CFO should try to kill innovation

Food is a dynamic sector

The food industry is an important and dynamic sector. Not only is it the largest industrial sector in the Netherlands [i], it is also an international branch with many themes and developments. Consider population growth and aging, the continuous focus on health, quality and safety, increasing legislation and regulations from Brussels, the sustainability of the food chain, increasing transparency in the chain, the rise of the food e-commerce channel, the increased share of Private Label in supermarkets, price fluctuations, the availability of raw materials, the scarcity of specialists, and new technological developments.

Innovation of products

The dynamics offer both opportunities and challenges and make the food industry an innovative sector that is constantly searching for better and new products. These range from relatively minor product modifications (slightly less salt/sugar/fat; no E numbers) to new technologies that have the potential to be disruptive. Consider the “cultured meat burger” by Mosa Meat or the development of valencene via fermentation by Isobionics, which may enable millions of liters of juice to be produced from a single orange [ii].

Manufacturing innovation

Innovation is not limited to R&D. The way food is made (production processes, techniques, factory facilities) is also becoming more sophisticated. More and more companies are using new technologies such as 3D printing, robotization, sensors and big data.

Terms such as “Smart Factories” or “Industry 4.0” refer to the benefits of innovative technologies in increasing productivity, efficiency and sustainability. For example, consider scanning cheeses with a 3D X-ray scanner during packaging for yield maximization.

Innovation of business models

A third level of innovation is the emergence of new business models. Companies like HelloFresh and did not exist in the Netherlands a few years ago and were created by cleverly responding to changing consumer demands. Or take Minibrew, a machine the size of a coffee maker that can be used to brew beer at home.

Multinationals are also coming up with new forms of organization to increase their ability to innovate. For example, Unilever plans to open a Food Innovation Centre in Wageningen in 2019, with R&D sites in Vlaardingen, Heilbronn (Germany) and Poznan (Poland) to close [iii]. Or consider 150-year-old but innovative Nestlé, which has gone live with Henri@Nestlé, a global open innovation platform in which entrepreneurs are asked to think with and work with Nestlé teams on innovative projects [iv].

Innovators in food


Where are the most innovative food companies located? The food sector has many startups, such as Seamore with pasta made from seaweed, or the American company Habit that provides customized meal boxes (“personalized nutrition” combined with convenience).

Family Business

In addition, many family businesses are active in product innovation. Think of The Vegetarian Butcher, Peijnenburg with Zero gingerbread, or Westland Cheese investing many millions in innovation and marketing.

Private Equity

Private equity-owned companies are also looking for innovation. For example, Sulá (producer of sugar-free confectionery) was acquired by The European Candy Group (Bencis), and finding new and alternative ways of working is a core value of Refresco (3i).


Companies like Unilever and FrieslandCampina have enough people and resources to innovate. At many levels (product/process/organization), they are working to increase their capacity for innovation. Dedicated teams are often assembled to focus entirely on the development and marketing of a new product. In addition, many multinationals engage in corporate venturing (investing in innovative startups to bring in external knowledge and entrepreneurship).

CFO research on innovation

Innovation is important but also difficult: it should lead to new sales and margins, but the costs are often high and the Return on Innovation is difficult to predict. Given the financial impact, Gwynt conducted a survey of CFOs of food companies. Moreover, in our opinion, the CFO plays an important role as an “innovation enabler” who must ensure innovation funding, investment reviews and proper allocation of people and resources.

Research among 26 CFOs of food companies shows that innovation is very important (score 4.1 on a scale of 1 to 5). Most companies have sufficient resources (money, equipment, knowledge) to innovate, but realizing a good Return on Innovation proves to be a tricky business. Only 16% report that the company has good to very good ability to convert innovation efforts into financial results.

Opinions are divided on innovation strategy (vision, goals, plan): one-third have (almost) no innovation strategy, one-third have a fairly clear strategy, and one-third have a (very) clear innovation strategy.

More than half (54%) of CFOs have an effective innovation process, but only 15% feel there is a good distribution of projects across the different phases of the innovation process (from idea to market launch).

Four in 10 companies dare to invest in long-term projects without a clear ROI or payback period. This is related to the fact that a minority has an innovation culture of working together on ideas and experimentation, in which it is allowed to make mistakes. It also shows that at only 1 in 5 companies does the development of new ideas take place through dedicated teams in “incubators” or internal startups.

Based on the research, it appears that innovating is important but also difficult. This aligns with research firm Nielsen’s finding that three out of four new FMCG launches fail within a year.

10 Innovation principles

Despite all the challenges, how can companies increase their innovativeness? The probability of success can be greatly increased by applications of a dozen innovation principles (see Innovation Framework). These are based on actual practical experience. The CFO plays an important role in this, particularly in the areas of innovation funding, progress monitoring, project reviews and the allocation of people and resources.

Principle 1 – Sponsor

Get a sponsor at the highest level who believes in the project and dares to advocate for it. Especially in the face of setbacks, the sponsor must ensure that a promising project can continue and not be halted.

Principle 2 – Innovation funding

There must be sufficient budget to fund innovation. This seems like an open door because large companies often have plenty of resources. But smaller companies sometimes have to look for innovation funding such as grants or collaboration with partners, where each pays a part and gets a share of the proceeds.

Principle 3 – The true cost

Think big. Often the cost of a new product is based on a pilot in a retail channel or country where the product will be marketed. These costs are relatively high because they include start-up costs and are based on limited scale. If the product is also introduced in other countries or sales channels, then economies of scale emerge and the “real” cost (and ROI) comes into play.

Principle 4 – More facts, less gut feeling

Provide facts and figures, because successful innovation is 80% data and research and 20% gut feeling and intuition. An innovation proposal must be well justified and financial projections adjusted during the project based on new insights and experiences. This does not mean that there should no longer be room for boldness and entrepreneurship. The business case is important but not sacred, because numbers are often based on assumptions and assumptions that turn out differently in practice. Therefore, work with short cycles of development, testing, learning and adaptation. Accept that not every innovation catches on. See what works and what doesn’t, after which can be continued. This makes the innovation process less costly.

Principle 5 – If you cannot kill it, embrace it

Prevent nonpotential projects from muddling through for too long and stopping late in the process (just before or even after market launch). Therefore, try to “kill” innovation projects as soon as possible. That is, look for weaknesses and try to find reasons why an idea will not succeed. This seems an odd approach, but if it fails then chances are the idea is worth further investment.

Principle 6 – The fast lane

Take two approaches to NPD (New Product Development). Many companies do not distinguish between NPD requests based on a specific customer demand and NPD requests based on ideas coming from marketing, R&D or suppliers. Specific questions from large accounts often need to be handled quickly through a “fast lane. A “fast lane” is a high-priority innovation process so that customer-specific product innovations or minor product changes can be implemented quickly. This can be compared to a business traveler boarding a plane faster than tourists waiting in a long line at the gate.

Principle 7 – Multidisciplinary teams

Provide a dedicated team at the edge of the organization. New products such as the Senseo or Beertender are developed by multidisciplinary innovation teams. These teams work on new ideas and concepts without being disturbed by the hustle and bustle of daily operations. They function as a kind of internal self-managing startup.

Principle 8 – Innovation control

With multiple (10+) projects, use an innovation project management system that employees can and should use. If they don’t, their project won’t run in Project Review Meetings, for example, or purchase orders can’t be created. The system enforces a structured innovation process and enables monitoring for the CFO. This may sound a bit rigid, but it prevents projects from going off budget or off schedule unseen. And it avoids having to keep all kinds of lists (in Excel).

Principle 9 – Real Options

In addition to the classic Net Present Value calculation, use the Real Options method when allocating people and resources. Real Options aims to reduce “downside” risk and increase “upside” potential. Make sure that prioritizing projects does not become a pure calculation exercise: the allocation of people and resources takes place in a multidisciplinary dialogue between the stakeholders involved.

Principle 10 – Be careful what you wish for, you might get it

Create a plan for success. If the new product becomes a success, make sure the supply chain can deliver and suppliers can step in if needed. An innovation that does not catch on is annoying, but an innovation that is well received by the market after which the company cannot deliver is even more annoying!


The CFO may not seem like the first person most involved in innovation, but he or she may be the most important “enabler” that enables innovation and can ensure that the Return on Innovation is as high as possible. This calls for a CFO who looks beyond the innovation budget and makes a significant contribution to maximizing the chances of success with a positive-critical attitude.


[i] Production value €60 billion (22.5% of total industry). Number of companies about 5500. Employment 150,000 people.

[ii] EVMI, “Millions of liters of juice from 1 orange”

[iii] VMT, “Unilever announces Wageningen innovation center, Vlaardingen closes”

[iv] EVMI, “Nestlé launches open innovation platform”