In April 1985, Coca Cola took biggest risk by changing its classic Coke’s formula and introduced new coke. Pepsi was in full demand at that time because of popular Pepsi challenge. The main turning point for the company was when people thought that new coke tastes like Pepsi and not Classic cola. The market value started declining and company received more calls than ever for bitter taste of new coke. Soon the company realized failure of the product though they tested the product for four years before launching it.
Studies show that though enough testing and documentation was done but Coca cola failed to make decision considering emotional behavior of people. Here comes the concept of intelligent risk taking. The process helps to make decisions based on past events and enables to predict most accurate future outcomes there by staying with current market trend and increasing company’s brand value. But seeing from business intelligence and decision-making point of view the company’s stocks became low up to a point that company had to stop producing new coke and replaced it with original Coca Cola that enabled them stay in market.
New coke was called the “Biggest Marketing blunder of all time” (New Coke | History, Response, & Facts. (2020)). The main reason for this failure was when Coke decided to sweeten its drink because of their competitors .As an organization every company has its rivals but maintaining stability in market is based on response of consumers. Coke at that time came up with rival strategy without considering impact of it on people. It failed in proper sentiment analysis where people’s emotions and behavior should be understood before making decisions. Before bringing any new product, it requires analysis, background checks, affects of it on people, advertisements and research. The company claimed that it spent about $4M for this but still the product failed reason being lack of intelligent decision making. Keeping risks in consideration instead of replacing it with old product Coke would’ve added new product. But the lack of proper analysis of blind test among people who preferred new coke instead of classic coke impacted in taking wrong decision of maintaining just one product. Hence, instead of just launching new product based on social influence to beat Pepsi Coca cola should’ve considered consumers behavior too.
Coca Cola performed beta testing where product is tested in real world conditions on consumers before launching the new coke. The users were not aware which product they were tasting, and the survey results showed people preferred new coke more than the classic coke. Coca Cola failed in beta testing because people were misled about how new coke would be presented in market. Beta testing is usually performed where a product is tested on intended audience and targeted group of people to predict how future results would be but here the case was beating the taste of competitors like Pepsi and replacing classic product with a new one. Studies show the main reasons of failure were:
- Replacement of product.
- Misleading focus group.
- Constricted tunnel vision.
- Limited use of Business Intelligence and decision-making ability.
- Failure in testing strategies.
- Inefficient resources for proper analysis.
A company’s success depends on what type of thinking and strategies they apply. Here, Coca cola used both convergent and divergent thinking where divergent thinking included open ended idea generation method-one new idea leading to another. In contrast convergent thinking includes applying past ideas and following same pattern to derive expected results. Divergent thinking that Coca Cola applied included taking risks and i.e. replacing entire product instead of adding new product and convergent technique included applying previous patterns of research and testing. Therefore, not following one certain technique in uniform way lead to negative results and failure. Based on evidence certain steps should’ve been avoided like decision bias i.e. making decision based on numbers. It is true that numbers play an important role that helps to decide downfall or success of product, but it should not be disregarded that company also took steps pertaining to bias based on memory structures. They misapplied it as they launched new coke relating it to previous diet coke that was a success. Use of BI tools and decision tree applications would have given different outcomes and potentially saved the company.
Today’s businesses can learn from this coke’s failure and make decisions by considering consumer’s sentiments. Example: If a new product is to be launched customers opinion on social media can help decide the company if the replacement or new launch would be a good choice or not. There should be transparency in any decisions that company makes, and people should not be misled about company’s future intentions. Hence, consumer preferences in real-time can help organizations decide negative or positive feedback along with saving company’s valuable time and efforts. These preferences can be noted and tracked in real time with use of Business Intelligence tools and processes. The new Coke failed bringing down the company’s reputation and consumers. The impact was terrible, and its value was overpowered by Pepsi cola that was biggest competitor of the company during that time. The company agreed that it was the biggest risk taken in history of developments done in the organization. It sent a powerful signal to the world that risks should be taken but not at cost that it degrades company’s values and hinders growth. The company learnt an important lesson and need of intelligent risk taking. We can conclude from this case that it’s never the case of not experimenting new things but also focusing on execution of existing methods rather than always being in race for innovation.
In today’s world the company is using AI and big data to know which drinks the customers like more from where and it easily helps them keep a track of numbers where users use their product more. The company learnt from the past experiences and is now using augmented reality that enables technicians know where fixes of machines are required and where technical assistance is needed. The company is also expanding their brand online and it now allows to blend different flavors according to consumers needs.AI also allows to track photographs of Coke posted online and daily or monthly consumption trend can be analyzed. This helps where the coke was consumed more at which time and helps to find if there is any relation of consumption related to time. Hence, BI has a big impact on company’s decision making and insight gaining process. In conclusion, any company should make decisions based on consumers sentiments and not compromise with the standard original product by replacing it with other item in hoard of competition.
- Ismail, S. (2014). 3 Ways Companies Can Encourage Smart Risk Taking. Retrieved 4 June 2020, from https://www.entrepreneur.com/article/238543
- Coca Cola.the-story-of-one-of-the-most-memorable-marketing-blunders-ever. (2020). Retrieved 4 June 2020, from https://www.coca-colacompany.com/news/the-story-of-one-of-the-most-memorable-marketing-blunders-ever
- The New Coke Flop. (2020). Retrieved 4 June 2020, from https://www.history.com/news/why-coca-cola-new-coke-flopped
- Coca-Cola: Driving success with AI and Big Data. (2020). Retrieved 6 June 2020, from https://www.bernardmarr.com/default.asp?contentID=1280
- New Coke | History, Response, & Facts. (2020). Retrieved 5 June 2020, from https://www.britannica.com/topic/New-Coke
- Pdf Coca Cola https://www.academia.edu/32379476/DONT_MESS_WITH_COCA-COLA_INTRODUCING_NEW_COKE_REVEALS_FLAWS_IN_DECISION-MAKING_WITHIN_THE_COCA-COLA_COMPANY