Tyson Foods Takes Aggressive Approach Towards Innovation
Views of Tyson Foods are being clouded these days by the recent abrupt departure of former CEO Tom Hayes for personal reasons. But beneath the churn at the top of the company and stressful short-term prospects over commodity prices and trade policies, other executives at America’s largest meat processor are seeking and shaping the rare cuts of innovation that may constitute the company’s future.
Indeed, Springdale, Arkansas-based Tyson is taking one of the most aggressive approaches of any food giant toward re-envisioning its future based on how global diets are changing, on how new products and brands succeed in the global food business these days, and on how all manner of digital technologies are affecting the entire business. It’s a strategy that may hold lessons for other CEOs in the legacy economy that are trying to figure out how to leverage interest in entrepreneurial companies and outside innovations, instead of allowing disruptive upstarts to redefine markets with the traditional giants left on the outside looking in.
“It’s all about growing and delivering and sustaining,” Tom Mastrobuoni, chief financial officer of Tyson Ventures, told Chief Executive. “We need to be at the deal, at the table, understanding how quickly technology is evolving and what portion of our business could potentially be at risk from these emerging technologies.”
Rizal Hamdallah, head of Innovation Labs for Tyson, notes: “In today’s world, we’re competing not only with other big corporations but with smaller companies that are more nimble and agile and can launch things more quickly to market.”
Tyson Ventures is Tyson’s arm for corporate investments in promising food-related startups, and Innovation Labs is the new “intrapreneurial” arm of the company. They may have a lot to say about where the maker of Tyson meat products, Ball Park hot dogs, Jimmy Dean sausages, Bosco bread sticks and other well-known CPG brands goes from here.
For a company whose main investments are in a supply chain and manufacturing footprint that churns out various forms of animal proteins, the biggest challenge may well be adapting to a new market in which plant-based proteins are a growing incursion because of improved products and more consumers’ concerns about the environmental impact of livestock.
“You can’t tell what pieces of the protein stack are going to advance,” as Masrobuoni puts it. “It’s important to step back and say that the processing of animals is one part of our supply chain. We’re a CPG business—providing delicious, healthy options for consumers when it comes to protein-focused products.
“It’s all about the consumer’s experiences with food, which is one of the most personal choices consumers can make. Tyson wants to be there every time you’re making a food decision.”
To that end, the investment that actually kicked off Tyson Ventures was the company’s investment in 2016 in a 5-percent stake in Beyond Meat, a startup that has been creating beachheads for plant-based meat analogs with Beyond Burgers, Beyond Sausage and Beyond Chicken Strips. Tyson has ubsequently boosted its stake in Beyond Meat.
Tyson Ventures also has invested in a $19.5-million round of financing for Food LogiQ, which provides software-based services for traceability, food-safety and supply-chain transparency.
Tyson’s charge in funding Tyson Ventures with $150 million was to make investments in breakthrough business models, technologies and products. “We want to be strategic similar to traditional corporate VCs, and be financial like Google Ventures,” Mastrobuoni explains. “If a deal is strongly strategically aligned to what the parent company is trying to accomplish, then those financial returns will come. If you try to go too far off the reservation, it won’t work.”
Meanwhile, Innovation Labs is harnessing “an open innovation approach that can help us to innovate differently whether using our ecosystem with partners and incubators we’ve identified in the Lab or through Tyson Ventures,” Hamdallah says.
One of its first products is Yappah, a new form of chicken-based chip that relies on vegetable purees from produce that otherwise would be wasted and on the grain after products of brewing. It’s a way for Tyson to test the appeal of a brand meant to appeal to Americans’ concerns about cutting food waste.
The lab aims to accelerate Tyson’s traditional product-development cycle and introduce new products within six months if possible. “Large corporations are very slow in developing new products,” Hamdallah says. Yappah showed that “we could cut almost 80 percent of the traditional timeline of the average new-development pace for an innovation. We want to be able to compete with smaller, nimbler companies.”
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