One year ago, Kraft did something it hadn’t done in nearly a quarter of a century: It launched a new brand that created a new category. A year later MiO, a liquid water enhancer whose name means "mine" in Italian, achieved an impressive milestone when it reached $100 million in sales.
With its 2011 corporate revenue estimated at $54 billion and brands in practically every aisle of the grocery store, Kraft is the largest producer of branded, packaged food and beverages in America. So it’s hard to believe that before MiO, the last new category Kraft created was DiGiorno frozen pizza in 1995 and its last new beverage brand was Crystal Light, launched in 1988.
"Like a lot of other CPG companies, Kraft had gotten in the rut of gravitating to the safer, closer-in, lowest risk type of innovation—small line extensions with minimal downside but also limited upside," explains Barry Calpino, vice president of innovation at Kraft Foods.
Kraft isn’t alone. Creating a new brand is an expensive and difficult task and innovation of any kind is too often associated with blind risks and leaps of faith. The data speaks to the challenges: According to a leading market research firm, only 25% of new consumer and retail products generate more than $7.5 million in sales in their first year, and only 3% achieve $50 million or more.
But MiO and Kraft defied the odds. What went right? Here are five things innovators of all sizes can learn from MiO as they try to craft their own innovation success stories.
Politicians of all stripes today love to sing the praises of small business and the ingenuity of the American entrepreneur. And for good reason. Startups and small companies are rarely burdened with the bureaucracy, history, and quarterly earnings pressure of the big companies. Therefore, they tend to move faster and are willing to take more risks in the pursuit of their goal.
"I think the reason MiOs don’t happen very often in big companies is that it’s hard to set up the right conditions," Calpino says. "It’s not what big companies normally do and it’s just not natural. When everybody has 20 projects and lots of things on their plate, they’re not going to unlock the big idea."
So Kraft simplified things. Beverage Business Unit President Deanie Elsner created a small team, composed of some of the BU’s top talent, pulling them out of their day jobs and committing them 100% to the development and launch of a new brand. To avoid the risk of organizational antibodies slowing down progress, Elsner required the team to report directly to her.
The result? At the $100 million revenue party in December, one of the team members, a 30-year veteran of Kraft, proclaimed that the MiO team was the single best team he had worked with in his career because of the high level of trust and character of teammates, the willingness to have each other’s backs, and the practice of solving problems together. "It’s what you see in great startups," Calpino says. "This team proved you can create it in big companies too."
Every company has zombie ideas—ideas that never die, they just get dusted off every couple of years, assigned to a new team to explore and develop, and then put back on the shelf for any number of years. MiO was a zombie idea until the team fundamentally changed the way they thought about it.
For years, the idea of a concentrated beverage had been floating around Kraft’s R&D labs and several times it had been explored as a line extension for Crystal Light. But concerns about the product, the ability to effect change in consumer habits, the packaging, and the economics conspired against the idea time and again.
So, working with the original idea of a concentrated beverage enhancer, the team focused first on the consumer—specifically their "jobs to be done"— those important and unsatisfied consumer problems that could be translated into a compelling value proposition. The jobs approach considers both the emotional and functional dimensions of why a customer would "hire" a product or service and is a particularly powerful lens when launching a category-creating product.
The team then carefully crafted an experience that combined the product and its packaging and created messaging that spoke directly to consumers’ emotional and functional jobs.
As the influence of social media marketing grows, it’s tempting to view fundamentals like marketing’s "four Ps" (product, place, price, promotion) as relics of a past age. But companies that dismiss these foundational ideas in favor of the latest trend do so at their own risk. These fundamentals still work, and MiO’s success is testament to their lasting power.
The MiO team created a story based on the idea of "your drink, your way" that was integrated into every element of the product, packaging, and promotion. The team relied on both social media platforms and more traditional advertising channels to communicate and deliver the offering. In addition to a YouTube campaign featuring Second City’s Sassy Gay Friend, Kraft gave away 100,000 free samples through Facebook. TV spots like "Symphony" (see video above) beautifully demonstrated not only the "how" of the new product but also the less tangible "why."
Being in sync with the consumer and speaking to them about the way they live their life is a timeless principle. "We combined a very traditional old-school approach with all the state-of-the-art vehicles available," Calpino says. "I really believe that one of the keys to our success was blending the fundamentals that never change with execution that used new tools."
In order for an initiative to survive, it needs the support of senior leadership. Innovation is no different. Too often senior leaders say that innovation is a strategic priority, but when it comes to allocating resources and creating the time and space for innovation to occur and thrive, many deprioritize it in favor of shorter term (and often smaller financial) wins. Kraft did the opposite. Senior leaders, including CEO Irene Rosenfeld, declared that Kraft would invest in big, bold innovations—ideas that went well beyond the usual line extension.
"To launch a new brand with a new behavior, we’ve always said we needed to commit people and money," Calpino says. "But it’s saying it versus doing it. We stuck to our guns. We were serious. It goes back to top Kraft management agreeing to launch big innovation and taking actions to show they’re serious. Your business unit teams have to be really ambitious and your senior management has to be committed, supportive, and hungry. It can’t be one or the other."
As part of de-risking innovation, my colleagues and I encourage an emergent approach by identifying critical assumptions, executing tests to resolve each assumption individually, and pivoting based on the results of those tests. This approach is in direct conflict, though, with the deliberate approach most companies use: They develop every element of a product launch, test everything all at once in a test market, and then read the results to arrive at an all-or-nothing decision.
Having a team that anticipated and planned for setbacks and that was able to learn and adjust was critical. "There were definitely near-death moments, but they were all typical things that happen during a startup-–a truck full of valves didn’t show up, they didn’t have enough samples and they’re filling them by hand, and picking the brand name at the last minute," Calpino says. "But the team dealt with all these hairy setbacks because they had such cohesiveness and support from above. It gave them the energy to fight through these obstacles."
MiO’s successful launch shows that a new product launch does not have to be an all-or-nothing leap of faith. By focusing on consumers’ jobs to be done, combining the best of old and new marketing techniques, and testing incrementally to reduce risk, even the largest companies can get out of their own way to bring big, new innovations successfully to market.