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Lise Berg Kildemark Open Innovation, Suppliers Arla Strategic Innovation Centre Open Innovation in the Food Industry, Copenhagen, 28 May 2014 Confidential. Only to be distributed to participants at the event

MILK INTAKE 12.5+ BILLION KG

TURNOVER 10 BILLION EURO

LOCATIONS IN THE WORLD

PEOPLE 19,000+ EMPLOYEES 12,500+ OWNERS

COOPERATIVE SINCE 1880

BRANDS MAIN GLOBAL

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Creating the future of dairy to bring health and inspiration to the world, naturally

Vision

To secure the highest value for our farmers' milk while creating opportunities for their growth

Mission

Our vision, mission & strategy 2017 The foundation for everything we do

Deliver the growth

Develop the core

Do it faster, simpler and leaner

3 strategic axes

Cooperative mindset At the heart of Arla’s identity

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GOOD GROWTH is our identity

We want to grow and we care about how we do it

Cooperative growth at Arla

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Executed in multiple ways

STA

RT-

UP

S

COOPERATIVE GROWTH SOLUTIONERS

SCOUTING

CR

OW

D S

OU

RC

ING

COOPERATIVE MERGERS UNIVERSITIES

STRATEGIC COOPERATION

CO

NT

RA

CT

RE

SE

AR

CH

EN

TR

EP

RE

NE

UR

S

CONSORTIA

CATEGORY MANAGEMENT

OPEN INNOVATION

JOINT VENTURES

VOLUME SUPPLIERS ARLA FOODS EXECUTIVE ADVISORY BOARD

INDUSTRIAL ASSOCIATIONS

OUT SOURCING

CUSTOMER GRREEN HOUSE

SMEs

LARGE ENTERPRISES

CO-DEVELOPMENT

A structured approach to external cooperation We call it…

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OI AMBITION

1. Scale up external cooperation as a key lever to the growth of Arla

2. Work with best-in-class external partners

Innovation & Open Innovation is EVERYWHERE

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…along the entire value chain

…and everyone plays a role

Farms Dairies Consumers

It is not new

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…..but now a strategic priority

…..and with structure, alignment & governance

Innovation at Arla

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Profitable SELL implementation DO of en idea THINK

Speed Cost

How we define it

Differentiation

INCREMENTAL RADICAL

A paradigm shift and a game changer

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The lab is my world The world is my lab

Inside Outside

Driven by change, technology and opportunity

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A change of mindset

How can we create and deliver

maximum value most effectively,

regardsless of corporate boundries

We must own everything, invent

everything, gain everything

Inside Outside

12 Empathy

Sharing

Trust

1+1=3

Think ‘WIN-WIN’

A structured but simple approach

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The Arla Open Innovation steps

WANT FIND

GET

MANAGE

Inside Outside

Adapted from The ”Want, Find, Get, Manage” Model of PhD Gene Slowinski, an expert on alliances and co-author of the book The Strongest Link

Who are the external players?

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Development stage Early Mature

Mid

Business needs

Benefit areas

Focu

s

PRODUCTS & SOLUTIONS

Consumers

Consumers

Consumers

Consumers

Consumers

Consumers Suppliers

Start-ups & entrepreneurs

Universities & consortia

Supplier segmentation Work with the right partners - Work with the partners right

We use a segmentation model to help us identify the best-fit relationship with our suppliers

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Commercial fit and innovation fit goes hand in hand …for successful and sustainable supplier relations

CO

MM

ER

CIA

L F

IT

Fit

bas

ed

on

co

mm

erc

ial o

bje

ctiv

es

INNOVATION FIT Fit based on value contribution & culture

Low High

VOLUME SUPPLIER Interdependent relationship

STRATEGIC PARTNER

Collaborative relationship

STANDARD SUPPLIER Standard relationship

SOLUTIONER

Targeted relationship

High

Medium

Medium

’LIMBO’ Relationship to be clarified

START-UPS

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Think different

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Find new ways of innovating and cooperating

Opening our doors – annual supplier inno fairs

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Arla Closer to NatureTM Supplier Inno Fair 2012

Opening our doors – Arla Foods Global Innovation Centre An enabler for excellence in cooperative innovation and knowledge sharing

1. Using the Danish Food Cluster as a stepping stone

2. Designed for seamless collaboration with external parties – open space and project rooms

3. Access to and testing of 3rd party technologies / equipment

4. World class innovation environment – attractive to talents

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The additional outcome of Open Innovation Fostering cooperation internally

Source: Forrester report commissioned by InnoCentive, Feb. 2012. Survery on open innovation with decision makers from large companies in US, Germany and the UK 20

Does it work? According to our suppliers…

Source of quotes: Master thesis on Arla and colloborative innovations. Students from Aarhus School of Business and Social Science, 2013 21

Our best results are created in cooperation with others….

THANK YOU likil@arlafoods.com +45 22 72 85 94