Innovation & Renovation The Nespresso Story Case Solution

2. What role did Nestlé’s corporate culture play in the productization of Nespresso?

The corporate culture contributed to productization of Nespresso as innovation (and renovation) was an important ingredient at senior levels of the organization. While there was initial resistance to this new concept, it was the leadership capabilities of the CEO and NCS which took the project to conceiving and then the implementation phase. Research & Development (R & D) was a significant concept at Nestle Headquarters at Vevey. Plus, the headquarters was willing to extend support in the form of a separate business unit.   

3. Who were the key players in the Nespresso productization, and which role did each one play?

The most significant player in this episode appears to be Lang, who was headhunted by the company from Philip Morris. He spearheaded the company’s Nespresso initiative and explored markets other than the office segment. Secondly, it was Nestle’s CEO who continued to challenge Lang and pushed him further into the product. While there was skepticism inside the organization about the Nespresso System, the CEO and the senior vice president of the division both stood by the concept.

4. Based on what you know from the case study, what role did Nestlé’s core competencies play in the productization of Nespresso?

The core competencies at Nestle included a legacy, a heritage of successful and reliable products, competent workforce, and a premium image. These competencies all contributed to the productization of Nespresso as an elitist and individualistic image of Nespresso was planned. The team that was working with Lang was strongly committed to and believed in the concept, although the concept faced resistance initially. An overall culture of innovation and R & D practices further contributed to the productization.  

5. What is meant by “innovation” and “renovation”, respectively, in the Nestlé context?

In the context of Nestle, innovation meant thinking much ahead of the consumer; that is, giving the consumer a lot more than what they expect from you as a company to deliver. Renovation, on the other hand, is at least meeting customer expectations or adding value-added benefits or services with a basic product. Hence, innovation, as compared to renovation, is more related to breakthrough products and providing a ‘wow’ moment to the customer.   

6. Which role did each of Nestlé’s corporate functions play in the Nespresso productization?

The success associated with Nespresso was a combined effort of manufacturing, operations, R & D, finance, and marketing functions. Although it was ultimately the push from the marketing that led to more awareness and international expansion of Nespresso, the role of technical and manufacturing cannot be ignored. This is because Lang was primarily hired for the technical side of the business and reporting to the in-charge of Technical. The role of operations then was to identify ‘change leaders’ in the organization.  

7. Identify the critical success factors in the productization of Nespresso.

The critical success factors can be identified as primarily identifying an opportunity and capitalizing upon it, the team’s firm belief in the concept and dynamic policies of Lang. Nespresso was promoted as a bundled solution consisting of the machine and the espresso capsules. The elite image of the company, and in particular the espresso, made a significant contribution to the success. While there were ambiguities, the team for Nespresso stood with the senior management and their line managers.

8. Why do you think Nespresso was first launched in Italy?

Italy was the country with the highest consumption of espresso style coffee. Hence, it seemed a good idea to promote a new and technical product related to espresso in that country. Moreover, Italy was being understood as the leader in the world of fashion, cuisine, and culture. Hence, the premium image of Italy was consistent with the image of Nespresso that the management was trying to promote. Also, Italy enjoyed a comparatively closer proximity to the Nestle Headquarters and NCS at Vevey.  

9. Why did Nestlé management keep an “arm’s length” relationship with Nespresso and bring in Yannick Lang, an outsider, to manage it? What does this say about Nestlé’s ability to innovate?

Since Nespresso was a business and product which appeared much different to Nestle’s main line of products, the management did not want increased resistance and criticism to the idea. For this purpose, Nespresso needed to have its breathing space and separate research and development facility. Nestle’s ability to innovate seems limited, and time consuming, which is why an outsider was hired to bring in more fresh ideas, and not necessarily from the same industry.

10. Compare Nespresso’s initial “stealth marketing” (word-of-mouth) strategy with its current use of George Clooney as “poster boy” for the product.

The initial stealth marketing was used by Nespresso as its management believed advertising will not create good awareness for this exclusive product. The customer had to hear about the product from the people they trusted (peers, family, friends) to want to try the product. However, the current celebrity endorsement is in line with the company’s challenge of increasing awareness and image of the product. Hence, the company is moving towards more traditional and mass media campaigns.

11. Do you think that Nespresso would have been as successful without Nestlé as a corporate parent? Justify your answer.

No, I believe a major part of the success of Nespresso can be attributed to its corporate parent. The customers adopted something new because it was coming from a well establish corporate parent in the form of Nestle. Secondly, Nestle was already present in the coffee business but now they were moving towards more individualized coffee. The European presence of Nestle contributed to its success in France, Belgium, and Italy, which have high coffee consumption.