How do you measure the success of an innovation? Part of the answer to that question depends on who is doing the measuring. How else, for example, could two companies launch innovative snack products that achieve similar levels of retail sales, yet one company describes its brand as a success and the basis for future growth while the other sees it as a disappointment and decides to withdraw support from its brand.

First published in New Nutrition Business, September 2010 Newsletter, by Julian Mellentin

The difference in perspective is, in this case, accounted for by the fact that one of these companies is an entrepreneurial start-up and the other an established corporate giant. As our case studies of Popchips and PepsiCos Flat Earth show, both the entrepreneurs behind Popchips and the corporate giant behind Flat Earth (PepsiCos Frito-Lay business, which launched Flat Earth, is the world's biggest snack company) were targeting the same consumer need.

That need is for snacks that have good taste and are healthy, lower in calories, sodium and saturated fat, and interesting for restless consumers who are always on the look-out for variety and something new in their snack choices. Both used technological innovations PepsiCo with ingredients such as vegetables and fruit which produce a very different chip from conventional potato chips, and Popchips with a processing technique which produces a potato chip, but one that's different from anything previously seen in the snack aisle.

As the table shows, both innovations quickly achieved very respectable levels of sales. The difference in perspective is attributable to the very different innovation criteria of the two companies.

The late Professor Peter Drucker of Harvard Business School was one of the best-known writers on innovation of the 20th century and his book, Principles of Innovation, is a standard textbook. Among the criteria Drucker sets out for successful innovation are some which, it seems, will almost always trip up large companies and which explain why innovations in food and health usually come from small start-ups.

Innovations, says Drucker, should be capable of being started small and should be aimed at only a small limited market. Taking an innovation to market, he adds, requires patience because you will need time to make the adjustments and changes to your product, because at first innovations rarely are more than almost right. The necessary changes can be made only if the scale is small.

The other conditions Drucker says are essential for success are: Diligence, Persistence, Commitment.

Popchips seems to perform well against all of Drucker's criteria. And while it's true that with Flat Earth PepsiCo was seemingly attempting to act like an entrepreneurial innovator (for example, making adjustments and changes to the product soon after launch), it's nevertheless difficult, perhaps impossible, for a company of PepsiCo's size to start small and then persist. That's not because it lacks the skills - it's a company with an abundance of talented and entrepreneurial individuals but because top management in all large enterprises is impatient for fast results.

So investing to patiently building up a brand to $100 million in sales over five or 10 years is, in the eyes of most CEOs, a failure. But for a start-up company such a long road is usually built into the business plan and achieving even half that number would be the proof of success.

The qualities of persistence and commitment hold no value the moment that your boss's number one success criteria becomes become a big success, fast. And until the current generation of boards of directors grasps that the landscape of the food and beverage industry has changed, that creating a successful mass brand as was a common and viable goal 20 years ago, is now the (near-unattainable) exception, and that a landscape that is filled with a plethora of niche brands is the new normal, many innovations will founder.

They will founder not because the products and brands werent good enough, but because the CEO insisted on sailing the innovation ship towards the rocks and shoals of the coast of unrealistic expectation.

It seems that few large companies create new categories or commercialise innovations. The energy drink market, for example, was not created by a household-name company or a corporate giant but by an entrepreneurial company, Red Bull, which was a 10-person start-up back in the late 1980s. Red Bull began by aiming at a limited market –- 18-25-year-olds in bars and nightclubs - and slowly grew its popularity with diligence, patience and single-minded commitment.

Only much later, some 10 years after Red Bull debuted in the West, did the big beverage groups enter the energy market, and by the time they had they were unable to dislodge Red Bull from its established market leadership.

Big beverage groups played no part in creating the energy drink market, nor did they create the energy shot market (which was pioneered in the US by 5-Hour Energy, a small entrepreneurial company which defined and still leads the category). Nor, it seems, will they play any part in the development of a relaxation drink market, even though what that market needs is a breakthrough in innovation in ingredients that can deliver the benefit better than anything that's currently available an area in which well-resourced corporates should have an advantage.

As a cautionary tale, the case study of Slim-Fast illustrates what happens when the tendency of a large company (in this case Unilever) to play it safe becomes its dominant characteristic. In its 12-year ownership of the Slim- Fast brand, Unilever has managed only one significant innovation, the creation of a variant, called Optima, offering a satiety benefit.

Optima hasnt arrested Slim-Fast's decline, but it has at least slowed the pace of the decline and without Optima Slim-Fast would already be history. Optima aside, Slim-Fast has retained broadly the same image, packaging design and product formats which were already looking severely dated when Unilever bought the brand back in 1998. Slim-Fast shows what conservatism can do in the long run - it can leave a company unable to keep up with shifts in the market.

Combine corporates tendency to play it safe with their expectations of rapid and large returns and you have a recipe for disappointment. But should corporates even try to innovate like entrepreneurs?

In truth, innovation is an essential part of how any business, even the largest, must renew itself if its not to end up like Slim-Fast. But one thing that's clear is that in most large companies there needs to be a shift in attitude to risk and innovation and a willingness to embrace starting small, coupled with Drucker's virtues of diligence, persistence and commitment.

	POPCHIPS	FLAT EARTH
PRODUCT	Popchips’ proposition is simple: using heat and pressure to “pop” potato chips instead of bake or fry them cuts calories. Popchips have less than half the fat of fried and even baked chips. Per serving, Popchips provides 4g of fat and 120 calories.	Flat Earth chips contain a half serving of fruits or veggies per per 28g (6oz) bag. Each 2g serving has less than 5g of fat and about 130 calories. Rice or potato-flake-based chips, which are baked, not fried.
PRICING	A premium price that typically is $1.29 (€1.02) for a single-serving 1oz bag.	The suggested retail price is $2.99 (€2.38) for a 6oz bag, a small premium over Fritos, PepsiCo’s market-leading potato chip brand.
PROMOTION	Placement and merchandising decisions are especially crucial for Popchips because it doesn’t have national advertising campaigns. Sampling is important and Popchips targets venues ranging from local races to international events such as the Sundance Film Festival. Popchips also uses social media. In regular supermarkets, Popchips takes pains to be included in the natural foods aisle set rather than the conventional salty-snacks aisle.	Mainstream distribution in the snacking aisle.
SALES	The company is on its way to $40 million (€32 million) in sales this year, after revenues of $19 million (€15 million) in 2009, its second full year in operation.	After peaking at $26-$30 million (€21- €24 million) in 2007, its first year on the market, PepsiCo seemed to lose interest and sales cratered to only about $5 million (€4 million) for the 52 weeks ended June 13 2010.

About New Nutrition Business

New Nutrition Business is a London-based research, publishing and consulting company which specialises in researching, analysing and forecasting developments in the business of food, nutrition and health around the world.

The strategies and success factors it  has identified in the 1990s have become the benchmarks for strategy development and brand positioning in the worldwide nutrition business. It works with companies all around the world, from the United States to Australia and from Sweden to South Africa.

New Nutrition Business is headed by executive director Julian Mellentin, one of the world’s very few global specialists in the business of food, nutrition and health.

He is the editor-in-chief of New Nutrition Business and Kids Nutrition Report, the only industry journal in the world on the rapidly developing kids’ nutritional marketplace.

Julian is co-author of both The Functional Foods Revolution: Healthy people, healthy profits?, the first-ever book on the business of functional foods, now translated into Japanese, and Commercialising Innovation: The Food & Health Marketing Handbook.
See www.new-nutrition.com