We live in a society that revels in the stories of heroic events, a belief that David can slay Goliath, and the assumption that improbable odds can be overcome with guile and gumption and a little bit of luck. Every week people put their hard earned money across the counters of stores in pursuit of a winning lottery ticket that will lead to a serious improvement in their lifestyle. The reality of most business successes though is not as dramatic as guessing some random numbers, but in making the small changes that build success over time.

Lip Service, Not Action

In a recent study conducted by McKinsey Consultants, and reported in the McKinsey Quarterly (www.mckinseyquarterly.com), business leaders were asked about the difference between their ability to execute innovation within their companies and their aspirations to innovate. Not surprisingly, the desire to innovate far exceeded their companies' capacity to perform. While over 500 of the 722 executives participating in the study identified innovation as a key business driver for their business over the next five years, they also shared that they were generally dissatisfied with efforts to date and nearly a third of the executives admitting that they drive innovation in an ad hoc way.

The implications of this are that there is a broad gap between the desired state of innovation within companies and ability to execute. In part, the issue may be due to poor management perspective on what it takes

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to drive innovation through a company - wishing for it to occur organically will seldom lead success. There are plenty more lottery players that lose each week than win and the underdog rarely does succeed over the favorite in competitions. Additionally, there may be a failure to understand exactly what constitutes innovation, and so much of what would be successful is either ignored or never pursued.

Grocery Examples

Perhaps no other industry is a better example of the dichotomy between winning innovation and those that fail than the local grocery store. In very rough numbers, the average grocery store contains somewhere around 35,000 unique items from numerous manufacturers, sold within numerous categories, and competing for shopper's attention against some of the best known brand names with long legacies and relationships with not only the current shopper, but in many instances, the shopper's parents and even grandparents.

With all of that variety to choose from, the industry introduces between 20,000 and 25,000 new items in any given year. Behind each of these new items is a company that has spent significant sums of money in researching, producing, manufacturing, distributing, marketing, etc. that product in an effort to ensure it will sell and be a success for both the manufacturer to have produced it, and for the retailer to sell it. With each new item introduced and presented to the retailer for acceptance, the hope is that the new item will be the next Febreze, Snapple, Biore, or other revolutionary item that causes the market to take notice and generate huge demand.

Unfortunately, in the pursuit of the huge success, it often leads to taking chances and betting on hopes more than measured guesses based on facts and insight. The legion of products that were to be surefire winners, only to fail miserably are legion: the Edsel perhaps being the best known, but Microsoft's operating system named, Bob, Apple's Newton, and the Titanic would certainly be vying for colossal failures.

Comparisons of Two Companies

Coca-Cola has perhaps the most recognizable brand to be found in grocery stores and some of the most loyal customers of any product. Yet, senior management within the company determined that introducing a new tasting product would be in their best interests in their efforts to deflect in-roads their main competitor, Pepsi was making on their market share. So, in a move that was predicated on trying to replicate their competitor's taste sensation, they introduced a product named, New Coke. Even though their own focus groups and market research dissuaded them from changing the formulation (http://www.google.com/search?hl=en&ie=ISO-8859-1&q=New+Coke+explanation), they still went ahead and introduced the product. As it is now one of the most often cited missteps of corporate management, the results were swift and about as strong negatively as any new product has ever confronted. Within months, the decision was reversed and the previous formulation was put back into the product. The product may have been "new" - but it certainly was not improved.

The post-mortems on the gaffe point out that the sale of a soft drink is as much, if not more, about image, marketing, and factors outside the taste alone. By relying on the taste sensation, Coca Cola needlessly alienated loyal customers and failed to acquire Pepsi customers that were loyal to their product and were unwilling to switch for a taste that was close to, but not quite the same as their preferred brand.

In comparison, H.J. Heinz the venerable manufacturer of condiments, soups, and prepared foods did not try for a huge game changing innovation and in effect risk betting the company on the new product. Heinz confronted a similar task to Coca Cola in that their flagship brand was losing market share and was becoming stodgy and on the way to becoming disconnected with customers. Heinz used their market researchers to look for incremental gains of product features that would appeal to customers, and not seek a truly new product.

For instance, the company used the insight it had accumulated about children's usage of the product to introduce a green colored ketchup. The product had the same taste, same formulation, but in an appealing (to children at least, if not their parents) color. In so doing, many households now purchased the traditional red ketchup for the adults and the green version for kids. Sales increased and the interest in the category was revived.

The next innovation they arrived at came from watching how customers actually used the product in their homes. Rather than conducting taste tests, focus groups, surveys, or other market research techniques in a laboratory, the researchers went into the homes of customers and watched as they used the product. What they uncovered is that many people turned the bottle of ketchup upside down after the initial use to foster easier pouring of the product on subsequent usages. In what was a key discovery that now seems so intuitive as to make one wonder what took them so long, they created the wider mouthed top down bottle package.

Teaching Old Dogs

These two companies do deserve credit for not sitting by idly as their market position was challenged by competitors or apathy among customers. However, it is instructive for all business owners to assess their understanding of their customer's expectations, usage of their products and services, and tolerances for change to the offering. So, rather than holding to previous truths, why not spend some time with your customers over a meal and really connect with them on their needs. Just be sure to enjoy the Coke and Ketchup while you are learning more about your business.

David Zahn is a serial entrepreneur and consultant to Fortune 100 businesses (www.zahnconsulting.com) as well as entrepreneurial startups (www.startupbuilder.com).

The opinions expressed are the author's and not necessarily those of connpost.com. Please direct comments to cdauber@ctpost.com.