Platform for growth?

June 15, 2003
Broader use of their technologies is helping food companies get more bang for their R&D buck
As a fake fat, Olestra never lived up to Procter & Gamble Co.'s billion-dollar hopes. But as a moisturizer, Olestra has found its way into several P&G skincare products, including Max Factor Lipfinity and Cover Girl Outlast lipstick, helping to create one of cosmetics' major new product hits of the past decade. Therein lies a map to what could be hidden treasure in the intellectual property of food and beverage companies, according to Jeff Dufresne, president of the BrandStorm new-product development unit of the advertising agency Northlich, Cincinnati, and a former general manager in P&G's food and beverage business."I think there's more and more interest" among food companies to look for ways to get more mileage out of their platform technologies by expanding them, sometimes in hard-to-foresee ways, to other areas either in or outside the industry, Dufresne says. "They're trying to take their technology base and make it work harder."Among other companies with which BrandStorm has worked is a large commodity ingredient supplier to the food and beverage industry. He sees potential, in particular, in expanding uses of soy processing technologies.Though Olestra is one of the higher-profile examples of platform technologies in food with far-ranging applications, Dufresne says there are many more that are often overlooked. Indeed, the strategic basis for P&G and its rival Unilever moving into soaps and detergents more than a century ago from their bases in the fats and oils business was the technological interplay between the two. Combinations of food and non-food business have since lost favor, with Wall Street and management theory instead embracing more focused approaches. But the potential for technology to spread its wings from food and beverage to seemingly unrelated industries remains, Dufresne says.Emulsification of fats and oils formed the basis of detergent technology in the 1940s and ,'50s. But decades later the technology also paved the way for advances in latex paints, Dufresne said, as scientists found ways to emulsify acrylic polymers in the water-based paint.He also points to the more recent example of Metabolix, a Cambridge, Mass.-based company that's using the fermentation process with E. coli bacteria genetically altered to create biodegradable plastic polymers. The fermentation process creates plastics without using petrochemicals and with lower overall energy requirements and carbon dioxide emissions than conventional plastic manufacturing. While producing plastics via fermentation remains more expensive than conventional production, Dufresne says it becomes cost competitive when oil prices reach $25 to $30 a barrel, a level they have reached at times in the past year. Metabolix in May received a $1.6 million grant from the U.S. Department of Commerce Advanced Technology Program to help enhance the cost efficiency of the fermentation process in synthesizing plastics and other chemicals. The current focus for potential commercial applications is on paper coatings, non-woven fabrics, disposable food ware, adhesives and performance additives for other plastics."I'm a big believer that good technologies are fundamentally underutilized," says Gordon Brunner, former chief technology officer at P&G and now an advisor to BrandStorm and an investor in Metabolix. "It takes a lot of great creativity and work to come up with a really unique technology, and too often we don't spend enough time conceptualizing what it really can do."The technology behind controlling calcium in beverages, he notes, ultimately became the basis of controlling calcium and other minerals in laundry and developing the drug Actonel to prevent osteoporosis.Bounce gets a boost At P&G in the 1970s, he recalls food technology saving the day when developers of Bounce fabric softener dryer sheets hit a stumbling block. "Early on, [Bounce] ran into a huge problem. The chemicals were interfering with paint on the surface of dryers, causing paint removal and rusting," he says. "There was a technology we brought over from the food area, called sorbitan monoesthers, which was used as an emulsifier, but it had some very unique spreading properties and became the additive in Bounce that [eradicated the negative impact on paint]."Still, even P&G, which at the time housed food and non-food business under a single corporate roof, and operated the two under a centralized structure, had trouble taking full advantage of platform technologies. "Had we approached Olestra as a technology as opposed to a low-calorie fat, we probably would have created an immense number of additional opportunities early on," Brunner says. "Because it was such a unique molecule, it had [the potential for many] more opportunities. But the company focused on it as a low-calorie fat, and that put a lot of risk against its initial application."Among key problems with taking full advantage of platform technologies is finding people who can recognize the potential for application outside of their own narrow spheres of focus, Brunner says. That's particularly true if the potential application doesn't include something the company that invented or perfected a process makes."It's foreign to people," to look for ways to expand platform technologies, he says. "It's not an easy process. But I absolutely think it's worthwhile. I've spent some time myself working with different companies on this, and I've yet to see a situation where some good new applications haven't evolved. But I also would say that it's a difficult process."It almost always helps, Brunner says, to have an outside advisor or facilitator work with a a company team to identify new applications for platform technologies. Once those applications are found, the company may need to develop a new capability for out-licensing technology to external partners.Food technology may present fewer potential candidates for platform technologies, Brunner says, "because my sense is that there isn't as much fundamental, basic [research] work going on and not as much R&D investment [as in some other industries]. "But I'd have to say that good technology in the food area is very bit as valuable."One problem is that food technology is often hard to protect and new food products and concepts can be fairly easy for competitors to reverse-engineer, Dufresne says. But he adds that finding novel applications for food technologies in other areas could increase the likelihood of creating a technology that can be successfully patented and defended."Food companies are so different, because they're so market driven," says Jeffrey Stamp, a former General Mills and Frito-Lay food technologist whose credits include developing Baked Lays potato crisps. "Everything you're doing is very applied. So it becomes very difficult to have a platform technology. If you're in extrusion to make cereal, all your technology is focused on cereal technology. You sometimes get blinders on and don't realize that extrusion could have applicability in other areas. Or people tell you: ,'We're not in those areas. We're in food.'"That mindset has only been exacerbated, he says, by the fact that most food companies have eliminated all or most of their separate R&D departments and assigned all their technologists to work directly with business units. And, he points out, many food companies have pushed packaging and flavor development to outside vendors, making it even tougher to tap platform technologies. Stamp, now "chief trained brain" with new product development Richard Saunders International's Eureka Ranch near Cincinnati, and a professor of creativity and new product development at Miami University (of Ohio) and New York University, doesn't recommend that companies tear up their organization charts or business models. But he does believe companies can tap the potential for platform technologies without doing that, or making new hires."At Eureka Ranch, we advocate forming venture teams," he says. "You put together a cross-functional group, which includes technologists, manufacturing, a finance person, a brand person and an operations person. And you spend a very short time , 90 to 180 days at most -- trying to apply a platform structure or find other ways to harness it. I don't think you need to totally restructure R&D. I think you need to make an enhancement to allow entrepreneurial teams to go explore areas and build a business case."While Wall Street values focus and hitting quarterly numbers, Stamp believes unleashing platform technologies successfully could also help unlock value that would make investors take notice. "There's a lot of hidden intellectual capital in food companies , knowledge that's sitting around and not being leveraged," Stamp says. "I'd like to know what that's worth to Wall Street."

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