When To Pivot
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What is the main topic of this episode?
This is Hidden Brain. I'm Shankar Vedantam. In the mid-1980s, Coca-Cola was feeling threatened by the growing popularity of its rival, Pepsi. Executives at Coca-Cola decided to shake things up. In April 1985, they launched a new product.
The supermarket shelves throughout America will have the new Coke by Memorial Day weekend, summer's kickoff, and the soft drink season.
New Coke promised to be sweeter and smoother.
Rounder, yet bolder. It's a more harmonious flavor. You're a pretty good copywriter.
Why did New Coke fail in the 1980s?
Sounds great, right? But not everyone was happy. Consumers took to the streets to protest New Coke, pouring out the beverage in defiance. The Coca-Cola company received over 40,000 calls and letters from angry, dissatisfied customers.
Dear Chief Dodo, what ignoramus decided to change the formula of Coke? The new formula is unexciting and it's as bad as Pepsi. Burn it.
People didn't just take the change seriously. They took it personally.
That's un-American because we fought wars to have a choice, to have freedom.
New Coke was a disaster. Customers boycotted it, the media mocked and criticized the move, and distributors were reluctant to sell it. Sales plateaued and a rapid decline loomed on the horizon. The company threw in the towel and switched back to its original formula. Peace and taste buds were restored. There's a saying that's often attributed to Burt Lance, a political appointee of former U.S. President Jimmy Carter in the late 1970s. If it ain't broke, don't fix it. The origins of this expression go back even further. Farmers believed that when something worked, it was best to leave well enough alone. Tinker with things, and you risk disaster. Today, we look at the truth of this old adage.
When should a company pivot its strategy?
When it makes sense to stay the course, and when it makes sense to change direction, this week on Hidden Brain. Imagine you're paddling a boat across a calm lake. The wind is steady. You're moving forward slowly but surely. There's no need to change course, adjust your stroke, or head back to shore. But what if a storm rolls in, or your boat springs a leak, or you feel a sudden stabbing pain in your chest? Now, staying the course and sticking to your plan could be disastrous. At Columbia University, Rita McGrath studies when it makes sense to pivot and when it's wiser to stick with what's worked. Rita McGrath, welcome to Hidden Brain.
It's a pleasure to be here.
Rita, you tell the story of the Gillette Company, a popular personal care brand that most people are familiar with. Give me a brief history of the origins of the company.
Sure. So Gillette is one of the most successful consumer product companies in the world. They were founded in 1901 and they were one of the original safety razor manufacturers. So King C. Gillette, the actual man, founded this company. And before that, if you wanted to get a close shave, you pretty much had to go to a barbershop. So it was a huge breakthrough in mass market consumer products. And they were basically able to pull off the strategy unthinkable. They maintained a competitive advantage for literally decades. They were the dominant player.
So in 2010, two entrepreneurs, Mark Levine and Michael Dubin, met at a holiday party. Mark was a product wholesaler who had a problem in one of his warehouses, and Michael was a marketer. What was the problem in the warehouse, Rita?
Well, Mark has this interesting career where he buys stuff from one part of the world and sells it for a profit in another. And as you mentioned, he was trying to unload this set of decent quality, not exceptional, but decent quality razors that were made by a South Korean manufacturer.
So I understand at this point, Mark has something like 250,000 twin razors in this warehouse, and he approaches Michael, who's an online video marketer, about potentially going into business together. What was the proposal?
Well, Mike Dubin at the time was kind of a failed entrepreneur. He found his way into marketing. He was doing a lot of video work. He tried to turn his life around. He applied to the Columbia Business School. I'm sad to say we rejected him, which is not so happy. But the two guys get to talking over what I presume is some adult beverages.
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Chapters
8 chapters
1
What is the main topic of this episode?
0:00–0:38
2
Why did New Coke fail in the 1980s?
0:38–2:09
3
When should a company pivot its strategy?
2:09–4:57
4
What can we learn from the success of Dollar Shave Club?
4:57–11:23
5
How did Gillette respond to digital disruption?
11:23–19:35
6
What are inflection points in business?
19:35–27:49
7
Why do companies miss inflection points?
27:49–41:13
8
What can Blockbuster and Kodak teach us about timing?
41:13–49:28