This speech was delivered by Jeff Dunn, president and chief operating officer of Coca-Cola North America, at the 2002 INTERBEV conference in Atlanta. The speech won the IABC Golden Flame award for 2002.

Thank you.

The world is filled with brands and products competing for our attention and our dollars. For consumers, it can be downright mind-boggling.

{Consumer brand explosion video, RT: 57}

25,000 new products, brands and packages hit grocery store shelves in an average year. That makes breaking through the clutter a never-ending battle for all of us. So in an ultra-competitive environment, how do we stand out and own a share of the consumer's mind?

The answer is through innovation. For all of us today, it's an imperative.

By innovation, I mean the constant challenge to the status quo … the relentless, restless search for something new … and not just new, but better.

That sort of innovation is the "brass ring" for business today. Companies grab market share and reinforce leadership positions with fresh ideas that create fresh profits. And, just as it's always been, innovation is the lifeblood of the beverage industry.

But if innovation were a stock, it would be like the rest of the market today - highly volatile.

In the '90s, the economy - and innovation - were booming. Companies were investing in innovation like it was the next hot IPO. But, as the economy cooled off, so did a lot of companies' willingness to fund innovation. Their focus turned from the "next new thing" to the next quarter's earnings.

But I'm happy to say our industry has not turned its back on innovation. In fact, innovation is happening at a fast and furious pace in our industry today.

Our consumers have always wanted choices, and throughout our history, our companies have always responded.

From the glass contour bottle … 6-pack carriers … and flavored CSDs … to diet and caffeine-free colas … 2-liter and 20-oz. PET packaging.

And today, as consumers' tastes change and their desire for variety … wellness … and convenience continues to grow, we continue to respond.

Just take a look at some of the great examples of innovation in our industry recently. Whether you're talking about Red Fusion … Mr. Green … Pepsi Blue … Simply Orange … or Vanilla Coke, we're giving consumers a rainbow of new choices in colas, flavors, juices, nutritional beverages, waters and sports drinks.

But when you add thousands of other product introductions from other industries - 25,000 a year - you know how that woman in the video felt - bombarded.

Which brings me to the essential question I think we must ask about innovation. About any new product, new package or new service we introduce: What is its value? And, in and of itself, is it meaningful?

To me, there's an easy litmus test. Meaningful innovation is sustaining. It stands the test of time because it continues to add value.

That was the hard lesson of the "Dot-Com Economy." The problem with a lot of the dot-com companies wasn't a lack of good ideas. Webvan and pets.com … just to name two … were great ideas … and very innovative. But they didn't have the right business models to support the innovation and sustain long-term value.

And that's my point. Innovation isn't all about flash and sizzle. In fact, innovation is very much about substance. And that's the foundation for our vision for innovation at Coca-Cola North America. It's really pretty simple:

Innovation must be a 'difference engine.' It must make a real difference and drive real growth.

And in order for innovation to be worthy of our investment, it must add value to our brands and create long-term value for everyone touched by our business.

Our vision is inspired by history. We've known for a long time that the greatest periods of growth in our company followed dramatic examples of meaningful innovation. If you look at volume growth after the introduction of diet Coke in the early '80s … the return of Coca-Cola Classic in the mid '80s … and the repositioning of Sprite and the launch of the contour PET bottle in the early '90s … you'll see one reason we remember those introductions so fondly.

There's also a corollary. When there isn't meaningful innovation, the business loses momentum.

But as you see here, when we began to innovate again … specifically around trademark Coca-Cola in the fourth quarter of 2001 and continuing into this year … the growth accelerated.

We've put a lot more emphasis on innovation in the last couple of years, and I'm excited about what's coming out of our company. We're also learning a lot about innovation. And tonight I'd like to I'd like to share five lessons we've learned.

The first lesson is that innovation comes from listening and from understanding consumers.

Consumer relevance really drives everything. To be relevant, we must be observant and understand what's important in our consumers' lives.

That's how Red Bull did it, starting back in the early '80s, when its founder began noticing the popularity of a new kind of beverage while he was traveling on business in Asia. He brought a few samples back to Austria and ended up creating not only a brand, but also a whole new beverage category - energy drinks. Now that's innovation.

At Coca-Cola, we used to think about painting the world red. Now, we think about painting the world relevant.

Vanilla Coke is turning out to be very relevant. It reminds older consumers of simpler times … maybe afternoons when they stopped by the soda fountain after school for a soft drink and some fries. And, for younger consumers, it's giving them a distinctive new taste and new look with its Coca-Cola trademark packaging.

Connecting with consumers in relevant ways has gotten us off to a great start with Vanilla Coke. We've attracted more than 7 million new drinkers … we've sold more than 60 million unit cases … and we're expanding the category.

Vanilla Coke reinforces this lesson in another way, too. After we launched in May, our consumer center received thousands of phone calls from people who wanted to talk about the new vanilla taste. A lot of those people were saying they'd love a diet version of Vanilla Coke.

So we created diet Vanilla Coke, which launched last week. That just goes to show that if you're listening, your consumers will tell you where to look for your next innovation.

The second lesson is that brands, not products, create sustaining value. And innovation builds brands.

The author of the book "Brand Valuation" puts it this way: "Products are made in factories. Brands are made in consumers' hearts and minds."

The distinction is that brands have the ability to provide two things in great demand today that products just can't. That's time and trust. Brands deliver both by making choices easier and more reassuring.

Great companies are in the business of creating and sustaining great brands, and I'm convinced the way to do that is through innovation.

Harley-Davidson is certainly one of America's great brands. It stirs passion in its riders, its dealers and its employees. And it translates that passion into profits year after year. Since Harley-Davidson went public in 1986, its shares have risen a whopping 15,000 percent.

Forbes named Harley-Davidson "Company of the Year" last year because in its one-hundredth year of industry leadership, Harley-Davidson flexed its innovative muscles.

Harley's innovation was a motorcycle with a liquid-cooled engine. Now I'm not an expert on liquid cooling, at least as it relates to motorcycles, but the benefit - I'm told - is that it revs the bike higher and hotter in each gear. And that makes you go faster.

It was a giant step for a company that made only air-cooled engines for 100 years. It also helped Harley appeal to the audience it was after - young, urban, hip Americans and Europeans.

Now, if you'll indulge me, I'd like to add one more example of innovation driving brands. It's POWERaDE. … POWERaDE was living in the shadow of a very formidable competitor until we gave it a complete makeover last year - a new formula, new graphics, new advertising, new flavors. Now, it's a serious No. 2 contender being driven by an innovative consumer proposition - very real power.

POWERaDE video

Pretty powerful stuff.

The third lesson is a hard one for most of us. The lesson is that you really aren't committed to innovation unless you're willing to fail.

Thomas Watson, IBM's legendary chairman once said, "The fastest way to succeed is to double your failure rate." Inventors have long known that failure is a prerequisite to "eureka" moments, but in business we have a hard time with that.

Does anyone remember this product? We sure do.

New Coke was a lesson disguised as a failure. When consumers turned their backs on New Coke, we were reminded of the deep emotional relationship consumers have with great brands. In this case, with brand Coca-Cola. Brands should cherish those kinds of relationships. I can tell you, it's a lesson we value, and one we'll never forget.

Our own legendary chairman, Roberto Goizueta, used to say: "You can only stumble if you're moving." Innovation is about moving. Most of the time, hopefully, the direction is forward. Occasionally, a few steps to the rear. Often innovation takes us into uncharted territory, where the risk factor goes up. And that's OK. In fact, it's good. The key is to stay moving.

The fourth lesson is that innovation is more than products and packaging. In terms of business, it's everything and everyone.

Innovation permeates everything - or at least it should. Operating strategies and tactics … systems … supply chains … information technology … distribution … marketing.

And when it comes to marketing, there's always room for innovation. We found a new opportunity this summer with "American Idol." Here's a clip.

{American Idol video}

The innovation here was in how we integrated the consumer messaging.

In addition to the customized advertising, Coca-Cola ended up playing a role within the framework of the show - in the Red Room … with the Red Couch … and with some prominent product placement. As everyone knows, the show was a blockbuster success, which put us on the leading edge of an innovative marketing strategy.

If innovation really is all encompassing, as we believe it is, it should also be approached systematically, just as you would anything else. In other words, define the problem and solve it. What are the objectives? … Who will do the work? … How will we measure success?

Looking at it this way, innovation is an opportunity for everyone.

You may remember this story. At Delta Air Lines several years ago, a menu planner noticed that most people never touched the lettuce leaf under their salads. Her suggestion to eliminate the lettuce leaf saved Delta $1 million. … A good idea is a good idea - no matter how small it seems at first glance.

In Coca-Cola North America, we're trying to build a culture that encourages innovation through the same sort of observation and curiosity. Our goal is that every employee starts to think about ways they can do their job better - more efficiently, more productively with greater innovation.

In that kind of culture, companies leverage their people and assets to their fullest. An example is our new "good answer" program that's now a part of our Customer Communications Center.

Historically, the Customer Communications Center has handled issues with our Fountain customers. A dispenser goes down at a QSR at lunchtime. Can we have someone there in 45 seconds. That sort of thing.

But a year or so ago, one of our employees had an idea - why not use our experience in the restaurant industry and the Customer Communications Center infrastructure to help our Fountain customers handle their customer calls. So we created the "good answer" program.

Our "good answer" team now receives phone calls, e-mails and regular mail from consumers on behalf of a growing number of our restaurant customers. In addition to responding to the consumer's issue, they also provide an analysis of the calls to help the operator make better decisions about their menus, facilities and service.

The fifth lesson is the most important because it's bigger than brands and packages and marketing campaigns. It's about our reputation and our image. The lesson is that we must apply innovation to our social contract with communities.

I don't have to tell any of you that we're all under constant scrutiny these days regarding ways we affect our communities. Two places where the focus is intense - the environment and the obesity issue.

All of us - our brands and our companies - have important roles to play in these issues. Individually and collectively we're doing some good work - and showing a lot of innovation.

Soft drink packages are already the most environmentally friendly recycled consumer packages in the world. As an industry we're continuing to find creative ways to increase the recycled content we use in packages and recycle more of those packages.

For the Salt Lake Olympics, for example, our people created a fully recyclable, biodegradable cold-drink cup made from renewable resources, including corn and cornstarch, which really helped the Games' composting efforts.

Our industry's biggest environmental challenge is to increase recycling rates, and the place we've got to start is by looking for creative solutions.

I'm glad to see our association continuing its focus on this issue. The NSDA's recently announced plan to test ideas in three model communities across the U.S. is something worthy of our support.

Then there's the obesity issue. This is a complex issue because it's not just about what you consume. A balanced dialogue on this subject must include a healthy and active lifestyle.

Again, there's an innovative spirit working.

Our company recently launched what we think is a very innovative program called "Step with It" in cooperation with the National Association for Sport and Physical Education to increase physical activity in schools.

Pepsi formed an alliance with a respected health, nutrition and exercise expert to educate and encourage Americans to reduce health risks through informed choices and an active lifestyle.

These programs are an excellent start, and I'm confident our industry will do more.

We need to be vigilant in these areas …

Just as important, we need to be as innovative in the ways we protect and sustain our business as we are in the ways we market and sell our products.

{Pause}

Those are the five lessons we've learned about innovation. Individually, they're our innovation guiding principles. Collectively, they represent an imperative to continue to delight our consumers with innovative brands, packages and business systems that create sustaining value.

I really appreciate the opportunity to be with you tonight. I'm continually reminded that this is a wonderful industry to be part of. There's a world of opportunity out there for all of us. People wake up thirsty everyday, and we have unlimited opportunities to bring simple moments of refreshment into their lives.

If we continue to innovate, we'll continue to get those opportunities.

So I want to congratulate you on your innovation success and encourage you to keep at it. Because when we're creating the next great innovations for our companies and our industry, we're creating sustainable value … and we're making sure we're leaving our businesses, our communities and our industry a little better and a little stronger than we found them.

Thank you.

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