There was a report today of Coke employees selling trade secrets, which reminded me of the New coke saga, a tale of failed innovation.
Most who were around in 1985 recall this as a huge fiasco, where a bad drink was rejected by the public. But the details are much more interesting, as Coke did many things right from an “innovation as strategy” perspective.
What went right:
- Coke chose to move forward in response to real market pressure, rather than defending their existing products.
- They had their best R&D & flavor people design the new product.
- Extensive taste testing and veteran approval were sought, and all pointed to them having a better product.
- They put big $$$ behind a major rollout campaign.
What went wrong:
- The press conference (April ’85) was a disaster. Coke failed to explain why they made the change and did not acknowledge Pepsi taste test, or any taste testing done by Coke in R&D.
- Pepsi attacked with counter-ads, including a full page ad in the New York Times.
- According to Gladwell’s Blink and other sources, the successful taste tests of New coke didn’t suggest people wanted an entire 12 oz. portion of the new formula.
- There was initial acceptance and the product did well it’s first weeks, sales up 8% compared to previous year.
- However public outrage grew, with groups protesting New Coke (especially strong in the south).
- By June ’85 there was enough public pressure and complaints from bottling suppliers that Coke execs were under pressure.
- In July ’85 Coke brought Classic Coke back to the market.
It’s a great story of the risks of innovation. Coke did many things right – their greatest mistake was underestimating their customers lack of interest in innovation: they were surprisingly happy with how things were.
(See wikipedia’s excellent entry on the New Coke saga).