Employing Open Innovation to Create the Future of Dairy

An interview with Harry Barraza, head of Open Innovation at Arla Foods
By Paul Arnold
At Arla Foods, a farmer owned dairy company headquartered in Denmark, innovation starts with milk and the cows and extends through the entire value chain.

In recent years, the multinational has been integrating open innovation into its processes, and helping to spearhead these activities is Harry Barraza, the Head of Open Innovation at Arla Foods.

In this interview with IdeaConnection, Harry discusses open innovation adoption by the dairy industry at large, the importance of success stories and the lessons being learned. He starts off by talking about some of the ways Arla is benefiting from its OI activities.

We are strengthening relationships with academia through centers of excellence in different areas of interest to Arla. Last year, we launched the Arla Dairy Health and Nutrition Excellence Centre, partnering with two of the biggest Danish universities, Copenhagen University and Aarhus University to bring research on the health and nutrition benefits of dairy to the forefront. In this respect, we are moving away from short-term interaction with universities to a more strategic and longer term relationship.

Another aspect is building new models of how we work with small and medium-sized companies, SMEs. Historically, we have worked with SMEs on specific areas, for instance in processing machine manufacturing, but we want to extend the relationship to integrating SME innovation to the whole supply chain and start thinking about where else SMEs can help us in a range of different things - everything from developing new ideas for dairy and other food products to how to commercialize and use digital channels and digital marketing to bring our products to different customer bases.

Harry BarrazaIs there widespread adoption of open innovation in the dairy industry, an industry that appears conservative by nature?

I would say that open innovation is entering the dairy industry later in the game say than pharmaceuticals and some other industries. I think this gives us an advantage in that some of the things we are testing will be more suitable for our industry. We’re not testing things that have been tried and subsequently failed in other industries.

We know there is an important lesson from other industries, which is the type of innovation that is required for the type of products you have, forces you to tailor the open innovation activities that fit that particular product category.
We are also trying to adapt things that have been successful in other industries to our industry. At least, that is how I see it at Arla. And with companies like Coca Cola entering the market and selling milk, I feel that other milk companies will accelerate innovation through open innovation.

When embarking on anything new or different, early wins are important. Have you had any success stories with open innovation?

I think this is an area where a lot of people can count their beans in different ways depending on what they are actually looking for and the impact of what they are trying to measure. For us, it is very clear that we do a better job of investing in the right types of collaboration with academia.

For example, we are more effective in channeling money through a center of excellence rather than to continue doing what we used to do which was small, ad hoc projects. Then, it was mostly looking for a pair of hands to do something rather than looking at longer term challenge-based solutions. In that respect, we think that there is already a great saving and efficiency in the way in which we invest in our portfolio of R&D projects externally. That is a tangible measure.

Then, if we look not just at the type of partner, but when and how we partner with others in either consortia or research projects, we are more effective in participating in the right type of consortia.

Something else that is important, but harder to measure is changing the mindset of our internal marketers and research and development people to think outside of Arla’s four walls. What I see is that people are more and more engaged in trying to find answers externally. And I would say that has been the easiest part, because there is a big tradition of collaboration in Scandinavian countries, of collaborating with universities and external parties and all that. So, I guess that change of mindset has probably not been as difficult as it has been in other industries and probably in other regions.
I would also say that by having the center of excellence in food, health and nutrition, we will be able to start applying what we learn here to creating other centers by ourselves or working with others to create more centers that can help us create the future of dairy.

In a nutshell, open innovation has given us a new way of thinking, a new way of working and most of all, it’s bringing efficiencies in transferring knowledge that’s created in collaboration with others.

Is there an open innovation service that you wish existed, that perhaps can make relationship forming easier, speed things up or help you in other ways?

Well, I am very, very passionate and hopeful that the model of working with small and medium-sized enterprises can make a big difference for companies like Arla. I think that as well as the incubation of startups are going to be the next wave of open innovation. I think the big companies like Arla have already had a chance to play a little bit and see how we much we can do, but I think it is time to start thinking in terms of ecosystems of incubation.

Also, last year we ran The Arla Food Innovation Challenge in collaboration with the Creative Business Club. It was a global competition specifically for startups and we invited the best five startups to come to Copenhagen. We gave the prize to a company from Portugal. They are not exactly a dairy company, but their model was very inspirational to us. So in a sense, it’s using examples like those and bringing those ways of working closer to us so we can learn from them and work together with them in bringing new innovations to dairy. We will try to run that event again this year and try to create interest in dairy among the startup community and SMEs.

What do you hope the future of open innovation will look like in dairy?

I would like it to be centered on big challenges. I would love for the dairy industry to raise the profile of the products and how dairy products can be a force for good in terms of alleviating some of the big problems in health and nutrition around the world. I think we will have á big role to play in the future, in terms of our protein offering for those facing starvation around the world. And proteins in milk are one of the best sources of protein for the human body.

Part of what we want to do with open innovation in the future is more than just create delighting products, because they will always be there. We also want to provide options in terms of healthy alternatives to what people can eat. To do that we will have to create a new science for manufacturing, and new science for product formulation and product structuring. And open innovation will be part of the way that innovation will happen, but it’s going to be transparent for everyone, because everyone is going to be working in that way.

I am also really excited about the possibilities of digital sharing and interacting digitally with consumers, not just to sell the products but to design the products with them. A lot of that is being speculated, but there aren’t too many examples in the food industry that I am aware of. So maybe, that is the frontier where open innovation can start making a difference.

Could you just elaborate on that a little?

I’m thinking of people using digital devices and channels to do things like self measuring sugar levels and monitoring vital signs and using that to inform them about what they can consume. For example, with this information they might be able to say, “today I can have a glass of milk and this much cheese to keep my calcium levels in check” or something like that.

I think there should be a way in which we will interact with our bodies to tell us consciously what we should be eating and what our body’s nutritional needs are depending on our health states.

Will big data form a part of this?

I think it will. Now, Arla is not just a manufacturer of dairy products. We also own the dairy farms, so in a sense for us, using big data is not just related to the things I was telling you about in the previous answer. It is also using that data across our value chain - from milk production and products to adapting processes and farms to produce the right type of milk, the right content of nutrients and so on, to get the right products in the end.

So I think digital is going to be pervasive, and we will be able to use those loops of knowledge at different stages of production. We’re not there yet, so there might be areas in which this will be more advanced than others, but in the end I think it will be a connecting thread for innovation, not just starting with the milk itself but starting with the cows.

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