Pepsi's Failure to Walk the Talk…and a BIF Biz Lesson

Why are some brands able to be at once both global and local — to successfully seize the energy of grassroots movements and at the same time leverage corporate assets on a massive scale — while others only come off as artificial and pandering?

The web did not invent community-driven brands – just think of Harley Davidson — but technology has surely made the strategy more popular. These days, it’s pretty easy to interact with consumers directly.

Yet that’s exactly the problem. All too often, when marketers talk about their “social strategy,” they really mean a digital marketing strategy implemented on social platforms, rather than using social dynamics to benefit their business.

That’s why many social initiatives fail miserably. Consider Pepsi’s Refresh project, which sought to replace $20 million in Super Bowl spending with a social platform that funded good works. While its social media KPI’s soared, its business suffered. Pepsi actually lost market share and fell to number three in the cola wars for the first time in modern history.

Clearly, social initiatives are not a panacea. They can be wildly successful, but they can also crash and burn. For marketers to build effective community platforms it’s not enough to simply join the conversation—we must lead it.

For marketers to succeed in the social arena, strategies need to be grounded in network science, not conjecture. More specifically, four elements need to be in place.

First, we need to win credibility, not by paying lip service to the concept of authenticity, but by truly earning our mission. Pepsi Refresh failed because it had no relevance to the brand’s operations or heritage. Giving large sums of money to unspecified social causes might have reflected genuine corporate sentiment, but had no real relevance to Pepsi’s longstanding brand identity. Pepsi never earned that particular mission and therefore consumers saw little need to reward the company for its efforts.

Now consider the Business Innovation Factory (BIF), an organization that seeks to bring cutting edge innovation techniques to social initiatives, many of which are similar to those Pepsi Refresh sought to promote.

Its founder, Saul Kaplan, is a self-professed innovation junkie. After a successful career as a corporate consultant, he became the Director of Economic Development for Rhode Island, a cabinet level position, where he saw the opportunity to put his ideas into action and create innovation at scale.

Saul eventually left government to focus on BIF full-time.  It is now a cult favorite in the innovation world.  Today, their annual conference brings together well-known corporate innovators, such as Harvard’s Clayton Christensen, Zappos CEO Tony Hsieh and author Daniel Pink, to mix with an eclectic assortment of social entrepreneurs and devise solutions to society’s thorniest problems.

The contrast is stark. Where Pepsi merely borrowed its mission for Refresh, Saul spent decades earning his. Where Pepsi sought only to join the conversation, Saul led it and continues to do so today, a decade after BIF’s founding.

OK, you might say, it’s not fair to compare a large, for-profit enterprise with a mission-driven organization. But consider the example of American Express and its long-running Open Forum initiative. While BIF has empowered social initiatives, Open Forum empowers small businesses. Given AmEx’s operations, consumer base, and resources, it’s well positioned to do so.

And that brings us to the second principle—social efforts need to be guided by genome of shared values. Let me explain. DNA, despite popular misconceptions, is not a blueprint –in fact, our genome contains only about 1.5 gigabytes of data, barely enough for a full-length movie.  Its genius is that rather than try to specify every single feature of our biology, it provides us with rules for adaptation—first, for chemical gradients in the womb and later for the outside environment.

Effective corporate genomes perform the same function, establishing core principles that can adapt to local environments. McDonald’s has a great business in India, where beef is taboo and the company must cater to strict vegetarian diets.  Cosmopolitan magazine thrives even in Islamic countries, where attitudes toward sex differ markedly from the US.  Yet in both cases, the brands remain faithful to their core values, whether it’s fast and affordable food, or fun and femininity.

It is, of course, important that core values are codified and documented (BIF has published its genome), but even more crucial is that core principles become mantras, continuously repeated and applied throughout the organization even as they are adapted to local environments. This can only be done by applying a third principle: we must balance cohesiveness with diversity.

When we find a model that works, there is a strong compulsion to try to replicate it at scale. We establish rules and regulations, along with penalties for violating them. While such orthodoxy can instill discipline and obedience, it squelches innovation and the ability to adapt to changing contexts.

Research has shown that top performers find a way to combine both cohesive local units and global networks. In a study of currency traders, researchers at MIT found that the most successful performers worked within a core group, but also diversified their sources of information.  Other studies of star researches at Bell Labs and of informal company networks found much the same thing.

Every community must find a healthy balance between cohesion and diversity.  Without cohesion, there is no common purpose, but without diversity groupthink will set in and eventually that purpose will lose relevance.

Finally, every successful community creates passionate platforms.  BIF’s annual conference serves as its focal point. American Express has developed “Small Business Saturday.” Harley Davidson has its group rides. These are all essential for allowing members to connect, share experiences and build ties.

Yet passionate platforms cannot be conjured up out of thin air, but must evolve over time. Network science tells us that the strength of a community is not determined by its size, but by itsdensity of internal connections; you must build in before you can build out.

And that, probably more than anything else, is what caused Pepsi Refresh—along with many other social marketing efforts—to fail. While digital technology can empower social initiatives, they are essentially human endeavors. Clearly, merely setting up a web page and a Facebook account will not suffice.

The humbling reality of social movements is that, while we can lead them, we can never really control them. As Daniel Dennett put it, “A scholar is just a library’s way of making another library.”

Note: This article previously appeared on Harvard Business Review

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Greg Satell is an internationally recognized authority on Digital Strategy and Innovation. He consults and speaks in the areas of digital innovation, innovation management, digital marketing and publishing, as well as offshore web and app development. His blog is Digital Tonto and you can follow him on Twitter.

Greg Satell




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