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Nespresso Case Study. (Entrepreneurship and Innovation)

August 2019

DOI:10.13140/RG.2.2.27417.98404/1

Affiliation: University of Birmingham

Authors:

University of Birmingham

Teaching Note: Nespresso Innovation and Business Strategies Nespresso is a business unit of the Nestle Group autonomously operating in 76 countries around the world. Nespresso has more than 135,000 employees worldwide. The Nespresso innovation aimed to portray product uniqueness as well as become a valuable product to the broader organization. Peter Brabeck, a former CEO for Nestle, formed a new business unit, Nestle Coffee Specialties (NCS), to conceptualize the ideas of Nespresso. One of the significant threats that the Nespresso business idea faced was the existing Nestle business model. The purpose of this paper is to highlight the significance of Nespresso's innovation. Evaluate whether NCS continuously succeeded in the conceptualization of its plans. Identify whether or not NCS effectively coordinated the innovation analysis to various business units that contributed to the future success of Nespresso. Additionally, in the business world today, turning creative business ideas into a profitable business is tough, and therefore, companies will show resistance at first. Nestle is not an isolate. Nespresso research and development (R&D) teams had to present a persuasive case for the innovation to move to adoption. To adequately justify Nespresso's venture, an analysis of both the Nestlé's Business Strategy Canvas and the innovation was key. Nespresso's business model was expounded from a perspective of various industry sectors affecting its success. The segments analyzed included the value chain, manufacturers and suppliers, ownership of patents, market share, organization committee, and financial resources. Technically, Nespresso was moved out of Nestle building to free it from Nestle business rules and effectively concentrate on its core functions. Although Nestle hired Lang to spearhead the NCS organization, in 1988, Nespresso became a strength and beneficial to nestle by allowing it to operate on its own (Söderberg 2019, 6). The analysis of the innovation ensured the continuous push of Nespresso's business strategic plans steering unimaginable success. However, the victory came with its challenges. Nespresso's well-positioned strategies effectively combated the threats and maintained sustainable growth that is evident until today. Nespresso's business management model is flexible in adapting to changes despite high reliance on its own creative and innovative ideas. Reference: Söderberg, P. J. V. (2019, August 8). Nespresso case study (Entrepreneurship and innovation) (DOI: 10.13140/RG.2.2.27417.98404). The University of Birmingham. https://www.researchgate.net/publication/335058135_Nespresso_Case_Study_Entrepreneurship_and_Innovation

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Nespresso Innovation 1

NESPRESSO INNOVATION AND BUSINESS STRATEGIES

Paula Jean V. Söderberg, MBA

Business and Innovation

University of Birmingham

United Kingdom

2018

*Teaching note at the end of the essay.

Nespresso Innovation 2

Abstract

The Nespresso business innovation model is one of the most successful and

widely studied mainly by businesses in the consumer sector. The business idea was not

successful overnight but slowly evolved into a profitable business venture. Nestle put in

place strategies to facilitate the conceptualization of the business unit plans. The

innovation eventually thrived into a successful model. An extensive analysis of the sectors

within the industry identified methods in which Nespresso could transform to attain

efficiencies. The business strategies were able to combat the challenges that came with

its success to gain a competitive advantage in the market. Nespresso venture overtime

achieved its aim of ensuring product uniqueness and value addition to Nestle. This paper

provides a summarized overview of the Nespresso model and its key elements. A brief

historical beginning of Nespresso as an independently operating business unit of the

broader Nestle Corporation is outlined in this essay. Referencing from a detailed study, it

describes how Nespresso systematically integrated and implemented the business idea.

Keywords: Nestle, Nespresso, Business Innovation

Nespresso Innovation 3

Introduction

Student ID 1735120

Nespresso is an “autonomous” worldwide corporation of the Nestlé Group,

contemporaneously in 76 countries with more than 13,500 employees worldwide. (Nestle-

Nespresso, 2018) Nespresso Innovation described the notion “what could we do” as a part

of Nestle s entrepreneurial and innovative activity for being a large organization. Its creativity

was not influenced only by producing something unique but as well as for being a useful

product. Therefore, this assignment is stipulated in order to emphasize the importance of

Nespresso s innovation, if whether or not Nestle Coffee Specialties or NCS was effective in

continuously conceptualizing its idea, by correlating Nespresso Innovation Analysis into

different segments and factors that contributed to Nespresso s success.

Nestle s Business Strategy Canvas Model was plotted and expounded to justify the qualities

of Nespresso s venture. The analysis on Nespressos industry and market picture after 2003

will further identify Nespresso s different ways of transformation and operational efficiencies.

Nespresso s sales are continuously manageable therefore I will also intricate the factors why

sales targets are arranged and how it is being achieved, as well as the significance of

learning from Nespresso s entrepreneurship, innovation and business strategies.

With accomplishments comes issues, therefore, this task will correspondingly enumerate

some of those risks and threat factors that Nespresso faces, then will convey the

recommendable and considerable actions needed.

INTRODUCTION

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Student ID 1735120

Business Model Strategical Canvas and Innovation Analysis from different significant

factors:

Nespresso s Business Model Canvas (Figure 1) is expounded below in different sectors:

1. Value Chain Management:

Nestle s separate organization: Nespresso by Nestle Coffee Specialties (NCS)

Nespresso is considerably a small separate company of Nestle. Its function is to develop

the innovation further, widening its market, develop its own persona, disseminate the

product and services as well as developing and producing the coffee capsules for the

Nespresso machine called the Nespresso pods. Nespresso was “physically moved out

of Nestle so that it could establish credibility and so that it didn t have to fight against all

the company s rules” of Nestle (Miller, 2003) which means that by launching this new

business, NCS can concentrate on the “core business by removing the managerial and

technical burden of activities unrelated to the mainstream business or to facilitate

learning from external sources in the case of enabling technologies or activities” (Tidd

et.al, 2015) Therefore Nespresso was beneficial to Nestle and considerably a corporate

proficiency strength.

NESPRESSO INNOVATION ANALYSIS FOR THE YEAR 1990 2003

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Student ID 1735120

5I Ne e inn a i n ill cc ing hi ea ? ha e he e been

incremental significant changes?

Primarily, after Nespresso s 1,700 patents expired in 2012, numerous companies such as

Lavazza, Senseo, and Tassimo began entering the portioned coffee market with similar

capsules, pods, and pads” (Teng, 2017) Therefore, there is a huge increase of competition

during this period. As a counter measure, Nespresso in 2013, ultimately achieved 80%

collaboration with AAA Sustainable Quality (Trademark) Program. This means that

Nespresso covers a higher protectorate over the coffee producers which means that rivals

may have to purchase coffee beans in a more expensive price. Nespresso therefore

strategized its growth into sustainability which will expectedly extent until the year 2020. In

2010, Nespresso had reach 200 boutiques. During the span of 2005 to 2018, Nespresso s

marketing strategy was “a lot of advertising” using Hollywood icons/personalities as well as

continuously increase and manage its sales. The machines and capsules continued to

innovate as well.

5 Question inspired from the Apple-Android Case

NE PRE O IND R AND MARKE PIC RE AF ER 2003

Nespresso Innovation 12

Conclusion and Recommendation

Student ID 1735120

6Ha an hing like c ea i e de c i n cc ed ?

Nespresso s innovative idea is considerably a “creative destruction” (Tidd et.al, 2015) due

to that espresso coffee, regarded as a high-end coffee indulgent, in which a suitable

espresso is well-known by its “fine taste and its crema, the visually distinctive creamy foam

on the surface, which coffee connoisseurs considered an essential part of the espresso

experience”, (Miller, 2003) affected the value of the espresso and the other special variety

of coffee when Nestle commercialized coffee machines through serving it at-home, as well

the non-partner coffee machine manufacturers. Big coffee restaurant servers are affected

as well for instance, the market share of Starbucks and of many others.

To sum up, Nespresso continued to fulfill its value proposition in bringing in-home,

personalized coffee while at the same time conducting a long-lasting relationship with the

customers. As the world evolve, I learn that the Nespresso s management is very much

capable of adopting to changes whilst being sequestered with its innovation creative ideas.

It also enhanced my perspective after analyzing this case that force-able decision making

is as important as being open to many dispositions, since being aggressive, could mark an

innovative idea into position. If Lang had not taken the fierce leadership strategy, Nespresso

would not have been materialized and developed today. For instance, Steve Jobs of Apple

had the same “to-do” aggressive attitude. Therefore, Nespresso s management is very

effective in implementing success in its environment.

I had ascertained as well that marketing research for commercialism/entrepreneurial

business is very essential to avoid additional costs in majorly relying into trial and error

learning as previous facts and data as well as the current influences will formulate a much

clear description of any business ecosystem.

Therefore, upon identifying Nestles Business Strategy Canvas Model, the analysis on

Nespresso s industry and different ways of transformation and operational efficiencies, as

6 Question inspired from the Apple-Android Case

CONCLUSION AND RECOMMENDATION