Why It’s Crucial to Understand Your Company’s Innovation DNA

May 18, 2015

In living things, DNA serves as the fundamental blueprint — it instructs our cells on how to develop. Similarly, I believe that companies have a central idea at their formation, which endures for decades, powering their growth. That’s the DNA of a company. And if you are working to create the right growth and innovation strategy, its important to understand that DNA composition.

Was your company born to disrupt established industries? Or is its heritage in marketing and distribution, building brands that are recognizable around the world? Maybe the way your company obtains new products is always by acquiring small startups. Every company has different DNA, which means innovation approaches need to differ — and that it can be extremely difficult to “reprogram” something that is fundamental to your company.

Here’s one way to think about analyzing your company’s innovation DNA:

I’ll share two examples from my career. I spent 13 years at Coke doing innovation — building new brands as well as making early-stage investments in emerging brands. More recently, for the last three years I’ve been building an innovation & new ventures function at Assurant, the global insurance firm. These companies are in two very different sectors, and they have very different DNA. Both gave me insightful learnings in crafting innovation strategy.

Innovation at Coke

Coke has over 400 brands across the world in non-alcoholic beverages. These are soft-drinks, energy drinks, waters, teas, etc. Coke has excellent product development capabilities, numerous food scientist at key centers around the world, and excellent ideation, stemming from consumer insights and trends. There are a lot of good ideas coming through the pipeline. However, few of the ideas ever make it to market and get scaled. The Coke system missed the energy boom that Red Bull led, even though it had numerous energy drinks early on. I remember stacking up seven cases of Coke versus one case of a new energy drink, KMX, to illustrate to the bottler that less “heavy lifting” was required for energy drinks, for the same gross profit. Despite the clever demo, I got little traction. Vitamin Water, one of the billion dollar brands in Coke’s portfolio was acquired at a huge premium — $4.1 billion — even though similar products were developed and marketed previously by the company in other parts of the world.

During my time at Coke we missed out on energy shots, such as 5-Hour Energy, which came to market via a different route, and we didn’t pay enough attention. Why? Well, I believe Coke’s 130-year old DNA is about selling brand Coca-Cola and everything it stands for. The company and its culture are geared to brand Coke. As CEO Muhtar Kent likes to say, they are “polishing the diamond.” This cult of Coca-Cola is excellent for employee belief and for brand Coke. When the brand performs, the company as a whole does well (which not the case lately, hence the search for $3 billion in cost savings, along with thousands of employee layoffs.)

Yet the cult of Coke is not good for innovation. Protecting the mother brand leads to a lack of any kind of risk-taking on organic, internal innovation. Coke itself is not to be innovated on as a beverage, as in the company’s eyes, it is the perfect soft drink. Partnerships are few and don’t involve open innovation (exchange of intellectual property between companies, something Procter & Gamble is stellar at.) The attitude is driven by the heritage of the “secret formula” and the “we know best” mentality. Not a great foundation for innovation.

So how can Coke innovate for growth? I believe by being aware of its DNA, rather than fighting it. Its origins are a great product, and maybe more importantly, outstanding brand marketing and a powerful distribution system. These were the hallmarks of the Coke system early in the 19th century, and they remain so to this day.

Is there a way to use that strategic advantage for innovation? There are certainly examples of it. A capable team of seasoned Coke marketers and the bottling system in the U.K. came together to form an entity that focused on an energy drink called Mother. They used the capabilities of sales and marketing that have always been a strength, and it was a big win.

Conversely, while I was with the Coke North America innovation group (known as Venturing & Emerging Brands, or VEB), we were unable to strike a partnership with the bottlers that was meaningful. So we built our own warehouse distribution network, partnering with external entities and sharing space on the truck and on the shelf, while at the same time building and testing new brands like Zico coconut water, Sokenbicha Tea, Cascal Natural Soda, and Honest Tea. We were solving multiple unknowns and not using our core strengths. We had to piece the network together, working with “hired guns.” It was very tough going, until we honed our strategy.

Partnering and investing early and collaborating with entrepreneurs, while using Coke’s marketing and distribution strength, eventually paid dividends. We invested in Zico coconut water and birthed a new beverage category (natural isotonic) by using our packaging development, marketing, and distribution scale to capture the market. Similarly, Project Jet, known now in the market known as the “Freestyle” soda dispenser, was a success, as it focused on the core brand, and utilized Coke’s sales and distribution strength. Freestyle, left, gave Coke added leverage with some of its fast food restaurant customers.

Innovation at Assurant

Assurant is a $10 billion diversified insurance company. It is made up of about 30 businesses, organized in four business units (they are currently selling off two, health and employee benefits, and focusing on housing and lifestyle protection services). The company was formed in 2004, yet prior to that it was part of a Belgian holding company, Fortis, that acquired numerous assets in the U.S. Why is this important? Well M&A is how the company came to be, and M&A is still the driver, whether investing in new growth or shedding assets for profitability. In essence its a holding company, not really a unified entity.

How does innovating for growth fit at Assurant? Initially, my mandate was to set up a team and capability to develop and test our internal ideas. We had some great ones, and they would get C-suite support and funding. Yet we would then not get traction with the business units and in the market. The business units were off looking at investments and possible M&A transactions — quick wins. That was a path to growth that was more attuned to the DNA of the company. It was apparent that we were going against the grain.

Eventually, I shifted strategy to focus on early-stage partnering and investing for new growth. We started working with innovative start-ups in the financial tech world, in financing, in the sharing economy…and we were getting traction. The process was becoming smoother, because we were closer to the DNA of what the company was about. Several initiatives are commercialized and growing. The jury is still out on the level of success.

Implications for Innovators

As humans, our core make-up, our DNA, does not change. We certainly can influence who we are through the actions we take, the environments we choose or create, and the people who surround us. As an individual, when you are matching your innate gifts to the right environment, good things happen. Similarly, innovation leaders need to understand their company’s DNA, the evolution of the business over time, the environment in which it operates, the unwritten rules of engagement, its culture and its strengths.

With that understanding, you can develop strategies for innovation based on your company’s DNA. That will produce the greatest results in the shortest amount of time, with the fewest resources and the least friction.

Here’s a chart that offers my perspective on what characterizes the DNA of five companies:

Sreten Gajic is a Contributing Writer and formerly VP/Innovation, Assurant & Director, Coca-Cola New Ventures