Deep Pockets, Open Mind

Got soy? Scott Lutz and his colleagues at 8th Continent aim to create an innovative player in a fast-growing segment of the food business. The formula: Use the clout of their corporate parents (DuPont and General Mills) and the brains of executives who think different.

Scott Lutz looks the part of the corporate pioneer, what with his faded denim shirt, gray woolly vest, cords, Skechers, and just the right amount of facial hair. Around his neck is a talisman, awarded at one of his company's regular gatherings. The thin leather strip, looped into two figure-eight knots, is adorned with a stamped metal dog tag, eight ivory beads to signify his company's core values, and a lone crimson bead for courage. "I got the red one because my team said nobody but me would have the guts to stand up and defend the name '8th Continent' in front of the board," he says, laughing.

Lutz, 43, is president and CEO of 8th Continent, a young soy-milk company that is headquartered out of Minnetonka, Minnesota. But don't get the wrong idea. Lutz and his colleagues aren't some fringy whole-earth startup. Their company is a 50-50 joint venture between two corporate giants, DuPont and General Mills, and their target is a fast-growing segment of the food business. Lutz says that 8th Continent aims to combine "the power of the big with the spirit of the small" -- to create a fresh new brand (and a nimble new company) using the technology and financial resources of two major players.

"Our key leaders supported the idea that we were doing more than launching a soy-milk business," explains Lutz. "We were guaranteeing the future of innovation not only for ourselves but also for our two parent companies."

The business opportunity is obvious. In 2001, refrigerated soy milk accounted for some $200 million in retail sales, led by Silk, which claims more than 50% of the market. But according to Peter Golbitz, an analyst with publishing-and-consulting firm Soyatech, the market for soy-milk products is likely to be worth $1 billion by 2005. "Soy represents a hot market, big margins, big growth rates, educated consumers, premium pricing, and a healthier food platform," Golbitz says.

Those numbers caught the attention of DuPont, which was looking for a product in which to debut the proprietary bean that was developed by its Protein Technologies division, says J. Erik Fyrwald, vice president and general manager of DuPont Nutrition and Health. "We were looking for a great-tasting product that appealed to mainstream consumers to be the first consumer food product in DuPont's 200-year history," he says.

Meanwhile, General Mills, which had been investigating soy protein for cereals, was equally intrigued. "We wanted the DuPont technology that would help us to make a significantly better soy-milk beverage; DuPont wanted our marketing expertise and selling infrastructure," says James Lawrence, executive vice president and CFO of General Mills. "Both sides wanted to be in the business; both sides wanted what the other had."

Enter Lutz, who, as vice president of new enterprises, had been pegged as a rising star at General Mills. Lutz and his corporate parents agreed that the new company should have an extraordinary degree of autonomy. It would be, in essence, a startup -- with its own staff, its own space, and its own culture. So Lutz found a small office in a gabled high-rise just four miles from General Mills headquarters, scavenged furniture from its storage rooms, and began recruiting from both parent companies.

He knew that he needed to assemble a team of renegades, so he personally interviewed every employee, seeking out those who could handle the demands of such an entrepreneurial environment. "I wanted to establish 8th Continent as a landmass outside of DuPont and General Mills," he says. "The people I hired had to be okay with not being in the Big House. They needed to be pioneers and have the right mix of passion and courage. They had to be willing to do things that they had never done before."

Once the founding team of about 20 was in place, Lutz could focus on creating traditions that gave new employees a sense of place. Among those was a series of off-sites called "Deep Breath" sessions, where the 8th Continent pioneers could align their goals, map their strategy, and recognize their victories. The 8th Continent necklace, decorated with its signature colored beads, is awarded at these sessions.

But Lutz had earned his chops as a marketer; he knew that successful products aren't launched by good feelings and courage beads alone. So he herded his new team into the field to meet consumers and test all aspects of the company's strategy. In the product's first year, Lutz traveled 100,000 miles to meet consumers across the country. "I was the crazy man you'd meet at the grocery store," he says.

Knowing that he would face tough questioning from his board, which was equally split between senior executives at DuPont and General Mills, Lutz did what two decades of product development had taught him to do: He marshaled the metrics. He tested the package, he tested the marketing concept, he tested the name "8th Continent" (which signifies "a better place of wellness"). Says Lutz: "We brought all the rigor that you'd expect from General Mills to the Continent."

While Lutz and his team have access to the formidable sales, marketing, and packaging staff at its corporate-parent headquarters, they are careful about asking for help. "You don't want to put somebody in a position where they have to choose between working on Cheerios and working on this." The trick, he says, is finding a way for people to work on both. This is achieved by fitting into their schedules and keeping requests as clear and as simple as possible. "We might have 10% of their time, but we work hard to get 50% of their heart," says Lutz.

The strategy seems to be working so far. Three months after its soy milk was launched in July 2001, 8th Continent became the country's second-leading soy brand. If all goes according to plan, it will get a full national rollout this summer, and the battle to unseat Silk will be engaged. For Lutz, though, the success of 8th Continent is only part of his mission. His real goal is to prove that "innovation" and "corporation" are not mutually exclusive terms. "I don't want people to talk about the death of corporate America," he says. "I want to make corporate America as cool as it can be -- for those who want to make a difference."

Contact Scott Lutz by email (scott.lutz@8thcontinent.com). For more resources on DuPont and General Mills, visit the A - Z Fast Companies Directory by clicking here.

Sidebar: All in the Family

Just as in a family, the relationship between a corporate parent and a frisky offspring can be fraught with tension. Here are tips to ease growing pains.

Find a place to call your own. Kids (and new companies) need to leave the nest. Distance from headquarters helps build autonomy.

Choose your team carefully. In a small operation, there's no bench. Be sure that those you hire have an entrepreneurial mind-set: the passion to succeed, the ability to work without structure, and the willingness to wear many hats.

Create unique traditions. Creating an authentic company means developing rituals and practices that are different from those of your corporate parents.

When in doubt, call home. Recognize that even though they're your parents, your corporate sponsors may still have something useful to say.

Choose your battles. Understand the problems that your parents deal with so you have a better sense of when to push and when to hold back. "It's not about winning every battle," says 8th Continent CEO Scott Lutz. "It's about building a great business from the ground up."

Show a little love. "You have to have an emotional connection between the parents and the kid," says Lutz. "You want your picture on their desk. You want to come home for Christmas." Show your parents your report card, and make sure it's full of A's.

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