The Wall Street Journal-20080206-Business Bookshelf- Seemed Like a Good Idea Inc-
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Business Bookshelf: Seemed Like a Good Idea Inc.
Full Text (1013 words)Why Smart Companies Do Dumb Things
By Calvin L. Hodock
(Prometheus Books, 357 pages, $25.95)
Blue french fries. A colorless soda that tastes funny. A frozen soup-and-sandwich convenience food that turned out to be inconveniently labor intensive.
These products not only failed in the marketplace, but did so predictably, at least in the eyes of Calvin L. Hodock, a marketing guru whose "Why Smart Companies Do Dumb Things" is all about the many ways that innovation can go wrong. Mr. Hodock knows a thing or two about the subject, and his book offers considerable wisdom, some of it conventional and some of it not. Despite having a wooden writing style and a propensity for stating the obvious, he raises a handful of matters worth thinking about.
Mr. Hodock identifies eight errors that companies can fall into when trying to innovate. At the top of his list is "marketing misjudgment," which is his way of saying a company has strayed from its core competency (he cites Gillette's foray into calculators and Bic's into pantyhose). Other types of missteps include bad positioning in the marketplace, producing a dreadful product (the hideous Pontiac Aztek), underestimating the competition (as Total did when it tried to challenge the supremacy of Quaker Oats in the hot-cereal business), and rushing a new product to market.
Mr. Hodock is especially good on the subject of defective market research and the self-deceptions practiced by new-product teams determined to march ahead with a dubious idea despite red flags raised by focus groups and others. Mr. Hodock might have shown a bit more innovation himself and avoided trotting out the shopworn story of Coca-Cola's New Coke debacle in 1985, but he manages to make the tale seem fresh.
Coca-Cola executives were traumatized in the early 1980s by "Pepsi Challenge" commercials that showed real people, in blind taste tests, repeatedly choosing Pepsi over Coke. The folks in the taste tests really did prefer Pepsi, and in response Coca-Cola decided to reformulate its flagship product. The problem, Mr. Hodock says, is that a sweeter beverage -- in this case, Pepsi -- will always win in a "sip test." But real people, in the real world, don't take just one sip. They drink perhaps 16 ounces, and that's a different story. Millions of consumers had long ago decided that they preferred a less sweet cola -- as they loudly let Coca-Cola know when their favorite drink was supplanted by a sugary replacement.
One of the most interesting case studies in the book concerns a failed effort in the late 1980s by Campbell Soup Co. to launch a line of frozen soup-and-sandwich products called Souper Combos. Early tests indicated that consumers liked the concept, and Campbell projected $68 million in annual sales, just about hitting the company's target for new products. But as more data became available, the forecast was cut to about $40 million. "The innovation team didn't want to hear talk about a revised forecast," Mr. Hodock reports. "It was too far off the mark from the $70 million threshold level."
Nor did anyone at Campbell seem to want to take aboard the idea that, as Mr. Hodock says, "the product was a nightmare to work with." The frozen soup took twice as long to microwave as anticipated, and the directions required consumers to repeatedly insert and remove the soup and the sandwich. Mr. Hodock observes: "It was easier to prepare a bowl of soup and a sandwich from scratch."
Why do such innovation blunders occur? Mr. Hodock cites several convincing reasons: a company's me-too impulses, which can lead to me- too products that people don't need or want; the high turnover rate among marketers, who are often young MBAs with more attitude than experience; an unwillingness to give the boss bad news ("That Apple Newton you've been counting on to save the company? It doesn't work."); chummy and inattentive boards of directors; and the short- term focus of chief executives, which can lead to the hasty development of new products.
Worst of all, marketers are just human. "People fall in love with what they create," Mr. Hodock says. "All too often that love is blind . . . normally rational people become evangelical salesmen for their dreams rather than practical, objective business executives."
Unfortunately, Mr. Hodock doesn't always follow his own advice. His book feels like it was rushed to market without enough editorial oversight during production. At one point, innovating in the area of mixed metaphors, he writes that competitors "figured out the flaws in California Cooler's fabric and knocked it off the radar screen." Decidedly not new to the market is this piece of advice: "Don't be content with the status quo."
Another cliche Mr. Hodock employs -- that companies should "stick to their knitting" -- gets to one of the book's limitations: The author is speaking with the advantage of hindsight. Every impending disaster seems obvious, every success predictable, as when Mr. Hodock praises Stokely Van Camp ("an obscure processor and marketer of fruits and vegetables") for launching Gatorade. One wonders, though, what his attitude toward Apple would have been a few years ago when the company tossed its knitting aside and plunged into making iPods and marketing music online. Even the launch of Target stores by Dayton-Hudson (a parent long ago subsumed by its offspring) might have been considered a risky departure from traditional retailing. The truth is, it's hard to know what's really a foolish venture until the thing fails or succeeds.
Neither does Mr. Hodock deal with a larger question: Do U.S. companies experience too many innovation failures or too few? Too few such failures, after all, might mean that companies weren't taking enough risks. But the author of this uneven work isn't focused on such big ideas. What he offers instead, at least in the book's best parts, is real-world insight into the complex reasons why innovation efforts can go badly awry. And unlike so many of the new products he describes, his sensible advice passes the smell test.
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Mr. Akst is a writer in Tivoli, N.Y.
