20 Feb 2013 Entrepreneurial tortoises beat corporate hares

How do you measure the success of an innovation? Sales results achieved is the obvious answer – and flowing on from that, profits. But given that markets, business and products all evolve over time, a key part of the usefulness of any measurement of innovation is not just what you measure, but when you measure it.

One thing that is certain – most corporate bosses take the measurement at the wrong moment and usually come to the wrong conclusion, while entrepreneurs tend to take the measurement much later. And hence corporates – over-eager for quick results – kill great ideas when they have barely got started, while entrepreneurs slowly build them into successes.

A case study of Popchips illustrates this perfectly. A company based on a technological process innovation, it launched in 2007. It had its first full year of sales in 2008 – and they totalled just $6-million. In 2012, after years of consistently building its brand, sales are on track for $100-million.

In the same year as Popchips debuted PepsiCo’s Frito-Lay business launched its Flat Earth brand of vegetable chips. Both Popchips and Flat Earth were targeting the same consumer need. That need is for snacks that are indulgent and good tasting – and are also 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.

In 2009 Popchips had clambered up from zero to $19-million. Flat Earth had hit $30-million. But which brand was withdrawn at the end of that year? Why, Flat Earth of course. Measured by sales it was doing better than Popchips – but PepsiCo’s management was disappointed with its performance.

Their (deeply unrealistic) expectation was that the brand would have quickly hit $100-million in sales. Flat Earth has passed into history and in 2012 it is Popchips that is hitting the $100-million mark. The lesson for PepsiCo’s executives – and those of many other companies – was that if they had thought and acted like tortoises, rather than hares, and taken their time about getting to their target, they too could have had a $100-million brand by now.

Hare-brained thinking killed what could have been a profitable business because hare-brained management measures success in year two – tortoise management measures success in year five.

A tortoise strategy is exactly the approach being chosen by healthy snack start-up Barnana. Despite huge retailer interest in its products, the company, co-founder Matt Clifford told New Nutrition Business, is actually saying no to opportunities to rapidly expand its distribution and is prioritising building the brand well over building the brand fast: “We believe that it is more important to sell the product well, to help stores promote the products and then move on to the next one. If you look at the growth in our stores, it is very deliberate and dictates everything we do.”

The late Professor Peter Drucker of Harvard Business School, one of the bestknown writers on innovation of the 20th century, wrote a very successful book called Principles of Innovation. 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 conditions Drucker says are essential for success are:

• Diligence

• Persistence

• Commitment

These are the qualities of the tortoise – and they are why he will always beat the hare.

This editorial from New Nutrition Business’s magazine was first published in its October 2012 edition.

Additional reading:

Popchips: The next $1-billion snack food or just full of hot air?

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 (right), 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. See www.new-nutrition.com