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STRUCTURED CREATIVITY CONFERENCE EXECUTIVE SUMMARY C, CDO "CO BATCo document for Legal Services " Health Canada 19 May 1999

STRUCTURED CREATIVITY CONFERENCE EXECUT IVE SUM~fARY Background: The Conference objective was: "To bring key marketinff and product applications thinkers together in a situation which is sufficiently creative to stimulate genuinely innovative produc~-based project ideas, but sufficiently structured =6 examine these ideas against realistic technical feasibility and marketability constraints" The objective was achieved within a three day structure where eight delegates selected from BAT Group Marketing departments and GR&DC Product Applications group presented de%ailed project propositions to the group on the first day and each project was discussed in detail on the second day. Following :his discussion each presenter re-cast his original projects to reflect more tightly specified projec: objectives and technical/marketing feasibility. The project proposals (together with the strategic objective) identified and evaluated during the Conference are shown in List B. During the evenings, each delegate was interviewed individually and his judgemental criteria for defining commercially applicable projects were identified. On the morning of the third day, the criteria generated by the delegates individually were amalgamated in a group session resulting in 8 major criteria, show in List A. The afternoon of the third day was spent by the group evaluat- ing each of the re-structured project proposals against these 8 judgemental criteria. C Oc ~O BATCo document for Legal Services • Health Canada 19 May 1999

• Conclusion: Project propositions, duly rated against the judgemenza! criteria, were :reared with the type of analysis now familiar from DELTA, and GR&DC's Strategic Project Selection method. The top-line results of the analysis indicate that the projects can be broadly grouped in three categories. I, Large market potential, high behavioural validation (evi- dence of consumer need) but potentially high associated risk to the business: io ii. ilL. Low sidestream and irritation/aroma ameliorated cigarettes. Compensatable cigarettes. Nicotine optimised ciNarettes (least risk element). 2, High return on investment, high communicability and high cost savings in manufacture but lower market size poren- tia!: iv. Individually wrapped cigarettes. v. Slim/short and high expanded tobacco cigaretues. vl. Moist snuff. 3. Interestin~ and potentially useful concepts but lac'" g behavioura! validation at this stage: vii. viii. ix. x. 'Traditional' full flavour cigarette. Grezter satisfaction in early puffs (front end lift). Modified menthol (aniseed, spices etc.) Low CO cigarette. C Oc £j- BATCo document for Legal Services • Health Canada 19 May 1999

LI ST A i. Return on investment (by time scale) 2. Ease of communication 3. Scale of the target marke: 4. Lead time to manufacturabi!iZy @ 5. Positive/negative manufacturer cost impact 6. Degree of behavioural validation (evidence of consumer need) 7. Degree of external risk 8. Degree of commercial applicability BATCo document for Legal Services • Health Canada 19 May 1999

LIST B I. Modified Henthol/SDice Flavour Products "To develop a product which would offer something extra to current and potentla! menthol smokers who require either menthol plus an overt modifier or a cooling/spice alterna=ive to men~hol." 2. The 'Ameliorated' Cigarette "To capizzlise on the potential for a cigarette which produces less of the unpleasant after effects of smoking i.e. irri:a%ion, aftertaste, dryness." 3. Shorter Lenszh/Reduced Tobacco Conzen~ "To offer consumers value for money through our technical ability ;o provide the same ~aste/satisfaction as conventional cigarettes with a considerable reduction in tobacco content." 4. Individually Heat Sealed Cigarettes "By offering cigarettes in peak smoking condition in any unit volume, to increase: a) Total sales through increasing price accessability. b) Market share through genuine product benefit. c) Profi=abi!ity through reduced variable cost, reduced F & SV costs and control of distribution up to the end user." 5. Front End Lift "To improve the taste and flavour of :he first few puffs on cigarettes." OC BATCo document for Legal Services • Health Canada 19 May 1999

6. Comoensatable Filters "To make i= easier for smokers to take what they require from a cigarette. This means in e~fect that the filter will be compensatab!e and implies z high taste to tar ratio." 7. Nicotine Optimised Cigarettes "More efficient uti!isation of in situ nicotine in cigarette smoke." 8. Ultra Slim Cigarettes "To develop a new, higher margin, low price cigarezte offering." 9. Moist Snuff "To capitalise on the potential do~ntrend of the smoking habit as the only means to achieve nicotine satisfaction by participating in a parallel product market free of social/health concerns and with a=tractive profitability." I0. Full Flavour Product Ii. "To capiZalise on a potential return to full flavour by offering a cigarette with markedly superior smoking characteristics at physiologically acceptable delivery levels." Low CO "To understand how to design low CO/tar ratio products and make them acceptable to smokers in the event that they are required for league table CO." p~ L'- BATCo document for Legal Services • Health Canada 19 May 1999

12. Hish Expanded Tobacco Cisarette "To maximise financial return by use of lower amoun:s of tobacco while maintainin~ consumer attributes of the product." 13. Low Sidestream/Ameliorated Aroma Product "To pre-empt potential volume decline from smokers under 6 pressure in social and work environments b7 providing them with an offer which combines re-assurance in social smoking with taste and satisfaction." u~ C-- r-. BATCo document for Legal Services • Health Canada 19 May 1999

CONFERE~;CE OBJECTIVE To BRING KEY MARKETING AND PRODUCT APPLICATIONS THINKERS TOGETHER IN A SITUATION WHICH IS SUFFICIENTLY CREATIVE TO STIMULATE GENUIt~ELY INNOVATIVE PRODUCT BASED PROJECT IDEAS, BUT SUFFICIENTLY STRUCTURE3 TO EXAMINE THESE IDEAS AGAINST REALISTIC TECHNICAL FEASIBILITY AND MARKETABILITY CONSTRA:NTS- C..T. CO BATCo document for Legal Services • Health Canada 19 May 1999

LIST OF PARTICIPANTS BOB BEXON TED PARRACK IAN ROSS MIKE SCOTT MAURICIU WURMSER : GEOFF BROOKS DAVID CRE[GHTON : ROB FERR[S (GONVENQR) COLIN GREIG TAJ HIRJI IMPERIAL TOBACCO LIMITED, CANADA BROWN AND WILLIAMSON, USA SUOMEN TUPAKKA, FINLAND B.A.T. UK & E, ENGLAND TABACANARIA, CANARY ISLES MARKETING DEPARTMENT, MILLBANK PRODUCT APPLICATIONS GROUP, GR & DC PRODUCT APPLICATIONS GROUP, GR & DC PRODUCT APPLICATIONS GROUP. GR & DC PRODUCT APPLICATIONS GROUP, GR & DC C BATCo document for Legal Services • Health Canada 19 May 1999

BACKG2OUND AND CONFERE~;CE STRUCTURE What are the distinguishing features of a commercially applicable produc= projec=? It is generally accep=ed that, given any set of potentla!ly applicable projects, decision makers are capable of prioreTising such a set against the criterion of 'degree of commercial applicability'. What is less well understood is the nature of judgements taken into account when making that prioretisazion. A good illustration of this problem can be seen in RgD cultures. Any R&D culture generates a large pot=folio of projects, each of which exhibits a life cycle running from origination as a 'source' projec~ generating information and fundamental understanding of principles, through to deployment as an 'applied' project exploi=ing such information in product applications. The problem for R&D decision makers committed ~o the application of R&D innovations to the product lies in reliably distinguishing 'applied' from 'source' projects and understanding the basis on which such distinctions are made. GR&DC have at=empted to resolve some of thesc problems by developing a systematic approach to evaluating projects and isolating and defining the judgements used in such evaluations. The me~hod is called 'Strategic Prosect Selection' and was developed in ia~e 1983. In this approach every discrete project within the R&D portfolio (70 projects in all) was subjected to • standardised examination of strategic objectives, anticipated constraints, criteria of success, anticipated applications etc. Following this, several of =he pro~ects thus described were used in interviews with a small group of selected decision makers within GR&DC. The interviews followed an established psychological approach in which successive pairing of projects are compared and contrasted, with a view to drawing out the implicit set of judgements which the interviewee is using to justify a more global judgement (i.e. that one pro~ect is Cf: C Oo BATCo document for Legal Services • Health Canada 19 May 1999