The Rest of the Milkshake Story

Series 2, Episode 10 | 14 March 2023

Show notes | Transcript

Demand is demand, and supply is your supply. And you must match the two. Only when both sides match can you make a product.

In today’s Circuit Breaker Show, Bob and Greg unpack the milkshake story, or what their competitors call “the milkshake marketing myth.”

They’ll explore how the fast food restaurant was able to increase sales of milkshakes and review the entire process. Fun fact: This happened almost 30 years ago. You’ll learn why switching the milkshake from ice cream to yogurt increased sales.

This is the most recognizable application of the Jobs to Be Done (JTBD) theory. You’ll discover why this is the case as you get an introduction to Clayton Christensen’s concept of “disruptive innovation.” Bob and Greg will talk about the tests and interviews they conducted and why the franchisees rejected the project. They will also explain why it’s the job of people in innovation to design their supply to fit the demand.

Join us for this thought-provoking discussion.


What You’ll Learn in this Show:

  • The first step in JTBD.
  • Why do you need to match both the demand and supply side?
  • What creates demand?
  • The importance of having a third party in your company.
  • Similar examples to the milkshake story.
  • And so much more…



The Rest of the Milkshake Story – Transcript

The reality is this is that as a developer, we do our best given kind of the constraints we have. But the thing is, is just start with demand. And to start with the anomalies, and to start with, basically what progress are people trying to make and demand exists without supply. And so this is the thing that most people don’t understand is that they think that the product creates demand. And the reality is, is it’s the struggling moment that creates demand. And so part is being able to understand where are the struggling moments, and where are the things where people want to make progress, but they can’t. That’s where real growth comes from.

Welcome to the circuit breaker podcast where we challenge the status quo of innovation and new product development. We’ll talk about tools and skills and methodologies used to build better products and make you a better consumer. I’m Bob Vesta. And I’m co founder of the rewired group and I’m one of your co hosts. And we’re joined by Greg Engel, who was my co founder and chief Bob interpreter. Join us now as we trip the circuit and give you time to reset reorganise and recharge your brain to build better products.

So today, we’re going to do a topic that you dread. You’re going to probably yell at me after but you know, tough luck. No, we don’t have to play it. If it doesn’t go. Well. Now, we did it, therefore it will be published. Oh, no, that is the rules. Alright. So really, what we’re gonna talk about today is, you know, we get a lot of questions.

Competitors, poke fun at the milkshake story. Yeah. And I think one main competitor calls it the milkshake marketing myth or something like that. And the reason why people do that is because they actually don’t understand the whole thing, because the way, clay and you and us have told the story, it’s a very neat, very together story, that doesn’t really have a payoff, because it literally made decisions. That’s right. So I want to unpack it. And it’s to me, and nobody in our audience will get this reference, because they’re all under the age of 55. But we’re going to do the Paul Harvey style rest of the story, I need a couch, I need to lay down, this is going to be therapeutic, we’ll get this off my chest. So I can just literally never tell the story again.

But well, I’m going to try to make it not. So it’s like, you know, so I’m going to try to ask you questions and get you to kind of talk about them. And we’re going to talk about kind of the steps along the way. So it’s going to be a little bit of a review of what the steps are in the judging process. The way we’re going to try to do this. So the first thing is, you know, one of the first things you have to do when you do any study via jazzy Don, or anything else, you have to understand the problem you’re trying to solve?

Yes. And there’s framing, and there’s many ways to to discover that problem. You know, it could be something’s not selling, as well as, as you think it should be something selling better. You have a new idea, all these different things. But in the milkshake story, how did you discover to go do the interviews you did? So it was actually a shift in the way we were kind of doing our business. So we have been doing some work for a fast food manufacturer. And one of those things was, we had done cost reductions for them, we help them kind of launch a couple of new products. And one of the things we talked about was, well, how do we actually go build our own product and kind of bring it back to them. So instead of them paying us as a consultant, we’re actually going to go develop the product itself, and bring it back to them so we can get a licencing agreement with it.

And so one of the things we did is we approached kind of the head of the operation side of the fast food restaurant and said like what is the least productive piece of equipment in the store? And as they kind of, you know, not even hesitating, they said the milkshake machine, like it was like it didn’t go on till noon. It literally was you know, it was obviously selling more in the summer than it was in the winter. You know, they had three flavours at the time. And it was one of those things where people came, but it was it was, you know, it didn’t do anything else. It just literally made milkshakes. And so it was like it was a very limited product that had three skews. And basically, it took up a footprint that just wasn’t as productive. And so they said, you know, like that would be if you could help us make that more productive.

That would be great. Okay, so the first thing you did was just summarise that is you looked for a piece of equipment in that thing, or something that wasn’t selling as well or was not meeting its goal. So you look, you look for something like that. And then once you found that, they said, Hey, here’s the milkshake machine. What do you do? We said, Alright, it’s send us some data. I want to know, I want to be honest, this is where we went and look for anomalies. Right? And it was like we just to be honest, we just looked at the data and you know me, I love data. And so I just played with the data and back and forth.

Within looked at different things, and, you know, was there a SKU of something at one time versus another? Is there a SKU by geography is there like, “Can we can we, what patterns can we see at it, and the data that we had actually had a timestamp on it.”. So we can see when things were bought and sold. And one of the things that came out was that there was these three restaurants that were selling milkshakes in the morning. And it turns out that it was not not part of the franchise rules to say, you couldn’t turn it on until 11 o’clock, you couldn’t start selling till 12, or something like that. And so they, they were breaking the rules, and yet they were selling a lot of milkshakes in the morning.

We’re like, What the heck is that? And so, you know, in clays, where it is like, it’s the end of one like, like, what’s that anomaly? And why is it why is that happening? And so that’s when we went out and tried to basically understand what what was going on with it and see the patterns of it. So that’s where we went to a source. Let’s slow it down. So the first step in Joss Whedon, or any research project, basically, is identifying the problem you’re trying to solve or framing the question, I think, is what we call it.

So the question was, A, how do we make this we had three, two or three questions here. How do we make this piece of equipment more profitable? Yep. Productive in? How do we, where were the anomalies? Or where were why were people using it? Not intended, which there’s a lot of there’s a lot of products that do really well in that space. Right. And I always say anomalies, you know, in anomalies lie the DNA of the future. And so if we can see those anomalies and understand them, we can actually see what it’s where it’s gonna go. So you did that. And you framed your question. And those were your questions, basically. Now, you had to go and find people.

Yeah, well, it was pretty easy, because you looked at the stores that were so emotional, and we flew to the store. And that was your, your interview set. Right? So so that was, so that was fairly easy, compared to some of the other things people had to do. It was a little bizarre, to be honest, because I’m not saying it’s bizarre. I’m just saying it’s your people were there. We knew where they were, we knew when they were buying, we knew what we get, we knew where we had to be to talk to him, where if you’re in another company, where you might have to lay out more, some more basic criteria in order to screen people, you were able to go where people were. So if you have a product that you can do that.

That’s fantastic. If you don’t you have to now create some screening criteria. You guys really didn’t have to do that. Because your screening criteria was people that went to the store that day. Yep. So you did that. So we did that piece? And then we had to go interview them. Yeah, so I actually interviewed them in line while they’re waiting for the milkshake to be delivered. And knocking on their window is a little weird. Yeah.

And I know, we can’t get into because it’s been umpteen years ago, but almost it was 30. I mean, the first question was probably something along the lines. What do you buy in? And why are you buying that? That’s right. Like, why, why this? Why now what what else was in your consideration set? Like, like, where are you going? What are you doing with it? Like, like, all these different kinds of questions, and it was in it, and, you know, it was just watching people do it, and then getting their phone number and talking to them and understanding like, kind of like, how does this fit into your life kind of thing? And saying like, how are you fitting a milkshake?

A chocolate milkshake into your life? Right? At eight in the morning. And and you have to realise this is 1994 1995. So it’s almost 30 years, right? So you do that. And you get these, you get these things. And I’m sure you know, we talked about, or the story talks about really one job to be done. But they’re pretty probably found a few different reasons why people were doing this. But you once you got that data, and you did that the next step is to now you get the data, you fill out what the jobs are. And I’m not going to try to get you to remember what those were because it was 30 some years ago, but there are three jobs. But yes, so you find those three jobs, but then you have to decide which one we’re going to go after. And you do that in kind of concert with many different things.

Whereas demand, and then where are you or what are you trying to achieve? So you know, you have to accomplish things that you want to achieve or or your supply side is what we call it. So the next step is to kind of do that right, you detail about the jobs now, you know, you think about your supply side. So that right? And the important part of the story here is you guys had a different supply side than the end user or the end company, you know, the company? Well, that’s right. So so from our perspective, it was we we wanted to sell them a formula and we had to know their machine. So we actually had, you know, basically a food scientist and we had basically a call a culinary specialist who basically helped us kind of understand what was possible what we could do with it. What are the parameters, we could change on it? How can we modify the machine? Can we actually add different things to make it different ways?

And so ultimately, it’s like okay, these are these are anomalies and then trying to understand how do we make it more familiar to people. And ultimately, part of it was was changing flavours and also changing kind of the underlying notion of being ice cream to being yoghurt. So I want to unpack that a little bit because…

…you guys had in a very first part of your story was you guys had a notion of you were going to sell something to this company, right? We were going to basically build the formula and licence it to them. So your goals were things or your strategy were things like, I need a I need a formulation that will fit and will work in their machines. I need a formulation that customers want based on the job we were doing, which were which you’ve hit on some of the big things which are we want to make it not ice cream, but yoghurt.

But why did you want to make it not ice cream? Well, so this is the thing is that what we realised is so part of it was the fact that it was it competed with sleep mostly like people, people were going to be hungry. They weren’t hungry in the moment. But what happened was is like they this was something they could actually eat or drink. It was substantial enough. And so it was it felt like it was something that would hold them over to lunch. It had you know, carbohydrates and fat and protein in it. They didn’t think of as unnecessarily unhealthy.

But it was more the fact is like this, this will fuel me till dinner, or to let show some of the things the criteria that they gave you were, hey, it has to fill me up, and did not too much but fill me up enough and fill me up in energy. We know from food science, and I’m gonna tell it butchers the food scientists are gonna kill me. You need fat, you need protein, you need carbs, right? You need a blend of those things, right?

Where the ice cream may not give might not give you all of that it can one of the things we one of the things we came to is that one of the rejecters was as most people saw milkshakes as a dessert or a treat yourself kind of thing. And so it was not a breakfast thing. And what we were able to do is then see that yoghurt, was actually more of a breakfast food and people would eat yoghurt. Again, remember, it’s 1996 1995.

And so this is where people ate yoghurt for breakfast. And so when we had Dan on and kind of those kinds of people, but but it was it wasn’t it was we had no Greek yoghurt back then. Right? With high protein, but it’s that kind of thing where it was like, Okay, how do we actually make it more morning ish. And so we basically moved it to yoghurt. And then the other things we added, we change the flavours. Yep. So you were adding yoghurt, a because it’s familiar to people in the morning. So it fit with that morning. Right.

And amazingly, it worked in the machine, which was kind of interesting, but it’s live culture. So it’s very different underlying technology view the protein, yes, that you need for that systems energy. Yes. And it actually had less carbohydrates. So we could actually kind of monitor and figure out how to make sure it didn’t have because what you didn’t want was the spike despite your crash for telling you hey, I need to get to work. I need to do things. So I need to be in my meeting. I can’t crash at 1030 Yeah, the other thing is it had to be like how does it had to be thick enough there was a thickness thing about this about it was substantial.

And why was thickness important? From the demand side? What is it was like the notion of sounds horrible, but it was like sucking it up. The straw had to be work. Like it was thick enough and that it felt like it was going to sit in their stomach and it had substance also time, right? Yep. And it couldn’t take Yeah, they couldn’t drink it all in two minutes. So that aspect, there was a time element to it as well. And that gets back to some science. Well, and I’m sure your your food scientists and your, your psychologist, people you’re working with, were telling you, hey, if you eat too fast, you tend to get hungry or you’re gonna get brain freeze or you’re gonna get all these other things.

So part of it was actually making sure that it could do it. The other interesting part is it had to fit in the cupholder because it was a it was a commuter. At least in the beginning we decided to be part of that commuting so what I want people to understand what this conversation we’re having is we’re actually talking about supply and demand at the same time. Have you always have to think about it we and we exactly the important part of this next step that the step we’re talking about right is you have to bring both those things in what you guys and I’m gonna say failed to recognise but it’s not that you did it’s no we didn’t we didn’t say we it was it was literally sprung upon us and we did not think about it all because we were so focused on the formula and the customer the consumer that that at some point in time we thought the franchisees would be all over it because it’s like something adding adding a new set of products without having to add a whole bunch of new things it was a big deal for them so the supply side You didn’t think through was how was the restaurants going to adapt? That’s correct. So so we ran a test you actually and I’m gonna I’m gonna spoil a story a bit you guys actually discovered the protein shake before it was a thing.

… yoghurt smoothies before like it might have been a thing with the workout warriors the Arnold Schwarzenegger ‘s of the world right they were they were doing these types of anomalies at that point there was not me dream was not no means there was no the the calf routine what does it go smoothie?

The tropics smoothie or whatever it’s called right? It was none of those yet the best you could come up with was Orange Julius, right, which are delicious, but different. That’s a different thing and no drive thru at the test. So you guys actually discovered that. But the supply side you didn’t actually account for was the restaurant, the restaurant and Well, what happened, what we didn’t account for was, so we did a test in like 10 stores. And it did, it did very well. And one of the things in 1996, that we did not account for was a labour shortage.

And that one of the one of the consequences of actually making it yoghurt is you had to clean the machine. And it took about an hour to clean the machine. Right. And so, in the end, what happened is they rejected the idea. The franchisees rejected the idea, because they didn’t have the labour at the time to be able to shut down the milkshake machine, clean it out, and then basically put it back, because everybody was getting ready for lunch. And so they end up rejecting the entire offering, if you will, and so from from their perspective is like, you know, thanks. But no, it’s just not gonna work. And that was like they said, 9596. And the reason why I want to talk about that is because that’s actually the rest of the story to me is is you can find demand and demand doesn’t mean that the supply has to, to support that demand, or we have to do that, right. And there’s many companies that make decisions all the time.

And if I had $1, for every company that’s told me, Hey, we had x idea before so and so did well, yeah, but you had also constraints or supply side things that wouldn’t allow you to do it. But the moral of story is, even if you find that demand, what I think you should be doing is, you find that demand and you you say I don’t want to do it, you shouldn’t forget about it, it shouldn’t go in a drawer and never be done. Because someone says and we if I had $1, for every time I’ve heard this, too, is, hey, we tried that 20 years ago, but didn’t work. Well, circumstances change in 20 years. So you should act, they actually should have had a head start. But I don’t know if they actually.

So 15 years later, they came out with their whole line of, of their ethics. But But again, let’s be clear, we were an early anomaly, we literally the market was not proven. The fact is, is it we were able to kind of show and demonstrate that it works. But it took them 15 years to actually actually have access to that there to further demand or reach work has to catch up with their supply side constraints is ugly, other companies were able to do it quicker, like Tropical Smoothie in different places that popped up. And usually mama pops that pop up and do that fill that space in the beginning. Because the big companies can’t do that. And that’s part of disruption to me as well. What clay teaches us about disruption is I can look at the decision that fast food company made. And it was a rational sound business decision. I’m not sure they had all the information, or, you know, they thought about the whole way. And maybe they would have made a different decision if we would have talked about a different way or something would have changed very quickly.

But I can defend that decision. That’s a defendable decision. Absolutely defendable. totally get it. But if you’re in the, if you’re doing these things, and you can see it or we can help you frame the idea better, maybe they would have been maybe it would have been only 10 years till they got there or five years. So they got there. But a lot of times what companies do is they throw these ideas away. And nobody wants to touch them again. Because we tried it we tried, it didn’t work well. And this is this is to me. Like there’s two other examples that come to mind that are similar to this one is pickleball. Right? Like all the big athletic people have just like ignored pickleball they don’t really think pickleball is real. They like it’s it’s it’s all popping up everywhere. People are literally converting tennis courts.

The tennis enthusiasts are basically telling you it’s like volleyball, not real sport. The people who have played tennis forever and can’t play anymore love it. People who’ve never played tennis can now play a form of tennis that’s different than ping pong, and you just start to realise like it’s this anomaly that’s growing. But again, nobody’s infrastructure can support it. Right and so big enough for some people to get into it’s it’s specialised, it’s this. It’s that it’s one of those things where there’s, it’s this this n of one and being able to understand these anomalies and being able to understand kind of how what what are they actually stealing from and it’s actually think of pickleball as the people who aren’t exercising now can go exercise without actually getting hurt, if you will, or not pushing themselves so hard as tennis for example. And what I want people to take away from this is is and I’ve said it a couple different times I just want to be very, very, very, very, very clear, which is demand is demand demand is demand supply is your supply. And you have to match both of them and ask me a match for both sides in order for you to make a product the the job of people that are in development entrepreneurs and different people that are in this innovative

Should space is, can I actually shape my supply to fit the demand. And if I can do it, if you can’t, don’t throw the idea away and have to start from scratch, develop out what you can, and then use that for your jumpstart if and when it becomes mainstream. Because the worst thing that happens is I have to start over from scratch, five years behind, and then two years development behind so I’m actually seven years behind. That’s right, do the work today do the work today, because you have the information, the struggling moments are out there. I mean, if you look at SNHU, how many people want to go back to school but couldn’t like that’s been around for, like ever.

And the whole notion is is all he did was basically cater to that group, which is of non consumption and to be able to go after it. And now he’s got over, you know, over 100,000 students, we’re the largest universities in the world, and most people don’t even know who he is. So the reason why I want to do this story is because I think sometimes we miss some of that, the story behind it, and people say, Oh, it was a failure, because because you the company actually didn’t do what you said to do. But that’s not a failure in our book. Because the demand was real. It took 510 years for it to become mainstream. But it was real. And the company had had an opportunity to be the first mover, but they were so big, they don’t need to be the first mover. They just they don’t incumbents, they usually don’t have to really innovate that much.

Right? So that was that was too. So it’s not that the methodology failed, the method actually actually worked perfectly, especially when you think about the other steps in the in the process, which is trying to match that supply and demand. Because if they would have caved, they would have said no, you have to do this. They could have lost more, it could have actually cost them more. Because what if it cost them the machine until seven o’clock at night? Well, they might have lost a lot of money, right? Well, and then there would have been conflict of like, I want a smoothie. And then I want to I want a milkshake. And I couldn’t do both. And there was there’s a lot of, again, we did our best. And this is the this is actually how they solve the problem is they actually have two different two different machines. But the reality is this is that as as a developer, we do our best given kind of the constraints we have.

But the thing is, is just start with demand. And to start with the anomalies. And to start with basically what progress are people trying to make and, and demand exists without supply. And so this is the thing that most people don’t understand is that they think that the product creates demand. And the reality is, is it’s the struggling moment that creates demand. And so part is being able to understand where are the struggling moments? And where are the things where people want to make progress, but they can’t. That’s where real growth comes from. So the homework this week is twofold. And it’s it’s for people that are not in big companies that have ideas, what I want you to do is I want you to just think about as you go through a project. Are you looking at demand first? Are you looking at supply first, and I want to make sure you’re looking at demand first. So that’s the first thing is try to get away from your preconceived notions because that would have killed this idea way earlier, because you were a third party, you were actually able to go farther than their internal for sure. It could have oh, yeah, they wouldn’t. They wouldn’t have, they wouldn’t have gotten to kind of even when they want to frame the question. They couldn’t have read the question.

Right. So so that was the that’s the first a heart of this thing is because you were brought in with fresh set of eyes, you were able to see opportunity that they would never have seen, right. And so think of it as we were able to see demand and then more for their equipment. And what they were would have done is they would have said, here’s the equipment, what else can we what else can we do with it. And they never would have seen that opportunity at all, they would have made it thicker and chunkier and added flavours and done all these other things to it. But they didn’t actually interview if they had done that before. And so as they tried to improve the milkshake, and they were going to incremental change, not know they were they were putting inclusions, all that other stuff. So the other one homework I want people to do is if you are in a big company, or you are in a place where you have had ideas in the past, I want you to go back through Yeah, do the post mortem. And I want you to look for things that you killed because your supply couldn’t take it now and as circumstances changed. And I’m not telling you to go back through every idea you ever had, it’s more of can you do a mental, a mental note of, hey, you remember we had we had this really good idea, but it was killed because of this. Did it change? Did the context of the company change? Because a lot of times it does. That’s right.

Well, it does. Everything’s dynamic. So yeah, so go back through just do that mental modelling of are there ideas that you had that maybe will work today because the world changed and some of those examples might be you know, you are a direct your had to go through retailer but now you have a direct to customer channel. Now, that was different. Maybe that changes something that you had before that you could you could bring to life now. So that’s that’s kind of what we want you to do. Hopefully this this kind of just told the story of behind the weather is at the end the rest of the rest of the story.

but also the steps that you have to go through and we, we went through them very quickly, we actually jumped a couple. And if you want to learn more about that we have some workshops coming up that’s gonna go in through some of some of the steps. But the other thing I want people to realise is sometimes, as we heard in this story, having a third person come in or somebody without those without those blinders on of the company is helpful. So keep that in mind. Yes, go discover the process, but sometimes you might have bring somebody in, and we’re here to help with that is Thank you.

Thanks for listening to the circuit breaker podcast. If you haven’t already, please subscribe so you won’t miss an episode. If you know somebody who’s stuck on the innovation treadmill, please share it.


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