Innovation Using Ansoff Matrix

Introduction

1. Evaluate the extent to which innovation has driven the development of Innocent from its inception to the present day

To start off with Innocent only had one product which is their renowned smoothie made from squashed up fruits. After entering the market with their famous healthy juice they were able to provide themselves with sufficient finance, in 10 years they were able turn over ?110 million calculating out to ?6m profit. With the additional finance Innocent were able to diversify their product range and widen the scope of their business. This successful turnover led them into creating and developing new products and penetrating into different markets such as,

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“Yoghurt thickies”
“Juicy waters”
“Wedged shaped cartons” – Fitting neatly into lunchboxes (entered into the children’s market in 2005)

In relation to the new products that Innocent have introduced it is possible to use the Ansoffs matrix in order to analyse the development of products into different markets and place them into the categories within the matrix.

Source: tutor2u.net

Product Development

Kids smoothies – Instead of appealing to cash rich time poor consumers they have started to bring out new products for kids
Innocent Smoothie– The first product that Innocent launched
Juicy waters– Competing with healthy waters such

Market Development

Yoghurt Thickies
Innocent Smoothies– Trying out new flavours with new fruits

Diversification

Vegetables– Trying to move into the fresh vegetables sector

In order for Innocent to be this popular there would have been certain stages that business would have to have gone through in order to be where they are at the present day. NPD (new product development) would have been a strategy that Innocent used in order to try and see whether or not their first idea was feasible to carry on with. The table below consists of 6 phases that they would have gone through.

StageRelating to Innocent
Strategic logic & AlignmentFirst of all Innocent wasn’t an easy business to set up for the three university friends. As they were young and inexperienced they found it extremely difficult to find financial banking for the business they proposed to set up. 20 banks or so had rejected their business plan due to lack of experienced and knowledge of the sector. Finally after much pursuing they were put in touch with a business angel who invested ?250,000 and who now owns 20% of the company.
Idea generationThe three university students at this stage would have had to look at the current markets and try and find a possible gap that they felt they could penetrate into. Smoothies were a concept they had engaged into.
Concept Development & SelectionOnce they had all of this set in place they needed to develop their idea to be different from any other potential competitor products out there, they made the smoothies from 100% fresh fruit which could be preserved for 14days and still get the same fresh taste.
Programme DefinitionThe idea of the smoothie had originally come from the trio buying ?500 worth of fresh fruit and making them into smoothies then going onto to sell them at a music festival in London. The customers were asked to put the empty bottles in either one of two bins one named “yes” and one named “no”, the question they would be answering was “do you think we should give up our day jobs to make these smoothies” The yes bin was overwhelming so this gave the three entrepreneurs the push they needed to take their idea forward. Giving every consumer “2 of their 5 a day” with one bottle of Innocent.
Design & DevelopmentThe design of the smoothies had to be unique and welcoming to the consumers Innocent also wanted to be a company that built on ethics hence the name. Ethics was decided to play a big part of the business by using fresh fruit for example the banana suppliers have rainforest accreditation, they also strived to try and be carbon neutral and using bio degradable packaging.
ValidationTo try and make sure that customers were willing to invest in the product they had the knowledge from the music festival that customers were interested in their product.
Pre- Commercialization & launchThe launch of their product was on a national level at first finding distribution channels through the market and now there product is stocked at many delicatessens, health food shops and coffee bars. First day they sold 24 bottles from a van.

Innocent were the first company to start selling smoothies which in turn gave them a competitive advantage of being the first on the scene, this gave them allot more experience over the years of operation than other competitors in the market today, factors which play in favour of Innocent are as follows:

Experience– Having years of practice in serving the customers exactly with what they want, also taking on board the customer’s views and opinions to try and increase product ranges but also at the same time satisfy the needs of the consumer.
Scale benefits- Innocent will definitely have this advantage as they will already have bulk order in place and be able to mass produce quicker than any new upcoming smoothie business.
Pre – emption of scares sources- Innocent have key technology and product innovation that makes there smoothies last 14 days from the day of production, so consumers will still get that great fresh taste.
Reputation- In the years Innocent have been operating they have managed to gather a huge client database through emails and feedback this gives them an advantage as they have started to build relations with the customers a long time ago and by listening to what the consumers want and by responding appropriately they are able to keep the interested and having consumers who are brand loyal.
Buyer Switching- As Innocent are big well known business there suppliers would be more than happy to negotiate with them in terms of competitive pricing.

2. Evaluate the extent to which entrepreneurship has driven the development of Innocent from its inception to the present day

As the three young entrepreneurs had a lot to learn about business it was a huge learning curve for them to be thrown into the deep end so fast. Although successful as it is Coca-cola have huge part to play with their ?30m investment into Innocent when sales went down and competitors got tough. Innocent can gain from Coca-Coola distribution channels such as Europe and global distribution something that Innocent wasn’t to geared up with. From being Entrepreneurs they had given 20% away for investment but also taken onboard help and investment from another major drinks company that has been around for a lot longer than they had. On the other hand this could be a partnership between both businesses that could work. Coca-cola can learn how to compete with a whole new style of drinks.

Below is a diagram of entrepreneurial growth cycle which the three young students would have found themselves going through in the early stages when Innocent started up. The diagram will give an insight and relate how the founders of Innocent would have proceeded within each step of the diagram.

Start up capital– For Innocent the start up capital came from on a business angel as the banks had turned them away for being inexperienced, the business angel now owns 20% of Innocent.
Growth– As the business grew so did the amount of employees by 2007 Innocent has 250 members of staff working within the organisation of Innocent.
Maturity– Innocent have handled with maturity very well in terms of them diversifying themselves into different markets offering new products aimed at different ages. They have kept revenue on a positive scale by doing this. Innocent are from maturing as they are constantly innovating new ideas and creations and with the help of their loyal customers they are always trying to find ways to impress their consumers.
Exit– This does not apply to Innocent as of yet as the entrepreneurs are still running the business and the Angel investor still owns 20%.

Innocent have done well to not base their business entirely on profits but have been looking at the bigger picture in terms of social and economical responsibilities. This helps them achieve the business they originally set out to create which was “natural, entrepreneurial, responsible, commercial and generous”.

3. Evaluate the extent to which leadership styles has driven the development of Innocent from its inception to the present day

When starting up a new business it is very important to try and get the leadership styles correct as this can make or break a business from the offset. Having a sound leader for a business can not only help with the direction of the business but also the way in which employees react to the style of leadership. If it is possible to get employees on side with the business values this can help increase efficiency and brand image. Being three young university students it was hard for Innocent to give of a professional image at first as the youth of the entrepreneurs was soon noticeable in their approach to business. Their youth style approach consisted of:

Dress codes- “dress informally, often in shorts and bare feet’
Messages- “funny informal message” on the drink carton labels
Employees- “leaving their personal values at home when they go work”
Buildings- “fruit towers” Office block name

The factors above show the laid back autocratic approach that the founders of Innocent adapted to help the business image and help support employees within the workforce to come up with new innovative creative ideas to help push Innocent forward.

As the company was growing it was very important for the leadership styles to suit the number of employees so that all work could be done effectively and efficiently. After the auto critic approach as there were no employees at that time the leadership style has slightly changed to democratic as there are now 250 employees, but Innocent still ensures that employees play a role in the business and partial decision making processes, giving the employees freedom at work helps with their participation in fundamental decisions.

4. Evaluate the extent to which both the strategic direction and the method of development chosen are suitable

As time went on Innocent found itself in a situation where it needed from help other businesses, this was mainly due to the expensive marketing decision that took them into the European sector this proved to be costly for them and made their financial positioning weaker. This led them into the path of Coca-Cola a large global drinks company that has one of the strongest brands in the world. Coca-Cola currently have operations in over 200 countries and has been around since 1886. The global organisation is currently the leader in the drinks beverage industry. As Innocent have decided to take investment from the global business it is able to use many of the resources that Coca-Cola use for its own products, as well as looking into international investment. There will be certain factors that will drive Innocent in this direction which can be seen in the table below.

Source: Yip, Total Global Strategy

As it is clear to see the above drivers would help Innocent to move forward internationally with the help of Coca-Cola and their global marketing brand.

Objective comparison (Innocent vs. Coca-Cola)

As two totally different businesses the vision, values, & missions would differ a lot which could cause issues in the working partnership and could push toward a change within either of the organisations.

Mission

Vision

Values

Innocent

Make good foodThe earths favourite little companyBe commercialBe generousBe entrepreneurialBe responsibleBe naturalBe generous
Coca-Cola

To refresh the world – in mind, body and spiritTo inspire moments of optimism – through our brands and actions, andTo create value and make a difference – everywhere we engageProfitPeoplePortfolioPartnersPlanetLeadershipPassionIntegrityAccountabilityCollaborationInnovation

Quality

From looking at table above it is clear to see that coca-cola and Innocent both follow similar ways but show their views in different perspectives. Innocent is all about being simple and telling the customers exactly what they are doing where as coca-cola is a much larger organisation therefore they have to try and abide by settling a level platform as they operate globally. Innocent tend to follow the trends of the UK and try and adapt their changes to suit the UK economy as that is their main source of income, compared to coca-cola who have to look at the issues of the world and try and adapt their company values to suit the mass market. Looking at the suitability of each company joining together, it may not have been the best idea. Coca-Cola doesn’t have the greatest image of being a healthy drink where as “Innocent” has a strong backing of being health conscious and the concept of the drink is that it contains “2 of your 5 a day”. This is an immediate clash for both companies whether Coca-Cola can learn from Innocents approach to being health cautious or whether Coca-Cola have only invested for a return on investment.

Strategic capability

In order for a business to be able to be able to survive and trade it needs to have the resources and competences at its disposable to help alleviate the downfall of the business. Innocent seem to have many resources which they use effectively to send out a positive message to all its consumers:

Intellectual

Customer feedback, letters from consumers, emails letting Innocent know how they feel about their products which in turn gives Innocent new innovative ideas.

Financial

Millions made which means investment for expansion and product development, Partnerships, Business angel, 2million Innocent smoothies sold a week bringing in constant revenue

Human

Creativity in the staff that Innocent employ which is showed throughout their products, 250 employees who all have different skills and knowledge that make Innocent who they are, New staff after working with Coca-Cola brining potentially new ideas to the business.

Physical

Innocent have all their products that they sell as well as all the development & production technology that use to create the drinks. They also have “Fruity Towers” where they operate from.

All the resources that Innocent have proved to be a success for the business in the previous years else they would not be who they are today. Innocent having proven themselves to have good customer relations and doesn’t find it hard to communicate with their consumers this could be because of their critical success factors. Innocent have certain product features in order to keep their consumers engaged with the business such as the “funny informal messages” or making sure they are letting their customers know what they are drinking is healthy. Innocent’s honesty with the consumer has paid off as they are well engaged with many of their consumers.

All the different departments within Innocent all interlink together which helps the business run effectively and efficiently. As Innocent is a simple business its logistics and processes flow easily enabling them to create their products and meet the demands of the consumer, compared to that of Coca-Cola who have vast production lines in 100’s of countries with lots more products. The two different value chains could clash as the organisational structure and technology development as well as process methods differ drastically. The technology that relates to Innocent would be the fact they can keep their smoothie fresh for up to 14 days where as Coca-Cola have developed their packaging to ensure the coke tastes fresh when opened. With Innocent juicy possibly entering into international markets as well as European they could benefit from Coca-Cola’s production methods to ensure they would be able to meet the extra demand on time and of high quality. Also when distributing abroad with only 14 days of freshness for the smoothie Innocent will have to work with Coca-cola to help distribute their products quick enough so that they can be on the shelve as long as possible before the best before date runs out.

Transportation costs on a global scale could creep up significantly for Innocent if Coca-Cola distribution channels are not feasible to use. Increasing costs in certain areas could cause internal conflict for Innocent as there are different investors that have put capital into the business, the decisions off Innocent as a whole can effect more than just the investors, other effected parties would be the employees and suppliers as well as any other stake holder. Rising costs and changes within the processes could cause possible disruption in parts of Innocents infrastructure leaving employees unhappy and investors concerned about expenditure. The stakeholder interests within both organisations will vary and all stakeholders will be expressing their views and concerns to the board which in turn could leave Innocent torn between following Coca-Cola on an international level or keeping stake holders happy on a more local scale.

Issues that face Innocent and Coca-Cola

The merge of the two businesses can cause serious issues that could affect the brand image and stakeholders concerned.

Ethics

Innocent have a much more ethical approach to business compared with Coca-Cola, partnering up with a less ethical company could bring down customer views and opinions of Innocent which could damage their international venture.

Competition

Although both brands are well established within their fields there is always the fear of a new competitor or substitute products being purchased, if Innocent cannot keep the price of their product at a competitive rate consumers may start to look elsewhere. Innocent currently only make 5p per bottle sold this is a low profit margin, with all the additional costs they will have to look closely or look into cutting costs which may cause a backlash on their ethical programmes. Innocent will have to do lots of market research to see if there is a need for their product in other countries, although consumers may be willing to pay the slightly higher price in the UK for a smoothie this may not be the same in international countries depending on the state of their economy.

Culture

The culture clashes between Innocent and Coca-Cola vary on a large scale, Innocent have the very laid back approach towards business where as Coca-Cola are a lot more formal and diverse. Management techniques and employee relations differ which could cause conflict in the way both businesses work together in order to get things done. The organisational structure’s of both business would look very different as Innocent only have 250 staff where as Coca-Cola would be in the 000’s making the layering of each level and employee powers differ.

Suitability

In terms of Innocent and Coca-Cola working together it needs to analysed whether or not it would be feasible for this to take place.

Strategic Options

Environment

Capability

Stakeholder/Cultural Influences

Consolidation

Innocent can maintain their market position within the UK and Europe. Coca-Cola maintains their global positioning.Build on their brand and product strength and new innovative ideas through the creativity of their employeesStakeholders not wanting to move into the European market as they are comfortable in the markets they operating in currently.
Market Penetration

Try gaining more market share through promotions or new products.Exploiting the resources available to them which were mentioned previously. Coca-Cola exploiting their vast global connection.Stakeholders happy with the current position of both businesses not wanting any change to occur, thinking they might be at risk of a loss in new strategic directions
Product Development

Innocent looking at feedback from the customers on acting on it. Coca-Cola taking a leaf out of Innocents book and engaging with their consumers maybe looking into healthy drinks with less sugar contents.Both companies could use each other’s research and development groups giving each business a different perspective on their products.Trying to make the stakeholders take interest in the better of the business in order for growth and expansion.
Market Development

Innocent and Coca-Cola can both benefit from new products and using existing products to penetrate into different segments of the marketExploiting the current capabilities and products in different market segments. Such as Coca-Cola trying out new kids drinks with an “Innocent” concept.Trying to help stakeholder understand the need for investment into new areas before current market reach the decline stage.
Diversification

The markets that Innocent and Coca-Cola have become to mature/declineExploit the core competences in new areasMust still be able to meet the needs of the stakeholders at the same time.

Source: Exploring Corporate strategy pg 337 exhibit 10.6

As we can see from all of the above analysis it would be fair to say that both Innocent and Coca-Cola can learn new ways of managing, developing products, and targeting different sectors, but this could come at a cost of either damaging brand image or leaving behind the ethical issues that both companies value.

With reference to appropriate models/frameworks analyse the change in management issues that could arise in implementing this strategy

With the merge and assistance of both Innocent and Coca-Cola coming together certain issues could arise in the management styles having knock on effects to other areas of both businesses such as employees and stakeholders the issues that could arise from this have been analysed below using different models.

To help try and overcome these issues there is a 8 step process that can be followed in order to and remove potential unwillingness to participate in new operations.

Step1- Create a sense of urgency

Innocent and Coca-Cola both need to let their businesses know that in order for them to grow and succeed further there visions and strategies need to be fulfilled to the maximum potential.

Step2-Pull together the guiding team

Making sure that the team has strong beliefs and values of what they are doing to show other people that it is a beneficial move.

Step3- Develop the change vision and strategy

Making sure that consumers and investors understand what the future will be able to give them and how they will gain from this and how it is different from the past.

Step4- Communicate the vision broadly

Make sure as many people as possible understand and accept the vision and the strategy this could be done through the media as both Coca-Cola and Innocent have media connections.

Step5- Empower others to act

For example if Innocent had enough money and certain stakeholder such as the business angel did not see the vision that everybody else had seen it may be in the best interest of Innocent to buy certain stakeholders out this would give the entrepreneurs more control and power to drive the company forward with Coca-Cola. Looking at this from Coca-Colas perspective they would have to convince their stakeholders that partnering up with Innocent is the way forward for a better image and more product innovation.

Step 6- Quick success

Produce sufficient short-term results to give their efforts credibility and to disempower the cynics

Step7-Buil momentum and keep pushing

Once the first success point has been reached for example Innocent in the international market they need to keep pushing themselves in order for the vision to become a reality.

Step8- Create a new culture

The old traditions of the business need to become the past and future should be embraced Coca-Cola could do this by leaving the high sugar content drinks behind and getting onboard with Innocent into the healthier beverages, with a strong brand name people may trust the drinks.

The method above is a simple 8 step rule of trying overcoming change management issues but time constraints need to be taken into account as it can be a lengthy process trying to get everyone on side.

References

1. http://tutor2u.net/business/strategy/ansoff_matrix.htm
2. http://www.innocentdrinks.co.uk/
3. http://books.google.co.uk/books?id=3Prwx2sWtPsC&pg=PA583&lpg=PA583&dq=DAVID+RAINEY+NPD+MODEL&source=bl&ots=vJ6Z37tZKT&sig=i8sT69tygn6cSHd3yuYTVRtuwAk&hl=en&ei=5kbYS-WdF4z0mAPezMCnCA&sa=X&oi=book_result&ct=result&resnum=1&ved=0CAYQ6AEwAA#v=onepage&q&f=false (PAGE 10)
4. http://www.coca-cola.co.uk/About_Us/

1. Kotter, J., and Rathgeber, H., (2006) Our Iceberg is Melting : Changing and Succeeding Under Any Conditions Pan Macmillan Ltd, London

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