S2 E10 | The Rest of the Milkshake Story

The reality is this, is that as a developer, we do our best given kind of the constraints we have. But the thing is to 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 it's the struggling moment that creates demand. And so part of it 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 Mesta and I'm the co founder of the Rewired Group and I'm one of your co hosts and we're joined by Greg Engel, who is my co founder and chief, Bob interpreter. Join us now as we trip the circuit and give you time to reset, reorganize, and recharge your brain to build better products.

Hey, Bob.

Hey, Greg. What's going on?

So today I'm gonna. We're gonna do a topic that you dread and you're going to probably yell at me after, but, you know, tough luck.

Well, we don't have to play it if. If it doesn't go well.

No, we did it. Therefore it will be published.

Oh, no.

That is the rules.

All right.

So really what we're going to talk about today is, 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.

People 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. Get this off my chest so I can just literally never tell this story again.

But 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 view of what the steps are in the Jazzly done 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, be it Jazzly done or anything else, you have to understand the problem you're trying to solve.

Yes.

And they're framing it, and there's many ways to discover that problem. You know, it could be something's not selling as well 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?

Yeah, yeah, yeah. So it was actually a shift in the way we were kind of doing our business. So we had been doing some work for a fast food manufacturer, and one of those things was we had done cost reductions for them. We helped them kind of launch a couple 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 licensing 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 not even hesitating, they said, the milkshake machine, it was like, it didn't go on till noon. It literally was obviously selling more in the summer than it was in the winter. They had three flavors at the time, and it was one of those things where people came, but it was. And 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 SKUs, 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, because I'm going to just summarize that, is you. 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 looked, you looked for something like that, and then once you found that, they said, hey, here's the milkshake machine. What'd you do?

We said, all right, send us some data. I want to know. I want to be honest. This is where we. We went and looked for anomalies, right? And it was like, we, we. We just. To be honest, we just look. And you know me, I love data. And so I just played with the data and we went back and forth and looked at different things. And was there a skew of something at one time versus another? Is there a skew by geography? Is there, like, what patterns can we see in it? And the data that we had actually had timestamp on it, so we could 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 part of the franchise rules. You couldn't turn it on till 11 o'. Clock, you couldn't start selling till 12 or something like that. And so they were breaking the rules, and yet they were selling a lot of milkshakes in the morning. And we're like, what the heck is that? And so, you know, in Clay's word is like, it's the end of one. 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 the stores.

Well, let's slow it down. So the first step in jobs we done 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. Or productive? Yep.

How do we. Where. 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 the. In anomalies lie the DNA of the future. And so if we can see those anomalies and understand them, we can actually see what's. It's where it's going to 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.

Selling milkshakes and we flew to the.

Stores 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 could. We, we knew where we had to be to talk to them.

Where, if you're in another company, 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 into the store at that.

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 so, and I know we can't get it because it's been umpteen years ago, but Almost it was 30. I mean, the first question was probably something along the lines, what are you buying and why are you buying that?

That's right. Like why this? Why now? What else was in your consideration set? Like, like what, where are you going? What are you doing with like all these different kinds of questions? And it was just watching people do it and then getting their phone number and talking to them and understanding kind of like, how does this fit into your life kind of thing. And saying, how are you fitting a milkshake, a chocolate milkshake into your life at 8 in the morning? And you have to realize this is 1994, 1995, so it's almost 30 years. Right.

So you do that and you get these, you, you get these things and I'm sure, you know, we talk about, or the story talks about really one job to be done, but there's. You 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 like you said, 30.

Some years ago, but there were three jobs. But yes.

So you find those three jobs, but then you have to decide which one are we going to go after, which one are you going to go after? And you do that in kind of concert with many different things. Where is demand? And then where are you or what are you trying to achieve? So, you know, you have to come up with things that you want to achieve or your supply side is what we call it. So the next step is to kind of do that, right? You detailed out the jobs. Now you. Now you think about your supply side. And the important part of this story here is you guys had a different supply side than the end user or the end company.

Yeah, the company. Well, that's right. So. So from our perspective, it was. 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.

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 anomalies. And then trying to understand how do we make it more familiar to people? And ultimately, part of it was changing flavors and also changing kind of the underlying notion of being ice cream to being yogurt.

So, and I want to unpack that a little bit, because you guys had, in the 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 license it to them.

So your goals were things or your strategy were things like, I need a. I need a formulation that will fit, 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 wanted to make it not ice cream, but yogurt. But why did you want to make it not ice cream?

Well, so this is the thing, is that what we realized is. So part of it was the fact is 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, this was something they could actually e. Eat or drink. It was substantial enough. And so it felt like it was something that. That would hold them over to lunch. It had, you know, carbohydrates and. And fat and protein in it. They didn't think it was unnecessarily unhealthy, but it was more. The fact is, like this. This will fuel me till dinner or till lunch.

So some of the things, the criteria that they gave you were, hey, it has to fill me up and not.

Too much, but fill me up enough.

And fill me up in energy. We know from food science. And I'm going to totally butcher. The food sciences are going to kill me. You need fat, you need protein, you need carbs.

Right. You need a blend of those things.

Right. Where 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. Is 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 yogurt was actually more of a breakfast food. And people would eat yogurt again. Remember, it's 1996, 1995. And so this is where people ate yogurt for breakfast. And this is when you had Danon and kind of those kinds of people. But we had no Greek yogurt 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 yogurt. And then the other things we added, we. We change the flavors.

Yep. So you were adding yogurt a. Because it's familiar to people in the morning. So it fit with that morning.

Amazingly, it worked in the machine, which was kind of interesting. But it's. It's live culture, so it's a very different underlying technology.

And it gave you the protein.

Yes.

That you need for that sustained energy.

Yes. And it actually had less carbohydrates, so. So we could actually kind of monitor and figure out how to make sure it didn't happen.

Because what you didn't want was the. The spike.

The spike crash.

Because people were telling you, hey, I need to get to work. That's what I need to do things. So I need to be in my meeting and I can't crash at 10:30.

Yeah. The other thing is it had to be like. How do I say? 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 one is it was like, the notion of it 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 the 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 psychologists and people you're working with were telling you, hey, if you eat too fast, you tend to get hungrier.

Well, you're gonna get brain freezer, you're gonna get all these other things. So part of it was actually making sure that could, it could do it. The other interesting part is it had to fit in the cup holder because it was a, it was a commuter. At least in the beginning. We designed it to be part of that commuting food.

So what I want people to understand with this conversation we're having is we're actually talking about supply and demand at the same time.

Have to, you always have to think about it.

That's the important part of this next step. The step we're talking about, right. Is you had to bring both those things in what you guys, and I'm going to say failed to recognize. But it's not that you did.

No, we didn't. We didn't see. It was literally sprung upon us and we did not think about it at all because we were so focused on the formula and the cost of the consumer that at some point in time we thought the franchisees would be all over it. Because it's like something adding an, adding a new set of products without having to add a whole bunch of new things was a big deal for them.

So the supply side you didn't think through was how was the restaurants going to adopt this.

That's correct. So we ran a test.

You actually, and I'm going to spoil the story a bit, you guys actually discovered the protein shake before. It was a thing.

Smoothies before, and it might have been.

A thing with the workout warriors, the Arnold Schwarzeneggers of the world. Right. They were, they were doing these types.

But they were anomalies at that point. There was not mainstream, was. There was no mainstream.

There was no smoothie. What is it called? Smoothie, Tropic smoothie or whatever it's called. Right. There was none of those yet.

The best you could come up with was Orange Julius.

Right. Which are delicious, but different things.

But different thing. And no drive through at the time.

So you guys actually discovered that. But the supply side you didn't actually account for was the restaurants.

The restaurant. Well, to be honest. So what happened there, 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 labor shortage. And that one of the, one of the consequences of actually making it yogurt 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 labor 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 their perspective, it was like, thanks, but no, it's just not going to work. And that was like I said, 95, 96.

And the reason why I want to talk about that is because that's actually the rest of the story to me is you can find demand. And demand doesn't mean that the supply has 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 a dollar 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 the story is, even if you find that demand, what I think you should be doing is even if you find that demand and you say, hey, 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 if I had a dollar for every time I've heard this too is, hey, we tried that 20 years ago, but it didn't work. Well, circumstances change in 20 years. So 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 their health. But again, let's be clear, we were an early anomaly. We literally the, the market was not proven. The fact is that we were able to kind of show and demonstrate that it worked, but it took them 15 years to actually have access to that.

Demand that was there for demand to reach to catch up with their supply side constraints.

Exactly.

Other companies were able to do it quicker, like Tropical Smoothie and different places that popped up. And there's 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 it 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 pro, 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 5 years till 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.

And it didn't work well. And this is, this is to me like there's two other examples that come to mind, mind that are similar to this. One is pickleball. All the big athletic people have just ignored pickleball. They don't really think pickleball is real. It's all popping up everywhere. People are literally converting tennis courts. The tennis enthusiasts are basically telling you it's like, well, it's not real sport. The people who've 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 realize it's this anomaly that's growing. But again, nobody's infrastructure can support it.

It's big enough for some people to get into it's specialized. It's this, it's that.

It's one of those things where it's this n of 1 and being able to understand these anomalies and being able to understand kind of how 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 it has to be 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 innovation 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 and I'm 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 and Paul LeBlanc, how many people wanted to go back to school but couldn't? Like that's been around for like ever. And the whole notion 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, he's one of the largest universities in the world and most people don't even know who he is.

So the reason why I wanted 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 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 5, 10 years for it to become mainstream, but it was real. And the company had an opportunity to be the first mover. But they were so big they don't need to be the first mover.

The incumbents usually don't have to really innovate that much. Right, that was too much.

So it's not that the methodology failed, the method actually worked perfectly. Especially when you think about the other steps in the process which is trying to match that supply and demand. Because if they would have caved and 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 7 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 was a lot of. Again, we did our best. And this is the thing is actually.

How they solve the problem is they.

Actually have two different machines, they have two different machines. But the reality is this, is that as a developer, we do our best given kind of the constraints we have. But the thing is to 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 it's the struggling moment that creates demand. And so part of it 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 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 or 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, 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 power could have went.

Oh, yeah, they wouldn't. They wouldn't have got. They wouldn't have gotten to kind of even.

They wouldn't have framed the question.

They couldn't have framed a question. Right.

So. So that was the. That's the first aha. 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 morph their equipment. And what they would have done is they would have said, here's the equipment. 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 flavors and done all these other things to it. But they didn't actually. And to be honest, they had done that before. And so as they tried to improve the milkshake.

Well, they were going to do incremental change. Not.

No, 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're in a place where you have had ideas in the past, I want you to go back through.

Yeah. Do the postmortem.

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. I mean it's more of can you do a mental note of hey, you remember 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, everything's dynamic, so yes, it does.

So go back through, just do that mental modeling 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, you're had to go through retailer but now you have a direct to customer channel.

Now that you have that, what's different?

Maybe that changes something that you had before that you could, that 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 what was it though? And the rest of the story.

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 going to go through some of the steps. But the other thing I want people to realize is sometimes, as we heard in this story, having a third person come in or somebody without those blinders on of the company is helpful. So keep that in mind. Yes, go discover the process. But sometimes you might have to bring somebody in and we're here to help if that is. Thank you.

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