The Beauty of Crowdsourcing

How Natura brings open innovation to life

Open innovation, also called crowdsourcing, has been adopted by several companies seeking to improve their innovation process by leveraging the ideas of people outside of the organization. The biggest beauty company in Brazil – Natura – is a huge promoter of open innovation, brought to life through different initiatives that contribute to Natura’s performance.
Natura is the leader in the cosmetics and fragrances industry in Brazil. According to HBR[1], in 2011:
“Natura— which launched 435 new products from 2009 to 2011—has a leading market share of 23.2%, a 62% household penetration rate, and nearly 100% brand recognition. From 2002 to 2011 the firm’s revenues grew by 463% and its net income by 3,722%, and the company had an average gross margin of 68%, compared with the industry average of 40%.”
However, Natura’s innovation team is aware that they don’t have all the answers, and even don’t have all the questions, and therefore the company needs crowdsourcing to foster its innovation process, critical to sustain the leadership position in the market. Natura deployed open innovation through two main initiatives: “Cocriando Natura”[2], for the broader public, and “Natura Campus” [3], targeted at college students.
“Cocriando Natura” is a platform where consumers can engage in “journeys” to address a problem or question. The platform allows users to collaborate online and through face-to-face meetings, and leverages gamification and recognitions to encourage users’ contributions. The ideas are used as inspiration sources by the internal teams.
“Natura Campus” is a platform that targets college students, bringing the company closer to the best universities in the country. The initiative allows students to submit their ideas and follow up on related projects. Besides, it promotes Hackaton events, which are intensive efforts that start with ideas and move into actual prototyping. The Hackaton events may bring together students, employees, customers and also renowned partners, such as MIT Media Lab and IDEO[4].
Innovation is part of Natura’s DNA and Forbes recognized Natura among the top 10 innovative companies in 2013[5]. However, besides the current efforts, other step that company could take to translate innovation into performance is broadening the scope addressed by their open innovation initiatives. Most themes address product and communication, but currently one of the company’s main challenges is migrating from its traditional direct-selling channel to a multi-channel approach [6]. The company has 1.4M sales representatives[1], but the direct-selling channel is shrinking. The new channels – e-commerce, physical stores, and pharmacies – are still relatively small and may cannibalize one another, potentially creating conflicts with its sales representatives force. How crowdsourcing could be used to address this go-to-market challenge?
Finally, an additional concern should be addressed: the competition in the Brazilian beauty industry is fierce and competitors may copy the products, messages and/or channels. What to do regarding strong competitors that may copy the innovations launched by Natura? How to ensure that all the efforts regarding open innovation create a sustainable competitive advantage?

References:
[1] Robert G. Eccles and George Serafeim, “The Performance Frontier: Innovating for a Sustainable Strategy.”, https://hbr.org/2013/05/the-performance-frontier-innovating-for-a-sustainable-strategy, accessed November 2018.
[2] Natura Cocriando, http://cocriando.natura.net/cs/cocriando/homecocriando, accessed November 2018.
[3] Natura Campus, http://www.naturacampus.com.br/cs/naturacampus/home, accessed November 2018.
[4] Hackathon Natura Campus Media Lab, Vimeo, uploaded August 21, 2014, https://vimeo.com/104044105, accessed November 2018.
[5] Forbes, https://www.forbes.com/companies/natura-cosmeticos/#6cae9ec77e66, accessed November, 2018.
[6] Paul W. Farris, Leandro Guissoni, Kusum Ailawadi, and Murillo Boccia, “The Multichannel Challenge at Natura in Beauty and Personal Care”, https://hbr.org/product/the-multichannel-challenge-at-natura-in-beauty-and-personal-care/UV7303-PDF-ENG, accessed November 2018.

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20 thoughts on “The Beauty of Crowdsourcing

  1. This piece was fascinating. I had never heard of Natura, and its crowdsourcing model seems to inject a unique sense of authenticity into the brand. Regarding a sustainable competitive advantage, I believe the emotional connection Natura creates through engaging its customer base differentiates it from other beauty players. Competitors may replicate Natura’s products, but they will not be able to replicate the client relationship Natura forges when involving customers in product development. Moreover, any competitive efforts to implement a similar crowdsourcing model will be a transparent copycat strategy, likely to deter more customers than its attracts.

    The author also raises an interesting point regarding the potential channel conflict between brick & mortar and ecommerce. The rise of the online beauty pressure is unlikely to abate, meaning the company will have to downsize its direct-selling channel. Given how large this channel appears (1.4M sales people), I expect this strategic shift to dramatically alter the fabric of the company — but such a transformation will be necessary if it is to survive the beauty industry’s rapid evolution.

  2. I think this is an interesting question of how Natura can transition its MLM model to the digital world. I do think it can replace its model with a digital platform and sell directly to consumers given the strong brand loyalty it has created. There is another company called Stella + Dot that has done a good job of leveraging a digital platform as well as in-person, social selling strategies. Sellers, typically women, will host Stella + Dot parties. Afterwards, they can share a unique link to their Stella + Dot showroom, where their friends can purchase products and have them shipped to them. I wonder if Natura could leverage a similar process for selling in the digital age.

  3. Great piece. I agree that Natura is leveraging their customers voice in product development through the “Cocriando Natura” and Natura Campus” which should make customers feel greater interest in buying products. I gather that the author is questioning whether or not the same crowdsourcing methods can be used in order to begin migrating away from DTC into other channels of making their products available to the market. I believe that this would be extremely difficult to do because of its current salesforce of 1.4M sales people and the ability of the salespeople to take over the discussion platforms because they would be essentially fighting for their jobs and that could lead to negative press.

  4. Interesting piece on Natura!

    While I am not certain how crowdsourcing could help address Natura’s channel challenge, I am very positive that this could become one of Natura’s key competitive advantage. One of the key reason is Natura will enjoy the first mover advantage in this space. First, Natura is being recognized as leader in innovation help building brand reputation. Second, through crowdsourcing programs, Natura is also building brand loyalty with potentially future buyers. Last, Natura would have more time and experience in understanding how to efficiently translate results from these programs into business.

  5. This is a really interesting article. I’m not completely sure I understand what incentivizes people to participate in a product development exercise on behalf of a ‘for-profit’ company (unless I have misinterpreted what Natura does). I think the gamification element of their Cocrianda Naturo programme is really interesting but over the long term it seems to me that participants may wish to be compensated.

  6. Thank you for such an interesting and enlightening article! I was not aware of Natura before reading this piece and am astounded at such incredibly high levels of revenue (463%) and net income growth (3,722%)! I would be very interested to know how much of that growth could be attributed to ideas that resulted from crowdsourcing as a concrete way to measure crowdsourcing’s impact on the company through its traditional purpose of idea generation. I would also be interested to know if in addition to acting on the ideas that are presented through the Cocriando Natura and Natura Campus programs, the submissions are used even more so as (a) a recruiting tool to identify innovative candidates that the company then encourages to apply to join the firm, (b) a marketing tool to increase the brand’s image and presence in consumer’s minds as being innovative or (c) an investor relations tool to help consumers feel more connected to the company through an additional touch-point.

  7. What a great article! I think this example is a trend that can span across a variety of industries, but its success in the beauty realm could be hard to replicate. By targeting the demographics that historically have driven trends in the industry, it can be a great way to stay ahead on the trends. I would speculate that most of the people contributing to Natura are people that follow beauty trends set by some of the larger players in the industry. By that logic, I would expect this to be a great way to indirectly act as a collaborator with a variety of firms operating in the same space. It also allows Natura to leverage innovation from many different firms.

  8. Fabulous piece. It makes a lot of sense for a consumer brand selling very personal products to be using crowdsourcing methods to connect more with its customer base. I would be curious to know how they manage IP for consumer-driven ideas, particularly in light of your comments on increased competition. If competing firms also look to crowdsource, will the differentiation of the brand be reduced? Also, I wonder how they manage to retain a consistent brand and product message to consumers whilst using open sourced ideas. It sounds as though they will still need an active innovation department in the future to manage this, even if they increase consumer engagement even further.

  9. I had never heard of Natura before reading this piece. Natura seems to be using crowd sourcing well to drive sales growth, as evidenced by the 463% growth that they saw in the prior decade. It seems like open innovation allowed Natura to continuously innovate while also driving speed to market. I think crowd sourcing can be very powerful in the beauty industry given how fad/trend driven the industry is. Open innovation can enable Natura be quicker to market because typically big CPG companies have to spend a lot of time doing consumer research before launching a product. This process allows the ideas to come to them from the consumers.
    The downside of crowd sourcing is that any of Natura’s competitors can also use it. Natura needs to use its brand and its platform to engage its consumer base. Long term, I think Natura could even use its platform to sell its current products online or Beta test new products.

  10. I think the bigger question here is how to efficiently filter through the ideas that come from their crowdsourcing funnel. Brainstorming may give Natura a large number of ideas, but it won’t mean much if they can’t efficiently (and thoughtfully) filter through them.

  11. I think your question hit the nail on the head – how does the company protect itself from competitors when it is using an open innovation format? I think it is good that the internal team uses these ideas as a source of inspiration rather than taking them literally. It allows them to put their own spin on the ideas, while also showing the customers that they are listening to them and that their ideas are valued. I would take it one step further and also crowdsource from the sales reps – they should have some ideas of what the company is missing out on since they are working directly with customers.

  12. This company surprises me. It seems to be full of contradictions. How can a MLM transition to a legitimate company? It seems to be doing that successfully. I’m also pleasantly surprised that open innovation works here. It feels like this would be a research lab-driven world, but open innovation, and especially the college collaborations, seem to be working well. Maybe beauty is a good fit for crowdsourcing: everyone is unique, and therefore need somewhat unique beauty products.

  13. Wow, what an interesting piece on a company I was unfamiliar prior to reading your article! I tend to agree with some of the other comments that as a first mover in using crowd sourcing in the beauty industry, Natura could have a relative advantage in building their brand in the mind of their target demographic. Furthermore, consumers may have the impression that the products are more personal due to their own involvement in their creation. This coupled with word of mouth advertising could help drive sales and further increase revenues with no additional costs incurred to the company.

  14. Crowd-sourcing could be the single-biggest innovation for the multi-level marketing business model. By receiving input directly from the salespeople, Natura can reduce its internal R&D efforts and focus on creating products desired by the people. When you consider that most network marketing schemes result in direct-salespeople selling to their immediate network, including family and friends, there is a sense of ownership in realizing their input impacts the products they have available to sale.

    The quality of this product’s distribution channel also lies in the fragmented nature of independent salespeople. By further engaging its salespeople with a sense of ownership (and potentially compensation if their ideas do make it past concept stage), Natura becomes more valuable as its channel is reinvigorated to sell new and existing products.

    Furthermore, the quality and frequency of feedback from direct sales people could insulate Natura from any imitators.

    This is a great story of bringing modern-day innovation to a business model with a troubled past, potentially revitalizing it as viable model for the 21st century.

  15. I struggle with answering many of the questions posed by this piece and the comments above. Mainly, how do you maintain a competitive advantage in an open source world? TOM Student and Jayne do a great job of providing me some clarity on this question. By crowdsourcing, Natura is also creating an authentic connection with its customers and in some ways is benefiting from network effects. The larger the crowd that they get to tap into, the better the ideas will be and the harder it will be for a competitor to replicate.

  16. Great post. I think Natura is getting a head of the game by engaging in open innovation as a mean to bring in new ideas from the public. The community of beauty industry strikes me as an excellent target source for ideas due to the passion of beauty product users and the pride they take in the products they wear or use. The second part of the equation is as important as the first which is how to filter the ideas that are coming your way to make a meaningful innovation. I also wonder if there is a potential to use the input that is coming from Natura Campus or Cocriando Natura as information to feed your marketing department on what products already resonate well with your customer. This also seems to be a potential candidate for machine learning to help Natura make sense of all of this information to make sound decisions provided that ML is worth the investment.

  17. The discussion on open innovation in the beauty industry is so interesting! I am so intrigued to learn more about how the information collected actually feeds in to making the product and services of the company better. It is a brilliant example of how the consumers can be empowered to help the company identify the actual useful products they might need. I am however skeptical about the reliability of these ideas generated and the degree of control the company has on what is posted on these sourcing platforms. The can also be a source of a lot of immaterial information and noise that would need extra energy to sift through. What is the way to make this a more efficient process?

  18. very interesting article! it is indeed a quite challenging question how to use crowd sourcing for go to market ideas. possibly they could have people recommending them products and sending them samples which they could then brand and sell in the market. Crowd could then take the function of the R&D department. understanding what the consumers need and have the expertise to apply the right branding to market a product could help them be ahead of competition.

  19. I love how Natura has harnessed the one-off conversations women have about beauty tips into a product development approach!

    One way the brand could crowdsource its go to market (GTM) strategy is to provide a tool online, on which customers could map-out their paths to purchase beauty products. Natura could then mine this data to proactively adjust their market presence to the formats most wanted by their customers.

    In addition to optimizing their GTM strategy, I think Natura should leverage its Cocriando Natura and Natura Campus initiatives for marketing purposes. Competitors may be able to copy Natura’s products, but only Natura will be able to feature the actual people who came up with the ideas in its ads! I think this connection to and appreciation for the customer will give Natura a sustainable competitive advantage going forward.

  20. Cool way to see how a company uses crowd-sourcing to better understand their customer and generate new product ideas! I think one of my concerns is how the company plans to maintain engagement on their platform in the long-term. Seems like it would be difficult and could potentially require significant marketing expenditures. Good point about them potentially giving their competitors some good ideas. It does seem like they need to come up with some sort of mechanism to keep that private, or maybe their core competency is just being able to process and refine all this information in a useful way that is specific to their products. Nice.

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