Boots: a dragon's den for innovation: while attending In-Cosmetics 2008, in Amsterdam, NBTs Claire Day met with Gail Eastaugh, Project Manager for the Boots Centre for Innovation, to discover how Boots has become a global magnet for innovation while helping entrepreneurs to achieve their lifelong ambitions.

NBT: What is the Boots Centre for Innovation (BCI)?

BCI: The Boots Centre for Innovation is a dynamic, not-for-profit organization that identifies and facilitates the development of pioneering health and beauty products to improve the quality of life for Boots consumers. It is a partnership between the Boots Company. Longbow Capital (a venture capital company, based in London) and the Welsh Assembly Government. The Centre is a global magnet for innovation; we welcome anyone with good ideas and offer them support, advice and, ultimately, help them to sell their product. We're not a department of Boots, it is a separate legal entity and, therefore, we can be truly independent.

NBT Who can benefit?

BCI: Early stage companies, lone inventors--with products and technology in their infancy--and those that haven't got the ability to commercialize their innovation. That's where we come in: that's where we're adding value. We can raise them up to a far more 'retailable' format. We recognize that small companies are absolutely committed to driving innovation. Previously, big business has had a bit of a problem there because it's very difficult to work with a big corporate entity when there's only four or five people in your company; they don't have a purchasing department as such, and Boots wasn't sure how to handle that because we've only worked with big suppliers. So now we're trying a new model that strives to get that innovation through, because it's actually stimulating things we would never see from our big suppliers. Hopefully, that balance will shift slightly during the next few years and we'll find a fast-track to offer small companies a route to market--with, on their part, very little input--and we'll hold their hands as much as we need to. We'll take it right the way through to the shelf.

NBT: How can you help inventors achieve their goals?

BCI: We can help with product development, sourcing manufacturing or funding, which is where Longbow Capital comes in. It's very rare to access to funds as part of an innovation house--and there aren't too many innovation houses full stop--so we're quite a unique model in that if someone comes to us in the very early stages, saying: "I've just run out of money; I can't prove this concept," we can connect them to the funding sources they need, which is why Longbow has set up a designated healthcare fund for us. We can then also access our broader Boots network. We've now got a European network that we can call upon for manufacturing to arrange licence agreements, and so on.

NBT: Will you help anyone, providing their idea is good enough?

BCI: Yes, though we're more interested in ideas that have been protected. This is more for their protection than anything else; if they're talking to us without any confidentiality agreement, they could blow their idea. We wouldn't want to get into too detailed a dialogue until they have filed some kind of protection for their intellectual property--and this is something we can help to facilitate as well.

NBT: What are BCI's operational models?

BCI: We had our first birthday in April 2008, which is very exciting, and in that time we've operated a model of simply opening the door to see what ideas would come to us--with the brand (Boots) doing the job for us. We're now using three models:

1. Open for Business: This model is literally where we open the doors and invite those with interest in the Boots brand to present their ideas.

2. Seek and Find: We might have something specific in mind--led by customer insights from consumer research--and we want to know who might be able to help us with it. It's likely to be a product that's already in development, or it might be two or more companies that can work together to develop a product.

3. Discovery: An innovation radar to stimulate the potential for more opportunities from other industries and, potentially, from outside the health and beauty arena, to spark cross-fertilization of technology. Ultimately, it's about the unknown, plotting new trends and opportunities and keeping our fingers on the pulse. We don't know what we don't know'.

NBT: Who funds BCI?

BCI: Boots doesn't necessarily invest; maybe Longbow has first Bibs on that investment, but in many cases they don't need a lot of money to move to the next stage, they just need to prove the concept, which is relatively cheap, compared with the full marketing and launch funding that you need to get a product out there. And, in a lot of cases, the brand does the job for us; inventors go to their local bank, mention the Boots brand and the bank is then likely to 'up' their loan. So we're not giving them money. Some people come to us with an incorrect assumption that we will loan them the money. If that were the case, there would be a different expectation around owning a percentage share. We're really saying: "You're the guy that invented it, you need to retain that asset, but you're never going to make it into that market without some help."

NBT: Do you always use the Boots branding?

BCI: It very much depends on the client's preference. Some people come with a very fixed view; they want their brand to be the one that's visible. Others are more pragmatic; their interest is in getting the technology out to the consumer and want somewhere to sell it. From a Boots brand perspective, if you put a product into the No.7 Botanics range, it's reaching a much bigger market instantly and I think people recognize that. We have Boots-branded products in all our stores, but we don't necessarily have every proprietary brand in all our retail outlets. Thus, they gain more visibility for their products under the Boots brand. But if somebody feels very strongly about it then that's their decision.

NBT: What about those that wish to use their own brand, rather than 'Boots'?

BCI: We would still get involved. We get more involved with the Boots branded lines, but if somebody's really passionate and has good credibility behind their brand, then of course we'll help. It could be that they've been in a different market very successfully but haven't been in the UK before; then we're just opening the door to the right people at the right time. Where we really get involved and add more value is when they come in much earlier in their development and possibly have a funding gap or they don't know where to manufacture. We're facilitators, if you like. It's a small team; we don't aim to be the centre of excellence in terms of expertise and providing manufacturing capability and things like that, but we know a lot of people who can help those, particularly small entrepreneurs.

NBT: Does BCI get involved with the production and manufacturing?

BCI: If clients have already established manufacturing procedures, then that's fine and we can work with them to develop the most cost-efficient way of doing that. There might be a aw in a client's business planning, so we'll ask them to adjust their volume predictions or their sales forecasts, or suggest that they might get a better deal from their current manufacturers--and they really value that advice. We also have a global manufacturing base; we have Alliance Boots sourcing out in Hong Kong and other territories. We've got big volumes from existing business and we can offer clients the ability to piggy-back onto those volumes in some cases. We're working with people who don't want to make a business out of their idea, they simply want the technology to be used--and we can help them licence it out to our suppliers, or maybe a new one, and then we would buy from them. This works well because they're already familiar with the Boots quality expectations. One of the first questions we ask clients is: "Where do you want to take this idea and this business?" Some people haven't got that far in their thinking; some just want to sell it on and retire, which is absolutely fine; it's very much done on a tailor-made, case-by-case basis.

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We're not talking about developing hundreds of products a year; it's tens of products a year and each one is completely different.

NBT: How did you come up with the concept of BCI: was Boots stuck for ideas?

BCI: It's very much reacting to the success of 'Protect and Perfect'--a skincare product--that was internally developed and enormously successful. It ew off the shelves and senior management said: "Let's get more of these quickly!" And we recognized that we'd be naive to think that we're going to be 'the best of the best' in every single category. The ability and the cultural change to recognize that open innovation adds value is not actually happening in the large corporates. So we're unique in embracing that and welcoming ideas through the door.

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NBT: What is your remit?

BCI: It's a very broad health and beauty banner that we've been given the remit to look for; whether that's medical devices, drug delivery systems, toiletries and cosmetics, or diagnostics so it's a very broad spectrum of things that we're interested in. We're realizing now that it's not appropriate to say we're the skincare expects, 'the best in the world.' We believe we have global expertise, but there's somebody out there that might be looking at something else, a different application altogether. It only takes the question: "Have you thought about doing this with it?" to turn it around and transform it into something very exciting. And it's that ability--to take a step back and really understand the potential of the idea--that sometimes the inventors themselves don't have. They may know its benefits, but they don't know whether to put it into a cream, toothpaste, a hair product or something you inhale. From a marketing perspective, we can suggest the best commercial application for it based on the data we have. There may be multiple applications and we can see how it can be moved into a different area. It's about getting the best value for the person that's put the effort into creating it.

NBT: It all sounds too good to be true ... so what's the catch?

BCI: There is an exclusivity expectation in exchange for our support; we would like 18 months exclusivity on that product when it goes to market. And we charge a very nominal royalty of 3% on the sales--if and when they are listed in Boots. So it's almost a 'no win, no fee' agreement. If it doesn't get that far, then there's no commitment to pay anything, and no ulterior motive.

NBT: Why are you located in Wales, rather than at Boots HQ in Nottingham, UK?

BCI: Were based at Swansea University, in Wales, which is a great location because we're sited in the Institute of Life Science. This gives us access to the medical school and all the academic support, which has been fantastic. We're desperately trying to give consumers the best possible products; products they can get excited about and, because Nottingham is focused on our core technologies, we want to keep the door open for that 'just in case' moment when someone has an interesting concept--and we don't want to miss that. Moreover, we don't want to develop a reputation for only dealing with big suppliers because we then miss out on the innovation, which is not the right message for Boots to be sending out. Were set up in Swansea because we're independent, and I think people strongly sense that, what with us being so far away from the head office in Nottingham.

NBT: Have you received much interest from outside the UK?

BCI: To be honest, a lot of the innovation that has come to us has been from outside Britain, including Australia, South America and South Africa. We had a great exhibition that we hosted in Hong Kong on the back of Cosmoprof. That was a great success! We've attended Medica and Arab Health, which was also very successful for us, and we're soon off to an exhibition in Israel. So, yes, the majority is coming from outside the UK, which probably re ects why we're open to innovation. We need to get to the sources of the best possible products and technologies available.

NBT: Has BCI been a success so far, and have you received the expected level ofinterest?

BCI: We've had much more interest than we anticipated, through word of mouth and the global distribution of cards containing the top ten areas--which is deliberately quite general to try to encourage as much innovation as we can. This network has spread very successfully for us and we've seen just short of 500 ideas come coding though the door, so that's been really successful and we're probably progressing around 30 of those. Also, the really big news for us was our first product launch, which hit shelves in May, and our second in September. This shows the ability to deliver as a centre because we're looking 5-6 years ahead at technologies that will pipeline through to great new products.

NBT: Where is BCI now positioned within the innovation arena?

BCI: We're at this very interesting time where we've had an awful lot of interest and we've got our first product out. So people are becoming more and more interested because they can actually see that this route to market is not just a promise, it's reality. And with 2500 stores in the UK, that's an incredibly interesting concept for anyone globally. Previously. all the industries have been quite internal in their new product development, but offering this open innovation model--which BCI has been established to encourage--means that we've got a great opportunity to go very quickly through those processes because we've been incredibly willing to share information with some of the people we would normally consider to be our competitors. We're not precious; we're really out there saying: "This is what we're looking for, can you help us find it?"

It's a new venture and we're still learning, and although we recently celebrated our first birthday, the core team has only been in position since November 2007, so we've only had a few months of focused activity to create that innovative streak. We're constantly evolving; as a small business ourselves, we're adjusting our focus all the time to find the best way to do this. Because we don't have a lot of competition as a centre for innovation, the brand owners have their own models for attracting innovation in the open innovation model, but there aren't too many dedicated areas where you can visibly see a centre, log your website or log your idea, and where somebody will come back and offer you a dedicated project management resource to take you through that journey--and people are really valuing this from BCI.

NBT: What trends, if any, are you seeing?

BCI: We might be a little bit young to establish trends, but because they are so different I'm not sure we ever will get a trend. We need to wait and see who knocks on the door. We're going out and actively asking if anyone can help us with a solution, which is a slightly different way of working because we will be sharing the idea and that, in the long-term, will become more valuable for us. Sometimes we have a particular customer need that we need a solution for; other times we just have a problem and we don't even know which consumer need that might be linked to, such as an increasing level of obesity within society in general. So we just have a problem, an insight, a fact, and what are we going to do about it? We might have a load of global experts together around a table asking who's doing what? What should we be working on? Then we might take it to the academics and ask there; to do some research on it, followed by a product developer, and so on.

NBT: Describe, if you can, the ideal invention/product to come through your doors.

BCI: A lot of what we've seen--in the 500 products that have come through our doors--has been device and hi-tech solutions in the area of heavy engineering applications, as opposed to topical or oral solutions. What we're really hoping for is a synergistic effect of a topical, oral and a device combination that would he the bullseye for us!

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For further information

Louise Bryce

Marketing Manager

Boots Centre for Innovation

Tel. [phone]

[e-mail]

www.bootsinnmlon.com

About the Centre

The Boots Centre for Innovation provides support and funding for the development of pioneering products and technologies, They are particularly interested in ideas and products that focus on the following consumer needs:

* improve and maintain the heft, lock and feel of skin

* Improve the health and appearance of teeth and gums

* Devices that enable people to monitor key aspects of their health

* Improve the health, appearance and comfort of eyes

* Improve digestive health, particularly issues related to stress, poor diet and obesity

* Minimize the severity and duration of pain

* Improve quality of sleep for everyone [Including pregnant women, babies and the elderly]

* Minimize the complications of living with diabetes

* Anti-ageing products and devices for mind and body

* Create more convenient methods of taking and using medicines and health products.