Breakthrough innovation is tricky. Pricing is tricky as well. But doing both to create a breakthrough new pineapple that costs 10 times more than an average pineapple? That's an incredible feat, especially to me as a fruit superconsumer and a growth strategist.
This is what Frankie's Nursery in Waimanalo Hawaii on the island of Oahu did a while back. They created the Meli Kalima pineapple, also known as the Honey Cream pineapple. An exotic fruit tree expert, Frank Sekiya, noticed some marked improvement on some pineapples that had grown near some of his white jade pineapples. After some experimentation over three years, he created this honey cream pineapple which is significantly sweeter, with less acidity and smoother texture.
These are hard to find, so when I found some recently on Oahu I gladly paid about $50 for four of these. So it was roughly $12-13 per pineapple which is nearly 10 times more expensive than the average you can get at Walmart on the mainland (about $1.50 on sale).
Skeptics might say, what was wrong with pineapples to begin with? There was no obvious problem with pineapples per se. And that's the point. There's always room for a startup and entrepreneur to create breakthrough innovation and charge exponentially higher prices, no matter what the category is. Which is why the honey cream pineapple isn't just an amazing eating experience, it's also a great case study for startups with three key takeaways.
If you can innovate a pineapple, you can innovate in any category.
My first takeaway is that startups and entrepreneurs should feel confident that opportunities can exist in any category at any time. If you can do it on a pineapple, you can do it anywhere.
Yes, it's great if you have a clear problem to solve in a crappy industry that consumers hate. This describes the cell phone market pre iPhones, which Apple brilliantly took advantage of. But you can innovate on categories that consumers seem perfectly happy with, if you create breakthrough innovation.
Breakthrough innovation breaks category compromises.
When I say breakthrough innovation, I'm not talking about mere line extensions or tiny innovations that hold pricing the same. The good news for startups is that the vast majority of what big companies launch fall into this category.
The honey cream pineapple combines three benefits in specific ways. First, it is significantly sweeter. So you want to eat more of it. But it also has far less acidity, which creates the sour taste of pineapple. Consumers love the sweet and sour combination of regular pineapples, but the build up of sour eventually makes you want to stop eating. So the honey cream pineapple breaks this compromise.
It also is a smaller size, which makes it easier to eat for a one or two people versus a normal pineapple which yields lots of leftovers. So the sweetness, lack of sour and perfect size opens up a lot of new eating occasions that traditional pineapples don't do.
Truly breakthrough innovation does the same. Consumers in two coffee drinker households didn't realize that one of them was compromising their preferred coffee palate for the other. One might like dark, unflavored stronger coffee, where another likes light, flavored and weaker coffee. But when you're making a pot of coffee, someone compromises.
But Keurig realized the coffee compromise and broke it so that each person could have exactly what they wanted. It wasn't a problem per se, but an exponentially better experience. Which enable them to charge fifty cents per cup of coffee versus five cents in a normal pot of drip coffee.
Breakthrough innovation can command exponentially higher pricing.
Finally, the truest test if your startup has breakthrough innovation is the ability to command exponentially higher pricing. This is to say, the proof that your innovation is truly game changing is your customers saying, "yes, I'll pay much more for that".
Pricing expert Rafi Mohammed talks a lot about the idea of the "next best alternative" when it comes to pricing strategy. If your startup is offering something that if you disappeared overnight, your customers would easily find another comparable alternative, then you have no pricing power. And you do not have a breakthrough innovation. But if your startup disappeared, your customers had nowhere else to go for a comparable experience, then you have pricing power and a true breakthrough innovation.
I'm not saying your startup should charge exponentially higher pricing on an absolute, but it should be able to on a relative basis. Keurig k-cup is 10 times more expensive than a cup of drip coffee, but is still one-fourth of the price of Starbucks.