The world is filled with brands and products competing for our attention and our dollars. It can be mind-boggling. That makes breaking through the clutter a never-ending battle. So, how can we stand out and own a share of the consumer’s mind?
The answer is through innovation the constant challenge to the status quo, the relentless, restless search for something new and better. Companies grab market share and reinforce positions with fresh ideas that create fresh profits.
Innovation is the life-blood of any industry. And yet, as the economy cooled off, so did funding for innovation. The focus turned from the “next new thing” to the quarter’s earnings. But we have not turned our back on innovation. In fact, innovation is happening at a fast and furious pace.
Our consumers have always wanted choices, and we have always responded. Today, as consumers’ tastes change and their desire for variety, wellness and convenience grows, we continue to respond. Just look at some of the great examples of innovation in our industry. Whether you’re taking about Red Fusion, Mr. Green, Pepsi Blue, Simply Orange, or Vanilla Coke, we’re giving consumers a rainbow of new choices in colas, flavors, juices, nutritional beverages, waters and sports drinks.
When you add 25,000 other product introductions a year from other industries, you know how many consumers feel bombarded.
This brings me to the question we must ask about innovation, about any new product, package, or service we introduce: What is its value? And is it meaningful? To me, that’s an easy litmus test. Meaningful innovation is sustaining. It stands the test of time because it continues to add value.
The problem with the dot-com companies wasn’t a lack of good ideas. Webvan and pets.com were great ideas. But they didn’t have the right business models to support the innovation and sustain long-term value.
Innovation isn’t all about flash and sizzle. Innovation is very much about substance. And that’s the foundation for our vision for innovation: Innovation must be a “difference engine.” It must make a real difference and drive real growth. And for innovation to be worthy of our investment, it must add value to our brands and create long-term value for everyone touched by our business. When there isn’t meaningful innovation, we lose momentum. When we innovate around trademark Coca-Cola, our growth accelerates.
Through our emphasis on innovation, we’ve learned five key lessons:
Innovation comes from listening and from understanding consumers.
Consumer relevance drives everything. To be relevant, we must be observant and understand what’s important in our consumers’ lives.
That’s how Red Bull did it, starting in the early ’80s, when its founder noticed the popularity of a new beverage while on business in Asia. He brought a few samples back to Austria and created not only a brand, but also a new beverage category—energy drinks.
At Coca-Cola, we used to think about painting the world red. Now, we think about painting the world relevant. Vanilla Coke is turning out to be very relevant. It reminds older consumers of simpler times, when they stopped by the soda fountain after school for a soft drink and some fries. And for younger consumers, it’s giving them a distinctive new taste and new look with its Coca-Cola trademark packaging.
Connection with consumers in relevant ways got us off to a great start with Vanilla Coke. We attracted more than 7 million new drinkers and sold more than 60 million cases; and when we learned that many consumers wanted a diet version, we created Diet Vanilla Coke. If you’re listening, your consumers will tell you where to look for innovation.
Brands, not products, create sustaining value.
And innovation builds brands. Brands are made in hearts and minds because brands provide two things that products can’t—time and trust. Brands deliver both by making choices easier and more reassuring. Great companies create and sustaining great brands through innovation.
- Harley-Davidson, one of America’s great brands, stirs passion in it riders, dealers, and employees. And it translates that passion into profits. Since going public in 1986, its shares have risen 15,000 percent. Forbes named Harley-Davidson “Company of the Year” last year because in its 100th year of industry leadership, Harley Davidson flexed its innovative muscle—a motorcycle with a liquid-cooled engine that revs the bike higher and hotter in each gear and makes you go faster. It was a giant step for a company that made only air-cooled engines for 100 years. It also helped Harley appeal to the audience it was after—young, urban, hip Americans and Europeans.
- Another innovation-driving brand is PowerAde. After living in the shadow of a formidable competitor, we gave it a complete makeover—new formula, graphics, advertising, and flavors. Now, it’s a serious contender, driven by an innovative consumer proposition—real power.
You really aren’t committed to innovation unless you’re willing to fail.
Thomas Watson, IBM’s legendary chairman, once said, “The fastest way to succeed is to double your failure rate.” Inventors know that failure is a prerequisite to “eureka” moments, but in business we have a hard time with that.
Does anyone remember New Coke? We sure do. New Coke was a lesson. When consumers turned their backs on New Coke, we were reminded of the deep emotional relationship consumers have with great brands. Brands should cherish those relationships. It’s a lesson we value, and one we’ll never forget.
Our former CEO, Roberto Goizueta, used to say: “You can only stumble if you’re moving.” Innovation is about moving, hopefully forward, but occasionally, a few steps to the rear. Often innovation takes us into uncharted territory, where risk goes up. And that’s good. The key is to keep moving.
Innovation is more than products and packaging—it’s everything and everyone.
Innovation permeates everything—operating strategies, tactics, systems, supply chains, information technology, distribution, and marketing.
When it comes to marketing, there’s always room for innovation. We found a new opportunity with the series “American Idol.” The innovation was in how we integrated the consumer messaging. In addition to customized advertising, Coca-Cola played a role within the framework of the show—in the Red Room, with the Red Couch, and with product placement. The show became a blockbuster hit, leading to an innovative marketing strategy.
If innovation is all-encompassing, it should be done systematically. In other words, define the problem and solve it. What are the objectives? Who will do the work? How will we measure success? Innovation is everyone’s business. At Delta Air Lines, a menu planner noticed that most people never touched the lettuce leaf under their salads. Her suggestion to eliminate the lettuce leaf saved Delta $1 million. A good idea is a good idea—no matter how small it seems.
In Coca-Cola North America, we’re trying to build a culture that encourages innovation through the same sort of observation and curiosity. Our goal is that every employee starts to think about ways they can do their job better—more efficiently, more productively with greater innovation. In such a culture, companies leverage their people and assets to their fullest. One example is our “good answer” program, created to help our Fountain customers handle their customer calls. Our “good answer” team now receives phone calls, emails and regular mail from consumers on behalf of a growing number of our restaurant customers. In addition to responding to the consumer’s issue, they also provide an analysis of the calls to help the operator make better decisions about their menus, facilities and service.
We must apply innovation to our social contract with communities.
This lesson is bigger than brands, packages, and marketing campaigns. It’s about our reputation and our image. We’re all under constant scrutiny these days regarding the ways we affect our communities. And the focus is intense in two places—the environment and obesity.
Soft drink packages are already the most environmentally friendly recycled consumer packages. We find creative ways to increase the recycled content we use in packages. During the Salt Lake Olympics, for example, our people created a recyclable, biodegradable cold drink cup from renewable resources.
The obesity issue is complex because it’s not just about what you consume—it includes a healthy and active lifestyle. We recently launched an innovative program called “Step with It” in cooperation with the National Association for Sport and Physical Education to increase physical activity in schools.
Pepsi formed an alliance with respected health, nutrition and exercise experts to educate and encourage Americans to reduce health risks through informed choices and an active lifestyle.
We need to be just as innovative in the ways we protect and sustain our business as we are in the way we market and sell our products. These five lessons are our guiding principles—an imperative to continue to delight our consumers with innovative brands, packages, and business systems that create value. When we’re creating the next great innovations, we’re creating sustainable value, and we’re leaving our businesses, communities, and industry a little better.