Wednesday’s Wall Street Journal had a great article (”U.S. Thirst for Mexican Cola Poses Sticky Problems for Coke”) illustrating the perils of ignoring customer preferences. (link via The Arizona Republic) As Chad Terhune describes in the WSJ article, Coke has been ignoring the demands of its Hispanic customers in the U.S., who prefer the taste of “Mexican Coke” (Coca-Cola bottled in Mexico and made with cane sugar rather than high-fructose corn syrup) to U.S.-made coke (which tastes worse and comes in cheap-looking cans). In one example cited in the article, a Latino supermarket near Atlanta sells 20 cases of Mexican-made Coke each week, compared to only 5 cases of the cheaper U.S. version. By a 4:1 margin, customers prefer the taste of Mexican-made coke, and also have a deeply-held loyalty to the old-time, curvy glass bottles (rather than the cheaper cans and plastic jugs of U.S.-made Coke). In response, these Hispanic customers have been devising ingenious ways of importing Mexican Coke into the U.S.

Mexican Coke has been a dirty little secret at Coke, which has been increasingly disturbed by the growth of underground supply chains that bypass Coke’s established distribution systems. (Think unmarked trucks pulling up with cases of scuffed glass bottles stamped “Hecho en Mexico” in Hispanic communities all across America). Coke calls this underground supply network the work of “bootleggers” and has even complained to the U.S. Customs and Border Protection Agency, but to no avail (the Mexican Coke isn’t fake, it’s just not officially sanctioned by Coke). As the Wall Street Journal explains:

“The underground business is especially galling to Coke and its bottlers because Coca-Cola Classic sales in the U.S. are down 10% since 2000, and Coke’s market share of the $66 billion-a-year industry is at an eight-year low.

Don Knauss, president of Coke’s North American operations, calls the bootleg cola “an irritation.” He recently assigned a team of executives to fix the problem. “There are a lot of distributors bringing Coke into the U.S. We don’t know how big it is,” he says. Last year the company quietly started a limited test program to allow the authorized distribution of a small amount of Mexican Coke through one of its U.S. bottlers.

When U.S. bottlers complain about unauthorized Mexican Coke being sold in their territory, Coke investigates. Mart Martin, a Coke spokesman, says the company has successfully filed lawsuits over Mexican Coke in the past, but he declined to elaborate. “We have found, however, that sending draft complaints and cease-and-desist letters to be relatively effective since they serve as a mechanism to inform the unauthorized distributor of the legal issues,” he says. Martin says that the importation of Mexican Coke infringes on Coke’s trademark and on local bottlers’ authorized territories, but “it’s not an illegal product.” The company also has fined some of its Mexican bottlers for failing to keep their sodas out of the U.S.”

So what do you do if you’re Coke? Or, for that matter, what do you do at any company when your customers are using your product in ways that you never intended? Do you embrace the customer-centered innovation and hope for a larger piece of the market pie - or do you call in the lawyers and force-feed your customers what they don’t want?

UPDATE: Grant McCracken has written a great (and entertaining) post about the Mexican Coke fiasco on his blog. Skip to the end, where he compares the executives of The Coca-Cola Company to (1) the administrators of the Roman Empire and (2) the heads of the Catholic Church. (Hat tip: Niti Bhan)

Renee Hopkins Callahan of IdeaFlow points out that Joyce Wycoff of the Innovation Network has launched a Web-based innovation book club:

“Out of a list of 90 best-selling books related to innovation, twelve were chosen by a group of avid readers and innovation practitioners as the must-read list for 2006. It was a difficult choice but these special books were chosen for their ability to stimulate thought and offer practical tools and techniques to help make participants more productive advocates and leaders of innovation.”

Via the [innovation book club] blog and emails, book club members will have access to reviews, Q&A sessions with the authors, weekly emails with insights and highlights from the books, and readers’ guides that will offer great discussion questions to help you integrate the book content with your specific situation. Also, participants will be able to make comments via the blog.

There are two ways to participate: You can join the book club today and start organizing your own discussion group … or just participate in the online discussion.”

It certainly sounds like a great way to meet other individuals who are passionate about innovation. The reading list includes classics like Malcolm Gladwell’s The Tipping Point as well as buzz-worthy books like The Ten Faces of Innovation and Blue Ocean Strategy. Joyce Wycoff was one of the guest bloggers at the FORTUNE Innovation Forum in December and was featured in an exclusive Fortune Business Innovation blog Q&A about innovation on November 18.

Ideas about the wisdom of crowds and emergent intelligence popularized by the likes of James Surowiecki and Steven Johnson continue to gain traction. Over at Information Today, Barbara Brynko catches up with Peter Gloor, author of the recently published Swarm Creativity: Competitive Advantage Through Collaborative Innovation. According to Gloor, a collaborative innovation network is a “cyber­team of self-motivated people with a collective vision, enabled by technology to collaborate in achieving an innovation by sharing ideas, information, and work.” By extension, swarm creativity is what results when such a a group works together and exchanges ideas. Interestingly, Gloor points out there may be similarities between creative swarms and phenomena found in nature:

“Swarm creativity is like a beehive or ant colony. It may look chaotic from the outside, but everyone has a job, knows what to do, and does it.”

[image: eyeinastoria via flickr]