Who is better placed to develop an adult soft drink? A soft drinks company or an alcoholic drinks company?

How about the soft drinks company? After all, they know the processes and technology for creating soft drinks.

Or is it the alcoholic drinks company? Aren’t they better placed to know what customers want?

If innovation is a mixture of technology/process and customer understanding, and neither company has both, how to know who is better placed to innovate?

One way to do this is to consider the question in the context of risk.

Let's start with the Ansoff Matrix. See below for the strategic options and growth strategies it offers.

1. Current products to current customers/markets
2. Current products to new customers/markets
3. New products to current customers/markets
4. New products to new customers/markets

The above four options are placed in order of increasing risk.

For the alcoholic drinks company an adult soft drink is option three – new products to current customers. This assumes that the product they are creating is a soft drink that is as near as possible a substitute for an alcoholic drink. Such a product might be drunk by a regular drinker of alcoholic beverages but who on this occasion is driving/taking medication/’on the wagon’.

As such the product might need to have the complex, possibly dry, flavour characteristics of an alcoholic beverage.

Now, when we consider the soft drinks manufacturer is could be argued that developing a truly adult soft drink is option four, the highest risk option – a new product to new customers.

How come?

Well, even if the soft drink company is already selling their standard range of soft drinks to adults. These are likely to be drinks with typical soft drink characteristics – sweet, fizzy, juicy etc. Possibly for daytime/sports/mealtime consumption.

When those same adults want to consume a truly adult soft drink – in a licensed premise perhaps, or at a party, their needs are often very different from those associated with the daytime occasion when they may consume regular soft drinks.

This evening/social ‘need state’ is so different from the day time occasion that it could be argued that these people are ‘new customers’ for the soft drinks company.

So who has the consumer knowledge about adult drinking taste preferences and needs in the on-trade premise in the evening day part? The alcoholic drinks company of course.

It is so easy to think that it is knowledge of the technologies that is the strategic asset relevant to innovation. However, as we know, it can be argued that customer understanding or insight is even more important.

Customer Understanding Is A Strategic Asset

Customer understanding is a strategic asset. It’s an intangible one – but increasingly they are the more important ones for building long term competitive advantage.

Many soft drink companies have tried to create products for adults to consume in the on trade as a substitute for alcoholic drinks. Typically these products have represented attempts to continue to exploit the variants of juice and carbonate technologies – the core technologies of the soft drinks trade.

At the same time the alcoholic drinks companies have continued to offer consumers low or no alcohol wines and beers – that in most cases frankly have been disappointing.

That’s the danger of relying on your core technology as your starting point for innovation.

If however, you start with your knowledge of the consumer – and in this case their desire for a non-alcoholic, dry, product with complex flavour profile – you are opening up the box. You are not saying the starting point has to be a known alcoholic drink – without the alcohol. Nor are you saying it has to be juice, carbonation, sugar.

You are saying – this is what we know the customer wants now, what can we use to create this?

Peter Spanton (see link below) isn’t burdened by the legacy of always having made recognisable alcoholic drinks. He knows the customer and the ‘need state’ from his work managing bars and he’s going to used whatever it takes to make an adult soft drink that is appropriate for the time and place when people want to drink it. Currently he is exploring  Acai berries as a new ingredient.

Breakthrough innovations rarely come from the company that has a legacy technology. It’s often just too hard to imagine doing things so differently and in a way that might even put you out of business.

Breakthrough innovations do come from companies that know what customers want. Such companies often have to source a new technology or develop a process innovation to provide the solution for the customers.

Suggested Action

• Consider the deep knowledge you have of your customer – what unmet needs do they have that could not be met with your core technologies?
• Is that customer knowledge enough to ensure success even if you have to get to grips with a new technology to exploit it?
• Is there a winning strategic alliance/partnership to be made, where your customer knowledge and a 3^rd party’s technological capability could deliver a winning proposition?

Learn more about Peter Spanton's innovation in soft drinks