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All Good Things?

I’m writing this in the midst of “iPhone 5 fever.” Yes, the latest iteration of the iPhone has just hit stores, accompanied by the usual long lines and various examples of hoopla.

By the time you read this, it will probably be ancient history (technology news seems to have a short shelf life), but the big complaint about this latest iPhone has been its new maps feature. If you remember, Apple dropped Google maps to make room for its own new map, which was widely viewed as a major disaster. Misplaced landmarks and incorrect directions led to an uproar among consumers.

In fact, it even led one reporter, Joe Nocera of i>The New York Times, to write a column that gained quite a bit of attention entitled, “Has Apple Peaked?” In it, he found bigger meaning to the map fiasco, writing: “And maybe that’s all it is—a mistake, soon to be fixed. But it is just as likely to turn out to be the canary in the coal mine. Though Apple will remain a highly profitable company for years to come, I would be surprised if it ever gives us another product as transformative as the iPhone or the iPad.”

Wow. That’s a big prediction to make. And Nocera then goes on to ponder whether Apple has grown too huge to still take big risks on innovating, spending most of its time instead protecting its hugely profitable business model.

Remind you of anyone in the beverage business? As I read this I couldn’t help but think of the big guys, Coke and Pepsi. The biggest criticism directed toward them in recent years has been on the innovation front. Yes, they have introduced some incremental innovations every so often—a mid-calorie soda here, a more natural formulation there. But it seems when it comes to big new beverages, their idea in-boxes have been empty for a long time. Instead, most of their innovation has occurred around their brands—such as in packaging (the PlantBottle, see my story in this issue’s packaging section), or in vending (Coca-Cola Freestyle).

Inventing new drinks has mostly been left to the small start-ups who have less to lose, and everything to gain. Honest Tea was a perfect example. And what has been Coke and Pepsi’s solution? Buy them, as Coke did with Honest Tea.

This strategy seems to have been working out pretty well for quite some time now. But my question is, for how much longer will it continue to work? How much longer can they rely on some other, smaller company, as a replacement for their own innovation? 

The soft drink category is increasingly under attack as we have just seen in Mayor Bloomberg’s victory in New York. And Bloomberg’s message is being heard by a new generation who are foregoing sugary soft drinks for more natural, more healthful offerings. 

Will Coke and Pepsi be able to rise to this challenge and come up with the innovative new drinks these consumers are looking for? Or are they positioning themselves for a slow decline, or at best stagnation, by guarding their current positions and being afraid to take the big risks that real innovation necessitates? 

As the saying goes, all good things must come to an end. Can Coke and Pepsi, and Apple for that matter, delay that end for many more years to come?  

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