New Coke Risk Lessons Are Still Easily Misunderstood

New Coke is back. No, it’s not back as a product that consumers can buy in stores, though it will be available online in limited quantities. Instead, New Coke, a high-profile failed product which was on the market briefly in 1985 to compete with Pepsi on taste, is back for promotional purposes, appearing in the Netflix series “Stranger Things”. And, with New Coke’s return, the role of risk taking at the Coca Cola Company has also resurfaced.

I wrote about the risk versus reward issues of New Coke some time ago in my special report titled “Are You Killing Your Golden Goose?” Now that Netflix’s “Stranger Things” has drawn attention to New Coke and to the Coca Cola Company’s risk taking, it is an opportune time to clarify the lessons that New Coke teaches about risk.

Essentially, New Coke’s lesson is that risks should be taken skillfully. This does not mean risk should be avoided.  What It does mean is that it is generally a good idea to avoid huge risks where there is low potential reward. It means that the risks taken should be prudent since, contrary to popular myth, high risk does not lead to high reward.

The May 22, 2019 Wall Street Journal article “Netflix Show Gives New Coke Second Life” by Jennifer Maloney mentions something called New Coke syndrome. A term that has been around for a while now, New Coke syndrome refers to how the Coca Cola Company has been avoiding risk due to fear of additional New Coke-like failures. According to the article, “The 1985 flop deepened a culture of caution that became known as New Coke syndrome.” The article adds that “Chief Executive James Quincey is now pushing his staff to take more risks.” The company’s heightened risk taking was made known a while ago and I discussed it in my newsletter last September.

Nonetheless, based on my extensive research into business success and failure patterns, the lesson of New Coke is not a call for excess caution. It is not a mandate to avoid risk. Nor does it encourage a culture of caution that fears risk. What New Coke teaches is that risk versus reward must be considered. Risks not justified by potential for reward generally should not be taken. And, risks should not be taken if a company is not prepared to deal with the potential downside. The lesson of New Coke is about the kinds of risks that should or should not be taken. It is not about whether to take fewer risks or to take more.  It’s about what kind, not about how many. Taking more risks of the wrong kind can be especially detrimental.

That’s why, as the Coca Cola Company strives to take more risks in the aftermath of New Coke, it’s really important to get those risks right. The right kinds of risk can bring huge reward. On the other hand, more risk of the wrong kind can easily do considerable harm.

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Taking the right risks can make so much difference for business success. If you’d like a workshop on Taking Business Risks the Right Way, just contact us.  

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