0:00 Okay, so here's a question for you.0:02 What happens when your data is perfect… but your decision is still catastrophically, historically wrong?0:10 That sounds like the setup to a horror story for founders.0:14 I mean, we live and die by our data.0:16 If you can't trust that, what can you trust?0:20 Exactly!0:20 It reminds me of what we were saying last week about Microsoft and Nokia.0:26 They had all this data, all these smart people, and they still just completely missed the boat on smartphones.0:34 But this...0:34 this is different.0:36 This is a story about a company that didn't misread the future.0:40 They misread their own customers.0:43 Right now.0:43 Today.0:44 Oh, I think I know where you're going with this.0:47 This is the big one.0:49 This is the one they teach in business school as the ultimate cautionary tale.0:54 We are talking about the launch of New Coke.0:58 The marketing faceplant to end all marketing faceplants.1:02 But here's the thing that always gets me — they didn't just, like, pull this idea out of thin air, right?1:09 There was a reason.1:11 There was a HUGE reason.1:13 And you have to understand the context of the time.1:16 This is the early 1980s.1:18 For fifteen straight years, Coca-Cola's market share had been slipping.1:23 Fifteen years!1:24 Wow.1:24 That's not a blip, that's a death spiral.1:27 It's a slow, grinding decline.1:30 And their biggest rival, Pepsi, is just eating their lunch.1:34 They're running the "Pepsi Challenge"— these blind taste tests in malls all over America.1:40 And people are consistently picking Pepsi.1:43 It was working.1:45 Pepsi was seen as the cool, new, youthful choice.1:48 Coke was starting to feel...1:50 a little old.1:51 A little tired.1:52 Okay, so they're on the defensive.1:55 This wasn't arrogance.1:56 It was desperation.1:58 A hundred percent.1:59 The entire cola category was lethargic, and they felt like they HAD to do something dramatic to shake things up.2:07 The CEO at the time, Roberto Goizueta, he knew they needed to take a big swing.2:13 So they said, "Okay, the problem is the product.2:16 Pepsi is sweeter.2:18 The kids like sweeter.2:19 Let's make our product better." Which, on its face, sounds like Business 101.2:25 If your product is losing in taste tests, make a better-tasting product.2:30 And that's exactly what they did.2:32 They launched what was, internally, one of the most ambitious research projects in history.2:39 Project Kansas.2:40 They spent millions.2:42 And they conducted nearly two hundred THOUSAND blind taste tests.2:46 Two hundred thousand?2:48 That's not a focus group, that's a census.2:51 It's a staggering number!2:53 And the results were completely unambiguous.2:56 Over and over again, people picked this new, sweeter formula over the original Coke.3:02 Not only that, they picked it over PEPSI.3:05 So the data was crystal clear.3:07 They had a scientifically proven better-tasting soda.3:11 They had a winner.3:12 On paper, this was the most well-researched, data-backed product launch in the history of consumer goods.3:20 They had solved the problem.3:22 So in April of 1985, they made the call.3:25 They held this huge press conference in New York City.3:29 And they announced they were changing the formula of Coca-Cola for the first time in ninety-nine years.3:36 And here's the part that I can never wrap my head around.3:41 They didn't just introduce "New Coke" as, like, an alternative.3:45 A new flavor.3:46 No.3:46 That's the critical mistake.3:48 They got rid of the original.3:50 They took it off the shelves.3:53 Forever.3:53 The ninety-nine-year-old formula was gone.3:56 This new thing was now "Coke." Period.3:59 That is...4:00 an incredible level of confidence.4:02 Or hubris.4:03 I can't decide which.4:04 It's walking a very fine line between the two, isn't it?4:09 And the public's reaction...4:11 was not what they expected.4:13 Understatement of the century.4:15 I mean, people lost their MINDS.4:17 It was immediate.4:18 It was visceral.4:19 The company's consumer hotline, which normally got about four hundred calls a day, jumped to fifteen hundred calls a day.4:28 Overnight.4:29 They had to hire a whole new staff of people just to answer the angry phone calls.4:35 And these weren't just, "Oh, I don't like the new taste" calls, were they?4:40 Not at all.4:41 People were emotional.4:43 They were hurt.4:44 They felt betrayed.4:45 The head of consumer affairs at the time, a woman named Lynn Henkel, said they had to expand her team from a dozen people to one hundred and eighty just to handle the calls and letters.4:59 And people were sharing these deeply personal stories about what Coke meant to them.5:05 Like what?5:06 Oh, everything.5:07 Their first date.5:08 Summers with their grandparents.5:10 Coming home from the war.5:12 It was woven into the fabric of their lives.5:15 And then you had the organized backlash.5:18 Protest groups started forming.5:20 My favorite is the "Society for the Preservation of the Real Thing." No way.5:26 Yes!5:26 And the "Old Cola Drinkers of America." They claimed they recruited a hundred thousand members to demand the return of the original formula.5:36 People were walking around with picket signs.5:40 It was a full-blown national crisis...5:42 over soda.5:43 This is where it gets surreal.5:45 And what were people inside the company thinking?5:49 The rank-and-file employees?5:51 They were getting hammered.5:53 The company's own archivist, a guy named Phil Mooney, said that people held any Coca-Cola employee personally responsible.6:02 Your neighbor who worked in accounting at Coke?6:05 It was HIS fault.6:06 The security guard at the headquarters?6:09 HE did this to you.6:11 Mooney said, and this is a direct quote, "Those 79 days felt like an eternity… it was sort of like we were starring in a bad movie." I can only imagine.6:22 You go to work for this iconic American brand, and suddenly you're a public enemy.6:28 And all because of a decision you had nothing to do with.6:32 So here's the question for us, as founders.6:35 What's the lesson here?6:37 The data was good.6:38 The logic was sound.6:39 Where did they go wrong?6:41 I think it's this: Your quantitative data can tell you WHAT people do.6:46 It can tell you what they prefer in a sterile, one-off test.6:51 But it almost never tells you HOW they feel.6:54 It doesn't measure the emotional, psychological weight of a brand.6:59 They asked the wrong question.7:01 They asked the wrong question!7:03 They asked, "Which of these two liquids tastes better?" And they got a clear answer.7:09 They never once asked, "How would you feel if we took your Coca-Cola away from you forever?" And if they had, the answer would have been...7:19 well, we saw the answer.7:21 Riots in the streets.7:23 Exactly.7:23 They A/B tested the product, but they never tested the meaning.7:28 There’s a story about that, right?7:30 About an elderly woman talking to one of the executives?7:34 Yes.7:35 It’s maybe the most powerful anecdote from the whole saga.7:39 The company president, Don Keough, was getting an earful from people everywhere he went.7:45 And an elderly woman came up to him and told him, flat out, that the company had taken away her memories.7:53 Oof.7:53 That lands.7:54 "You've taken away my memories." How do you even respond to that as a CEO?7:59 You can't show her a spreadsheet from the taste tests.8:03 You can't.8:04 The game is over at that point.8:06 You've stepped on something sacred.8:09 The company's archivist, Mooney, put it perfectly.8:12 He said, "When senior leadership made the decision to change the formula, they underestimated the deep psychological attachment people had to Coca-Cola." So the failure wasn't in the research, it was in the interpretation.8:29 They saw the brand as just the liquid in the can.8:32 But for consumers, the brand was...8:35 I don't know, America.8:36 Summer.8:37 Family.8:37 It was an identity marker.8:39 It was an identity marker!8:41 That is the perfect way to put it.8:44 It wasn't a beverage, it was a piece of them.8:47 And when you change it, you're not just changing a flavor profile.8:52 You're telling them that their memory, their identity, is wrong.8:56 Or that it doesn't matter.8:58 Which is an insult.9:00 It's a deep, personal insult.9:02 And here’s what that means if you're a founder, especially if you're working with a beloved product.9:09 You are not just the owner of that product.9:12 You are its custodian.9:14 You are the steward of what it means to your most passionate users.9:19 And that meaning might have nothing to do with the features you think are important.9:25 Absolutely.9:26 You might be obsessed with a technical spec or a new feature, while your customers just love the way your product makes them feel.9:35 They love the community around it.9:37 They love the memories they've made with it.9:41 And if you "improve" it in a way that breaks that feeling, you haven't improved anything.9:47 You've broken the magic.9:49 You can't A/B test magic.9:51 You really can't.9:52 And Coke learned that the hard way.9:54 They had the best data money could buy, and it led them straight off a cliff because it was measuring the wrong thing.10:03 So how long did they stick to their guns?10:06 How long did they let this firestorm rage?10:09 Seventy-nine days.10:10 From the launch in April to early July 1985.10:14 And like we said, inside the company, it felt like an eternity.10:18 They were getting thousands of angry letters, people were hoarding cases of the original Coke they'd bought before the switch.10:27 It was a total siege.10:29 So what was the breaking point?10:31 The pressure just became unbearable.10:34 It was clear this wasn't dying down.10:36 It was getting worse.10:38 So on July 11th, 1985, they surrendered.10:41 CEO Roberto Goizueta called another press conference and announced they were bringing back the original formula.10:49 And what did they call it?10:51 They couldn't just call it "Coke" again, could they?10:55 Nope.10:55 The new stuff was still officially "Coke." So the original came back under the name "Coca-Cola Classic." And the country basically threw a party.11:06 The news led the national broadcasts.11:08 It was a moment of collective relief and celebration.11:12 Which is just wild.11:14 But okay, here's the other part of the legend.11:17 The theory that this was all a brilliant, 4D chess move.11:21 That they did it on purpose to make people realize how much they loved the original.11:27 Do you buy that for a second?11:29 Not for one second.11:31 No way.11:31 This was a genuine, grade-A, spectacular screw-up.11:35 It cost them millions in development and lost sales, and the damage to their credibility was immense.11:42 Anyone who says it was planned is either buying into the spin or selling it.11:48 Right.11:48 But the spin itself is kind of brilliant.11:51 Oh, the spin is masterful.11:53 This is where Goizueta, the CEO, really earned his money.11:57 He never framed it as a failure.11:59 He said, and I'm quoting here, "We set out to change the dynamics of sugar colas in the United States, and we did exactly that — albeit not in the way we had planned." "Albeit not in the way we had planned." That's an all-timer.12:16 It's incredible!12:17 He also said the whole episode sent a powerful signal that the company was "ready to do whatever was necessary to build value." He turned a humiliating public retreat into a story about being a bold, innovative, risk-taking company that listens to its customers.12:36 So the lesson isn't "don't make mistakes." It's "be really, really good at explaining your mistakes afterward." I think the real lesson is even better than that.12:48 The genius wasn't the mistake.12:50 And it wasn't even the spin.12:52 It was the speed and the humility of the reversal.12:56 They screwed up on a global scale.12:58 And instead of digging in their heels and telling their customers they were wrong, they listened.13:05 They admitted their error, and they gave people what they wanted.13:10 Seventy-nine days is incredibly fast for a corporation that size to completely reverse a major strategic decision.13:18 That's a great point.13:20 The ability to say "we were wrong" is a superpower.13:24 And they ended up stronger for it, right?13:27 Coca-Cola Classic started outselling New Coke almost immediately.13:31 By a huge margin.13:33 New Coke limped along for a few more years under different names like "Coke II" but eventually just faded away.13:41 The whole fiasco ended up reaffirming America's love for the original.13:46 The brand's connection with its customers was stronger than ever.13:51 It's become such a part of marketing lore that Netflix even did a big partnership with their show Stranger Things to bring New Coke back for a limited time a few years ago.14:03 It's a cultural touchstone now.14:05 So the final lesson from Phil Mooney, the archivist, was that New Coke taught them they were "custodians of more than a product." Exactly.14:15 And I think that's the thought to end on.14:18 For anyone building a business, creating a product, you have to ask yourself: What am I the custodian of?14:26 Is it just this code, this physical object, this service?14:30 Or is it a feeling?14:31 A community?14:32 A memory?14:33 And are you measuring what really matters to the people who love what you do?14:39 Because if you're not, you might have the best data in the world...14:44 and still be just seventy-nine days away from disaster.
