Lush Fresh Handmade Comestics, a UK-based producer and marketer of ethical beauty products with around 500 stores worldwide, had effectively differentiated itself from its competitors through its strong ethical stance, products and packaging, and the way in which it conducted its business (Purkayastha, 2008). We are going to discuss about the internal and external sources of innovation for Lush, based on the Innovation case seminar several weeks ago.
Constantine sold all his rights on C&W products to Body Shop for £6 million and invested the money in Cosmetics to Go, a mail order catalogue of beauty products (CTG). However, CTG was not as successful as expected. He went bankrupt with a large debt. Constantine and his team then set up a new venture called Cosmetic House with £14,000. With a small amount of money, they improvised with irregular tools in Constantine’s kitchen to produce cosmetics. The first natural handmade products of Cosmetic House came into view in a creative way. The unexpected CTG failure was an important source of the innovative production – improvised cosmetics.
Constantine, with a strong ethical standpoint with long-standing commitment to eco-friendly natural products, anti-animal testing, and fair and ethical trade, has been the main driver of innovation at Lush. He successfully drove the message downwards to his staff, committed employees who share their founders’ passion for the values promoted by Lush brand. A superior leadership strategy motivates people to do more, dream more and learn more. Constantine and his team have the strong desire for growth. They are altogether making the innovation to occur.
One driver of innovation is the customers themselves. According to Gary Hamel – the world's leading expert on business strategy, “Every industry on the planet is being reinvented from the customer backwards. Companies need to bring as much innovation to the demand chain as they brought to the supply chain.” (Kirkpatrick & Hamel, 2004). Lush has implemented the same strategy. The name ‘Lush’ came from a customer in Edinburgh as a result of the company competition to find a name. The customers have been continually involved in Lush product development. Lush’s fanatics, called ‘Lushies’, participate in lively discussions on company’s forum, speak their minds, propose new products, vote on alternatives and suggest names such as "smitten," "whoosh," "aurora" to inspire the cosmeticians to create new products. (Conley, 2005).
Public opinions and customer demands are key drivers. People were becoming aware of the need to protect the environment and increasingly expressing the value they attribute to environmental protection through shopping behavior. They understood the impact of packaging in terms of the environment and their responsibilities to diminish the amount of waste. The ideas of ecological and social responsibility have become more and more important. That was the key factor for Constantine to drive his business with an innovative strategy that met customer and public demands: environmentally friendly packaging.
Competition is one of the external sources for innovation. With strong competition from famous cosmetic brands (Body Shop, Origins – Estée Lauder, Sephona – Louis Vuitton), Lush spent many efforts and resources on innovation initiatives with its own creative team led by Mo, Constantine’s wife. It drove the market by offering innovative products and training the customers how to use them. Lush differentiated itself from its competitors by innovative products, superior customer service, unconventional marketing approach and uncompromising ethical stance.
The regulatory environment also has a strong influence on Lush innovation. Constantine saw “climate changes” as an opportunity and made the necessary innovations ahead of the legislation changes. Before selling C&W to Body Shop, he once got into an argument with Roddick when she decided to replace unbreakable glass containers with plastic containers that could not be recycled. Lush products have minimal packaging or no packaging at all. The “green” packaging is one of the most considerable strategies of Lush. Lush is passionate about the environment and promotes campaigns that encourage environmentally friendly behaviors. In mid July 2007, in a campaign, the brave shop workers educated passers-by on the devastating environmental impact of packaged goods sold in cosmetic shops, supermarkets, and other retailers.
Climate change has generated a huge range of environmental policies and legislation at global and national levels. Packaging Regulations issued in 2003 (Exhibit VII) have supported Lush’s strategy and given it the competitive advantage with existing ‘environmentally friendly’ packaging.
In early days, the high cost of packaging cosmetic products made Lush think of a new resolution. The need was obvious, and the creative team then came up with ”no packaging” or ”minimal packaging” solution. This approach allowed Lush to save money and spend more money on high quality ingredients.
Why innovation? Beckeman, our guest lecturer, stated that one of the main reasons was to create competitive advantage. Michael Porter identified two types of strategies used by companies to obtain competitive advantage: low cost and differentiation (Porter, 1980). Low cost is based on increasing efficiency and cost reduction. In early days, Lush decided on no packaging or minimal packaging because of the high cost of packaging cosmetic products. The money saved could be utilized to put high quality ingredients. Lush was successful in differentiating from its competitors through strong ethical stance, innovative products, “green” packaging and in-store experience. Environment related investments can become sources of competitive advantage (Bonifant, Arnold & Long, 1995). Waddock and Bodwell also mentioned that responsible environmental management can provide a solid basis for competitive advantage, especially for early movers (2004). Lush is very keen on environmental issues by aiming at reducing unnecessary packaging and protecting the environment. Lush does have its competitive advantages over its competitors.
In the next post, I’m going to talk about Lush’s main competitor - The Body Shop: How Anita Roddick started her business and how innovation it was.
Beckeman, M. “Innovation within the packaging industry”
Bonifant, B., Arnold M. & Long F. (1995). Gaining competitive advantage through environmental investments. Business Horizons 38/4: 37-47.
Conley, L. (2005). How Lush Cleans Up. Retrieved October 28, 2008 from http://www.fastcompany.com/magazine/96/lush-cosmetics-fasttake.html
Kirkpatrick, D. & Hamel, G (2004, September 6), Innovation Do's and Don'ts, FORTUNE Magazine. Retrieved October 28, 2008 from http://money.cnn.com/magazines/fortune/fortune_archive/2004/09/06/380347/index.htm
Porter, M. (1980). Competitive Strategy: Techniques for analyzing industries and competitors, The Free Press, New York, NY.