Too many people confuse wasteful proliferation with innovation. Simply selling more varieties of the same product or service to more places, in more configurations adds complexity and many hidden costs. Frequently sales will barely budge, as the overall demand is subdivided among more and more choices.
There are good ways to extend ideas by refining them and adding more innovation—the Swiffer Duster and Wet Swiffer are good examples of innovative line extensions that are not wasteful proliferation. Adding video to an Apple iPod is powerful innovation. Creating two-dozen varieties of Wheat Thins crackers is wasteful proliferation.
An “Old But Still Good” Example
In their great, old book, Positioning-The Battle for your Mind, Jack Trout and Al Ries use a 7UP story from that era to make the same point. 7UP had successfully positioned itself as the Un-Cola. What brilliant idea. It differentiated 7 Up and placed it squarely in the place where its demand was greatest—someone who wanted a refreshing soft drink that was not a cola.
7UP erred when it started proliferating the varieties it offered. Diet was a good idea—it worked. Then came a variety of flavored versions, like Cherry 7UP, and other variations and combinations. More varieties of 7UP appeared on supermarket shelves, and a surprising thing happened: sales of 7UP in all its varieties didn’t go up. The various flavors, created by proliferating and brand extension, were each taking a piece of the total Un-Cola market, which was only so big in the first place.
The important lesson is more choices don’t necessarily result in more sales. In fact, too many choices can result in fewer sales, as confused consumers are unable to choose one. (Note: Bottled water had not come along yet!) 7UP wisely cut back to the Un-Cola and Diet 7UP and life was simpler and sales were just fine. From then on, new varieties were added very cautiously. Yet, soft drink companies spend million of dollars today creating new varieties and flavors, most of which come and go, adding little to total sales, but draining resources from true innovation.
Before anyone jumps to the conclusion that I am anti-innovation, nothing could be further from the truth. I am pro-innovation. It is the only way to create truly sustainable competitive advantage and grow profitably in low growth markets. In high growth markets, growth is easy to find. Not so these days, when most developed countries are growing in low single digit rates—if at all.
More Variety Doesn’t Mean More Sales
They can also over-complicate things. To expand on my earlier statement I am a big fan of Wheat Thins crackers, but about two or three years ago, Nabisco got the “let’s make more flavors” bug, and they got it bad. Shelf space expanded, but in supermarkets, the supplier pays slotting allowances so that is no indicator of success. I do not know what happened to overall sales and to sales of “original Wheat Thins,” but I’d bet the other flavors experienced brief growth spurts at the expense of “original” and then dropped off. I’ve noticed that where I shop, the number of varieties has now been reduced. That’s a good indication that the proliferated varieties were not selling so well.
Don’t Go Too Far
On the other hand, cutback on variety and new items can depress sales, as Walmart discovered. Walmart had historically done well for years at controlling proliferation. Then as it got “really big” it began to proliferate in search of sales growth—not just items but brands too—many of them, its own brands. This is a sure sign of corporate ego: “we know better than suppliers how to develop brands and merchandise.” They don’t say it; they just act like it. Inventories climbed, and shelf productivity dropped. John Fleming brought in his (now well-known) Win-Play-Show segmentation to reduce both supplier numbers and item proliferation.
When You Go Too Far, Stop And Back Up
Unfortunately, its well-intentioned SKU (Stock Keeping Unit) reduction was too severe, costing the giant retailer market share and sales. Comp store sales suffered from two problems at once: selling more pieces for less money (to be competitive during a downturn) and cutting back hard on SKUs while cutting inventories at the same time. Consumers came to find items that simply were not there—either out of stock due to low inventory or out of the assortment due to SKU cuts. In this case, containing complexity went too far. To its credit, Walmart has initiated corrective action, adding back some items it dropped, albeit selectively
With these old and new examples in mind, let’s consider the constant conflict between proliferation/line extension and the need for continuous innovation.
Innovate to Meet Needs—Recognized and Unrecognized
Innovation is all about finding new solutions that fulfill some recognized or (better yet) unrecognized need. Who knew they needed FedEx or chopped, bagged lettuce? Once these innovations came into existence, the problems they solved (fast delivery of packages, and time-pressed consumers meal prep convenience) became clear. Copiers quickly entered the markets created by the innovators. The wise innovators are prepared for this competitive surge of “me too” products. They are ready with a new generation of improvements on the first innovation.
FedEx came up first with an even faster delivery, and then later with a less expensive “FedEx Ground” to compete with the formidable UPS offerings. Bagged lettuce makers began to put an entire salad in a bag, complete with chopped vegetables, tailored to popular meal types (Caesar salad mix, for one example).
Creativity is not Innovation
Creativity is a wonderful thing. Ideation is a source of many innovations. Innovation, however, is the ability to commercialize a creative idea successfully. In this process, the huge array of ideas is trimmed, sorted, selected, and/or discarded. If this “winnowing out” process is not done, then the result is wasteful proliferation. If the selection process is done properly, it thwarts complexity, by increasing focus on the best choices for successful commercialization.
Thus, avoiding complexity is not anti-innovation. Innovation does not automatically lead to complexity. The two are complimentary. The challenge is finding the balance point. Some systems and processes are intolerant of high variety and this causes inefficiency and wasteful complexity. Others are very variety friendly—think of amazon.com—and use variety as a competitive advantage. So does Subway, in its “build to order” sandwich shops.
Summary—Understanding is Key
The key is in understanding what adds wasteful proliferation and what adds value. For example, a retailer simply opening more stores doesn’t necessarily add value. New stores cannibalize old ones and create wasteful duplications in overhead. The same is true for the offerings in those stores. McDonald’s and Starbucks® both learned this as they over-expanded stores and product offerings. They wisely cut back when they learned of their errors.
This learning need not be done by trial and error. Walmart, McDonald’s and Starbucks have learned the difference between innovation and proliferation—sometimes painfully. When the reasons behind the success or failure of the choices are well understood, many errors can be avoided. The key is understanding the differences.
* * * * *
John L. Mariotti is President and CEO of The Enterprise Group. He was President of Huffy Bicycles, Group President of Rubbermaid Office Products Group, and now serves as a Director on several corporate boards. He has written eight business books. His electronic newsletter THE ENTERPRISE is published weekly. His Web site is Mariotti.net.
 Trout, Jack and Ries, Al. Positioning—The Battle for your Mind. 1981. McGraw-Hill, New York.
 Schwartz, Barry. The Paradox of Choice—How More is Less. 2004. HarperCollins, New York.