Throughout history, people have always invented new products. The U.S. is known for its ingenuity and inventiveness. The files of the U.S. Patent and Trademark Office are filled with success stories and even many times more stories of failed attempts. No matter the outcome, the thirst for new is innate in many people.
Last month, the Pabst Blue Ribbon brewery in Milwaukee came back to life. While the brand name has been around since 1889, when a private investor took control of the company in 1996, they closed the founding operation in Milwaukee and relocated the brand to L.A. In September 2014, PBR was sold to a private equity investor group, who made the decision to reestablish a Milwaukee operation by opening a small brewery, restaurant and a bar in a church that Pabst once owned. Pabst also opened an innovation center to address the future of Pabst and beer.
This story hit me in a couple of ways. First, I went to Marquette University back in the heyday of PBR and the beer industry in Milwaukee. Not only was PBR in full swing, so were Miller, Schlitz and Blatz Brewing companies also going strong with headquarters based in Milwaukee. I was there when the drinking age was 18 years old too. It was not unusual back then to have one or all of the local brewers drive a beer truck up onto our campus and let the beer flow freely. And I fondly remember the brewery tours we took; especially at Pabst where at the end-of-tour we enjoyed bottomless glasses of beer in Sternewirt Pub. Those were the days… and when I acquired my thirst for beer.
Secondly, the story bewildered me when Pabst’s CEO, Eugene Kashper said, “This is really going to be an innovation laboratory for us.” My first thought was, innovation in beer- weird? How many more styles, types and flavor do people need?
Though a new beer is intriguing, it raises a more important question for any craft brew business. Is it more critical for a company to focus on Product Innovation or to create a Superior Customer Experience? Most people would argue both are equally important. And yes, theoretically that’s true. But if you had to bet your resources on only one- a better product or a better customer experience for your company’s long term success, which would you chose?
Since I am about to give you my perspective, here is a bit more on my background. It is not based on having worked in a brewery, or even working in the beer industry, though I have tremendous credentials enjoying beer. My view is based on having worked on both new product creation, as well as creating new customer experiences. As the lead marketer on GE’s Living Environment House back in the late 80’s, this research project developed innovative new products for home construction and living. Along with 53 partner companies, many ideas were developed and showcased, such as the first home automation system, smart toilets, and high performance window systems. Many of these ideas are now in people’s homes. Later in life, I advised companies in very mature industries, with lots of competition, tight margins, and declining prices. Most of these companies dreamed of a new product to free them from the commoditization of their industry.
Here is what I have learned. Though there are plenty of companies in mature industries who spend big on finding the next unicorn in their industry, I rarely saw them succeed. This is not to say they didn’t invent new things, some of which were pretty cool with seductive features. Typically, these products enjoyed little commercial success as well as became financial disasters because they were poorly grounded in making a real difference in the customer’s world. Where there was success to be found in mature industries was in discovering something to make a difference in the customer’s world. This might mean something such as faster turnaround on product orders to completely reconfiguring the entire customer experience so a customer got more bang out of a product.
As such, I would always bet first on creating better customer experiences as a growth strategy. The reason is, as any industry matures, including craft brewing, the entire industry tends to become more product focused to the point of ignoring customers and what’s going on in their lives. In the meantime, customers are going about their lives, often looking for better or more meaningful ways to live it. The opportunity for growth in maturing industries comes from working to better understand the day in the life of the customers and to figure out how the customer could enjoy what the company makes in new and interesting ways.
Here is an example of what I mean. In our home, we cook and entertain frequently. This puts us in the grocery store multiple times every week to buy fresh. We have a nice store nearby, with the typical store elements: produce section, deli counter, fish and meat counter, pharmacy, bakery, etc. Recently, we were in the Wilmington, North Carolina area contemplating our escape from New Jersey’s taxes. Our realtor mentioned the local grocery store, Lowes Foods, had a craft beer and wine bar inside the store. I don’t think he was ready for my reaction, as I grilled him mercilessly with questions about Lowes. Sure enough Lowes’ Beer Den existed. I got to try 4 brews for free, then buy a pint to go about shopping with my cart’s cup holders to assist- what a concept! Honestly, I do no remember what beer I drank that day, but I knew Lowes had delivered to me an awesome customer experience, in probably my future grocery store.
Betting the company’s future on the next big thing is a powerful urge, often yielding little success. Don’t get me wrong, a company that has been as successful as PBR has been in the past 21 years, would be on the top of my list as a candidate to invent such a new beer. And I will surely try it when and if it comes out. Craft brewers with weaker balance sheets could also be the one to come up with that new brew. Or all of these folks could get blind-sided by a home brewer. However, in maturing or mature industry it is ridiculously hard to beat the odds of failure with new products, with greater down side then up.
For my money, I would not make this error of product creation as a pathway to the future, but rather invent the next great customer experience, such as what Lowes is doing. A new customer experience is far more likely to be achieved because the constant societal change is always presenting new situations to create new experiences. The added benefit of focusing on customer experience is it would also increase the novel insights needed to invent a great new product.
For my tastes, enjoying beer is all about the experience with friends, food, and fun.