Does innovation depend on luck?
Large brands launch many new products every year—sometimes three or five, sometimes more than ten. Yet many of those products survive for only a year and disappear in the next.
Big brands do not lack R&D capabilities. They do not lack consumer insight, and they certainly do not lack distribution. Why, then, does the capacity to innovate seem to disappear once a brand succeeds and establishes itself? Why is it so difficult to keep producing meaningful innovations?
Why have Coca-Cola, Nongfu Spring, Uni-President, and Master Kong produced so few major beverage successes in recent years?
After Genki Forest launched Burning Tea, sparkling water, Alienergy, and milk tea, why did its beverage channel appear to produce fewer products that felt genuinely distinctive?
Why has Nongfu Spring struggled to establish a successful carbonated product, while Coca-Cola has struggled to build a successful tea drink?
Is innovation really a matter of luck?
Large brands are understandably anxious. Countless smaller brands use platforms such as Tmall to launch new products quickly. Their failure rate is high, but when enough teams keep experimenting, even a low-probability success eventually occurs.
So even if innovation contains an element of luck, a large brand must still ask how to improve the odds.
The Shoe Is Too Large for the New Foot
Why does a company like Coca-Cola so often struggle with new products?
From the perspective of the marketing system, imagine the product as a foot and the marketing system as a shoe. Coca-Cola's shoe is extremely large and has been fitted very tightly around cola.
A newly born product is a small foot. It simply cannot wear the shoe built for the mature cola business.
The underlying logic is straightforward:
The more successful a brand becomes, the more path-dependent it becomes. The better a successful product fits the marketing system, the lower the system's tolerance for variation—and the harder it becomes to accommodate a different product.
Once a large brand succeeds, it will almost certainly reuse its established channel and marketing system. It is very unlikely to design an entirely new system for each new product.
In that sense, when a new product from a large brand does succeed, it is often because the product happens to fit the old marketing shoe.
Why Small Brands Often Look More Innovative
Whether or not a small brand follows the right innovation methodology, it typically has two obvious strengths: speed and strong intuition.
The team is small. The founder often makes decisions directly, without complex workflows or layers of approval. The founder also works on the business personally, making it much easier to push action through than it would be in a large company.
That is a small brand's advantage—but the advantage tends to disappear as the company grows.
From an evolutionary perspective, a primitive stem cell can become almost anything. Once it divides and differentiates into specialized functions, each resulting cell can operate only within a narrower range.
Differentiation creates specialization, focus, and efficiency.
It also creates functional limits: each part performs only the work assigned to its role.
A problem is no longer considered by one cell with an integrated view. It is handled through cooperation among specialized functions. That improves efficiency and produces scale effects. Collaboration can also generate valuable new connections.
But it creates a serious weakness. Each function becomes narrow. It struggles to see the whole system or to integrate resources and coordinate work from a higher level.
This is a central problem in large-brand innovation. Unless the innovator is the owner, the person responsible for a new product rarely has enough organizational authority or breadth to discover the opportunity, develop it, coordinate resources, and drive it through the company.
That does not mean a large company's innovation capabilities are inferior. They are often formidable. They merely appear weak when compared with an entire field of smaller brands experimenting at once.
When a Company Becomes Too Correct to Innovate
A company as powerful as Coca-Cola can suffer precisely because its organization is so capable.
The processes are highly efficient. Financial accounting is extremely precise. The organization is not allowed to make mistakes, and the tolerance for failed innovation is very low.
The greatest enemy of innovation is often an organization whose management and processes are too correct.
Product innovation needs a small team, deep insight, simple decisions, efficient execution, and fast cycles of experimentation.
A very large company brings complicated processes, inefficient meetings, difficult coordination, an established marketing system optimized for success, and channels with limited capacity. Together, these conditions leave very little room for a new product.
I once asked the sales team of a major beverage company several basic questions during a training session:
- Who are we selling to, and why would they buy this product?
- Where should it be sold, and in which consumption occasion?
- How should it be sold?
- Why will consumers buy it—what is the reason they cannot refuse?
A room full of middle managers knew the price of the product. They knew almost nothing about how to sell it.
This was one of China's leading beverage companies.
Had the product team considered these questions during development? Perhaps it had; perhaps it had not. But that was no longer the most important question.
The real question was why a large company could produce such a result in the first place.
Was the problem the workflow, the system, the performance incentives, weak understanding, or a management loop that never closed?
Consider a further thought experiment: what would happen if a distinctive regional soda such as Dayao Jiabin were handed to a company like Coca-Cola to sell?
A Product Needs Its Own Marketing System
Peter Drucker argued that the most important and difficult work is not finding the right answer, but asking the right question. Few things are more useless—or more dangerous—than answering correctly after asking the wrong question.
Innovation should not be left to chance.
When studying consumers, focus on the problem they are trying to solve, not on the tool they currently use to solve it.
A person who buys a drill wants a hole in the wall, not a drill in the hand.
The research question is therefore which person needs which kind of hole—not which person wants which kind of drill.
Both Zhang Xiaolong and Pony Ma have discussed the need for product managers to become beginners again. This means temporarily becoming an ordinary user who knows nothing about product details or technology, observing the product with fresh eyes, and asking childlike questions.
Innovation follows three steps: observe, question, and associate.
From a product perspective:
- Which person is trying to solve which problem?
- In what occasion does the problem occur?
- Which means can solve it?
- Which needs remain unmet?
- Which needs could be met at lower cost?
The marketing system can then address these questions through STP and the 4Ps.
None of this is especially difficult for colleagues in a large brand's innovation unit. The difficult part is often the sales organization.
We often hear that salespeople do not want to sell a new product. We rarely ask why.
They may say:
- the product requires too much active selling;
- it does not sell through;
- it creates returns;
- the price is too high.
Ask long enough and a salesperson can provide countless reasons.
But if the company already knows that the sales force resists new products, why does the marketing-system design not account for that resistance from the beginning? Why not create targeted incentives that make the product worth selling?
More importantly, has the company designed a minimum viable sell-through model for the product?
Start with one store, one channel, one distributor, or one market. How should the supporting organization be designed so the product actually sells? What system would make it natural for the salesperson to offer the product?
The model must address:
- outlets, visits, merchandising, and sell-through;
- standards, real execution, inspection, and incentives.
The processes, systems, standards, methods, and performance mechanisms surrounding the minimum sell-through model must be tested in an exploration market, turned into an operating process and sales guide, and only then expanded nationally.
Many product leaders instinctively try to reuse the company's existing people and channels. But not every person, channel, or resource can be shared. When a company studies a product deeply, it often finds that most of the supposedly available resources do not fit.
Large Companies Need a Different Organizational Form
Consumer needs are diverse and constantly changing. One product and one channel model can no longer satisfy every occasion.
Companies must design a marketing system around the product, the occasion, and the consumer's problem.
But a brand cannot build an entirely new distribution chain every time it launches a product. The cost would be prohibitive, and creating a complete marketing system is extremely difficult.
The real challenge for a large company is therefore organizational: how can it build a management model capable of understanding consumers and designing the entire marketing system for a particular product?
That capability is the foundation of successful innovation and a renewed competitive moat.
The Quantum Story: Let the New Business Operate Differently
Clayton Christensen offers a useful example in The Innovator's Solution.
In the 1980s, Quantum was a leading manufacturer of 8-inch disk drives. When the 5.25-inch drive emerged, Quantum missed the opportunity and began to decline.
In 1984, several Quantum employees recognized that a market for ultra-thin 3.5-inch drives was emerging. These drives were intended for personal computers, while Quantum's primary customers at the time were computer manufacturers rather than individual PC users.
The employees planned to leave and start a company of their own. Quantum did not let them go. Instead, it supported them in forming a separate company, provided funding, and retained an 80 percent ownership stake.
The new business operated very differently from the parent. It recruited its own employees, designed its own roles, and carried responsibility for its own profit and loss.
When Quantum's other businesses later declined, this subsidiary continued growing. Quantum eventually closed the other businesses and rebuilt itself around the successful new company.
The lesson is internal entrepreneurship. By investing in an autonomous new business, the company eventually created something that surpassed the old core.
Many companies have internal venture programs. Their common mistake is to constrain innovators with the old organization, performance system, and financial controls.
That dramatically reduces both the occurrence and the success rate of innovation. The established organization is too powerful, and management is too tightly coupled.
Build a Blue-Force Unit inside the Organization
For innovation, a large company should consider establishing an internal blue-force unit: a small opposing force designed to challenge and disrupt the incumbent organization.
This unit exists specifically to address the internal and product limitations of a large brand. Like a special-operations team, it combines some of the advantages of a formal organization with the flexibility of a guerrilla force.
It needs three kinds of people:
- People skilled in human factors. Strong observers and questioners who judge whether an idea is desirable.
- People skilled in technical factors. Strong at association and experimentation, responsible for judging technical feasibility.
- People skilled in business factors. Strong communicators who assess commercial potential.
This blue-force unit is not a conventional new-product team based on the existing organizational structure. Nor is it simply a team sent to develop a new channel. If the existing operating model could succeed at that work, it would have done so already.
The unit needs real freedom. It should control its own budget and hiring and be able to build an organizational and management model suited to its product and business.
Its central purpose is to do what the large brand itself does poorly—and to build brands the existing organization cannot build.
Make the Organization Modular and Platform-Based
A second principle is to make the organization more like a modular platform.
Borrowing from the software industry, platform services divide capabilities into functional modules. A company can combine those modules according to its needs and assemble the business process and functionality required for a specific opportunity.
As companies improve their digital capabilities, information systems can connect business modules efficiently while still allowing them to be recombined.
Some industry leaders are already moving in this direction, including Tsingtao Brewery's innovation business unit and Budweiser's X business unit.
These units sit outside the established organization. They pursue work that the existing management model, processes, and resource structure cannot deliver but that remains essential to the company's future.
That work may include digitalization, innovation in particular categories and products, or the development of new channels and markets.
Innovation Is an Organizational System, Not a Single Product
View the success of a product, brand, or company through models and systems thinking, and one conclusion becomes clear: nothing succeeds through a single isolated point.
For a large enterprise, the core of innovation is to create an organizational system from which innovation can emerge. It is not enough to launch one innovative product, assemble one product-development team, or add one channel.
Large brands commonly fail to innovate for three reasons:
- The new product is too small and weak to fit the company's established marketing system.
- The distribution channel has limited carrying capacity and little attention available for more new products.
- The company's processes are too rigid to allow innovative products to emerge.
A company that wants to innovate successfully must build three capabilities.
1. Establish a Blue-Force Unit
The unit exists to address weaknesses in the incumbent company and organization.
The Fifth Discipline describes several problems of large organizations: excessive goal orientation, an emphasis on obedience, an obsession with right and wrong, excessive competition, and the loss of a sense of the whole.
Large organizations are often too tightly coupled, too intolerant of error, too focused on financial metrics, and too focused on efficiency. They lose flexibility and eventually become Goliath defeated by David.
2. Build Integrated, System-Level Capabilities
Inside the blue-force unit, work should not be divided only by traditional functions.
The organization should break through functional boundaries and form around projects and products. It needs the skill, expertise, and resources to design products for real consumer needs and to build the matching marketing system.
That requires marketing capability, a whole-system perspective, interdisciplinary thinking, and an interdisciplinary team.
3. Make the Organization Modular, Platform-Based, and Open to Third Parties
Break organizational capabilities into modules, connect those modules digitally, and assemble them into a larger service platform that can support innovative products and new organizational forms.
Genki Forest's innovation offers useful lessons. From the beginning, its organization was designed around product innovation, helping create the conditions for many new products to emerge.
Large brands should study not only Genki Forest's organizational design, but also the culture that supports experimentation.
The final point is simple: the owner remains the company's most important product manager.
If the owner does not value the product, meaningful innovation will be very difficult to achieve.