Innovation Lessons from the epic Crystal Pepsi Failure with Kyle Murray

Inside LaunchStreet Kyle Murray business podcast innovation podcast

Learning from Failure is Integral to Success

Learning from failure is integral to innovation. And it’s best if it’s someone else’s. It’s a free lesson. And that’s exactly what Kyle Murray did with the epic failure back in the day of Crystal Pepsi. He dug deep to understand why it failed and how we can learn the most valuable lessons from their experience. We talked about how you should never assume customers understand the why behind your innovation, why out-innovating your customer is one the biggest traps you can fall into and what behavioral economics has to do with innovation. Kyle Murray is the Vice Dean at the Alberta School of Business and a Professor of Marketing and today he’s on Inside LaunchStreet.


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Key Takeaways:

[2:50] You might be surprised to know that Kyle is a big fan of opera and mixed martial arts.

[4:32] Kyle shares why Crystal Pepsi was a failure shortly after the launch in 1983. He believes it failed because the consumer just didn’t see the need.

[8:23] Tamara points out that it’s important to be careful with information coming from the groupthink within a small group. Kyle discusses a bit of behavioral science and identifies the scheme of congruity problems with new products.

[10:28] Tamara shares that the dairy product is working to protect the name milk. They don’t believe that flax milk should be labeled milk.

[12:12] Crystal Pepsi was pulled from the market within about three years. From the failure, the investors learned about scheme congruency. If you can enable understanding, people will be more accepting and less anxious about the product. Kyle talks about creating a green vitamin coffee. If you're going to do something radical, you have to give the consumer a good reason for why you are doing it.

[17:54] The enabler is much better if it’s true.

[18:46] Kyle wrote an article, Enabling Innovation: Lessons from Crystal Pepsi, about the demise of Crystal Pepsi. Kyle points out that we tend to focus too much on the early adopters. Psychologically, we don’t like change. Tamara discusses the “er” trap.

[21:22] How do we avoid the pitfall of out-innovating our customers? The disconnect is connecting to customers. The enablers will help the customer understand that the new product is something better. Kyle shares that there was a carbonated milk product, Spider Milk, that was being sold in New Zealand and Australia. The innovator created a new scheme to help the product break out.

[24:25] Tamara and Kyle talk about setting expectations right. Tamara talks about an apple juice with bits of apple. The brand team refused to own the differences with the bits. If they could have found the weirdness, it could have helped set them apart. Kyle talks about the unveiling of chickpea cookie dough.

[27:26] Kyle explains what behavioral economics is and how experimental psychology helps us understand why people do what they do.

[29:59] Consumers are not rational creatures. Tamara shares an experience about Lululemon changing their bags. Tamara’s friend wouldn’t shop there because she didn’t support the new bag change.

[32:15] How does understanding the emotional approach help us become better innovators?

[34:09] Tamara asks Kyle his feelings on the Colin Kaepernick Nike ads. Find out how Nike was able to take the emotion of the movement and connect it to their brand.

[37:42] Connect with Kyle on Read his articles and view his books.

[38:08] What should innovators think about to end up at the right place on the scheme? Tamara reminds listeners that the idea is only as good as people opening up their wallets to buy it.

[44:30] Tamara asks listeners to think about what failure is out there that you can learn from. Then, do some research and apply the lessons to your world. And also apply the lessons outside of your category.