Marketing and Innovation: Coping with the Challenges · Google’s 9 Rules of Innovation: Hiring is at the heart of all we do Ideas come from everywhere Share all information Morph
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Marketing and Innovation:Coping with the Challenges
Jakki J. Mohr, Ph.D. Regents Professor of Marketing and
Hamilton Distinguished Faculty Fellow University of Montana-Missoula
Presentation to ORT University students & alumniMontevideo, Uruguay November 23, 2010
Peter Drucker (1954)
―There is only one valid definition of business purpose: to create a customer.
…. Therefore, any business enterprise has two—and only two—basic functions:
marketing and innovation.‖
The Practice of Management, pp. 39-40
The role of innovation in business
MP3 Players:
Sony vs. Apple
Digital Cameras:
Kodak vs. Nikon
Printers:
HP vs. Memjet
TVs, cars, retailers,
History is littered with the skeletons
of companies who failed to remain innovative.
Forces that Compel Change
New sources of competition Customers’ changing needs Internationalization Regulation Changing norms in society And on and on and on and on…
Stagnant Businesses Die
The Two Sides of Marketing & Innovation
Companies must
Remain creative internally Avoid complacency, the status quo
Know factors that affect innovation in the marketplace Where innovations arise
How customers make decisions to adopt new innovations
Obstacles to Innovativeness Within Companies
Core competencies Core rigidities
What a company does best becomes a ―sacred cow‖
A strait-jacket that makes it hard to change
Pressure to protect existing business model
Think: Sony in MP3 players;
Kodak in cameras/film
―Innovator’s Dilemma‖
Pressure to protect existing revenue sources (best customers/best products)
Means companies are not open to new customers/new products
Requires willingness to cannibalize their existing business success.
Not innovating means that the company may miss out on new opportunities to new competitors.
“You’ve been Amazoned!”
Per
form
an
ce
Time
Limit of Particular Technology
Models of Disruptive Innovation
Think: Netbooks: ASUS eePC; MSI; etc.
Fear of Change Results in Shocking Business Decisions
Music industry: sue its customers
Retailers: tell vendors ―You are either our supplier or our customer, but not both.‖ (if vendors use their own .com website, the
retailer will discontinue carrying its products)
Textbook publishers: don’t make all texts available on Kindle so as not to cannibalize their business model
Barnes & Noble unwilling to open the first .com book ―e-tailer‖ (lost to Amazon)
Causes of Lack of Innovativeness
Organizational size (?)
Sunk costs in existing facilities
Preference for the familiar/Discomfort with the unfamiliar
Thinking of markets in terms of products
rather than in terms of the customer need being met.
EX: phones (vs. communication)
Ex: Interface carpets
Success= Culture of Innovativeness
Break-through thinking
Risk taking
Enlightened experimentation
Creative destruction (willing to cannibalize)
Assess by percent of revenue derived from recently-released products and new innovations
Start at the Top!
Top managers:
Willingness to cannibalize
Use fear of obsolescence as motivation
―Only the paranoid survive!‖
Reward mavericks (―champions‖)
Process of developing/commercializing breakthrough product, service, or model that obsolete or cannibalize existing products
Current technology made obsolete by proactively developing next-generation technology
May be the antidote to the Innovator’s Dilemma if it overcomes internal rigidity
Abandon conventional wisdom
―Unlearn‖ traditional but detrimental practices
―Blue Ocean‖ Create a vision of the future based on ―markets that do not
yet exist‖ and unconfined by existing industry boundaries
Challenge the status quo Overturn price/performance assumptions
―Extreme design‖ – Nokia
Escape the ―tyranny of the served market‖– Nokia
Use new sources of ideas for innovation – Nokia
Get out in front of customers
Bifocal vision Engage in creativity exercises
Risk Tolerance
Tolerate ―mistakes‖
Learn from mistakes Nokia
―Mistake‖ may prove to be next success
Reward risk taking C. Barrett: You’re not qualified to run a start-up until
you’ve failed—at least twice!
Master of Culture of Innovation: Google
Google Innovation Strategy
9 rules of innovation http://www.youtube.com/watch?v=b59Jc3n0xHQ
Innovation at Googlehttp://www.youtube.com/watch?v=2GtgSkmDnbQ&feature=related
An Inside Look at Googlehttp://www.youtube.com/watch?v=aOZhbOhEunY&feature=channel
Life at the googleplex: http://www.youtube.com/watch?v=eFeLKXbnxxg&feature=channel
Google’s 9 Rules of Innovation:
Hiring is at the heart of all we do
Ideas come from everywhere
Share all information
Morph ideas, don’t just kill them
Users come first, not money
Data drives all decisions
Speed matters – iterate products
Vision must be shared with the team
20% time is at our core
Initially, ignore:
• CPU power
• Storage
• Bandwidth
• Money
Philosophy:
No Constraints
Open to New Sources of Innovation
―Open Innovation‖
Networks of Innovation
NIH vs. PFE
Not invented here versus proudly found elsewhere
Examples:
Management Innovation Exchange
OpenIdeo
Sources of Innovative Ideas
Biomimicry:
Nature-inspired design
Examples:
IBM
IDEO
HOK
SAP http://www.sapdesignguild.org/community/book_people/review_biomimicry.asp
Innovation in Business Models
A Better Place:
http://www.youtube.com/user/btrplc#p/u/5/kcjNd5Dn2ns
Metrics for Innovation Performance
Innovation’s usefulness, quality, speed to market, sales/sales takeoff
Compare attained innovation performance to the possibilities
What is the record of innovation in the industry?
How does company compare?
Did it miss important opportunities? Why?
Does it successfully convert R&D spending into commercial product?
A Brief Digression
National innovativeness
Finland & Japan vs. Uruguay?
Factors That Affect Innovation in the Marketplace-
The Demand/Customer Side
Innovation should be designed to solve problems people (customers) have
Problems they can articulate (express)
Problems they have but they can’t (don’t) articulate
Adoption & Diffusion of Innovation: Categories of Adopters
Innovators
Technology
Enthusiasts
Early
Adopters
Visionaries
Late
Majority
Conservatives
Early
Majority
Pragmatists
Laggards
Skeptics
{ { { { {
The
Chasm
Mohr, Sengupta, Slater © 2009
Factors Affecting Customer Purchase Decision
Relative advantage
The benefits of adopting the new technology
compared to the costs and in relation to other
alternatives
Compatibility
The extent to which adopting and using the
innovation is based on existing ways of doing
things and standard cultural norms
Complexity* The difficulty involved in using the new product
TrialabilityThe extent to which a new product can be tried on
a limited basis
Ability to Communicate
Product Benefits
The ease and clarity with which the benefits of
owning and using the new product can be
communicated to prospective customers
ObservabilityThe extent that benefits of the new product are
visible to everyone
Product Benefits Functional: new features/benefits
Operational: product’s reliability, durability, ability to increase efficiency/total cost of ownership
Financial: credit terms, leasing options
Personal: psychological satisfaction; emotional
CostsMonetary: price, transportation, installation
Nonmonetary: risks of product failure, obsolescence, factory downtime
Why do customers buy new innovations?
New features/benefits
Novelty
Compelling value
Different customer segments value
different aspects of the innovation.
What prevents customers from buying new innovations?
New = scary, unfamiliar
Inertia
Price too high
Or price too low (too good to be true)
Lack of awareness
Retailers not well trained
New benefits not compelling
Happy with the existing solution (no perceived need)
A Word about Competition
Strongest competition is old pattern of behavior-
Existing solutions
Versus: Our innovation is so new,
we have NO competition!
A Word About Price
Value = Benefits / (Price+Nonmonetary costs)
Lowering price to stimulate adoption makes sense ONLY when: Product is positioned as ―less expensive‖
alternative to ―typical‖ solution
Customers have some price elasticity
(an empirical question)
Company cost/margin situation makes it viable
Alternatives to lowering price
Re-segment the market
Re-think the offering
Offer bundled products
Offer services
Offer subscriptions
(Changes needed capabilities and cost structure as well)
It’s all about positioning
Which customers
Which value from the innovation
Which delivery model
These issues should be considered proactively: Prior to launch and during development!
Conclusions: Innovate or Die! Evaluate your company’s internal (organizational)
culture & values regarding innovation
Encourage culture of innovativeness
Be open to new sources of ideas
Understand your market:
Customers
Competitors
Craft a value proposition around innovation that is compelling.
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