Anne Carullo

SVP, Corporate
Product Innovation
Estée Lauder

the
innovator’s
interview
The Innovator’s Interview highlights unique innovations from a wide range of industries, and is an
opportunity for futurethink and some of today’s leading innovations to share insights and ideas.
May 2009

Turn innovation into action

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the innovator’s interview 2

Anne Carullo
the background
This Innovator Interview series highlights leading innovators at Fortune
500 companies. In contrast to past interviews, focusing on a single
innovation, this series examines the state of innovation at global
organizations. We spoke with both innovation leaders and practitioners,
within varying business units and organizational structures, across a
broad range of industries both for–profit and not–for–profit.
The interviews offer a unique insider’s view into the world of
innovation—what makes it work, what holds organizations back,
and what critical advice new innovators need to know to be more
successful with innovation overall.

the interview
futurethink recently tapped the mind of Anne Carullo, SVP–Corporate
Product Innovation at Estée Lauder to learn how the cosmetics giant
innovates. Read on to learn why the customer isn’t always right, how
hiring the Top 2% isn’t necessarily good for innovation, and the
importance of looking backward for new ideas.

You said that innovation at Estée Lauder is different than how other
leading innovators do it. Can you elaborate?
Innovation is a central theme to the corporate mission of Estée Lauder
Companies and much of that stems from the Product Development
department, which differs from other organizations in that Product
Development is not part of R&D or Marketing. We’re a very specific
group of people that work on development with R&D and Strategy with
Marketing. The senior heads report directly into the Chief Innovation
Officer as well as the President of the brands that we’re assigned to.
Our overall responsibility from a branded standpoint is to work with the
brands to develop innovation strategies and design these strategies so
that we can support their business initiatives. In addition, we are also
responsible for developing and conceptualizing – that is, investigating
new disruptive concepts and ideas outside the industry and applying
them to our business. These are things that are not necessarily
requested by any specific brand. So, I function as a creative developer
to conceptualize and formulate while supporting the brand strategies.

You work across multiple brands, then?

Yes. My official title at Estée Lauder is Senior Vice President of
Corporate Product Innovation. I’m corporate head, but I am brand-
assigned as well. I have three brands that I’m currently responsible
for: the Estée Lauder brand, the Re-Nutriv brand, and Tom Ford
Beauty. I’ve been here for 17 years, always in the capacity of product
development. And I’ve been in the industry for even longer, always in a
product development role. Before Estée Lauder Companies I was with
Max Factor for eight years, which was acquired by P&G. And prior to
that, I was with Revlon. So, my entire career has been specifically in Anticipate. Innovate.

the cosmetic industry.. |

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the innovator’s interview 3

Anne Carullo
What would you say is the single biggest challenge to making
innovation happen?
In my opinion, the two biggest challenges to making innovation happen “There has to be a genuine
are: building an infrastructure that supports and sustains innovation
and maintaining the speed and flexibility to drive it on a timeline that’s
recruiting effort to draw in
going to make an impact in the marketplace. Speed matters! new talent of a very specific
How you have overcome some of these challenges?
mold, perhaps not focusing
People and resources. If the message from the top down is that solely on the top 2% of the
innovation and creativity are singularly the most important elements for
sustainable and continued growth, you need to build an infrastructure
best colleges in the country,
that supports that. What I mean is that you need to have the but candidates who possess
capabilities within your organization for people to have the freedom
and time to think creatively, to have the resources, (meaning dollars) to a different kind of edge.
flesh out concepts that may or may not come to fruition. Additionally,
there has to be a genuine recruiting effort to draw in new talent of a
And I think that you need
very specific mold, perhaps not focusing solely on the top 2% of the to be open to receive these
best colleges in the country, but candidates who possess a different
kind of edge. And I think that you need to be open to receive these people so that you can build
people so that you can build an organization with a great diversity of
minds. Having a Product Development team that is sort of a hybrid
an organization with a great
between Marketing and R&D is building an infrastructure for innovation. diversity of minds.”
Do you think that innovation and Product Development teams
necessarily go hand-in-hand?
Yes. Any product developer strives to be inventive.

Say the CEO or the Chief Innovation Officer, in your case, wanted a
progress report on the state of innovation in your group or on your
brands. What are the three metrics that you would choose to report
on and why?
It would not be my specific role to measure the success of innovation
from a market standpoint. Clearly, a metric you use is sales. How is
the product performing? How is the product outperforming? Is it doing
better than expected? Is it performing as you expected and were
the appropriate resources allocated to support it? Those are all key
elements to determining how innovation is doing. Also, I think that the
attention the programs are receiving: Through media, blogs, even word
of mouth; the ‘buzz’ if you will, is a metric. If people are talking about
you, those are indicators that you have truly hit on an innovation.

An example of a product we recently launched that is a good measure

of innovation is TurboLash Mascara, the vibrating mascara. At the
same time, a competitor launched a similar product. We launched first,
but their sales outranked ours initially because they had more units
available. We use metrics that say we were successful because of our
position of being first to market. Now we’re in a position of getting the
volume out there and our ranking are improving, from 10 to 9 to 8 to
7. We know that the formula and the product are performing. All those
measures matter.
Anticipate. Innovate.
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the innovator’s interview 4

Anne Carullo
Is there anything else that you look at internally in order to gauge
the health of your overall innovation program and your product
development efforts? “Let’s say I wanted to develop
Absolutely. We do consumer insight studies, concept testing, and a new [make-up]applicator.
positioning testing to get a consumer gauge as to whether or not we’re
in the right direction. I may look to the tire industry
and find new ways that
In your experience, what would be the biggest indicator of a healthy
innovation program or effort? they’re approaching adhesion
I think that an innovation program should have at least five to eight balls to the roads, slicking,
in the air. If you can launch two out of those five or eight, you have a
very healthy innovation strategy. waterproof, antifreeze…and
see how that might apply to
How do you maintain that? How do you make sure that you
constantly have this pipeline of ideas? our industry. Looking in odd
Build an infrastructure that supports innovation while inspiring and
motivating your team. You must also give your team the time, freedom
places for insights is about
and resources to be innovative. You can end up with more than 8 being inspired.”
concepts to choose from. But, it is my role in our team to ensure that
we always have at least five feasible or non-calendarized programs
going on at any given time.

How do you choose new ideas to move forward with and start
investing in and exploring? What are the basic criteria that you use in
evaluating ideas?
Well, I essentially use three fundamental areas. The first is what is
going on in the marketplace, clearly, and not just my industry. It’s really
other industries, and how are those inclinations affecting consumer
habits or buying concerns, etc. The other is technology platforms, what
in fact is available to us to innovate against. And third, and probably
most importantly, inspired thinking. For example, let’s say I wanted
to develop a new applicator. I may look to the tire industry and find
new ways that they’re approaching adhesion to the roads, slicking,
waterproof, antifreeze…and see how that might apply to our industry.
Looking in odd places for insights is about being inspired.

Is the customer, then, the biggest judge of what ideas move forward?
Yes and no. I would say that, yes, they have to be because they
ultimately drive sales. With that said, I believe that it’s our responsibility
to surprise and delight and inspire the customer. Sometimes I do feel
that consumers can only give you what they know and what they feel
comfortable with. I have, myself, been responsible for concepts that
have tested very poorly, but decided to launch regardless because
I thought that the concept was what we call a high concept. High
concepts tend to test poorly compared to more recognizable concepts.
And that instinct to push ahead despite poor consumer testing proved
correct because the concept hit very big.

Anticipate. Innovate.
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the innovator’s interview 5

Anne Carullo
And in making those decisions, are you just basing them on instinct,
or are you using any kind of scorecard or screening tool?
Historically, I think that this organization has always leveraged its “The way our organization
incredible intuitive thought process. I mean, Estée Lauder herself was works, the Innovation group
the quintessential product developer and drove her business based on
her instincts. So, I do think that instinct plays a huge, huge part in what does [two things]. They work
we do here. Recently, and more so moving forward, we’re going to fuse
that with even more consumer insights and vetting processes, but it will on exploratory concepts. But
never serve as the only thing we do. because we’re also brand-
What should the role of an innovation team or an innovation office assigned, they are also
be? What should or shouldn’t they do in terms of how they operate
within the context of the larger organization?
responsible for driving the
What they should be is cross-functional; meaning you need to have day-to-day development of
cross-functional groups of different expertise on a team. They need to
be focused in their mission. I think they need to have the support of the
the concepts. We live with a
most senior level of the organization. I think they need to have flexibility, concept from the moment it’s
freedom and visibility. They need to be supported with adequate
resources to invent. And they should really operate on the belief that conceived to the moment you
anything is possible. What they should not be is subjective or egotistical
— falling in love with their thoughts and ideas.
give birth.”

Do you view the role of the team as someone that is developing new
products and really incubating them, or do you view them as a group
that should facilitate innovation across all different levels and silos of
the organization?
The way our organization works, the Innovation group does both. They
work on exploratory concepts. But because we’re also brand-assigned,
we are also responsible for driving the day-to-day development of the
concepts. We live with a concept from the moment it’s conceived to the
moment you give birth. Let me tell you why I think that works. I have
been part of innovation teams in the past that were solely responsible
for creating innovations and then knocking on brands’ doors to sell
them. “Here’s a great idea. Look at it. Don’t you love it,” and they’re not
accountable for the development. I think that when you have both the
ability to conceptualize and realize, you also have the opportunity to see
it through. I believe that people have vested interests in the projects
that they work on, and also have the passion to overcome challenges
and obstacles that others may throw in its way.

What are some “quick-win” tactics that you think people can use to
really build energy and sort of show success with innovation?
The first thing you need to do is identify what you mean by innovation,
because everybody has a different idea about it. People think
innovation always has to be disruptive, but innovation could be a clever
new position. So, let me just say that the first thing they should do is
they should decide what kind of innovation they really want to drive. Is
it high-tech? Soft-tech? Is it emotional innovation? What do they want
to do? From there, I would take a look at the company’s history, and
perhaps there are things that they have abandoned that were quite
successful that they can easily bring back. A lot of times, companies Anticipate. Innovate.
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the innovator’s interview 6

Anne Carullo
abandon things that were very successful. What have you abandoned,
and what can you re-adapt? The next thing I would do is look at what
your current portfolio of product is and what added value you can “The first thing you need to do
provide to the customer for it. Let’s say some company has a detergent
that they over-fill because of manufacturing reasons. There might be is identify what you mean by
opportunity for them to add that added value, two more ounces for the innovation, because everybody
same price.
has a different idea about it.
In your experience, have you found success in looking back at your
old portfolio of abandoned ideas and resurrected some of those?
People think innovation always
Estée Lauder has just re-launched EyZone. It was a phenomenal has to be disruptive, but
product that was previously launched in 1990 with huge success
and hoopla. Over the course of time, there have obviously been
innovation could be a clever
other innovations that have taken its place. But, because it was so new position.”
spectacular in its presentation, we felt that a whole generation of
people that never knew it would love it as much as those people 20
years ago loved it.

What characteristics would you say or what qualities make an

individual good at innovation?
I would say that a person or an individual who wants to pursue innovation
needs to be the kind of person that is open and has receptors sort of
24/7 moving, someone who is a good observer of things, someone who
is interested in things, someone who likes to be inspired, somebody
who may like to daydream, somebody who is imaginative, and
somebody who is really excited about doing something that’s never
been done before. I think you need to be a little ADD, quite honestly.

And I guess I might ask the converse. Have you ever encountered a
particular skill set or mindset that has made someone handicapped
when it comes to innovation?
Every day. I think that a person who is extremely process-oriented or
extremely rigid and very much in need of formality would probably
have a very difficult time being in an innovation role. I’m not saying they
couldn’t fundamentally execute or help, but I don’t think they can drive it.

What would be the biggest piece of advice you might give to another
individual who’s tasked with innovation in their company and who’s
really trying to get started and move it forward?
My advice would be to prioritize where you want to focus inventing. What
are the big volume potentials? What is the low-hanging fruit? I would start
there. You need to start with a successful roadmap and not try to do the
impossible too quickly. Get your feet wet first and get a little experience.
Then you could try to tackle some more difficult things.

Anticipate. Innovate.
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the innovator’s interview 7

Anne Carullo
Who do you look to as an innovation role model, either within your
company or your industry, or just other organizations in general?
I have wonderful people here that I get incredible tutelage from. My
colleagues, the people that do what I do on other brands, are a constant
flow of inspiration and debate and conversation. But, largely, I go
outside my industry to be inspired by what other industries are doing. I
tend to look at materials: textiles, paint, glass, furniture design, and the
automotive industry. I go to the tech world-like the luggage industry,
believe it or not, sportswear, sports gear, things like that. I know that to
innovate, you need to look far beyond what you are familiar with.

What can you learn from Estée Lauder’s approach to innovation?

• Getting to customer needs: How much time do you spend understanding your customer and their
needs? What methods are you using to uncover not just their blatant but their latent needs related to
your offerings?
• Hiring the right people: Do you have the right mix of people, with diverse skills sets, working on
innovation-related projects? Have you defined what skills or characteristics you’re looking for in your
people to be more ‘innovative’?
• Having a common language around innovation: Does everyone have a consistent definition of
what innovation means in your organization? Is there a published set of language that’s used an
understood to make innovate happen more quickly?

To learn more about the research, tools and training you need to better anticipate change and move innovation
forward, visit us at getfuturethink.com.

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