Nespresso x Risk Culture
Embracing risk/failure rhetoric is deeply rooted in innovation doctrine, harness both in today’s VUCA world and you can accelerate your organisations growth trajectory.
Nespresso encapsulates the old-age saying “with great risk often comes great reward”. Not many know that this high-risk venture failed several times before it became the successful international mega-brand and business model that we know today. The journey started with a prototype in 1975, then eleven years of convincing management to support its first launch in 1986. Several failed market tests and repositioning’s eventually led to the ousting of its founder Éric Favre from his organisation. On reflection of his experience, Favre said;
“Although I knew that failure brings those who are ready to learn closer to a solution, I still had to assume full responsibility for my mistakes. Refusing to come up with some sorry excuse or look for scapegoats, I claimed responsibility for the whole thing. I wrote a letter to my superior saying 'I realise I made some mistakes as Nespresso's director, but if I had refused to risk making any mistakes, the product would not exist today.”
Today, thirty-five years after its initial launch, Nespresso is sold in 82 countries and amasses annual sales of circa €5BN. Nespresso’s sales growth/profit contribution is accretive versus other businesses within its owner’s portfolio.
We see several insights in the Nespresso story that are key considerations for aspirational organisations looking to level-up their risk culture.
Build cultural receptivity to when things go wrong. Favre’s above quote demonstrates his mindset of connecting failure to learning and ultimately creating a successful product. Despite his positive outlook, corporate leaders tend to have a certain level of bandwidth before the initiative is stopped or punishment is served. In Favre’s case, the bandwidth was 5 years. Here’s an agile consideration that would assist:
Create a learning organisation. Firstly, provide psychological safety and coach mindset for employees to highlight mistakes/failures. Secondly, deploy continuous improvement routines for new launches and project teams.
Have a portfolio strategy. As an “Intrapreneur”, Favre’s appetite for high-risk and career limiting ventures was clearly higher than his corporate peers. His back-to-the-future prototype from 1975 was pitched internally for ten years before securing approval for launch in 1986. Across this time, the organisation’s strategy was to invest in driving the lower-risk, sure bet soluble coffee products. Here are several portfolio considerations that would assist similar initiatives like Nespresso:
Establish if the initiatives alignment to the organisations strategies
Evaluate the appetite for risk. Balance of safe bets & high-risk new-to-world initiatives
Align on resource investment and expected financial return/launch date
Develop product in increments, test and learn in iterations. Two Nespresso models were tested in Switzerland, Italy and Japan before the major launch in 1986. Furthermore, Nespresso was initially positioned as a solution for bars, hotels, offices and later re-directed to target the in-home market. This indicates that there was a strong test and learn culture alive within Favre’s team and the broader organisation. Here’s an agile consideration that would assist:
Instil agility into ways of working. Deliver minimum viable product in small increments, enough to support a market test as soon as possible, leverage customer feedback and then improve the product, repeat this process until satisfied with the performance. Test in simulated environments. Deliver results to organisational stakeholders frequently.
Activate your organisations growth trajectory! eutopos consulting’s X-celerator system optimizes risk culture, deploys agile processes and strategic portfolio modelling to deliver growth outcomes. Make contact today contact@eutopos.co