10:12 AM Friday April 22, 2011
by Alessandro Di Fiore |
Companies the world over find it tough to turn good ideas into great businesses. That's partlybecause, as we all know, organizations and cultures rebel against innovations, especially when they are first conceived. Companies that can protect ideas in their early years usually have a better chanceof success.
Take the Vevey-headquartered Nestle, for example, whose Nespresso has become Europe's leading coffee brand by packing a variety of high quality coffees in aluminum capsules that can beused only with the company's three types of coffee machines. Executives had to vanquish three hidden enemies that surfaced before the concept could see the light of day and become the Swiss company'sfastest growing new business in the 2000s.
Nespresso took off when it stopped targeting offices and started marketing itself to households. There was little data on how households would respond to theconcept and whatever information was available suggested a perceived consumer value of just 25 Swiss centimes versus a company-wide threshold requirement of 40 centimes. The Nespresso team had tointerpet the data skillfully to present a better case to top management. Because it believed strongly in the idea, it forced the company to take a bigger-than-usual risk. If Nestle had gone only bymarket research — usually innovation's first enemy — the concept would never have gotten off the ground.
Another enemy Nespresso faced was the incumbent business model. The Nespresso system, a machine andsingle dose capsules, didn't fit with the company's mass-market distribution system. Eventually, Peter Brabeck, Nestle's CEO, had to create a separate company and locate it in a different building.Only then could the new unit, Nestlè Coffee Specialties, pioneer the mass market household espresso coffee segment and boost Nespresso's sales.
Nespresso's third foe was Nestle's culture, which...