX, such as ecommerce in China, into the main business in order to provide these capabilities.

“It’s such a big business for us and now we want to scale it further, so we moved it into the core business,” he says.

Given the level of competition in the drinks market is so high, Earp says the trick is ensuring ideas come from anywhere, be it consumers, other companies, agencies or employees.

But in order to do that everyone needs to understand the company’s purpose and the “creative track” of each brand.

For example, Budweiser has a roster of agencies in the US that are all very clear on the creative track, he says, so ideas can then flow from all angles. But while the brand is open to ideas it also has a very clear filter around “what the brand stands for and what the role of the company is”.

Ensuring all ideas are in line with the company’s wider purpose of “bringing people together” also helps. In the case of Babe Rosé, while a wine brand may not feel like a good fit for AB InBev given it is a beer business at heart, the concept fit with the company’s wider purpose meaning it made sense to collaborate.

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