By Christian Madsbjerg & Diane Mehta
Kristian Villumsen is senior vice president of global marketing for Coloplast, an international company that makes medical devices related to ostomy, urology and continence, and wound treatment.
ReD: Coloplast is a company that has traditionally innovated through incremental, user-driven innovation. How has ReD changed that focus?
Kristian Villumsen: ReD came along when our company was making some very fundamental changes to the type of business we were—or rather, the type of business we wanted to become. We work in intimate healthcare—ostomy, continence, wound care, and urology—and have grown almost exclusively through organic growth for fifty years. We basically grew through a lot of product launches. Because of that we wound up with myriad SKUs and lot of complexity.
Before ReD got involved we innovated around technology and platforms. This is not necessarily bad, but we found it difficult to articulate what we wanted with the businesses and why customers should do business with us instead of with our competitors. It’s a position that’s quite costly to be in because it drives a lot of complexity upstream in the business. It’s also difficult to manage all that complexity and tell customers what it is they’re getting.
But real change is happening now. Historically R&D was responsible for innovation, but we wanted innovation that was more commercially driven. So we gave the marketing department the responsibility for innovation. In the beginning, however, they lacked the tools and language and processes to handle it. So we were hostage to existing ideas and thinking when what we really needed was a fresh perspective.
What ReD did was make the process work from the outside in: marketing drove the projects they worked on, and those ideas were built back into the innovation pipeline. One of our strengths is the quality of our engineers—so once we had a process for figuring out what people needed we could go to our engineers and ask them to create a product around those needs. Now the product development process tends to be more systematic and less hit or miss.
ReD: What compelled Coloplast to look harder at how the company needs to approach growth and the innovation pipeline?
KV: First, it’s extremely difficult to sustain growth with the type of model we had without your costs running amok. We found ourselves in a situation where our gross margins were below our competitors’—it’s hard to handle a portfolio with thousands of SKUs versus hundreds. So we have to deal with that. We’ve also gotten too little out of those products—too many small products, and too little discipline from idea to launch. There’s lots of stuff we’re changing.
We are working harder to build bigger, better, and bolder products and to drive our growth with fewer product launches. This ups the ante on how we launch, which is another big focus area now.
We believe this is a better way of running a global business, and a lot more fun.
ReD: Why is change more urgent now?
KV: Change is urgent because our competitors are not standing still. And our customers are demanding more from us. In almost all our markets we experience a lot of pressure on health-care costs and we have seen reforms become a recurring phenomenon. We need to be a more agile and effective company to operate and win in this environment. We are driven by the ambition to measure ourselves among the very best in our industry.
ReD: How does ReD make a difference at a company like Coloplast?
KV: I think for me, what was new about this type of work was that it got us to a simple insight, a simple but powerful idea—powerful enough to set the direction for our innovation roadmap and our entire franchise. It helped us to discuss not what we do but how we do it.
ReD: How do you approach innovation while taking into consideration the fact that the health-care system is changing in unexpected ways?
KV: We already work a lot with health-care providers and with governments but the regulatory environment also affects the type of innovation we think about. We’re dealing with this on a number of fronts. We impose very strict cost restrictions on the type of innovation we bring to market and invest a lot in trials of our products to have healthcare providers understand the value that our products bring.
But we also want innovation and differentiated products to drive our business the growth of our company—because if they don’t, we’ll be reduced to making cheap products that don’t necessarily serve customers well. For us it’s about making it much easier for people to cope with the diseases they have. We think we’re doing that by creating products that enable people to live more flexible lives, with more discretion and at reasonable costs.
ReD: When is ReD’s approach meaningful?
KV: In terms of the basic understanding and discovery of questions, there’s something unique about their approach. We would not have been able to do what we did were it not for their work. ReD also needs the right types of partners: I’m certain the work would not have had the same impact if it hadn’t been so anchored at the top. So there was something symbiotic about that.