Wednesday, November 6, 2013

There is always room for innovation: How leveraging trends can continue the global cola wars

The cola wars are said to be over. What was the epitome of cut-throat competition in 2010, after a century of competing with each other, Pepsi has been stated to have lost to Coca-Cola on numerous occasions. Some said as early as 2006 that Pepsi had lost, whereas sometime around 2012 – 2013 most people considered the cola wars to be over when Diet Coke overtook Pepsi as the second most popular soda in the US. However I think that while the competition has become less aggressive, there is always room for improvement that can be utilized by either of these global beverage companies to differentiate themselves. And the ten trends discussed in the article provide a perfect opportunity for innovative strategies that can be utilized by such large companies.

Initial steps to develop strategies from current trends such as social media
Coca-Cola and Pepsi have both been known to have featured on the list of ‘Most Innovative Companies’. Is it not surprising that they do have some strategies that take advantage of the trends in the market.
For instance, Coca-Cola has been pretty successful in its digital marketing, extending its loyalty programs, rewards and coupons to social media. In an article on their website they talk about how they realize the importance of social media and how they plan to leverage these technological trends to innovate their business. Pepsi is not far behind, and is using social media to maintain relevance with the “digital customer” as they call it.

Possibilities with the dramatic pace of these trends
In the McKinsey article about the ten IT-enables business trends, one of the trends that I found was most interesting was the blurring lines between the digital and physical world. The technology that enables this – augmented reality – has been around since a few years (but is still most popular only because of movies such as Minority Report). It hasn't gained much practical usage and is definitely set on the brink of being popular.
With respect to Coke and Pepsi, both have augmented reality apps. Coke used Augmented Reality tags on bottles to show customers ads that hadn't been released yet. But this to me seems more about using the trend just for the sake of using it, and not leveraging it to make a business impact.

An example of using this trend to make a positive impact on the business can be seen with Unilever’s Smile activated ice cream machine. Unilever wanted to re-connect the feeling of being “happy” with ice-cream with their project called “Share Happy” whose technological design was given by Sapient. This vending machine uses facial recognition and gives out free ice-cream for people who are smiling. This is the perfect implementation of charting experiences where the digital meets the physical and leveraging this experience for a positive business impact for Unilever that owns Ben and Jerry’s ice-cream.

How misreading the trends can be of a terrible consequence
While using these global trends to forma part of the companies’ strategy would help taking advantage of the trend to innovate, it is also possible that the core business can get affected by it (as mentioned in the McKinsey article “going from global trends to corporate strategy”). For example, JC Penney’s strategy change in 2011 came with the new CEO Ron Johnson who brought in a strategy that had worked wonders for him with Apple Store. The strategy of having full prices for customers who would come and hangout at Apple Stores was leveraging the trend of “engaging the next three billion digital citizens” with their cutting edge technology. This however doesn't work too well in the case of JC Penney that doesn't have such technology that it can leverage. This leads to the obvious conclusion that global trends may not be applicable in a similar fashion for all industries, and misreading them can have terrible consequences as seen with JC Penney that brought back their old strategies in 2013.

Considering that there is always room for innovation and I wish that the cola wars would continue for another century (because it would be boring otherwise), how effectively would these large beverage companies leverage the trends to differentiate themselves? And how effective would this also be as a corporate strategy without running a risk of adopting a strategy that may not be scale-able easily? And how would they manage these innovative competitive strategies on a global level which might need different strategies (and may also have different trends)?

While the complexities of analyzing these trends might be high and the strategies varied, as long as the competition continue through innovation, it can be said to be progress.

“Cola Wars Continue: Coke and Pepsi in 2010”, Harvard Business Review, May 26, 2011
“Ten IT-enabled business trends for the decade ahead”, McKinsey Quarterly, May 2013

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