Did you get a Snapple drink while you were doing that last assignment? I asked you a thing about what went wrong and why, and I'm sure you dug into it and I'm sure you have all kinds of really interesting ideas. This is a chance for me to share my take on it and you can kind of compare and contrast and maybe give you a chance to go a little bit deeper on some of the takeaway lessons that come from the case. The decision making process at Quaker Oats was a classic one, where they had built Gatorade into this kind of crazy successful thing, then they saw Snapple and they said, we're going to do the same thing. I mean, it's exactly the same thing I mean It's a different product I understand that, but we're going to be able to apply the Gatorade model to Snapple. And by the way that sounds a little bit like applying the model that worked in merger one, merger two or any of the other examples I shared with you on experience already in earlier videos. Well actually it was, it's a pretty good example and it was their emotions that played such a big role. Again, the emotional tagging comes up here as well because they felt so proud of what they had done with Gatorade. I interviewed lots of people within Quaker Oats that were involved with this deal all the way up to the CEO Bill Smithburg at the time and they were rightly proud of Gatorade. They felt great about it because they had built this kind of crazy big brand that's only gotten bigger and bigger over time. And they saw this as an opportunity to do exactly the same thing, but history counts something I've said in a few different ways and there's a classic quote in there. We virtually built Gatorade from scratch, we had double digit growth and an 80% market share despite Coke And Pepsi. People used to say about coke and Pepsi, they will bury you, but we survived, they couldn't beat us. So they bought us, which in fact happened years later when, when Pepsi acquired Quaker oats, but they felt this kind of tremendous pride, this tremendous history and what they did with Gatorade. But there were problems in due diligence once again, it was a classic quote, Quaker didn't really know us, they didn't know our business, they didn't understand our business. And that's probably true because when I interviewed Bill Smithburg, he describes some of these family distributorships that we're distributing Snapple and some of them came to Quaker oats head office to meet with Smithburg. Smithburg wanted to talk to them, he wanted to convince them, okay, I know you've done it always a certain way, but we want you to allow us because they had to get permission since they had the contracts. Independent distributorships have the contracts, Bill Smithburg and Quaker wanted to get the distributorships to say, okay, let us carry Snapple on these giant trucks, doing the traditional methods of doing things. And as I said earlier for the distributorships, it didn't make any money, it didn't make any money or made a lot less money to be more precise because the margins were lower, why would they want to do that? Quaker oats didn't really understand that and as I said, some of these distributorships showed up and when I interviewed Bill Smithburg, he was denigrating of some of these family run companies. He said when they came to see me they were dressed with what away they were dressed and they brought their families, couple of them even brought their dogs. I mean, he is bias, his negativity towards these kind of seat of the distributorships. And unfortunately for him and for Quaker they had no choice, they have to work with them, don't lose tacit knowledge is also important. Any time you have talent, this is a merger situation, but any situation where somebody is leaving for a new job or whatever you don't want to lose their tacit knowledge. Tacit knowledge is information, is knowledge people have in their brains, it's not written down anywhere, it's just based on really understanding the phenomenon of situation. And one of the founders of the company who ended up staying, two left but one of them that stayed ended up saying I was the executive vice president in charge of nothing, which is a great line. And then finally beware of, we can call it negative transfer, which is another kind of a psychology term that some people have used to describe this experience issue, where you transfer knowledge that you think is right. You're based on your past experience, but it's negative because it's wrong. And the differences between Snapple and Gatorade are pretty significant, Snapple's this image, drink, quirky marketing and this cult drink, entrepreneurial distributorships. And Gatorade is a fluid replacement product, it gets distributed and marketed in a classic way through a warehouse system. The bottom line was that Quakers experience with Gatorade just did not transfer over a sample, which was a sobering lesson for them, but a really valuable one for us. Experience can be a very tricky thing and we need to be smart about how we think about our experience when we make important decisions.
