I’m often asked how large, established corporations can organise to create breakthrough innovations which really succeed in the marketplace. To be honest, there isn’t one easy solution. So many of them invest vast sums of money in innovation and R&D, and all that happens in reality is that they give birth to a steady stream of more minor, incremental offerings.
If Microsoft can spend some nine billion dollars a year on it (see “Microsoft and their search for breakthrough innovation”, 2 March 2011) and have such limited success, what hope is there for the rest of us?
Well, one strategy that worked extremely well for Nestlé was embodied in the way that they went about developing their Nespresso brand. The company realised quite early that, given their worldwide dominance of the instant coffee market, if they were to enter the ground coffee market with a bang, they needed to have a completely new approach that would rewrite the rules of the game.
To do this, they set up a stand-alone business, geographically and organisationally separate from the “corporate machine”, Nestlé headquarters in Vevey, Switzerland.
And the concept itself is radically different. It is a superpremium product for a much more sophisticated consumer. The relationship with Nespresso starts with the purchase of a coffeemaker/espresso machine. Those things are bought once every eight or so years - and the purchase involves 100+ euros.
Then, having a consumer who has bought a machine, it is about home-delivery of coffee – and a one-on-one communication program including accessories, services and rewards. This required a totally different mindset, different marketing capabilities and completely different structural solutions.
Certainly wouldn’t be without it myself. And it’s a massive success around the world.
Would that have been possible if they had remained part of the mother-ship? I doubt it.
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