Bush Boake Allen

Bush Boake Allen

Case report

Prepared by:

Florian Nuebling

Olga Roshchupkina

Albert Wang

Balaji Venkata

Jie Zhu

Kenji Watanabe

Strategic options

Key issues

Changes within the industry: BBA business model is under the threat

New technology reveals fragrance and flavors composition and structure, threatens margins

Company-specific

Industry specific

Project Mercury related issues

• Semantics: fundamental block
• User Involvement level
• Customers' willingness to pay
• Internal acceptance (both flavorists and management)

• Resistance to change (disagreement among management)
• Vast supply chain
• Unclear company positioning and differentiation
• Unclear perspectives (internal and external)
• Small player in oligopolistic market (unable to influence cost structure and pricing)
• Overexposure to mature markets (US: 35%, EU: 33%, Asia: 16%)

End consumers

• Difficult to decipher customer preferences (transfer semantics to product features)
• Extremely high diversity of customers preferences

Clients

• High R&D costs are borne by BBA (not clients)
• Low acceptance rate of new products
• High negotiation power (big companies - Nestle, Unilever, etc.)
• Forced competition - every deal is a tender

Legal

• Inconsistent regulatory environment in different regions

How to deal with the new technology (Project Mercury)?

How to deal with project "Mercury"?

Background

Option 1: keep the new technology in-house

Option 3: establish sample production centers all over the world

Option 2: Place the machine with some large customers

• Total control over R&D process
• No leak of information

• No possibility to capture information on customer preference
• No incremental revenue
• No increase of customer involvement => no help in raising acceptance rate of flavors

• Most customer-friendly option
• Allows to grow customer base
• Disruptive - first-mover advantage

• Helps strengthen relationships with biggest clients
• Increases customer involvement => acceptance rate
• Allows to collect data on their preferences and behavior patterns
• Incremental revenue

• No control over intellectual property
• Business model totally changes => high risk
• Cannibalization of current business
• Easier for competitors to reproduce technology

• Unclear how to charge / design usage fees
• Unclear, if customers will be able to use the machine properly
• Possibility of smaller customers feeling disadvantaged

Project Mercury

Project Mercury goals

Automation of the process of flavor development: machine + software ("spidergram")

• Capture more data on customers' preferences
• Improve BBA's responsiveness to customers' requests
• Facilitate cost reduction

Flavor development

New Flavor idea (by Customer or BBA)

Market test with end consumers

Sample flavor is delivered in several days

Adjusting the flavor

Customer decision announced

Feedback from the customer

Average acceptance rate is 15%

Customer details parameters: flavor profile application

38 countries

6 continents

2,000 employees

50 offices and 39 labs worldwide

$25 million on R&D annually

25% to 50% of flavors accepted for market test make it to the market

R&D expenses: $1,000 - $300,000

300 competitors worldwide

BBA holds 4.7% of the market

Future key success factors

• Ability to develop cost effective service
• Ability to integrate new technology
• Ability to predict trends and understand changing customer preferences

Present key success factors

• International scale - 6th worldwide, operations in 38 countries (can offer complex services to MNC)
• Decentralized organizational structure - able to satisfy diverse tastes of customers in different regions
• Speed, quality, consistency
• Ability to attract and manage talented flavorists
• Attractive corporate culture (democratic management)

Critical success factors

Recommendation

Flavors and fragrances

Our choice: option 2

Option 1 - doesn't let to reach the goals set for the project Mercury

Option 3 - very radical change of business model, highest risk

extensive customer support to avoid problems with new technology usage

Q&A