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The following excerpt from Design Works, by Heather M.A. Fraser, is reprinted by permission of the publisher, Rotman UTP-Publishing © 2012. All rights reserved.

In this excerpt, the author uses a real-life example that brings to life the essence of the 3 Gears of Business Design: empathy, visualization and strategy:

In 1992, I was in Vevey, Switzerland, at Nestlé's global training center on Lake Geneva. I went to help myself to a cup of coffee and discovered a coffee machine that made an incredible cup of espresso by popping one small, easy-to-use coffee capsule into the machine. Fast-forward sixteen years. It's 2008, and I come upon a magnificent Nespresso Boutique on the Champs Elysées in Paris. I thought to myself,

"How remarkable. That's the same coffee system I coveted in Vevey sixteen years ago. Have they ever come a long way." That piqued my interest in the company and compelled me not only to become a customer but to investigate what was behind the Nespresso phenomenon from a business innovation standpoint, asking: What had they done over the years to build such momentum and distinct market success?

Coffee is one of the most popular beverages worldwide, with a yearly consumption of more than 400 billion cups and a steady upward trend in daily coffee consumption since 1993. The growth in specialty coffees and out-of-home consumption has also risen, fueled by the proliferation of cafés, franchises, and products that compete for that special coffee moment in people's everyday lives. To a coffee connoisseur, having your own stylish espresso bar in your home and being able to make a perfect cup of coffee at the touch of a button with no fuss or cleanup is the ultimate indulgence. To have instant access to a company that caters to you as a special member of an exclusive coffee club and delivers your customized order directly to you with one phone call or a quick online order makes the relationship that much more satisfying. That's the Nespresso brand experience.

This experience begins with the moment of discovery. Entering a Nespresso Boutique for the first time is a delight to anyone with an appreciation for coffee and stylish design. Beautifully designed and inviting, it might first make you wonder if you are entering a café, a design exhibit, or a store. There is a display of brightly colored high-tech pre-filled coffee capsules, an array of well-designed machines that are part of the unique brewing system, a selection of stylish accessories, a knowledgeable Coffee Ambassador to assist you with coffee selection, and an espresso bar to let you taste for yourself. The purchase of a Nespresso system marks the beginning of a new everyday coffee ritual and membership in the Nespresso Club. Members have access to special offers and a customer service center that fulfills requests for coffee capsules or new accessories with one phone call or through their elegant online Boutique. Members can also be reassured that the company is committed to minimizing its environmental footprint in every way, including a capsule-recycling program. Nespresso offers a delightful customer experience, from the moment of discovery and enjoying your first perfect cup of Nespresso to an ongoing relationship with a company in which the customer comes first.

Nespresso's vision to create the ultimate coffee experience for coffee lovers worldwide is delivered through a new-to-the world experience that is built around a unique and proprietary coffee system. Importantly, the company did not simply expand the technology I discovered years ago in Vevey; it enhanced the core product and built a rich, holistic customer experience around that technology. The in-house R&D team has been able to deliver a stylish and high-quality system, through collaboration with the best design companies — for example, Alessi — and manufacturing experts such as Krups and Magimix. The company has built strong brand momentum through a distinct and focused route-to-market strategy that combines sophisticated retailing, merchandising, customer relations, and a well-choreographed fulfillment center. It has shown commitment to environmental and social responsibility through the Ecolaboration initiative, which includes a capsule recycling program and a program that helps farmers who grow and supply Nespresso coffee by teaching them best growing practices. All of that adds up to a distinct business strategy.

Since 2000, Nespresso has grown 30 percent per annum on average to sales of over $3 billion today, selling more than 20 billion coffee capsules and 12 million machines since 1986. With presence in over fifty countries, Nespresso has opened more than 200 Boutiques since 2000, with flagship stores in cities all over the world. The Nespresso Club has more than 10 million members, and growing.

Nespresso's remarkable success adds them to the roster of other companies that have enjoyed long-run success in the market, including iconic companies such as Apple, Disney, Procter & Gamble, Kaiser Permanente, Nike, IKEA, Four Seasons, Nintendo, Virgin, and many others. In studying these companies, one can appreciate that there are many things these companies do well. One can also see that there are three things they all do exceptionally well:

1. demonstrate a deep, holistic understanding of their customers and their needs;

2. deliver distinct offerings and experiences that uniquely meet those needs;

3. engage in a distinct combination of strategic activities that is difficult for others to replicate.

This third factor is paramount to sustained success and is what gives these enterprises a sustainable advantage over competitors. This is the essence of strategy — defined by a distinct system of enterprise activities and capabilities that allow an enterprise to win in the market, give it an edge over competition, and deliver a better return on its investment. Clear strategies and activation plans are often the missing link in innovation and likely one of the reasons that the failure rate of new product introductions and new business ventures is alarmingly high. By one measure, from innovation consultant Doblin Inc., nearly 96 percent of all innovation attempts fail to beat targets for return on investment. No wonder innovation frustration is the talk of corner offices. As Roger Martin, Dean of the Rotman School of Management points out, "If the focus is entirely on creative discovery without consideration of how it converts to a winning strategy, creativity is practically useless."

Moreover, all of these three factors must work in concert; an effective strategy calls for a relentless devotion to serving the customer, continually expanding possibilities to do so, and activating a stream of experiments and expansion initiatives with a sense of purpose and perseverance in staying the course strategically.

This is the inspiration for the core framework: the 3 Gears of Business Design. Within this framework, the discipline integrates design-inspired methods that help enterprises to increase their odds of success by cultivating a deeper and more holistic customer understanding, creating more breakthrough solutions, and designing enterprise strategies to succeed.

Special to The Globe and Mail

Reprinted with permission from Design Works: How to Tackle Your Toughest Innovation Challenges Through Business Design, by Heather M.A. Fraser, published by Rotman/UTP Publishing, an imprint of University of Toronto Press in partnership with the Rotman School of Management. For more information, visit

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