You’re in the business of selling high-margin liquid in bottles. You’ve built a pretty good business doing that, and you’re guarding a formula that is supposedly as well-protected as Osama bin Laden. Money’s not the issue; you’ve got bottomless pockets to fund the study of social, cultural and consumption trends.
You’ve also got legions of people working at company and at your advertising agencies — and at the swarm of consultants that buzz around your honey pot — who are supposed to do nothing but observe consumer behavior, study our beverage guzzling habits, and develop new products to proudly put more plastic bottles into landfills.
So if you were Coca-Cola, it doesn’t seem like you would have to be a marketing genius to put two fundamental trends together: we’re drinking more and more bottled water, and we’re looking for quick shots of healthy living that create the illusion of righteousness (off-setting all the other horrible stuff we do to ourselves).
That low-wattage confluence would have led you to create Vitamin Water. But the light bulb didn’t glow in Atlanta. Instead, a guy named J. Darius Bikoff had the idea, and his insight was rewarded last week when Coca-Cola paid $4.1 billion for his company, Glaceau.
What accounts for this big-company failure to innovate? It’s a variety of factors. Innovation outside the core acknowledges that your model is flawed. That’s tough to handle. There’s an over-reliance on research; but focus-group testing at best produces incremental innovation. And there’s always the default of “we can buy it.”
True, Coca-Cola has the cash to wait till someone innovates and then swoop it up. But what kind of signal does that send? It tells investors you’ve lost your innovative chops. It tells increasingly savvy consumers that you are a vacuumer, rather than an inspirer, of new ideas. And perhaps most discouragingly, it tells employees that the source of fresh thinking lies outside the organization.
Why is it that big company innovation happens relentlessly in the high-technology world, whether it is at Google or HP or Apple? But in the consumer goods area, the food and beverage innovation, the forward-looking, trend-right thinking, is coming from small companies. While the big ones lumber late to the game, whether it is the LOHAS movement or New Age beverages or low-carb.
It’s great news for entrepreneurs, for sure. But the giant consumer goods companies need to do a lot of soul-searching to get back in the game. Perhaps they can sit back with a nice, iced, bottle of Vitamin Water and start the process.