Chapter 2: Tasting Success

The Coca-Cola Company (Coke) is in a league by itself.47 As the world’s largest andnumber one
nonalcoholic beverage company, Coke makes or licenses more than 3,500drinks in more than
200 countries. Coke has built 15 billion-dollar brands and alsoclaims four of the top five soft-
drink brands (Coke, Diet Coke, Fanta, and Sprite).Although it fell to the number-three spot in
2013, each year since 2001, global brandconsulting firm Interbrand, in conjunction with
Bloomberg BusinessWeek, has identifiedCoke as the number-one best global brand. Coke’s
executives and managers arefocusing on ambitious, long-term growth for the company—
doubling Coke’s businessby 2020. A big part of achieving this goal is building up its Simply
Orange juicebusiness into a powerful global juice brand. Decision making is playing a crucial
roleas managers try to beat rival PepsiCo, which has a 40 percent market share in thenot-from-
concentrate juice category compared to Coke’s 28 percent share. And thosemanagers aren’t
leaving anything to chance in this hot—umm, cold—pursuit!

You’d think that making orange juice (OJ) would be relatively simple—pick,squeeze,
pour. While that would probably be the case in your own kitchen, in Coke’scase, that glass of
100 percent OJ is possible only through “satellite imagery, complicateddata algorithms, and even
a juice pipeline.” The purchasing director for Coke’smassive Florida juice packaging facility
says, “Mother Nature doesn’t like to be standardized.”Yet, standardization is what it takes for
Coke to make this work profitably.And producing a juice beverage is far more complicated than
bottling soda.

Using what it calls its “Black Book model,” Coke wants to ensure that customershave
consistently fresh, tasty OJ 12 months a year despite a peak growing seasonthat’s only three
months long. To help in this, Coke is relying on a “revenue analyticconsultant.” He says,
“Orange juice is definitely one of the most complex applicationsof business analytics.” To
consistently deliver an optimal blend given the challengesof nature requires some 1 quintillion
(that’s 1 followed by 18 zeroes) decisions.

There’s no secret formula to Black Book, it’s simply an algorithm. It includesdetailed

data about the more than 600 different flavors that make up an orange andabout customer
preferences. This data is correlated to a profile of each batch of rawjuice. The algorithm then
determines how to blend batches to match a certain tasteand consistency. At the juice bottling
plant, “blend technicians carry out Black Bookinstructions prior to bottling.” The weekly OJ
recipe they use is “tweaked” constantly.Black Book also includes data on external factors such as
weather patterns, cropyields, and other cost pressures. This is useful for Coke’s decision makers
as they ensurethey’ll have enough supplies for at least 15 months. One Coke executive says,
“Ifwe have a hurricane or freeze, we can quickly replan the business in 5 or 10 minutesjust
because we’ve mathematically modeled it.”
Question- 1: Which decisions in this story could be considered unstructured problems?
Structured problems?

Answer:
Unstructured problem can be defined as problems that are new or unusual and for which
information is ambiguous or incomplete. The problem is new or unusual problems for which
information is ambiguous or incomplete. Since getting in to Orange Juice business is new for
Coke this could be considered an unstructured problem. This would be unstructured because
being able to expand an industry heavily relied on climate and weather conditions to produce
necessary crops is never something consistent year to year or even day to day so the decisions
will always be adjusted accordingly to external factors.Also, according to the case Coke’s
executive and managers are focusing on ambitious, long-term growth for the company; doubling
coke’s business by 2020. A big part of achieving this goal is building up its simple Orange Juice
business into a powerful global juice brand.

In this case making simple orange juice also can be considered as unstructured problem because
it involves complicated algorithm and complex application of business analytic. Making one
glass of orange juice by hand for small quantities is not hard. On the other hand, for one
company like Coke producing huge amount quantity of orange juice is not ease. As the Coke
revenue analytic consultant says, “Orange Juice is definitely one of the most complex application
of business analytics”. They should ensure that they have the same freshness for all bottles and
also it should have same quality oranges that will provide plenty of juices. Therefore, it requires
algorithm and complex application of business analytic for mass production of Orange Juice.

Structured problem is a problem in which straight forward, familiar and easily defined. In
addition, problem would be resolved with the pre-determined policies and procedure in a
structured and step-by-step process. They clearly identify what is given and what needs to be
found and much easier to solve.

A good example of Structured problem from this case is Black Book model. It is a simple
algorithm program that includes detailed data about the more than 600 different flavors that
make up an orange and about customer preference. This data is correlated to a profile of each
batch of raw juice. The algorithm then determines how to blend batches to match a certain
testand consistency. It also includes data on external factors such as weather patterns, crop
yields, and other cost pressure. By using Black Book, Coke can easily determine and produce
Orange Juice following the instructions.
Question- 2: How does the Black Book help Coke’s managers and other employees in
decision making?

Answer:

In the case of Coke, the Black Book that they considered as big data, stores the algorithm of the
company’s business success. The Black Book Model helps Coke’s managers and employees on
top of their game plan during decision-making process as it consists over 600 different flavors in
their calculation that is far more than normal human brain can process. By having the Black
Book, it greatly simplifies the decision-making process for the managers while making it more
powerful because of the amount of data being used. No other that, it also helps them to blend
batches of juices as well as tweak recipes.

How big data helps Coke’s manager and employees in making decision is based on the internal
and external sources gathered in the Black Book. Some information in the big data includes
weather pattern for supervising the growing season, crop yield and also other cost pressures. This
information is vital and valuable as it helps the manager to plan, lead, organize and control the
organization. However, to some organization, they rely on big data as much as they believe it is
their important weapon to blend within the market.
Question- 3: What does Coke’s big data have to do with its goals?

Answer:

Coca-Cola top executives and managers are focusing on ambitious, long term growth for the
company, which is to double up Coke’s business by 2020. One of the big parts in achieving the
goal is to build up its Simply Orange Juice business into a powerful global juice brand. The
executives and managers are well aware of difficulties and challenges they might face in the
production of the orange juice due to limited growing season and weather fluctuation.

One good advantage of Coke for being able to professionally analyze the possible consequences
is when they come out with ‘Black Book Model’. Black Book Model is like a house of formulae
specifically in making good orange juice. For the top executives and managers, the book is more
to algorithm, where it contains data about more than 600 different flavors that make up an orange
and about customer preferences. Not only that, it is correlated to a profile of each batch of raw
juices. The algorithm also determines how to blend the new batches to match a certain taste and
consistency.

The presence of big data or the Black Book makes the goal seem to be more achievable. As said
by the revenue analytic consultant, the process of making orange juice somehow requires one
quintillion decision. Big data is knows as quantifiable information that can be analyzed by highly
sophisticated data processing. It comprises of high volume, velocity and variety information that
contributes to the decision made in the decision-making process. Therefore, with the help of the
big data, Coke’s top executives and managers would be able to make a wiser decision based on
the reliable data they have. A part from that, it would also help to make sure the company is on
the right track towards achieving the goal.
Question- 4: Do some research on revenue analytics. What is it? How can it help managers
make better decisions?

Answer:

Revenue Analytics is a company that provides product solutions and recommendations to

companies whose priority is to retain their loyal customers. In short, it is a revenue management
and price optimization company. Revenue Analytics is the application of disciplined analytics
that predict consumer behavior in the market and optimize product availability and pricing to
maximize revenue growth.

The primary aim of Revenue Analytics is selling the right product to the right customer at the
right time for the right price. In Revenue Analytics, it is essential to understand the customers'
perception of product value and accurately aligning product prices, placement, and availability
with each customer segment.

The main challenge is that there are many different variables and many unknown outcomes, thus
the services provided by Revenue Analytics must be accurate. Revenue Analytics claim to only
employ the “A-team”, implying that they employ only the very best specialists and consultants.

Revenue Analytics uses an existing library of predictive analytics components based on decades
of experience across multiple industries, developed by the company’s experts. This will ease the
process for clients to create custom software that is relevant to their company and industry.

However, human emotions are usually affected by the change in prices of the products, thus
Revenue Analytics chooses to include that factor from the very beginning of the process. This
will help reduce the chances of customers becoming unhappy in the change in price. Revenue
Analytics helps managers make better decisions as they are presented with solid figures and can
make a rational decision.