Marketing and Innovation

A Tribute to Steve Jobs: Speed of Innovation and Executive Sponsorship as Competitive Advantages:

2011-10-05T21:25:00.007-05:00

© Mak Joshi October 5, 2011

There was a time when the First Mover Advantage (FMA) was touted as a significant competitive advantage. The first entrant in the market took most of the market (~40% market share) and the “laggard” entrants were left with very little upside. You enter first, bring good quality products and take a big chunk of the market. That was the traditional thinking.

Things have changed and how! What drives business today is not who enters the market first or how deep your pockets are. What matters more is the speed of innovation and how well you can engage your customers with your innovations. Quality is now work in progress. Consumers expect you to stumble along the way and eventually get it right. They also understand that innovation, by its very virtue, is not a smooth sailing road, but by bringing to market what customers perceive as the future, companies can expect consumers to go for the ride and enjoy the scenery, while paying for it.

Let’s take the case of two tech companies, viz. Apple, Microsoft,

Both these companies are giants in their own right, but have very different pasts and destinies.

Apple virtually created the PC market in the 80s, before they let it all slip away. By mid 90s, Apple was a non-entity, and left alone by most to die a natural, slow and painful death, except for the true Apple believer. Books were written about Apple’s imminent death and how unbundling the hardware and OS to create an “open yet proprietary network” in the early stages of the PC market had led to opening up of the PC market to the likes of HPs and Dells and Intels and Microsoft’s of the world and led to Apple’s demise. All that talk made sense.

Microsoft was the darling of the software industry with their MS Office suite and Windows OS, yet a company everyone slowly learned to hate. MS continued to churn out one blockbuster product after another. After they were caught napping with the Netscape browser launch, MS quickly reverse engineered the browser, made MS IE part of the OS, and practically killed Netscape as a company. Soon after, MS arrived with the .NET platform and looked like a steady ship in turbulent waters. Though never feted for their innovation, they were excellent copy cats, and provided good quality me-too products that surpassed the innovators in market performance.

Google came along and rocked MS’s boat with their search engine and solid innovations in the internet space with their awesome search engine and browser and generated steady revenue streams in the search and online advertising space. A new shining star was born.

Come Year 2001, Steve Jobs had other ideas. A visionary man who cut his teeth in the PC market and then left to run other companies such as animation factory Pixar, he had learnt his lessons over the years. Seemingly out of nowhere, Jobs got busy with his innovations. Starting with iPod, Jobs launched the iPhone and the iPad, products that created whole new product categories.

In 2001, just when Jobs launched the iPod, how many of us thought that a revolutionary product had launched? Not many and certainly not me! Today, ten years later, in 2011, the iPod is “the” consumer digital music device of choice. See Steve walk us through the need for the iPod and the economics of music in 2001. Fascinating stuff:

In the wireless handsets market, Nokia ruled the handset mobile phone market across the pre-iPhone world. Nokia was the Microsoft of the mobile phone market and Symbian seemed like a powerful platform with no end in sight to Nokia’s supremacy. In the US, Motorola did a few things right with their Razor platform by changing the profile of the handset. At one point, in 2004 and 2005, Motorola could not make Razor phones fast enough to keep up with the demand. All that was about to change with some significant innovations in the smartphone market, again thanks to one man – Steve Jobs. The interesting thing is that everyone knew where the phone market was headed in terms of capabilities. Yet, only a few capitalized on it and even fewer were successful at it.

Today, in 2011, the iPhone is “the” smartphone consumers want and the iPad is “the” computing tablet that customers are willing to wait in long lines for. Apple has more cash than the US government, and for a brief period, had the largest market capitalization than any other company ever.

How did Jobs do it? What was it about these products that caused absolute frenzy amongst Apple’s customers and developed such an awesome brand loyalty? What can others learn from Jobs and how can we attempt to replicate his successes in our own markets?

There are several known reasons for Jobs’ success:

1. Consumer experience: More than “fundamental research” and “truly breakthrough new-to-the-world” products, Apple products focus on a far better consumer experience than any other hardware or software maker out there. In addition to the superior usability experience, Apple’s User Interface and graphics set its products apart. As Jobs once famously said:
"We made the buttons on the screen look so good you'll want to lick them."
-- Jobs, on Mac OS X's Aqua user interface (Fortune, Jan. 24, 2000)

2. Segmented market: Jobs knows Apple products are not for everyone. He has focused his product development on consumers who are “willing to pay” for Apple’s high class user experience.
“Our belief was that if we kept putting great products in front of customers, they would continue to open their wallets.”

3. Power of the network: Through the App Store and iTunes, Apple has been able to create a network of users and apps that has snowballed into a significant competitive advantage. Even with a “closed network”, Apple has been able to create more apps than the competing platforms on the market. In fact, the variety of apps available for the iOS is one of the major reasons why consumers choose Apple products over competing products.

Yet, there is one distinct advantage that Apple has over any of its competitors. That advantage is “Speed of Innovation”. As Jobs himself acknowledged, Apple was once very slow to innovate:
"It wasn't that Microsoft was so brilliant or clever in copying the Mac, it's that the Mac was a sitting duck for 10 years. That's Apple's problem: Their differentiation evaporated."

Through Apple’s semi-annual events, the company expects the markets to anticipate new and breakthrough products. Apple has made a habit and a routine developing and launching new products at these events. This is a different, more forceful and dynamic approach to unleashing innovation and has sped up Apple’s innovation cycles. Only a few companies do this successfully, year in and year out.

Jobs also understood the relationship between R&D and speed of innovation better than most companies, including IBM, Xerox and Intel, who have had great tradition of innovation and have been prolific at producing patents, yet have seen varying degrees of success with commercializing them.
“Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It's not about money. It's about the people you have, how you're led, and how much you get it“. -Steve Jobs, Fortune, Nov. 9, 1998

A common folly by marketers is to develop products by asking the consumer what they want through focus groups and advisory boards - what I call “lazy marketing”. Jobs did not let his consumers tell him what they want. He showed and told them what they must have!
“It's really hard to design products by focus groups. A lot of times, people don't know what they want until you show it to them.” -Steve Jobs, BusinessWeek, May 25 1998
“You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new”

Finally, what is the most important factor that leads to “Speed of innovation”? It is Executive Sponsorship. Companies where executives are highly involved in innovation have better growth trajectories, more satisfied customers and happier and wealthier stakeholders. Steve Jobs was "the" master executive sponsor.

RIP, Steve Jobs. The world is a lesser place without you tonight.

Cool presentation on Unlocking Cool

2009-10-02T14:23:00.003-05:00

Check out this presentation by Jeremy Gutsche on spotting trends and leveraging them to deliver customer-centric innovation. By methodically approaching innovation, organizations and individuals can generate ideas, stimulate creativity, and ultimately unlock cool. Very impressive!

Unlocking Cool - By Jeremy Gutsche, TrendHunter.com

View more presentations from trendhunter.

HP DreamScreen and TouchSmart

2009-09-23T20:02:00.003-05:00

Check out these interesting innovations from HP. While one can debate how much of original IP (one that is patentable) went into these products, one has to agree that these devices nicely tie together some very cool existing technologies into an exciting package. From an innovation standpoint, these products rely heavily on derivative and variation types of innovation to create a strong impact in the market. This further emphasizes the point that not all innovation has to be fundamental or breakthrough type to make an "innovation" play for your company.

Some very smart marketing at play here. Don't forget that the marketing function is about satifying and exceeding consumer needs and it plays a huge role in the way the final product shapes up. Marketing is not just about selling or push/pull tactics.

With such futuristic products, HP is slowly but surely reclaiming its lost glory, as the analyst reports and stock price will suggest.

More on Innovation Culture

2009-09-20T18:23:00.003-05:00

Here is an excellent presentation on developing an innovation culture in companies in decline. The author talks about 8 steps required to turn around companies that are past their hey days.

Seven Triggers To Breakthrough Companies

View more presentations from Justin Beck.

Innovation in China

2009-09-11T08:23:00.003-05:00

Look how the Chinese are innovating. Its a revolution happening there. And the best (worst?) part is that we have not even heard of many of these companies. They are innovating in every way: the way they communicate with their customers or the way they monetize these innovations. Take a look:

Mobile and Web Innovation in China

View more documents from Benjamin Joffe.

How difficult are Marketing Innovations?

2009-09-09T20:29:00.010-05:00

Growth is a fundamental differentiator between profitable and non-profitable businesses. Innovations are considered incredibly hard to come by. Many industries thrive on Intellectual Property (IP) for their existence, sustenance and growth. Technology and healthcare companies make or break due to their IP.

Just how difficult is innovation? Innovation seems incredibly difficult, laborious and time-consuming. When we think of innovation, we think of scientists in labcoats toiling away in an R&D lab trying to discover a cure for cancer or develop the next big supercomputer.

Not always the case. Thankfully, for marketers, we need not always depend on huge R&D investments to drive innovation. Marketers are very unique because we can continue to create wealth and add to the company topline as well as the bottomline by being customer oriented and by fostering customer-centric innovation.

In order to understand further how marketers can achieve this, lets first visit the different types of innovation. Praveen Gupta, in his highly recommended book Business Innovation in the 21st Century describes the following 4 different types of innovation:

Fundamental innovation develops fundamental science or knowledge and is extremely rare. It typically happens in government labs and universities. The timeframe for development of fundamental innovation is usually several years.

Platform innovation extends fundamental innovation into useful product platforms, systems and technologies. The timeframe for development is usually several months and is sporadic in nature.

Derivative innovation happens more regularly and has a cycle time of weeks or a few months. It develops products or small systems for platforms that are usually part of a larger system.

Variation innovations can be continuous in nature and can be delivered in days, even on-demand.

So where can marketers innovate to target growth? In all four types of innovation, of course. But marketers are uniquely positioned to leverage both derivative and variation type innovations. Here is how:

Product line extensions: These are your new and improved product with additional benefits to consumer. Example is vitamin and calcium fortified cereal that improves upon the original cereal or Tylenol Arthritis Pain, which a slighltly modified and improved version of the original Tylenol.

Brand extensions: Arm & Hammer went from being a baking soda to a tooth paste to a laundary detergent and now a household paint. Thats an extremely elastic brand. By leveraging your brand equity and brand strength, you can quickly grow a product in a relatively unknown product category.
Customer-centric variation innovations: By making changes to your product that makes it easier to use, more convenient or faster, you can innovate for growth. Examples would be faster service such as 3G or a better user experience such as the one with the Apple iPhone.

So, marketers, don't let the inefficient innovation processes in the R&D labs dishearten you. Put the customer at the center of your innovation process and get busy with your innovations.

Learning marketing from the Prez

2009-08-20T14:08:00.003-05:00

What can we learn from President Obama about marketing? Watch this interesting presentation to learn how to run a publicity campaign against some heavy brands.

10 Lessons for Marketers from Barack Obama

View more documents from Vijay Sankaran.

Social Media and Marketing Innovation

2009-08-20T13:56:00.002-05:00

How much of a marketing innovation is social media? Will Facebook, Twitter, Linkedin, YouTube and the likes change marketing? If so, how? Take a look at this video to learn about the impact of social media.

Innovative advertising??

2009-08-19T18:33:00.002-05:00

This is a really cool idea. Advertising that addresses people's issues and helps them in their time of need! What a great way to get people talking about your product!

Aircel Innovation In Mumbai On Rains

View more presentations from guest31109a6.

More on Business Model Innovation

2009-08-19T18:14:00.005-05:00

Another great presentation from Alex on how to innovate your business model. Interesting step by step process and exercises for business model innovation.

Business Model Innovation

2009-08-19T18:07:00.003-05:00

Product innovation is sometimes not enough to ensure profitability. Take a look at this presentation from Alex. It provides some good insight into how businesses have to innovate their business models to stay ahead of the curve to make money. There are times when you give away your product for free to generate revenues. Interesting times.

Lifecycle Management

2009-05-15T12:11:00.001-05:00

Here is a basic yet interesting presentation on Lifecycle Management.

Nice Presentation on Innovation

2009-05-14T06:36:00.003-05:00

Here is a nice presentation on Innovation. More comments on types of innovation to follow. I will also tie this back to New Product Development in later posts:

Nike's product innovation

2009-05-02T19:40:00.002-05:00

Watch these cool videos on Nike's product innovation history and innovation management process:

Innovation and New Products

2009-05-01T17:28:00.004-05:00

In this blog, we have discussed quite a bit about customer centricity of innovation. This begs the question:

How many of your new product ideas come from your customers?
What role does innovation play in developing new products?
Who should innovate and how?

Check out this video for some answers and examples.

We will spend a lot of time discussing NPD and Innovation with future posts in this blog.

Innovation and the New Product Development Process

2009-04-22T10:29:00.006-05:00

New Product Development (NPD) is the holy grail of marketing and as a result, commercial success. Revolutionary new products were and still remain the greatest source of revenues for most successful companies. A study of successful companies shows that companies with more than 20% of revenues from new products year after year continue their growth trajectory and continue to command commercial success as well as brand recognition. Companies that are not able to do so eventually mature and get bought out or stagnate. A huge correlation exists between market capitalization of successful companies and their revenues through new products.

Revolutionary products are now losing their shine to evolutionary products. Products that evolve from newer technologies are stealing the thunder. New drug classes and new technologies are making headlines. The world is changing very rapidly and integration of different technologies across different domains is becoming commonplace.

Over the next few posts, we will discuss the New Product Development Process and see how innovation can change NPD process as well as products.

Innovation Culture and Mindset

2009-04-21T10:14:00.006-05:00

A cultural change needs to drive innovation in modern organizations. Only a cultural change can propel us towards an innovation mindset. Here are a couple of interesting blogs and a video on this topic:

http://www.vijaygovindarajan.com/

http://collaboratetoinnovate.blogspot.com/

Of particular interest from the video below is Prof. Govindarajan's assertion that innovations from the emerging markets will fundamentally disrupt products in the developed markets, something that I stated in my last blog entry. I feel this is a huge opportunity for forward looking management teams. This will also pose a huge challenge for management that does not identify this as an opportunity and continues to bury its head in the sand. I have seen firsthand how the emerging markets will yield paradigms that have the power to disrupt mature business models. The writing is on the wall. Open your eyes and see it!

Interesting perspective on creativity

2009-04-19T20:22:00.002-05:00

Creativity may come from a divine source? Elizabeth Gilbert seems to think so:

Innovation in resource limited settings

2009-04-15T14:29:00.005-05:00

My last post on innovation friendly countries got a great comment. Resources limited settings are fantastic breeding grounds for breakthrough innovations that have the potential to change the world.

An example is the whole wireless communications revolution that is going on in India. India was never able to ramp up wired communication due to lack of qualified technical people and resources (money) to lay the wired lines for telephones. A pathetically paltry number of people in India had a telephone till about a decade ago.

With the innovation of wireless telecommunications, the issue of laying wired lines was made redundant. Today, over 400 million people in India have phones now and that number is growing every day. Now, the infrastructure is being upgraded to enable 3G networks. So what is innovative about this?

Well, several things. Several out of the box products have come up:

Sloka Telecom, an India based telecom hardware company, has developed a unique design for a base station that is so small it can be installed on a traffic light pole. This base station is 50% cheaper and does not require air-conditioning or cooling. It can be installed out in the open anywhere. The cost of running this base station is 50% lesser. Read the Sloka Telecom success story here: http://specials.rediff.com/money/2009/mar/18slide1-innovation-woes-india-neglects-product-firms.htm
Innovative mobile platform products have flooded the market. Many applications from mobile gaming to maps to you-name-it have entered the market and are extremely successful. A lot of these products have a market in the developed countries as well. Some of these product companies are getting big clients in the European and American markets.
Cost of a phone call is the cheapest in India. It costs less than a penny a minute. Incoming calls are free. Unique calling plans have come up.
Companies like Nokia are developing concepts, testing them and manufacturing products in India. India is their laboratory for mobile platforms.

Overall, companies from developed countries have a lot to gain from competing in resource constrained settings. They can learn how the market is evolving and will likely evolve in the future. They can finetune their offerings so that they can make money in these markets. More than anything else, they can charge a lot more for these same services in the developed countries as customers are willing to pay much more in these countries. And that is a VERY smart business model.

BusinessWeek's Survey of The World's Most Innovative Countries

2009-04-14T10:48:00.003-05:00

I read with interest the article in BusinessWeek that ranks countries by their "innovation friendliness". These are countries that have an atmosphere conducive to innovation. The list is that of countries that have "the right mix of pro-innovation policies and superior results".

While there is no argument that pro-innovation policies play a big role in fostering innovation, why should policies matter in the first place? What if a country delivers superior innovations despite pro-innovation policies? Where would such a country fall on the list?

Also, why should innovation input score matter? Is the proof not in the pudding anymore? How does GDP per capita and FDI matter? Does a country have to have large amounts of resources to be able to innovate? Sometimes great innovations are created and delivered in highly resource constrained settings precisely because large amounts of resources are not available. Is such innovation inferior by any means?

The world around us is changing rapidly. The hangover of the industrial revolution is over. Computers and the internet have created an even playing field. Such surveys need to upgrade what they look for and how they measure innovation effectiveness.

Innovation and Tradeoffs?

2009-04-09T16:10:00.010-05:00

Is the world of consumers kind to tradeoffs in products?

Ask your customer what they want in their new product and the answer you get is "Everything!". Customers want the most features at the lowest possible cost, even free if possible. Everyone wants a product or service that will do everything for them and not cost a penny.

As marketers know, you cannot make that happen at no cost and no upside in revenues. Businessmen and women know that it is the revenue model that drives the business. No revenue means no business and no customers. So, I have good news for you. Customers are willing to make tradeoffs when it comes to products. This is exactly where Innovation comes into play. The higher the magnitude of the innovation (per definition of a "Marketing Innovation", see below), the higher the willingness of the customer to pay. The more you alleviate a painpoint, the more you can charge for it.

An example would be medicine. Some truly innovate life saving drugs can facilitate tremendous extensions in patient lifespan. They cost a lot to make, and have good amount of margins, but patients are willing to pay more because of the benefit of extension of their lives or pain alleviation.

Another good example is air travel, which is a mature industry and not an innovation anymore. Nevertheless, when passenger air travel was introduced, it was a true innovation. We are still willing to pay a lot more than it costs to drive so that we can get from Point A to Point B faster. We are willing to pay for speed of travel.

Consumers are willing to pay several hundred dollars for an ipod for an iphone for the additional innovative features that they offer.

Overall, this is good news to marketers. Why? Because the better you are at innovating, the more value you can deliver to your customers and the more value you can extract from them.

Questions that come to mind are:

How much more can you charge?
And how will I know where the customers will be willing to make tradeoffs?

Answer: Ask your customers. They will tell you.

Tools and frameworks like Conjoint Analysis and Pricing models facilitate asking these questions to your customers. A conjoint study is a partial DOE (design of experiment) that can assist you in asking your customers where they are most likely to make tradeoffs. The output of a conjoint study will help you a) find areas to innovate in and b) understand how consumers will make tradeoffs and maximize value delivery.

Value extraction from consumers will come from value based pricing. There are several pricing models that can help you answer the price question. More later on pricing models as applied to innovations.

Marketing Innovation Myths

2009-04-09T16:05:00.004-05:00

Here are some common myths on marketing innovation dispelled for you:

Myth 1: Innovation should be driven by R&D, technology or a function dedicated to innovation.
Fact 1: Every marketing person is responsible for driving innovation.

Myth 2: Being creative with marketing projects will lead to innovation.
Fact 2: Creativity in itself is not enough for innovation. Companies need structure, processes and training of personnel to drive innovation.

Myth 3: Marketing Innovation is fostered at exotic locales with “out of the box” thinking through right brain activity of creative and artistic marketers.
Fact 3: Innovation requires utilization of the full brain and not merely the right brain; Innovation can become an every day habit for ordinary individuals who can innovate on demand within the confines of their own offices, given the right tools and processes.

What is a marketing innovation?

2009-04-09T14:55:00.003-05:00

A Marketing Innovation is an innovation that satisfies customer needs and develops a competitive advantage through differentiation along one or more of the following performance characteristics:

Desired Product Features and Design
Size
Usability/Service
Quality
Time
Price
Cost savings/ Incremental Revenues

As a rule of thumb, a good innovation strives to achieve a multiple or division of 2 to improve the above performance characteristics, which is called the Innovation Rule of 2.

Why innovation

2009-03-08T18:50:00.014-05:00

Innovation is exciting because:

Innovation creates new markets and new products. In that sense, it brings the future to us. Alternately, we can define the future or bring it ourselves by pursuing innovation.
Innovation drives growth. Good innovation can bring in significant revenues for your company through revenue streams that did not exist before. Innovation creates jobs.
Innovation differentiates. It is a compelling differentiation strategy. It sets you apart as a leader in the area.
Innovation destroys old competencies and creates new ones. Through breakthrough innovation, you can kick the old products and technologies in their teeth and create new desirable atributes for your customers. Innovation changes the game where competitors cannot build these competencies overnight. It can help you leapfrog competition and leave them behind in the dust.
Innovation creates and defines your culture. It rejuvenates. Innovation culture, of which we will discuss quite a bit in this blog, is an important mandate for the company bosses, an area which is poorly understood and recognized.

Scott Berkun feels innovation is overrated in his blog on Harvard Business.

http://discussionleader.hbsp.com/berkun/2008/07/why-innovation-is-overrated.html

A few quick comments on Scott's article:

Customers may not complain about lack of innovation for several reasons: a) Their expectations of the present customer experience may keep them from thinking of a better experience. In other words, they may not know what is feasible and hence stuck with reality. b) Customers are driven to complain with sub-optimal user experiences, very few have the wherewithal or skillset to suggest a better product or service. c) Complaints are opportunities to innovate.
Scott argues that inventors typically do not use the word innovation and there are better words to describe what they do. Since innovation has not been defined well, this is not surprising. Also, the end product of the words he likes ( problem, experiment, solve, exploration, change, risk and prototype) is usually innovation. Unless we define innovation, what is good and bad innovation, and the varying degrees and levels of innovation, we are doomed to not recognize it as such and call it out as such. Later in this blog, we will define the examples Scott uses (Apple iPhone, Google Search engine) within the continuum of innovation. Once we do that, we will recognize innovation on its merit and categorize it accordingly.
Finally, Scott argues that we should really focus on making great things, which requires "a commitment to craft, an attention to detail, and a love for work that has always been rare". I cannot argue with that. However, these inventors did learn to innovate and perfect their ware. Whether we call it innovation or something else, those skills are worth learning.

Finally, innovation is about doing.

What is innovation and why we should care about it

2009-03-07T16:48:00.002-06:00

We hear a lot about innovation these days. Yet, we don't have a body of knowledge for this topic and we cannot clearly define what constitutes innovation and what does not. We all agree innovation is important, but there are no known courses in schools for innovation. Business schools teach how to "manage" and "lead". However, they do not currently teach how to "innovate".

We hear the word "creative" and "innovative" used interchangeably. Creativity is conventionally associated with the right side of the brain. Yet, the people hired to deliver innovation (as in R&D) are people who have demonstrated prowess with the left side of their brains through their superior analytical and mathematical skills.

We are told innovation is good. It sets companies and products apart. It is associated with growth. Yet, it is considered a mysterious process, driven by genuis of individuals who somehow create magnificent designs that are aesthetically pleasing.

So what is innovation? Is it creativity? Is the ability to create something beautiful that people love? Is it doing things better? If so, by how much? How do we measure innovation and its effectiveness? Can innovation be learned? Can you and I create successful innovations? How do we know it is successful? There are no clear known answers to these questions.

I felt compelled to write this blog to investigate the area of innovation and try to answer some of these questions, especially from a marketer's perspective. I feel marketers have a unique role to play in the process of innovation due to their proximity to the customer.

As of now, the questions I set out to answer remain unanswered. Over a series of blog posts, I hope to answer these questions and bring to light many ideas on innovation and marketing by discussing ideas in the area of "commercialization of innovation". I will also discuss ideas on successful innovations in advertising, product life cycle management and marketing strategy. Stay tuned.