Leveraging Innovation to enhance Corporate Reputation

By Jeremie Guillerme, Consultant, ReputationInc.

Being perceived as an innovator enhances corporate reputation and business performance. However, besides technology companies that consistently top reputation league tables, how can firms in more traditional sectors, such as food and beverage, leverage radical innovations to enhance their reputation?

Looking at the latest Fortune’s Most Admired list, it is clear that companies perceived as most innovative enjoy a significant reputation advantage over their competitors. The corporate reputation of innovators such as Google or Apple is clearly triggering admiration and envy across all industry sectors.

Academic research provides evidence that a reputation for innovation leads to various business and reputational benefits such as:

- customer loyalty

- improved favourability

- propensity to pay premium prices

- and perhaps most importantly: customer excitement (Henard & Dacin, 2010)

Ultracompetitive marketplaces require companies to think beyond customer satisfaction and market needs to become providers of excitement. Remember Steve Jobs’ mantra: “people don't know what they want until you show it to them.”

However, all industry sectors are not born equal when it comes to creating excitement. In the present context, the task is certainly easier for a technology company than it is for a large food and drinks company. While the high-tech industry has generated many disruptive innovations lately (tablets, apps, streaming technologies and so many others), the consumer goods industry has mostly focused on incremental product changes (improved taste, different portion sizes, more convenient packaging, etc.).

It would however be unfair to say that the food and beverage industry has not provided any disruptive innovation. Innocent is one notable example of a company that succeeded in creating excitement about a new product category, and reaped the associated reputational benefits. But what can be said about larger, sometimes century-old global players with well-established brand portfolios?

Acting under the constraint of increasingly stringent health-related regulations, these companies are also trying to create the new product category that will enhance their reputation for innovation as well as generate consumer excitement. However, large incumbents face a challenge that new players like Innocent did not. How to enhance an innovation profile with radically new products while avoiding blurring the reputation of a well-established company? Being a disruptive innovator can indeed be highly regarded, but doing so shouldn’t confuse stakeholders on your vision and purpose.

A classic example of a large food and drinks company successfully launching a disruptive innovation without losing focus is Nestlé’s Nespresso venture, which radically changed the way coffee is sold to consumers through a clever product associated with a profitable business model:

- A new, premiumized coffee giving consumers a ‘connoisseur’ feeling

- A business model where an appealing appliance (see the design of the coffee machines) is the starting point of virtually unlimited repeat purchases of high-margin coffee capsules

- A closed distribution circuit eliminating any competition

The resulting consumer excitement has led the new brand to the success we all know. However, it is interesting to note that, in order to achieve this level of innovation, Nestlé has had to create an entirely separate organisation, with its own staff and office buildings. In a well-known Harvard Case, a senior VP from the company mentions how difficult it was to break away from the company’s culture: “internally, there was a lot of scepticism about the possibility to commercialise Nespresso. The business was physically moved out of Nestlé so that it could establish credibility and so that it didn’t have to fight against all the company’s rules”.

However, the new venture remained bound to Nestlé by a set of unconditional values and principles formulated by its CEO Peter Brabeck: “very simple, not a lot of words, no mission statement—just a list of the things we didn’t want to change at all, even as we evolved.”

What learning can we draw from the Nespresso case, looking at it through the lens of corporate reputation management?

1- Even large companies in more ‘traditional’ sectors can create disruptive innovations and enhance their reputation as an innovator.

2- Fostering cultural change internally is not always sufficient to drive radical innovation. Sometimes innovation has to happen outside of the company culture.

3- Maintaining the overall coherence with the company’s vision and purpose is critical to avoid stakeholder confusion about your activities.