Gerry’s Summer Reading List

Hey, readers: if you’re in the beverage innovation game and haven’t yet read Jonah Lehrer’s Imagine: How Creativity Works (Houghton Mifflin Harcourt), you ought to put it on your summer reading list. Not that the book utters a single word, to my recollection, about the packaged beverage business, but its insights into innovation – ranging from how creative corporations like Pixar routinely break through creative barriers to the neuroscientific underpinnings of innovative thinking – are fascinating reading. (OK, I’m no neuroscientist, and if I was maybe I wouldn’t be in the beverage business, but Lehrer’s arguments and citations have a convincing ring to them.)

Since you’ve just promised me you’re going to read the book, there’s no need to review all its key arguments, which are rooted in compelling empirical experiments and case histories. So I’ll just highlight a couple. For one, Lehrer makes much of the propensity for outsiders to make key breakthroughs in a given sector, using insights from their areas of expertise to spot solutions that are opaque to insiders wrestling with the same problem. Such “recombinant” discoveries are reflected in history by Gutenberg’s transferring his knowledge of wine presses to book-printing and the Wright brothers’ transferring their knowledge of bike-building into creating the first (pedal-powered) airplanes. More contemporarily, former Eli Lilly unit InnoCentive, an early crowd sourcing initiative aimed at solving problems that Lilly’s own scientists couldn’t crack on their own, scored its best results from people who weren’t enmeshed in that specialty. Lehrer notes: “The secret was outsider thinking: the problem solvers on InnoCentive were most effective when working at the margins of their fields” – chemists solving molecular biology problems, a particle physics expert solving problems in chemistry and engineering, and so on.

Another key point in the book: new ideas arrive from the creative friction of dissimilar people who are forced to interact – whether it’s citizens colliding in a crowded city (Talking Heads frontman David Byrne picked up many of his most crucial musical and art influences just bicycling around New York) or people from different corporate departments bumping into each other in public areas (as Steve Jobs forced his Pixar employees to do by progressively moving the meeting rooms, cafeteria, bathrooms and gift shop to the center of its headquarters). Those ultimate outsiders, immigrants, account for a disproportionate share of patents and technology startups, Lehrer notes.

That creativity and innovation come out of this stew of unlike people interacting has cropped up in quite a few recent books on urbanism, including Edward Glaeser’s Triumph of the City and Alan Ehrenhalt’s The Great Inversion (about the movement back into the city). But, as Lehrer makes clear, it’s a mistake to view big corporations as a business analogue of vibrant cities. He cites researchers who concluded, after an exhaustive analysis of 8,500 publicly traded companies, that corporate productivity, unlike urban productivity, doesn’t increase with size. “In fact, the opposite happened: as the number of employees grew, the amount of profit per employee shrank,” he reports.

It’s easy to transfer Lehrer’s insights to other realms. As a pop music fan, I’ve long been struck by how many ground-breaking acts not only came out of left field, but couldn’t even claim a fundamental mastery of their instruments – whether it’s the semi-amateurs Johnny Cash assembled into his Tennessee Three or the Ramones, who helped change the direction of rock music while barely managing to strum three chords coherently. It’s not that breakthrough artists never emerge from conventional realms – after all, before breaking out, Jimi Hendrix spent years as a sideman – but rather that commanding formal virtuosity hasn’t been necessary to making a lasting impact.

Though Lehrer doesn’t talk about beverages specifically (aside from a discussion of the cutting-edge cocktail mixologist Don Lee at the center of a “parable of knowing less”), his conclusions synch up pretty well with the ad hoc observations of beverage people I know. Smaller companies, despite – or actually because of – the pressures and limitations they face, are inherently more likely to come up with breakthrough ideas than large companies. Prior beverage experience confers only limited advantages: many of the most intriguing new brands have come from total outsiders, or from folks who’ve come from some marginally related area, whether online marketing or sports medicine. In innovation, as Lehrer persuasively shows, having just a little bit of knowledge, far from being a dangerous thing, actually can be a good thing.

Sometimes having that “outsider” perspective can come just from being willing to look beyond the beverage aisle. This was brought home to me early when, in the 1990s, a since-vanished rival of AriZona Iced Tea used its superior purchasing power to put the squeeze on the 23.5 oz. cans that were vital to AriZona’s identity. That sent AriZona’s founders scrambling for an alternative, and the solution turned out to be a longneck, square-shoulder glass bottle of the type seen not in the beverage aisle but in the salad dressing or steak sauce aisle. In its modest but vital way, that seems to reflect the kind of “recombinant” thinking that Lehrer argues can lead to breakthroughs. In AriZona’s case, the bottle allowed the company to weather the can crisis, and it remains a key part of the packaging mix today, more than 15 years later. For those of us – in large companies or small – who take pride in how carefully focused we are on our business – it’s worth keeping examples like this one in mind.

Longtime beverage-watcher Gerry Khermouch is executive editor of Beverage Business Insights, a twice-weekly e-newsletter covering the nonalcoholic beverage sector.