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BrewDog’s disruptive innovation strategy

January 13, 2015

BrewDog is a maverick, craft beer brewing business, founded in 2006 by James Watt and Martin Dickie, located in Fraserburgh, Scotland. It produced its first brew in April 2007 and is Scotland’s largest independently owned brewery producing 200,000 bottles per month.

Childhood friends who grew up in Peterhead, Watt and Dickie started brewing together as a hobby. At the time of founding BrewDog, both aged 24, Watt was working as a deep-sea fisherman, while Dickie was a whisky distiller.

BrewDog is a ‘disruptive thinker’, its strategy, customer offering and marketing built around a range of uniquely branded beer products that capture the imagination. It has created its own market space, each beer each has an ‘identity’ and promoted as a unique, memorable product, for example:

  • Tactical Nuclear Penguin (32% ABV) – at the time, the strongest beer ever produced in a competition with German brewer Schorschbräu;
  • Sink The Bismarck! (41% ABV) – at the time, the strongest beer ever produced, in response to a brew from Schorschbräu;
  • The End of History (55% ABV) – the beer formerly known as “the world’s strongest beer”. Only 12 bottles released and packaged inside stuffed squirrels and stoats;
  • Nanny State (1.1% ABV) – a very weak, extremely heavily hopped bitter, brewed as a reaction to criticism of the high strength of their beers.
  • #Mashtag (7.5% ABV) – a brown ale loaded with hops, aged with oak chips and hazelnuts based on a collaboration of ideas generated on Twitter;

Bored of the industrially brewed lagers and stuffy ales that dominated the UK market, they decided the best way to fix this predicament was to brew their own beers. They brewed tiny batches, filled bottles by hand and sold at local markets from the back of an old van. Their vision was to make other people as passionate about craft beer as they were.

Things started getting crazy in 2008, when they masterminded the UK’s strongest ever beer, Tokyo. In 2009, Punk IPA became the UK’s fastest growing alternative beer brand and they launched ‘Equity for Punks’, a ground-breaking crowdfunding campaign which saw 1300 people invest and their anti-business business model was born. They continued to push boundaries and smash people’s perceptions of what beer can be by brewing the world’s strongest ever beer, Tactical Nuclear Penguin at 32%.

2010 was a veritable rollercoaster as they opened their own venues, brewed a 55% beer and packed it in road kill, making it the world’s most expensive beer ever as they fused art, craft beer and taxidermy. In 2011, four venues were opened including a flagship London venue in Camden. In true BrewDog style they announced their arrival in the capital by driving down Camden High Street in a BrewDog tank.

In 2011, they launched Equity for Punks II, raising £2.2m and welcomed 5,000 new shareholders. 2012 saw five new venues, and 2013 was pretty epic, with a further £4.25m raised through Equity for Punks III, with 10,000 new investors from 22 different countries joining the community.

Growth in the last two years has continued, including the launch of BrewDog TV, and equally flattered and bemused when a fake BrewDog bar opened in China. Fast forward to 2014, and BrewDog saw turnover top £32m, employ 357 people, own 25 bars, 18 across the UK, and seven abroad. It exports to 52 countries.

BrewDog’s provocative marketing has been a key aspect of the business, and has gained them substantial coverage. Say goodbye to the corporate beer whores crazy for power and world domination. Swear allegiance to the uncompromising revolution. Taste the hops, live the dream. Learn to speak beer, love fruit and never forget you come from a long line of truth seekers, movers and warriors – the outlaw elite. Ride toward anarchy and caramel craziness. Let the sharp bitter finish rip you straight to the t**s.

Check out the web site, you’ll be on it for ages http://www.brewdog.com/

Brew Dog captures the essence of the micro-brewery in a global beer market dominated by just four companies, so let’s raise a glass to the UK’s micro-brewery industry, which represents a stunning 15% of all beers sold. This surely is a nod to the UK’s entrepreneurs and SMEs as to what can be achieved in revitalising a declining market with a vibrant, intelligent and disruptive business strategy.

From the very start they were inspired to brew American-style craft beers – sweet-tasting ales with high alcohol levels and very large amounts of hops, which gave them a bold, fruity, even perfumed flavour. There are no hard and fast rules on what makes a craft beer. However, unlike Real Ale which has to be unpasteurised and unfiltered, Craft beer is also typically served chilled and carbonated.

The zeitgeist is also key. People are looking for something different. This is a complex product, made in the right way, with the right taste and flavour to be a great experience. BrewDog took a lot of its cultural values from the punk ethos – not necessarily just looking at music, but looking at how punk rock existed as an alternative to pop culture. BrewDog wanted to exist as an alternative to what people perceive beer to be.

The point was to make people reassess the value of beer and how it should be drunk, and ultimately start a movement away from the ‘4% tepid lager’ which dominated pubs. Three marketing events stand out:

  • In October 2010, BrewDog lobbied Westminster in what it called ‘The World’s Smallest Protest’ – one placard-wielding dwarf – in an attempt to tear-up UK licensing laws that stipulate beer can only be served in third, half or full-pint measures. BrewDog wanted a new ‘two-thirds’ measure introduced – and it succeeded in getting the law changed.
  • Ahead of the 2012 Olympics, BrewDog released a special edition beer named ‘Never Mind the Anabolics’, containing steroids and other substances allegedly popular – though banned – among athletes. When we were putting steroids and other banned substances in beer, the initial reaction from the media was shock, disdain and disgust, but then we were able to talk to them about the chemicals that are in beer – that started a whole discussion, said Watt.
  • ‘My name is Vladimir’, was a beer released to mark the 2014 Winter Olympics and protest against President Putin’s archaic laws around homosexuality. The website, product packaging and advertising slogans continue in the same vein.

In a highly competitive market, Brew Dog’s strategy was not to compete head-to-head with opponents, but instead to create an entirely new market and offering. This way of redefining the market – and market boundaries – has been called a Blue Ocean Strategy, developed by W. Chan Kim and Renee Mauborgne.

Blue Ocean is a market that is as yet undefined, there is lots of space (literally, visualise an expanse of empty blue water) and appears when a company pursues seemingly unorthodox methods. Continuing the analogy, Red Ocean refers to a situation where the market is predefined. Companies vie for a set number of customers and in order to gain market share, companies compete on price to win, thereby depleting the resources of the other companies, and leading to metaphorical ‘bloodshed’ – thereby colouring the ocean ‘red’. Many markets can be classified as red oceans.

Another business following the Blue Ocean approach is Apple, which like Brew Dog, created its own market space. But don’t be overawed by Apple’s apparent continuous stream of innovations, Apple doesn’t actually do that, it’s a user-focused fast follower and a relentless improver. Patrick Barwise and Sean Meehan developed an innovation model, Beyond The Familiar, which incorporates the Blue Ocean philosophy, and illustrates Apple’s innovation strategy as creating new market space.

When Apple enters new categories, it does so not as a pioneer, but as a user-centric fast follower. It did not invent the first online music store, integrated music offering, smart-phone or tablet, yet Apple dominates these markets with premium-priced high-end offers, which combine enhanced features and capabilities (mostly created by others), backed by brand communications, product and service design and innovation, and world-class execution. All its products live symbiotically in the Apple brand eco-system, boosting sales of the entire product family.

Having entered a new market as a user-centric fast fol­lower, it then determinedly embraces incremental improve­ment. It studies the initial customer response to the pioneers’ products and then trumps them by adding more features and benefits, and a much better user experience, well beyond what customers have had before. It isn’t a pioneer but it does innovate Beyond the Familiar.

Consider the iPod. It was not the first MP3 player. Apple learned from the earlier offers that had failed that compactness was good, but not at the expense of capacity, battery life, ease of use or attractive design. The iPod did not create a new product – it was a fol­lower, but it was the first to succeed in bringing the real benefits of an MP3 player to the premium end of the mass consumer market. It was the blue ocean strategy of ITunes that made the iPod the killer app, and subsequently added a range of better and cheaper variants such as the ‘shuffle’, the ‘nano’, and the ‘touch’.

The general framework for innovating beyond the familiar developed by Barwise and Meehan reflects Apple’s obsession with the nature and effective­ness of customer orientation, to execute the four direct drivers of long-term organic profit growth:

  • Offer and communicate a clear, rele­vant customer promise.
  • Build customer trust and brand equity by reliably delivering that promise
  • Drive the market by continuously im­proving the promise, while still reli­ably delivering it
  • Get further ahead by occasionally in­novating beyond the familiar

You can see that BrewDog are following a similar strategy, including creating their own eco-system as has Apple.

The reality is that innovation is like the old story about a teenage boy’s claims about his first kiss: everyone talks about it all the time; everyone boasts about how well he is doing it; everyone thinks everyone else is doing it; almost no one really is; and the few who are, are fumbling their way through it incompetently. (Yes, I know things have changed.)

However, Brew Dog are more of an innovator than Apple, displaying traits of disruptive innovators highlighted in The Innovator’s DNA, by Jeff Dyer, Hal Gergersen, and Clayton M. Christensen. They identify five core traits and skills that distinguish innovative entrepreneurs from the rest of us, and how they are restless and repeatedly come up with great new ideas. They researched five hundred innovators and compared them to five thousand executives and identified five discovery skills that distinguish innovators.

First and foremost, innovators count on a cognitive skill called ‘associational thinking’. ‘Associating’ happens as the brain tries to make sense of novel inputs, it helps innovators discover new directions by making connections across seemingly unrelated questions, problems, or ideas. Innovative breakthroughs often happen at the intersection of diverse disciplines and fields.

Frans Johanssen described this phenomenon as ‘the Medici effect’, referring to the creative explosion in Florence when the Medici family brought together creators from a range of disciplines – sculptors, scientist, poets, philosophers, painters, and architects. As these individuals connected, they created new ideas at the intersection of their respective fields, spawning the Renaissance, one of the most innovative eras in history. Put simply, innovative thinkers connect fields, problems, or ideas that others find unrelated.

The other four discovery skills trigger associational thinking by helping innovators increase the building-blocks for ‘thinking outloud’ from which innovative ideas spring. Specifically, innovators engage the following behavioural skills more frequently:

  • Questioning Innovators are consummate questioners with a passion for inquiry. Their queries frequently challenge the status quo, ask questions to understand how things really are today, why they are that way, and how they might be changed or disrupted. Collectively, their questions provoke new insights, connections, possibilities, and directions. They found that innovators consistently demonstrate a high Q/A ratio, where questions (Q) not only outnumber answers (A) in a typical conversation, but are valued at least as highly as good answers.
  • Observing Innovators are also intense observers. They carefully watch the world around them and the observations help them gain insights into and ideas for new ways of doing things. Peel attended three concerts a week to check out new bands, gaining a rich observational insight of emerging bands.
  • Networking Innovators spend a lot of time and energy finding and testing ideas through a diverse network of individuals who vary wildly in their backgrounds and perspectives. Rather than simply doing social networking or networking for resources, they actively search for new ideas by talking to people who may offer a radically different view of things.
  • Experimenting Finally, innovators are constantly trying out new experiences and piloting new ideas, unceasingly exploring the world intellectually and experientially, holding convictions at bay and testing hypotheses along the way. They visit new places, try new things, seek new information, and experiment to learn new things.

Collectively, these discovery skills – the cognitive skill of associating and the behavioural skills of questioning, observing, networking, and experimenting – constitute what Christensen et al called the innovator’s DNA, or the code for generating innovative business ideas.

There are lessons for us all in the attitudes of entrepreneurs like Watt and Dickie, their world is everything-is-possible and optimism rules. A strong sense of the possible is essential to driving innovation that in turn leads to success. Whilst the image of the swashbuckling adventure-hungry risk-taking buccaneering entrepreneur is somewhat of a caricature, positive energy and exuberance makes a refreshing change.

We all need to have new ideas, different ones, about what’s changing in our market, and how those changes could disrupt our business model. You also need to think about how you can disrupt yourself. For example, how many times have we been banging our heads against a wall for a long time with a particular problem? One of two things is true at this point, either we should keep banging our head and the wall will crumble soon, or we should do something different and hope things get better. Einstein said insanity is doing the same thing over and over and expecting different results, perhaps it’s time to reflect upon that.

We need to live in the future market of our business, we need to work on the business, not in the business.  The world isn’t waiting for you to get inspired, you have to inspire it, and at the same time don’t let your doubts sabotage your thinking – there are far better things ahead than any we leave behind.

We are all confined by the mental walls we build around ourselves, sometimes innovation starts with a critical decision to reinvent yourself and kick-start your business 2.0 – a moment of truth, flash of brilliance or the end result of a bout of determined reflection to make a difference. But whatever the trigger, take a leaf from BrewDog, pushing limits and challenging conventions, live craft and die punk.

 

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One Comment leave one →
  1. guyremond permalink
    January 13, 2015 10:09 am

    Really enjoyed this blog – a really disruptive company who are continually innovating & thinking differently!

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