Archive for the ‘Mktg – Product & Innovation’ Category

Innovation: USAA says “Grab your iPhone”

March 3, 2010

Using your iPhone to deposit checks in your bank account, to initiate insurance claims from the accident scene, and to go toe-to-toe with car salesmen … now, that’s cool stuff, for sure.

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Excerpted from Business Week: Customer Service Champs – USAA’s Battle Plan,  February 18, 2010

The provider of financial services for military families uses remote technology and a keen focus on clients to stay atop our annual customer service rating

When customers want to deposit checks, they don’t need to use an ATM, a teller at a branch, or even a stamped envelope and deposit slip. Rather, they can take a  picture of the check with their iPhone, use an app to send it to their bank, and within minutes the money shows up in their accounts. Giants like Bank of America are just testing a similar service.

In almost everything it does, the financial-services outfit puts itself in the spit-shined shoes of its often highly mobile military customers, many of whom face unique financial challenges.

USAA was the first bank to allow iPhone deposits, it routinely texts balances to soldiers in the field, and it heavily discounts customers’ car insurance while they are deployed overseas.

“They do all this really creative stuff … There is nobody on this earth who understands their customer better than USAA.”

No fewer than 87% of respondents to J.D. Power’s syndicated surveys say they will definitely buy from the company again, far higher than the average, which is just 36%. Its client retention rate? A near-perfect 97.8%.

Reps are armed with software that lets them view a history of the online screens a particular customer has viewed on USAA’s Web site, letting them know what policies or business lines the customer was perusing — and may be ready to buy.

Another high-tech service USAA rolled out in 2008 lets its far-flung customers — a sizable number of whom are young, tech-savvy, and living paycheck to paycheck — get text messages about their account balances before, say, making a big purchase.

Later in 2010, USAA is planning mobile peer-to-peer payments, which let customers e-mail or text-message money to friends or family for immediate deposit, no matter where they are at the time.

USAA was among the first to let customers initiate an insurance claim using their phones from the scene of an accident. And it soon will expand that app so policyholders can attach photos to the claim and complete the entire process via phone. By 2011 customers will even be able to attach voice recordings to their file, immediately retelling exactly what happened.

Also coming this year: a mobile car-buying service that lets customers standing at a dealership snap an iPhone pic of a vehicle’s VIN number and instantly get back insurance quotes, loan terms, and pre-negotiated rates at approved dealerships. “The idea is you can turn that phone around to the salesman and say ‘this is the price I’m going to pay.’ ”

Besides helping policyholders, such technology benefits USAA.  “If you can have the member self-serve on certain parts of the claim, or the entire claim … clearly there’s an efficiency gain.” 

Full article:
http://www.businessweek.com/magazine/content/10_09/b4168040782858.htm

Gillette launches new razor … guess how many blades ?

February 15, 2010

Excerpted from AP: Gillette Unveils Razor, and No, It Doesn’t Have 6 Blades, Friday, Feb 12, 2010

A redesign of Gillette’s Fusion razor, the nation’s best seller, is coming and it doesn’t have any extra blades.

The blades war started with Gillette’s introduction of a two-blade razor in 1971, Japan’s Kai went to three in 1998, soon followed by Gillette’s three-bladed Mach3, and then Schick launched Wilkinson-Sword’s four-blade Quattro in 2003.

Not to be outdone, Gillette countered with the five-blade Fusion which has become a $1 billion brand in annual sales and accounts for 45 percent of the men’s razors sold in the U.S. (Below is a revealing internal perspective on Gillette’s 5-blade strategy – it’s well worth reading)

Now. the company’s focus is on making shaving easier and less irritating to the skin.

“Shaving is a very complicated and precise operation. Guys don’t say they want more blades. They want more comfort.”

So there will be no escalation in the decades-long blades race.

New features range from blades that are 15 percent thinner and meant to tug skin less, to a better grip and new mineral-oil lubrication.

The ProGlide will cost 10 percent more than the current Fusion, at a suggested price of $10.99 for a handle and a single shaving head.

Full article:
http://www.cnbc.com/id/35364266

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Company Confidential

We’re Doing Five Blades!                                         

By James M. Kilts
CEO and President,
The Gillette Company

February 18, 2004

Would someone tell me how this happened? We were the vanguard of shaving in this country. The Gillette Mach3 was the razor to own. Then the other guy came out with a three-blade razor. Were we scared? Hell, no. Because we hit back with a little thing called the Mach3Turbo. That’s three blades and an aloe strip. For moisture. But you know what happened next? The competition went to four blades. Now we’re standing around selling three blades and a strip. Moisture or no, suddenly we’re the chumps. Well, we’re going to five blades.

Sure, we could go to four blades next, like the competition. That seems like the logical thing to do. After all, three worked out pretty well, and four is the next number after three. So let’s play it safe. Let’s make a thicker aloe strip and call it the Mach3SuperTurbo. Why innovate when we can follow? Oh, I know why: Because we’re a business, that’s why!

You think it’s crazy? It is crazy. But I don’t care. From now on, we’re the ones who have the edge in the multi-blade game. Are they the best a man can get? Hell, no. Gillette is the best a man can get.

What part of this don’t you understand? If two blades is good, and three blades is better, obviously five blades would make us the best razor that ever existed. Comprende? We didn’t claw our way to the top of the razor game by clinging to the two-blade industry standard. We got here by taking chances. Well, five blades is the biggest chance of all.

I’m telling Engineering to stick two more blades in there. I don’t care how. Make the blades so thin they’re invisible. Put some on the handle. I don’t care if they have to cram the fifth blade in perpendicular to the other four, just do it!

You’re taking the “safety” part of “safety razor” too literally, grandma. Cut the strings and soar. Let’s hit it. Let’s roll. This is our chance to make razor history. Let’s dream big. All you have to do is say that five blades can happen, and it will happen. Hey, if I’m the only one who’ll take risks, I’m sure as hell happy to hog all the glory when the five-blade razor becomes the shaving tool for the U.S. of “this is how we shave now” .

People said we couldn’t go to three. It’ll cost a fortune to manufacture, they said. Well, we did it. Now some egghead in a lab is screaming “Five’s crazy?” Well, perhaps he’d be more comfortable in the labs at Norelco, working on electrics.

Maybe I’m wrong. Maybe we should just ride in Bic’s wake and make pens. Ha! Not on your life! The day I shadow a penny-ante outfit like Bic is the day I leave the razor game for good, and that won’t happen until the day I die!

The market? Listen, we make the market. All we have to do is put her out there with a little jingle. It’s as easy as, “Hey, shaving with anything less than five blades is like scraping your beard off with a dull hatchet.” Or “You’ll be so smooth, I could snort lines off of your chin.” Try “Your neck is going to be so soft, someone’s gonna walk up and tie a Cub Scout kerchief under it.”

I know what you’re thinking now: What’ll people say?  When you’re on top, people talk. That’s the price you pay for being on top. Which Gillette is, always has been, and forever shall be, Amen, five blades, sweet Jesus in heaven.

Stop. I just had a stroke of genius. Are you ready?  Put another aloe strip on that thing, too. That’s right. Five blades, two strips, and make the second one lather. You heard me—the second strip lathers. It’s a whole new way to think about shaving. Don’t question it. Don’t say a word. Just key the music, and call the chorus girls, because we’re on the edge—the razor’s edge—and I feel like dancing.

Source: The Onion.com

While Pepsi pushes health, Wall Street is still on a sugar high

January 29, 2010

Key Takeaway: PepsiCo, a company whose only ties to health come through the athletes in its advertisements, is trying to make a push for a more balanced portfolio.

Throughout this period, the company has seen a sharp decline in sales for many of its hero brands. PepsiCo is still staying true to its healthy vision, as the R&D budget has increased by nearly 40% over a three year period.

As delicious as Pepsi Apple Slices may sound to some, Wall Street does not seem to be as favorable to the strategy as it holds PepsiCo’s stock price well below the soft drink giant, Coca-Cola 

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Excerpted from BusinessWeek, “Pepsi Brings In the Health Police” by Nanette Byrnes, January 14, 2010

Over the past two years, Pepsi has hired a dozen physicians and PhDs, many of whom built their reputations at the Mayo Clinic, WHO, and like-minded institutions. Some researched diabetes and heart disease, the sort of ailments that can result in part from eating too much of what Pepsi sells.

Last year, technological improvements to an all-natural zero-calorie sweetener derived from a plant called stevia allowed Pepsi to devise several fast-growing brands, including Trop50, a variation on its Tropicana orange juice that has half the calories of the breakfast standby. Introduced in March, Trop50 has become a $100 million brand.

Chief Executive Nooyi says she has no choice but to move in healthier directions. For more than 15 years, consumers have gradually defected from the carbonated soft drinks that once comprised 90% of Pepsi’s beverage business. Many switched to bottled water. Meanwhile, the cloud of criticism shadowing Pepsi’s largest business, oil- and salt-laden Frito Lay snacks, grew steadily.

Coming off a tough 2009, during which once high-flying brands such as Gatorade slipped, Pepsi hasn’t convinced Wall Street that Nooyi’s plans will pay off. The company trades at a significant discount to its rival, Coca-Cola . While securities analysts say that healthier foods look like a good long-term market, for now, the slowdown in the company’s far larger traditional snack-and-soda portfolio cannot be ignored. “The consumer can move to baked chips, or pretzels, or Sun Chips, but they’re not yet giving up their chips for an apple or carrot stick,” says Bill Pecoriello, CEO of Consumer Edge Research, an independent stock-research firm in Stamford, Conn.

Pepsi built its empire on the manufacture and distribution of instantly recognizable products. It could get a bag of Lay’s or a can of Mountain Dew to customers practically anywhere in the world. So far, healthier options have produced only modest hits, including TrueNorth nut snacks and SoBe Lifewater.

Edit by JMZ

 

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Full Article:
http://www.businessweek.com/magazine/content/10_04/b4164050511214.htm?chan=innovation_branding_top+stories

Apple’s tablet to be the savior for lagging industries

January 28, 2010

Key Takeaway: Apple is back to its incredibly innovative ways as it prepares for the launch of the iPad in 2010.

This device will allow consumers to have a more interactive experience with print media, give people the ability to host two-way video discussions anywhere and anytime, and may finally jumpstart telecommuting.

Talk about benefit-overload; this product’s unique attributes show that there are ways to revive and improve stagnant, or even declining, categories.

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Excerpted from BusinessWeek, “Five Ways Apple’s Tablet May Change the World” by Ben Kunz, December 30, 2009

Speculation about Apple’s one-device-to-rule-them-all iPad reached fever pitch this month when Yair Reiner, an analyst at Oppenheimer (OPY), dug through Steve Jobs’ production pipeline and found evidence that the tablet was being readied for an April 2010 launch.

…the iPad will change the world in at least five ways.

• Magazine and newspaper publishing will bounce back as consumers rediscover paid subscriptions…Expect to see publishers launch visually stunning versions of their magazines with swooping typography, video insets, CNN iReporter-style news uploads, social media overlays—whatever it takes to make you think you’re seeing a magazine or newspaper like never before, so much so you’ll even want to pay for it.

• Television and radio ratings will continue to fall. Unlike print, TV and radio won’t fit easily into the Apple tablet’s format. Sure, U.S. consumers still watch 5 hours and 9 minutes of live television a day, but the problem is ratings don’t hold when commercials actually air…Rather than being a device to watch television, the Apple tablet is more likely to be an interactive distraction when real TV ads come on your basement set.

• Augmented-reality views of the world will increase. If you missed this trend, it’s simple: Augmented reality puts computer graphics on top of live video feeds, similar to the yellow line you see on the field in NFL games.

• Two-way video on tablets will push communication costs even lower…Add a tablet with built-in Webcam, and suddenly video calls are as easy as holding up a mirror.

• Telecommuting may finally take off…when Apple tablets make portable video truly accessible, plane ticets and poor coffee in cars may become things of the past.

Edit by JMZ

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Full Article:
http://www.businessweek.com/technology/content/dec2009/tc20091229_795528.htm

Holding on for dear life, Nokia attempts to re-enter the handset market

January 21, 2010

TakeAway: Like 66% of companies out there, Nokia suffered from the first mover disadvantage.  Then throw some complacency on top of that and you will have the current day Nokia – losing market share by the minute and watching its stock price tumble. 

Now Nokia it is trying to crawl back.  Blaming customer focus, carrier demands, etc. for its dwindling success, Nokia is hoping that a suite of killer apps and new distribution channels will renew its position as a credible competitor in the handset market.

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Excerpted from NYTimes, “Can Nokia Recapture Its Glory Days?” By Nelson D. Schwartz, December 13, 2009

If there’s anywhere left in the world where it’s still impolite to flash a BlackBerry or an iPhone, it’s Nokia’s annual analyst meeting.

But earlier this month, as executives talked up the company’s plans for 2010, the optimistic message from the stage was belied by the behavior of the audience. In the back of the room, one money manager after another distractedly toyed with a competing device … one analyst announced to the room, “I don’t think anyone in this room is expecting an improvement in earnings next year” …

Although Nokia still commands 37% of the world’s handset market, it’s facing bruising competition in the lucrative high end of the industry, where the iPhone and BlackBerry have grabbed the cool factor in smartphones that can surf the Web and handle e-mail …

Nokia’s problems are especially acute in North America, where its hold on smartphones equals 3.9%, compared with 51% for Blackberry and 29.5% for iPhone … 

“We made wrong decisions in the American market,” says Nokia’s EVP for devices. For example, Nokia was slow to make the change to so-called clamshell phones, sticking with “monoblock” models even as consumers abandoned them.

And while Nokia first offered touch-screen technology in 2004 — three years before the debut of the iPhone — Apple’s models quickly made Nokia’s competing products look stodgy. Most of Nokia’s touch-screen phones can’t quickly transform their screen with the jab of a finger, which is among the factors that make the iPhone seem so much more slick.

Until recently … the company didn’t want to produce phones specifically tailored for American consumer tastes, and it resisted demands from the major carriers to come up with phones based around their brands and individual specifications …

Nokia has also been hobbled by its traditional weakness in phones employing C.D.M.A., the wireless technology offered by Sprint and Verizon Wireless that’s used by about 50% of American consumers … Nokia focuses instead on G.S.M. phones for AT&T and T-Mobile. However, AT&T’s exclusive deal with Apple has hurt Nokia in the high-end smartphone market …

Nokia is finally responding — its lithe, BlackBerry-like E72 appeared in the United States on Tuesday — but it is facing looming threats in other segments.

Google is offering Android, a rival to Nokia’s own operating system, which has been picked up by competitors like HTC, Motorola and Dell, while Asian manufacturers are turning up the heat with low-priced handsets in emerging economies where Nokia has long enjoyed outsize market share … 

“The market believes this is a management team that can’t and won’t execute,” …

Despite the pessimism outside, Mr. Kallasvuo insists spirits are still high inside the company …

Indeed, for all the new competition in smartphones, Nokia remains the dominant player in conventional handsets, selling roughly 15 phones a second worldwide …

And while market share might be minuscule in North America, the company commands a whopping 62.3% of the market in the Middle East and Africa, as well as 48.5% in Eastern Europe and 41.8% in Asia …

What’s more, Nokia has been written off before.  Citing past crises in 1998 (the advent of smaller phones), 2001 (the bursting of the tech bubble) and 2004 (the sudden popularity of flip phones) … “we’ve always had points where technology hit a plateau and had to be reconfigured.”

So why didn’t Nokia move more quickly to counter Apple and Research in Motion in smartphones? “We didn’t execute; we were aiming at too geeky a community,” he says. “Apple is made for the common man. It’s more for Joe Six-Pack than techno-geeks. But we understand Joe Six-Pack too” …

Nokia executives say new offerings like the N900, which is as much a mobile computer as it is a phone, or the N97 Mini, which combines touch-screen technology with a qwerty keyboard, will win back buzz from Apple and BlackBerry while appealing to the company’s 1.1 billion customers …

Another crucial development in 2010 will be a bigger push for North American market share, as Nokia works more closely with carriers and brings out more smartphones … Nokia executives are promising a smartphone for next year that will update the company’s aging Symbian operating system, combining the touch-screen coolness of the iPhone with a BlackBerry-like e-mail solution …

And though Nokia’s flagship outlets in the United States may be folding, the Finnish giant is still trying to compete directly with Apple online, opening Ovi in May to compete with Apple’s hugely successful Apps Store …

Edit by TJS

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Full Article
http://www.nytimes.com/2009/12/13/business/13nokia.html?_r=1&scp=2&sq=nokia&st=cse

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Arm & Hammer vows to make child-raising a little less stinky

January 12, 2010

Key Takeaway: In what now almost seems routine, Arm & Hammer has once again laughed in the face of the product life cycle.

The company known for continually finding new ways to market its core product of baking soda has found yet another use: odor-eliminating diaper pails. Arm & Hammer has successfully brought the efficacy of baking soda into several new categories, ranging from refrigerator deodorizers to laundry detergent.

Just goes to show that if you continue to search for new consumer insights and find innovative uses for your product, you too may come up smelling like roses (or baking soda).

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Excerpted from Brandweek, “Arm & Hammer Diaper Pail Finds Fresh Use for Baking Soda” by Elaine Wong, November 16, 2009

Church & Dwight has found new usage for baking soda: A vented diaper disposal system. The brand tapped baby care maker Munchkin to launch Arm & Hammer Diaper Pail, which hits stores this week.

In launching the Arm & Hammer Diaper Pail, Church & Dwight is hoping to “address the unmet needs of…[more than] four million new moms every year,” said the company’s licensing director, Tammy Talerico. (Munchkin developed the product under a licensing agreement with the packaged goods maker.) The move is Church & Dwight’s first significant foray into the baby products category, but the company sees it more as a way to extend the multiple uses of its baking soda product, Talerico added.

Print ads will also appear in January parenting magazines; online ads are running on mommy sites like Parents.com, Coolmompicks.com and Babyzone.com. “This ties in nicely with our Diaper Pail, which is designed around one of mom’s most tried-and-true nursery solutions—using the natural power of baking soda to eliminate odors,” Ardell added.

Munchkin has also enlisted the help of mommy bloggers—including Lisa Sugar (Lil’ Sugar) and Michelle W. (Mama Plays Mozart)—to share parenting tips with consumers.

Edit by JMZ

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Full Article:
http://www.brandweek.com/bw/content_display/news-and-features/packaged-goods/e3i8ccf864b12d44b626fdc10a8c8c7edbd

What bad economy? DelMonte doing peachy …

January 12, 2010

Key Takeaway: Although the marketing department may continue to be the first to get hit with budget cuts during troubling economic times, Del Monte is showing this may not be the right strategy during a recession.

Through increased advertising, a strong focus on an innovative product pipeline, and leveraging the synergies between consumer and trade promotions, Del Monte has been able to build share and profitability in several markets.

Just goes to show that during times where all of your competition begins to cut marketing programs, ample opportunity is left behind for those who continue to maintain a connection with both consumers and distributors. Who needs a finance department anyway?

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Excerpted from Brandweek, “Marketing Helps Del Monte Thrive During the Recession” by Elaine Wong, November 14, 2009

When Del Monte Foods appointed Bill Pearce as its first CMO in May 2008, the goal was to deliver category-changing marketing that would drive the organization forward, the company said at the time. Going by top-line results, you could argue that he delivered. The company reported a first-quarter profit of $58.6 million, versus a year-ago loss of $10.1 million. On Pearce’s watch, the company has rolled forth eye-catching campaigns, such as the “nude fruit”-themed “Fruit Undressed” ads—via lead consumer goods agency, Smith Brothers Agency, Pittsburgh. The advertising is part of Pearce’s strategy to reinvigorate Del Monte by more “consumer-centric marketing,” the former Taco Bell marketing chief said. Pearce, a veteran of the Campbell Soup Co. and Procter & Gamble, spoke with Brandweek about Del Monte’s new marketing focus.

BW: Earlier this month, Del Monte Foods consolidated consumer promotions and shopper marketing duties for its consumer goods and pets business under two different agencies—Catapult Action-Biased Marketing and Draftfcb, Chicago, respectively. What brought about this decision?
BP:
It goes to what we’re trying to do. I talked about top-tier growth and top-tier share, [and this is part of our effort to achieve that]. It’s not just what you do on TV, but how you surround the consumer on the integrated marketing [front]. We wanted to [increase] our ability to communicate with the shopper in-store, and that really requires ramping up our shopper marketing capabilities. And frankly, the consumer trend—how people shop—has changed over the last couple of years. So it’s really also about making sure we have shopper/consumer promotion capabilities in line with the [current] shopper marketing [trends].

BW: Del Monte Foods dialed up ad spending by 11 percent in its latest quarter. Which brands are you focused on marketing in a recession?
BP:
On the consumer side, you’ve seen our Del Monte ads [for our canned fruits and vegetables business] on TV for the first time in 10 years, and we will continue to support [that campaign]. We believe that the brand is extremely relevant, and we’ve got a very creative way to reframe it in consumers’ minds. [Spots, also via Smith Brothers, show the value and nutrition of buying Del Monte’s canned foods over fresh or frozen brands.] On the pets side, we see continued upside in the pet snacks business, and we recently launched a new campaign for Milk-Bone [“It’s good to give,” via Draftfcb in Irvine, Calif.]. We will continue to support that as well as our work on Pup-Peroni [ads show dogs communicating with their owners with the help of signs], which has been on air [since January].

BW: Marketers have cut back on new product pipelines in a recession. Do you see much of Del Monte’s innovations coming from line extensions or category-changing new products? Do you have an example of this?
BP:
Fruit Chillers [Freeze & Eat Tubes is a good example]. You can think of them as line extensions, as we do have the Fruit Chillers [fruit cup snacks] product. But it was a totally reworked proposition with an entirely new target audience. So, a focus on kids, a new product form, a handheld, versus a cup, like one you’d eat sorbet or ice cream out of with a spoon. And we view that as more than a line extension. It’s been well received. It opened our brand to a whole new user base and to new occasions that fit in with today’s lifestyles and [busy] moms’ needs.

Edit by JMZ

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Full Article:
http://www.brandweek.com/bw/content_display/news-and-features/direct/e3i8f2c0287dc37ec6b833274de1d3ffa85

What’s an iPhone without AT&T? … a hot-selling iPod Touch.

January 4, 2010

Punch line: While Apple’s iPhone grabs headlines, the cheaper iPod touch keeps gaining devoted fans … thanks to strong functionality and, well, no dependency on AT&T.

Trend to watch: As my students know, I’m very critical of cell phone service — dead spots, crackling reception, dropped calls, slow upload / download speeds.  Wonder if iPod Touch (and Apple’s tablet to follow) will give a super-boost to WiFi coverage and obsolete cell phone technology.  Hmmm.

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Business Week: iPod Touch’s Holiday Sales Spike Likely Beat the iPhone’s, December 30, 2009

Ever since Apple introduced the iPhone in the summer of 2007, it has been hailed as one of the most revolutionary products in tech history. By comparison, the iPod touch, which has all the iPhone’s features without the cell phone, has been downright publicity-starved.

But this holiday season, it seems the thinner, cheaper iPod touch may be Apple’s breakout hit …  iPod touch sales soared more than 100%, to 7.2 million, in the final quarter of 2009, while iPhone sales rose 53%, to 11.3 million.

Post-Christmas, the number of apps downloaded onto … iPod touches surpassed the iPhone. “It wasn’t just that the iPod touch barely squeaked by … It blew the doors off the iPhone—and overnight.”

The iPod touch can do pretty much anything an iPhone can do, and for a lot less money. It features the same slick multi-touch interface and can run almost all the 100,000-plus programs in Apple’s App store. The device has taken the portable gaming market by storm

The main difference is that the iPod touch does not work over cellular networks, so owners must be within striking distance of a Wi-Fi hotspot to go online or download apps. But Wi-Fi is available in most homes, offices, airports, and coffee joints, either for free or for a few bucks—but it costs nowhere near the monthly $100 of an AT&T contract.

This year, iPod touch sales may be getting an extra boost from the travails of AT&T, the exclusive carrier of the iPhone in the U.S.

Because of Ma Bell’s network problems, including frequent dropped calls and spotty Net access in cities such as New York and San Francisco, many consumers are opting to carry a new iPod touch along with their old cell phone rather than rely on an iPhone. Many users carry a BlackBerry  for email and making calls, and an  iPod touch for running apps and going online.

Some folks may soon be tempted by Apple’s much-rumored tablet device. Sources expect the tablet device to be roughly three times the size of an iPhone, making it well-suited for playing games, running apps, and reading e-books or online newspapers. The device may also rely on Wi-Fi, allowing Apple to further distance itself from AT&T’s service woes.

Full article:
http://www.businessweek.com/magazine/content/10_02/b4162022078079.htm

There’s nothing like a good fight when it comes to boosting the bottom line

December 16, 2009

Takeaway: A healthy dose of discord may be just what the doctor ordered when it comes to promoting innovation and achieving profitability within an organization.

Companies recruit employees for the diversity of their backgrounds, so why do these recruits so often transform into bobble-head yes-men?

Let’s face it, we all love a good round of Kumbaya, but effective MBAs should aim to be selectively disruptive in order to deliver real value to their employers.

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Excerpt from Harvard Business Review, “How to Pick a Good Fight,” by Saj-nicole A. Joni and Damon Beyer, December 1, 2009.

The effort to eliminate discord at the firm had backfired. Lehman’s board of directors and management team became too agreeable—and too loyal, content to follow even when they knew better. In 2007 and 2008, numerous signals indicated that the firm was heading into a crisis, but insiders who paid attention to them were afraid to point out the elephant in the room. Nobody wanted to disrupt the peace.

The problem is that a peaceful, harmonious workplace can be the worst possible thing for a business, according to consultancy eePulse, which conducts in-depth surveys that measure employee engagement. Complacency, in fact, is the single greatest predictor of poor company performance. The second greatest predictor is an environment in which employees are overwhelmed. In the first case, employees are reluctant to rock the boat. In the second, the level of employee satisfaction is low and the amount of dysfunctional fighting is high. In both situations, low energy levels and fear of political fallout curb action that might address any looming crisis. At Lehman, many alums told us, raising difficult questions could kill your career.

Most leadership experts argue that the best way to manage change is to create alignment, but our research indicates that for large-scale change or innovation initiatives, a healthy dose of dissent is usually just as important. Within an acceptable range of competition and tension, science shows, dissent will fire up more of an individual’s brain, stimulating more pathways and engaging more creative centers. In short, more of what makes people unique, innovative, and passionate is available for use.

Many successful companies are known for their stressful work environments. Microsoft, in its early days, had one of the most contentious, high-strung, and fast-paced corporate cultures in the United States. Bill Gates and Steve Ballmer were famous for yelling at people. Food distributor Sysco, an unusually successful company built on roll-ups and acquisitions, dismisses district managers who don’t meet annual productivity targets—a pretty tough standard for an operating company with thin margins. Market leaders Goldman Sachs and McKinsey are notoriously competitive, hard-driving places to work. Not places you’d go if you were looking for polite and equal regard for all voices.

So it’s time to stop candy-coating what’s taught to executives and their direct reports. It’s time to stop pretending that conflict-free teamwork is the be-all and end-all of organizational life. It’s time to own up to the truth that the right balance of alignment and competition is what pushes individuals and groups to do their best. It’s time to push employees into the right fights.

Let’s be clear—alignment is important. But the purpose of alignment is not harmonious agreement. It is to sustain an organization’s ability to fight for what really matters, and to pull everyone together again once the fight is resolved.

 

Edit by BHC

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Full Article
http://hbr.harvardbusiness.org/2009/12/how-to-pick-a-good-fight/ar/1

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There’s nothing like a good fight when it comes to boosting the bottom line

December 16, 2009

Takeaway: A healthy dose of discord may be just what the doctor ordered when it comes to promoting innovation and achieving profitability within an organization.

Companies recruit employees for the diversity of their backgrounds, so why do these recruits so often transform into bobble-head yes-men?

Let’s face it, we all love a good round of Kumbaya, but effective MBAs should aim to be selectively disruptive in order to deliver real value to their employers.

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Excerpt from Harvard Business Review, “How to Pick a Good Fight,” by Saj-nicole A. Joni and Damon Beyer, December 1, 2009.

The effort to eliminate discord at the firm had backfired. Lehman’s board of directors and management team became too agreeable—and too loyal, content to follow even when they knew better. In 2007 and 2008, numerous signals indicated that the firm was heading into a crisis, but insiders who paid attention to them were afraid to point out the elephant in the room. Nobody wanted to disrupt the peace.

The problem is that a peaceful, harmonious workplace can be the worst possible thing for a business, according to consultancy eePulse, which conducts in-depth surveys that measure employee engagement. Complacency, in fact, is the single greatest predictor of poor company performance. The second greatest predictor is an environment in which employees are overwhelmed. In the first case, employees are reluctant to rock the boat. In the second, the level of employee satisfaction is low and the amount of dysfunctional fighting is high. In both situations, low energy levels and fear of political fallout curb action that might address any looming crisis. At Lehman, many alums told us, raising difficult questions could kill your career.

Most leadership experts argue that the best way to manage change is to create alignment, but our research indicates that for large-scale change or innovation initiatives, a healthy dose of dissent is usually just as important. Within an acceptable range of competition and tension, science shows, dissent will fire up more of an individual’s brain, stimulating more pathways and engaging more creative centers. In short, more of what makes people unique, innovative, and passionate is available for use.

Many successful companies are known for their stressful work environments. Microsoft, in its early days, had one of the most contentious, high-strung, and fast-paced corporate cultures in the United States. Bill Gates and Steve Ballmer were famous for yelling at people. Food distributor Sysco, an unusually successful company built on roll-ups and acquisitions, dismisses district managers who don’t meet annual productivity targets—a pretty tough standard for an operating company with thin margins. Market leaders Goldman Sachs and McKinsey are notoriously competitive, hard-driving places to work. Not places you’d go if you were looking for polite and equal regard for all voices.

So it’s time to stop candy-coating what’s taught to executives and their direct reports. It’s time to stop pretending that conflict-free teamwork is the be-all and end-all of organizational life. It’s time to own up to the truth that the right balance of alignment and competition is what pushes individuals and groups to do their best. It’s time to push employees into the right fights.

Let’s be clear—alignment is important. But the purpose of alignment is not harmonious agreement. It is to sustain an organization’s ability to fight for what really matters, and to pull everyone together again once the fight is resolved.

 

Edit by BHC

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Full Article
http://hbr.harvardbusiness.org/2009/12/how-to-pick-a-good-fight/ar/1

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GE’s “Reverse Innovation” … no, it doesn’t mean going retro.

December 7, 2009

TakeAway: For decades, GE has sold modified Western products to emerging markets. Now, to preempt the emerging giants, it’s trying the reverse.

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From WSJ:” GE CEO Touts ‘Reverse Innovation’ Model”, Sept 22, 2009 

To better compete in emerging markets and elsewhere, General Electric is is changing its method of innovation and developing products in low-cost countries, such as China and India, then distributing them worldwide.

Two products – a $1,000 handheld electrocardiogram device and a portable, personal-computer-based ultrasound machine that sells for about $15,000 – are examples of GE’s “reverse innovation.”

They were originally developed for markets in emerging countries and are now being sold in the U.S., a contrast from the past when GE and many other industrial companies created products in the U.S., then adapted them for global sales.

The new business model allows the company to expand into emerging countries and keep firms there from creating similar products, then expanding sales to the U.S.

“Success in developing countries is a prerequisite for continued vitality in developed ones.”

For reverse innovation to work, product developers must be based and managed in the local market, and when the products are sold globally, they may need to be sold at lower prices even if they cannibalize higher-margin products in rich countries.

GE now has more than a dozen “local growth teams” in China and India.

Full article:
http://online.wsj.com/article/SB125364544835231531.html?ru=yahoo&mod=yahoo_hs

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From the HBS article:

Two myths must be shattered:

Myth #1: Emerging economies will largely evolve in the same way that wealthy economies did.

The reality is, developing countries aren’t following the same path and could actually jump ahead of developed countries because of their greater willingness to adopt breakthrough innovations.

With far smaller per capita incomes, developing countries are more than happy with high-tech solutions that deliver decent performance at an ultralow cost—a 50% solution at a 15% price.

Myth #2: Products that address developing countries’ special needs can’t be sold in developed countries because they’re not good enough to compete there.

The reality here is, these products can create brand new markets in the developed world — by establishing dramatically lower price points or pioneering new applications.  And, technology often can be improved until it satisfies more demanding customers.

* * * * *

Local Growth Team (LGT) model,  is based on five critical principles.

1. Shift power to where the growth is.
Without autonomy, the LGTs will become pawns of the global business and won’t be able to focus on the problems of customers in emerging markets. Specifically, they need the power to develop their own strategies, organizations, and products.

2. Build new offerings from the ground up.
Given the tremendous gulfs between rich countries and poor ones in income, infrastructure, and sustainability needs, reverse innovation must be zero-based. These wide differences cannot be spanned by adapting global products.

3. Build LGTs from the ground up, like new companies.
Zero-based innovation doesn’t happen without zero-based organizational design. GE’s organizational “software”— its hiring practices, reporting structures, titles, job descriptions, norms for working relationships, and power balances between functions—all evolved to support glocalization. LGTs need to rewrite the software.

4. Customize objectives, targets, and metrics.
Innovation endeavors are, by nature, uncertain. It’s more important to learn quickly by efficiently testing assumptions than to hit
the numbers. So the relevant metrics and standards for LGTs—the ones that resolve the critical unknowns—are rarely the same as
those used by the established businesses.  The new business model emphasized training, offered online guides, designed simpler
products, created built-in presets for certain tasks, and tracked customer satisfaction to gauge success.

5. Have the LGT report to someone high in the organization.
LGTs cannot thrive without strong support from the top. The executive overseeing the LGT has three critical roles: mediating conflicts between the team and
the global business, connecting the team to resources such as global R&D centers, and helping take the innovations that the team develops into rich countries. Only a senior executive in the global business unit, or even its leader, can accomplish all of that.

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Wanna double shareholder returns? … Try "organic" growth through focused innovation.

November 25, 2009

HBR: Focus Intensely on a Few Great Innovation Ideas, by Georg von Krogh and Sebastian Raisch, Oct 2009

The global companies that are the most successful at achieving growth through innovation (as opposed to acquisitions) tend to devote their energies to a small number of breakthrough ideas. They select the initiatives with the greatest market potential and marshal their resources to develop them.

The organic-growth champions do more than focus on breakthrough ideas. They also put innovation at the top of the agenda, work across functional and divisional boundaries, and empower employees with an entrepreneurial mind-set.

Obviously, pursuing dozens of innovations is less expensive than developing thousands. But it also requires an intense focus on picking winners and commercializing them.

In a study of organic-growth champions— including GE, BMW, Nestlé, and Samsung— researchers at the Center for Organizational Excellence in Switzerland found that the firms’ shareholder returns were almost double those of the other Global 500 companies (which had lower rates of organic growth).

Procter & Gamble focuses its R&D on just eight to 10 core technologies, and Nestlé  … allocates large budgets to the 10 most promising innovations.

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Repeat after me: time is money, time is money, time is …

November 19, 2009

TakeAway: When it comes to designing products and services, companies would do well to keep in mind the old saying “time is money.”

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Excerpted from WSJ: Beat the Clock – How companies can use time to their competitive advantage, October 26, 2009

History suggests that by helping consumers save time or more fully enjoy the time they spend doing something, companies could gain a competitive advantage that could lead to higher sales and profits. Consider the success of innovations such as fast-food restaurants, automated-teller machines and countless labor-saving appliances.

Consumers are continually searching for new offerings that might allow them to do more in less time, and they are growing  less tolerant of organizations that waste their time—say, by keeping them on hold too long or providing poor service.

 

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There are 3 ways that firms can turn time into a source of competitive advantage.

  1. They can help consumers do things faster by, for example, making a product easier to buy, use or throw away.
  2. They can make the time involved in using a product or service more pleasurable.
  3. Or they can design offerings that empower people to choose the mix of time and value that is right for them.

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Managing Time as a Price Paid

… and get the price down.

  • Doing It for Them. One simple approach is to help people get more than one thing done at a time. The Roomba vacuum from iRobot Corp., for instance, seeks to get the time-cost associated with the use of a vacuum down to zero by working automatically once it has been turned on. Roomba’s promise is that it “cleans routinely so you don’t have to,” freeing up the customer to do something else.
  • Picking Up the Pace. In many cases, consumers just want to get things done faster. The fast-food industry made it possible to purchase a meal in just a few minutes when it pioneered the drive-through window. Other businesses took note: Today, drive-through services exist at banks, coffee shops, pharmacies, liquor stores, and even at certain wedding chapels in Las Vegas.
  • Shrinking the Commitment. The expression “I’d like to do x, but I just don’t have the time” is uttered with great frequency. A solution is to reduce the “size” of the time needed to complete a task. Examples include speed dating and “lunchtime face-lifts” that takes 30 minutes.
  • Ending the Wait. Getting people out of line also allows companies to reduce the price of time in their offerings. Whole Foods Market Inc. instituted a bank-style checkout system at grocery stores in Manhattan, where customers form two to three big lines and move to one of the more than 30 registers per store as they open up. While this process can make the lines that feed into the registers look frighteningly long, it actually gets large crowds through the store more quickly, the company says.

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Managing Time as Product

In our survey of North American consumers,  70% agreed or strongly agreed that they would be “willing to spend more time doing product or service labor” if companies “could figure out how to make the experience more satisfying or engaging.”

The family dinner is an example of something that lends itself well to rethinking time-as-product. Studies have shown that many families wish they could eat more meals together, but they are overwhelmed by the amount of work it takes to get a home-cooked meal on the table.

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Giving Customers the Choice

It can be difficult to determine whether a customer is interested in saving time or enjoying it more at any given moment. So some companies are putting the “time dial” in their customers’ hands, allowing them to switch dynamically from fast to slow, depending on their feeling of time pressure at a particular moment.

The evolution of self-service technologies illustrates some of the simplest examples of this approach. 

Online retailer Blue Nile Inc. employs the “choice” strategy when it comes to selling diamond-engagement rings. In many cases, the time cost involved in buying a diamond ring isn’t in favor of the buyer — often a young man making a once-in-a-lifetime purchase. Whether he shops at a diamond warehouse or a high-end retailer, he is likely to find the process of eyeing even a few product samples through a jeweler’s loupe time-consuming and unfulfilling, and to feel pressure to make a difficult and expensive decision in a hurry.

With Blue Nile, the proverbial shopper in his pajamas can spend as much or as little time as he wants researching the diamonds—by cut, size and many other criteria—online. From there, he can shop for particular settings or rings, pricing out the products with a variety of options. Once he has reviewed his choices, his purchase can be quickly executed. Throughout, the purchaser is in control of his time and the pressure is off to hurry a decision.

While critics originally said this business model was doomed to fail, because people wouldn’t go online to buy a product whose sentiment is supposed to “last forever,” the company says diamond engagement rings now account for 70% of its overall sales, and it estimates it has a 4.5% share of the U.S. engagement-ring market.

***
Consumer attitudes about time are a moving target, and companies must constantly reset their sights.

Tasks that were once seen as easy are now often viewed as burdensome, such as renting videos from a brick-and-mortar store when movies are available for purchase digitally at home.

Full article:
http://online.wsj.com/article/SB10001424052970204038304574145390833891688.html?mod=djemMM#printMode

Distinguishing between customers’ nice-to-haves and gotta-haves …

November 19, 2009

Excerpted from: HBR, What Do Customers Really Want?, by Almquist & Lee, April 2009

Most customer-preference rating tools used in product development today are blunt instruments, primarily because consumers have a hard time articulating their real desires.

Asked to rate a long list of product attributes on a scale of 1 (“completely unimportant”) to 10 (“extremely important”), customers are apt to say they want many or even most of them.

To crack that problem, companies need a way to help customers sharpen the distinction between “nice to have” and “gotta have.”

Some companies are beginning to pierce the fog using a research technique called “Maximum Difference Scaling.” which requires customers to make a sequence of explicit trade-offs.

  • Researchers begin by amassing a list of product or brand attributes—typically from 10 to 40— that represent potential benefits.
  • Then they present respondents with sets of four or so attributes at a time, asking them to select which attribute of each set they prefer most and
    least.
  • Subsequent rounds of mixed groupings enable the researchers to identify the standing of each attribute relative to all the others by the number of times customers select it as their most or least important consideration.

A popular restaurant chain recently used MaxDiff to understand why its expansion efforts were misfiring. In a series of focus groups and preference surveys, consumers agreed about what they wanted: more healthful meal options and updated decor.

But, using MaxDiff showed that prompt service of hot meals and a convenient location were far more important to customers than healthful items and modern furnishings, which ended up well down on the list.

The best path forward was to improve kitchen service and select restaurant sites based on where customers worked.

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“Adoption velocity” and abandonment: Here today, gone tomorrow …

November 17, 2009

TakeAway: Some research indicates that — counter-intuitively — products which catch on too quickly may end up being less successful overall.

* * * * *

Excerpted from Knowledge@Emory, The Long-term Downside of Overnight Success,  September 16, 2009  

Marketers may dream of coming up with a product that skyrockets in popularity as soon as it is introduced to the public.

Research, however, indicates that products which catch on too quickly may end up being less successful overall.

* * * * *

There are patterns in “cultural adoption and abandonment.” 

“We often see products, ideas and behaviors catch on and spread like wildfire. But we know less about why once-popular things become unpopular.”

“Most managers want their products to catch on faster, but our analysis suggests that this might not always be the best strategy. If something catches on too quickly, it might not only have a shorter lifespan, but may also end up being less successful overall. Faster adoption may hurt product success.”

Fads tend to be viewed negatively: “If people think that sharply increasing [popularity] will be short lived, they may avoid such items to avoid doing something that may later be seen as a flash in the pan.”

The research into the adoption and abandonment challenges some assumptions about the diffusion of a message and its saturation in the population, which is an important concept in marketing.

As a message spreads — or diffuses — through a population, it reaches more potential adopters. However, diffusion models typically assume a set target population size. But, a group may continually renew itself. Other factors, beyond diffusion and saturation, must be involved: “Adoption velocity is one such factor.”

Conventional wisdom would hold that if a message diffused through a population quickly, more potential adopters would be reached, improving the prospects for widespread adoption. “The effect of adoption velocity on the cumulative number adopters … shows that adoption velocity has a negative effect on the cumulative number of adopters.”

For example, in the music industry, new artists who bolt to the top of sales charts, often realize lower overall sales than those whose popularity grows more slowly. “This seemingly counterintuitive finding has important implications. One is that faster adoption is not only linked to faster abandonment, but may also hurt overall success.”

The research fits into the growing literature about “cultural dynamics.” By “more closely examining the psychological processes behind individual choice and cultural transmission, deeper insight can be gained into the relationship between individual (micro) behavior and collective (macro) outcomes such as cultural success.” 

Advertising might lead to fast adoption of a product, but the popularity of the product or service advertised might decline when that support dies off or switches to a substitute. “Importantly, though, results suggest that independently of its cause, a quick rise in popularity may have an accelerating effect on abandonment … as such, we anticipate that there will be an inherent tendency for items that have been adopted quickly to decline faster, even in cases where advertising persists.”

‘This is here today, gone tomorrow.'”

Full article:
http://knowledge.emory.edu/article.cfm?articleid=1266

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If it doesn’t walk like a duck and quack like a duck, what the heck is it?

November 12, 2009

TakeAway: When companies develop innovative products and services that don’t obviously fit into established categories, managers need to help people understand what comparison to make. Without that step, potential customers might just walk away wondering, “What is it?”

* * * * *
Excerpted from NY Times, It’s Brand New, but Make It Sound Familiar, October 4, 2009

GLANCE through a photo album of early automobiles and you’ll find an eclectic assortment of vehicles, including three-wheeled machines and bicycle-like contraptions. You’d be hard-pressed to identify many as cars.

Early consumers were confused, too, until innovators finally converged on a carriage-like design and coined the term “horseless carriage” in the 1890s, giving a clear point of comparison. More than 100 years later, we can learn from their example.

Humans instinctively sort and classify things. It’s how we make sense of a complex world.

So when companies develop innovative products and services that don’t obviously fit into established categories, managers need to help people understand what comparison to make. Without that step, potential customers might just walk away wondering, “What is it?”

* * * * * 

As a starting point, it helps to understand some basic traits of behavior. When people encounter something they don’t recognize, they make sense of it by associating it with something familiar.

“The category signals not only a set of features to expect, but at a more basic level, when and how you should use the novel item.”

Companies can benefit by using comparisons to create expectations that best match an innovation’s strengths.

Problems can arise if consumers can’t place innovations into familiar categories. Consider the introduction of the Segway, the high-tech motorized scooter, “Nobody was quite sure what it was … There was no clear analogy, so people had no idea how to use it.”

* * * * *

Finding the right label is only one of the many ways organizations can influence the way consumers categorize a product. They can also experiment with the product’s shape, packaging, pricing and retail store placement.

* * * * *

As innovative products are introduced, category boundaries are continually shifting and new categories emerging. In some ways, the auto industry is going through a transformation that harks back to the 1800s.

Today’s consumers are confronted with an impressive assortment of new vehicles, including electric models with three wheels and others with designs that just don’t look like what we expect a car to look like.

Will electric vehicles be broadly accepted? And which models will be most popular? The answers may well depend on the associations that automakers try to imprint on consumers.

Full article:
http://www.nytimes.com/2009/10/04/business/04proto.html?sq=segway&st=cse&scp=1&pagewanted=print

Q&D testing of "killer assumptions" … If you can’t GET the data, then CREATE it.

November 6, 2009

TakeAway: By becoming skilled at experimentation, innovators can gain a competitive edge.

STRATEGY & INNOVATION, Not-So-Risky Business, September 16, 2009

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By systematically attacking the most critical unknowns with tailored, low-cost experiments, innovators can systematically “de-risk” their strategies and thereby increase their chances of success while lowering the associated investment cost.

Systematically testing “killer assumptions” with quick experiments can create the data otherwise not available in market research reports but necessary to move forward to the next step, whether that step is doubling down, re-vectoring, or folding.

This type of approach is generally most critical when data doesn’t exist in market research or other reports, but rather exists in behavior that hasn’t yet happened or outcomes that can only be learned in market. In other words, if you can’t GET the data, then CREATE it through market experiments.

In other words, the goal is to run early experiments up front to gain critical pieces of information that can enable re-vectoring early and increase odds of success at a lower price tag.

“Test and learn” is the mantra. Invest a little and learn a lot is the approach.

And, the prizes over time come in the shape of lower investment costs, more innovation opportunities, and higher odds of success. Again, just remember “invest a little, learn a lot.”
* * * * *
The first step is detailing “killer assumptions” by assessing risk, confidence, testability:

  • How important is it for this assumption to be true?
  • How confident are we in this assumption?
  • How easy would it be to test this assumption?

Then, start experimenting …

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The best experiments:

  • Isolate the variables being tested and keep it to one (or perhaps two) at a time
  • Keep the experimentation quick & dirty (Q&D) … not elaborate or expensive

Get out of the lab and office and into the “real world
* * * * *
Armed with information from experiments, make one of three immediate choices:

  1. Double down and continue to the next assumption,
  2. Re-vector and accordingly re-assess the killer assumptions involved,
  3. Determine that it is time to cut your losses and fold.

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Full article
http://www.innosight.com/innovation_resources/article.html?id=842

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How do you say “Mmm, Mmm, Good” in Russian ?

November 5, 2009

TakeAway:  As the simple meals category grows, soup faces greater competition for a share of your plate.  Campbell’s is making important changes to its products to adapt to consumer needs and win your loyalty (when your budget is not your key decision factor).

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Excerpted from BusinessWeek, “Campbell’s: Not About to Let the Soup Cool,” By Matthew Boyle, September 17, 2009

In tough times, comfort sells. And few brands evoke a warm and fuzzy feeling more than Campbell’s … The cost-conscious climate has been a boon for soup sales, which rose 5% in the U.S. in fiscal 2009 … That performance launched Campbell Soup into the ranks of the top 100 brands, where it joined food giants Kellogg, H.J. Heinz, and Nestlé.

But as the recession recedes, Campbell’s will need to prove that its name still resonates with American consumers, many of whom will venture back into restaurants once the economy improves. To stay on top, Campbell’s is launching new products, recasting old favorites, and aggressively pushing into emerging markets …

Consider Campbell’s Chunky line of soups. Last year the company neglected the brand, focusing instead on Select Harvest … Select Harvest became one of the top food launches of 2008. But Chunky suffered as a result … Now Campbell’s is revamping Chunky … the company wants to make the soup more nutritious without sacrificing its perceived heartiness …

China and Russia present a bigger opportunity and challenge for Campbell’s. The two countries account for more than half the world’s consumption of soup. But nearly all of it is homemade. If the company can capture just 3% of the at-home consumption … the size of the business would equal that of the U.S. …

To break into those markets, Campbell’s has been conducting extensive on-the-ground research over the past few years, interviewing thousands of consumers in Russia alone … Their findings led them to develop a broth-like product that Russians can use as a base for their own soups. Next year the company will sell 14 different soups in the country, up from three this year

Edit by TJS

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Full Article
http://www.businessweek.com/magazine/content/09_39/b4148060517726.htm

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Starbucks plays the value card … say, what ?

October 15, 2009

TakeAway:  For a company that has increased the price of its latte exponentially each time the price of milk rose by a penny, it is very intriguing to see Starbucks aggressively offering a coffee value play.  Will a high volume, low margin gain from an extension of its market footprint be able to turn this company around … we’ll see.

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Excerpted from WSJ, “Starbucks Takes New Road With Instant Coffee,” By Julie Jargon, September 30, 2009

Starbucks aims to convince Americans and Canadians that its new Via instant coffee is comparable to its brewed product

Via is part of a strategy to provide value for customers who can’t or don’t want to splurge on a regular coffee purchase. One packet of the instant variety produces a cup of coffee for less than $1. Via costs $2.95 for a three-pack and $9.95 for a 12-pack …

Portability will be an important selling point. As such, Via will be available in stores such as REI and Office Depot … Via will be available for purchase on domestic United Airlines flights longer than two hours …

Starbucks doesn’t plan to enter traditional grocery stores until sometime next year … In traditional supermarkets, Starbucks will go up against Nestlé, maker of Nescafe Taster’s Choice, which already is running ads attacking Via.

Starbucks is launching its own ad campaign on television — a rare move for a company that has traditionally stuck to print ads and social-networking sites for its marketing.  The initial commercials will promote a “taste challenge” that will take place at Starbucks stores … “We’re convinced a majority of people won’t be able to tell the difference” …

The idea for developing an instant coffee has been brewing at Starbucks for 20 years … The company, which has struggled amid the recession as customers have either forgone Starbucks visits or purchased less expensive coffee drinks, expects its entry into the $21 billion global instant-coffee market to be a huge opportunity to boost sales …

Edit by TJS

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Full Article
http://online.wsj.com/article/SB125418430092348015.html?mod=djemMM

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Leading with their chin: NBC shows marketing savvy in late-night comedy timeslot switch

October 5, 2009

TakeAway: Finally Hollywood can provide us with something other than a Paris Hilton debacle or Speidi controversy.

NBC went back to the basics: giving consumers what they want.

By focusing on people, the ever-important (and often forgotten) node of the 6 P’s, NBC has drastically changed the landscape of late-night television without developing a new, innovative product. It simply realized that it’s core viewers were changing, and acted accordingly.

This demonstrates that it doesn’t always take groundbreaking innovation to create a successful product. The same result can be achieved by simply looking at your existing products and attempting to deliver greater value to the consumer.

* * * * *

Excerpted from Forbes, “Lessons from Leno: Marketers Can Learn From NBC’s Timeslot Switch” by Allen Adamson, September 22, 2009

…the producers knew exactly what they were doing when they decided to shift Leno’s show from its 11 p.m. time slot to 10 p.m. They were making a smart marketing move, one that is an interesting case study in brand management. General Electric-owned NBC, recognizing that good brand management means keeping tabs on what’s important to a core target audience, decided that airing the show an hour earlier would be a great way to hang onto this faithful group of viewers who are probably saying, “Hey, I can watch Leno and be able to get up with the kids at the crack of dawn.” There isn’t a powerful company on the planet where executives believe they no longer have to worry about what matters to their most important consumers. Consumer attitudes change, and the best brands respond. The second important branding effort made by those in charge of the Leno brand was taking a look at the competitive programming landscape and determining that there was an opportunity to offer something different, yet relevant. After considering the lineup of mediocre shows on TV, they saw something right in front of their noses. “Why can’t an already successful late-night television show be on earlier?” Here was a simple brand idea which, with a bit of repackaging, could be made ready for prime time–along with an audience delighted to have it in prime time. Taking a look at your category from a unique point of view, identifying something no one else has seen and doing your homework to determine its relevance to a particular target can give you a real competitive advantage.

Edit by JMZ

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Full Article
http://www.forbes.com/2009/09/22/nbc-kanye-tv-cmo-network-allenadamson.html?partner=yahootix

 

 

 

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Apple set to compete with Nintendo and Sony

September 30, 2009

TakeAway: MSBers: Remember back in MarkStrat when we learned that a “Direct Hit” targeting strategy was better than a “Tweener” strategy?

Apple seems to feel the same way about the iPod touch.

Kind of caught in no man’s land (not as cheap as the iPod nano, not as awe-inspiring as the iPhone), Steve Jobs and his crew have decided to position the touch against Nintendo DS and Sony PSP as a portable video game player.

Their advantage? How about competitive prices on hardware, cheaper games with a wider selection, and, oh yeah, that delicious-looking fruit with a bite taken out of it.

* * * * *

Excerpted from Forbes, “Steve Jobs Takes Aim At Competitors” By Brian Caulfield, September 9, 2009

Steve Jobs was there . A tablet computer was not.

Jobs, however, did drag out a big bag of pain for Nintendo, Sony and Cisco from wherever he has been hiding this year.

The nastiest move: tacking a video camera onto Apple’s iPod nano.

Cisco’s Flip camera, by contrast, starts at $149 for a device with half the storage and no music player. In short: “We’re going to lower the price from $149 to free,” Jobs said.

Jobs also slashed the price of the iPod touch to $199 as he unveiled a new ad that positions the tiny touch-screen tablet as a Nintendo DS killer. The new tag line for the commercial Apple will soon be using to carpet bomb the competition: “next-level fun.”

Apple was eager to make unflattering comparisons between the Sony PSP and Nintendo DS.

Apple’s  pitch: Apple’s games are cheaper; the iPhone and iPod touch’s built-in App Store makes buying games more convenient; and Apple has more of them. Apple now offers 21,178 games, compared to 3,680 available for the Nintendo DS and 607 for Sony’s PSP.

Edit by JMZ

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Full Article
http://www.forbes.com/2009/09/09/ipod-iphone-apple-technology-enterprise-steve-jobs_print.html

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The “good enough” revolution …

September 10, 2009

Wired, The Good Enough Revolution: When Cheap and Simple Is Just Fine,  08.24.09

The central premise:

The world has sped up, become more connected and a whole lot busier.

As a result, what consumers want from the products and services they buy is fundamentally changing.

We now favor flexibility over high fidelity, convenience over features, quick and dirty over slow and polished. Having it here and now is more important than having it perfect.

These changes run so deep and wide, they’re actually altering what we mean when we describe a product as “high-quality.”

Entire markets have been transformed by products that trade power or fidelity for low price, flexibility, and convenience.

Some examples …

MP3s

The music industry initially laughed off the format, because compared with the CD it sounded terrible.

What record labels and retailers failed to recognize was that although MP3 provided relatively low audio quality, it had a number of offsetting positive qualities.

By reducing the size of audio files, MP3s allowed us to get music into our computers—and, more important, onto the Internet—at a manageable size.

This in turn let us listen to, manage, and manipulate tracks on our PCs, carry thousands of songs in our pockets, purchase songs from our living rooms, and share tracks with friends and even strangers.

And as it turned out, those benefits actually mattered a lot more to music lovers than the single measure of quality we had previously applied to recorded music—fidelity.

Netbooks

On paper, netbooks might seem like crappy toys.

They have almost no storage, processing power, or graphics capability.

What they do have, though, is accessibility: Cheap, small, and light, they let you connect to the Internet from almost anywhere.

Netbook shipments were up sevenfold in the first quarter of 2009.

Kindle

Amazon’s Kindle can’t display complex graphics, and paper still has much higher resolution.

But the device does store hundreds of titles in a slim package, ensuring that you always have access to whichever Philip K. Dick tale you’re in the mood for.

The Kindle is expected to generate $310 million in revenue by the end of 2009

Kaiser Micrclinics

Instead of building a hospital in a new area, Kaiser just leases space in a strip mall, sets up a high tech office, and hires two doctors to staff it.

They cut everything they could out of the clinics: no pharmacy, no radiology. They even cut the receptionist in favor of an ATM-like kiosk where patients can check in with their Kaiser card.

Thanks to the digitization of records, patients can go to a “microclinic” for most of their needs and seamlessly transition to a hospital farther away when necessary.

What they found is that the system performs very well. Two doctors working out of a microclinic can meet 80 percent of a typical patient’s needs.

With a hi-def video conferencing add-on, members can even link to a nearby hospital for a quick consult with a specialist.

Patients would still need to travel to a full-size facility for major trauma, surgery, or access to expensive diagnostic equipment, but those are situations that arise infrequently.

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80 percent is a magic number — the famous Pareto principle, also known as the 80/20 rule.

And it happens to be a recurring theme in Good Enough products: 20 percent of the effort, features, or investment often delivers 80 percent of the value to consumers.

That means you can drastically simplify a product or service in order to make it more accessible and still keep 80 percent of what users want—making it Good Enough

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Full article:
http://www.wired.com/gadgets/miscellaneous/magazine/17-09/ff_goodenough?currentPage=all

Thanks to MSB MBA alum Mike Cirrito for the lead

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How (and why) consumers drive American innovation …

August 19, 2009

Excerpted from “Consumers Drive American Innovation”,  John Quelch,  Marketing KnowHow, March 31, 2009

Marketing, a distinctly American expertise, has of encouraged consumers to be venturesome and to welcome innovation.

The willingnes of American consumers to adopt new products, new processes and new services more rapidly than consumers in other countries may be the most important of all enablers of entrepreneurship and innovation in America.

Why is the American consumer more venturesome? Six factors come to mind.

Wealth. The average American consumer has more disposable income than his counterparts in most other countries. There is therefore money available, with easy credit historically fueling the fire, to risk on new things and new experiences. And the secondary market, from the flea auction to eBay, is well developed so the consumer does not necessarily lose everything if disappointed.

Mobility. American consumers relocate more than most. What they own, how they dress, what they do. In other words their consumption behavior, becomes an important signaling device to attract efficiently the right set of new friends and acquaintances. It’s not so much a matter of keeping up with the Jones’s; it’s a matter of quickly identifying the Jones’s like you.

Immigration. The prevalence of immigrants among America’s successful entrepreneurs is well-documented. But the same curiosity and openness to new things also characterizes consumer demand in the American melting pot.

Independence. The American frontier tradition and the sheer number of Americans promotes an attention to individual differentiation that is less prevalent in more conformist and homogeneous societies. Among 300 million curious consumers, it is possible for almost any innovation to find a viable niche market.

Recognition. Americans are not overly concerned or burdened by history. Many live for today or for the next new thing. Early adopters and lead users of new products are listened to and applauded. Their opinions are sought on the Internet. They can accelerate adoption of a new product or kill it. The American maverick commands more influence than the European eccentric.

Technology. Americans understand that innovation is the key to growth and wealth in a global economy where knowledge travels at lightspeed over the Internet. America’s economic strength is based on innovation. Proud parents take their children to science fairs, new electronic gizmos dominate Christmas gift sales, and senior citizens find renewed connectivity with far-flung families by going on line. Americans know technology adds value to daily life.

Bottom line: Venturesome consumers have an appetite for innovation …

Full article:
http://blogs.harvardbusiness.org/quelch/2009/03/how_consumers_drive_american_i.html

Stick a keg in the fridge … now, that’s innovation!

August 10, 2009

Among the Latest Innovations From Major Brewers Fighting for Business in a Jammed, Sluggish Market

MillerCoors  has begun testing the sale of $20 draft-beer systems for consumers to drink at home, part of a string of new products and package innovation from beer giants grappling for market share in a crowded, slow-growing industry.

The 1.5-gallon boxed product, which is designed to fit into refrigerators for drinkers to consume periodically, rather than for one-time party use.

Sales of major U.S. beer brands are struggling as some recession-weary consumers drink less or switch to cheaper brews.

Despite a new ad campaign this year aimed at revitalizing the brand, Miller Lite’s retail sales fell 7.5% by volume.

Sister brew Coors Light, on the other hand, continues to post sales gains. Analysts attribute its long-running success in part to innovations in packaging, such as “cold-activated bottles,” whose labels turn blue when the beer inside cools to a certain temperature.

MillerCoors’s new Home Draft systems are meant to be placed upright in a refrigerator, which will keep the beer fresh for about 30 days. The price per ounce is roughly 15% higher than for an 18-pack of the same beer.

The product, which is recyclable, is aimed at the 30% of beer drinkers who say they prefer draft beer to the bottled or canned variety.

“We’re really trying to meet that occasion when you just got back from work and want to reward yourself,” rather than “the party occasion,” he said.

Excerpted from WSJ, MillerCoors Tests a Draft-Beer Box for the Fridge, July 29, 2009
http://online.wsj.com/article/SB124882355717088341.html

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Name a government agency that works … here’s one if you’re stumped.

August 7, 2009

DARPA – the Defense Advanced Research Projects Agency — is the Defense Dept.’s famous research branch.

Created at the height of the Cold War to bolster U.S. military technology following the Soviet Union’s Sputnik satellite launch, the agency has a long history of innovation.

Most famously, DARPA’s researchers first linked together computers at four locations in the early 1960s to form the ARPANET, a computer network for researchers that was the core of what eventually grew into the Internet.

Other breakthroughs have fueled big advances in commercial areas , including:

  • GPS
    DARPA co-funded the original satellites used for GPS in 1960. By the 1980s its research helped miniaturize GPS receivers, making them portable and inexpensive enough for use in everything from automobiles to cell phones.
  • COMPUTER MOUSE
    An agency-sponsored researcher named Douglas Engelbart invented the now ubiquitous device in 1964. The original model was made of wood and had a single button.
  • INTERNET
    DARPA developed the military network, the ARPANET, from which the Internet later emerged. Launched with four connected sites in 1969, it eventually linked universities and think tanks before an international network was commercialized in the mid-1990s.
  • UNIX
    In the 1960s, the agency funded the further development of the computer operating system known as UNIX, which remains in widespread use today by Hewlett-Packard, IBM, Sun Microsystems, and others.
  • PARALLEL COMPUTING
    In the 1990s, DARPA funded research into a technology that breaks apart highly complex problems into pieces and solves them in parallel. It is now commonly employed in high-performance computing.

Excerpted from Business Week, Can the Military Find the Answer to Alternative Energy?, July 23, 2009
http://www.businessweek.com/magazine/content/09_31/b4141032537895.htm

How do you know a successful new car when you see it ?

August 6, 2009

 Ken’s Take: This article is specific to the auto industry but the general principles are applicable to most businesses.

* * * * *

Excerpted from: WSJ, The Auto Industry’s Comeback, July 29, 2009

The future of any car company is built on the relative success of its new cars.

Between now and 2014 there will be approximately 250 launches of either all-new or significantly redesigned new cars in the U.S.

* * * * *

What constitutes a successful launch?

First,  focus on the true indicators of how well a launch is going. Sales reports are not enough. What are the cars actually selling for at retail? Do the vehicles require incentives? Are dealers earning a profit? How are the residual values holding?

Second, the company must deliver a high-quality product if sales are to be sustained. Getting things right from the start has become the price of admission. Even the most subtle mistakes—like user-unfriendly technology—can kill off an otherwise promising product.

Third, the vehicle must have appeal. Owner delight with the design, content, layout and performance can be objectively measured. Attributes such as drivability, instrument panel layout can make the buyer an advocate and give the launch momentum.

Fourth, the products must have durability and reliability. It takes about three years to get a good reading on how the consumer feels about these two qualities. But we do know there is a direct relationship between a brand’s reputation for reliability and durability and its performance. So part of the assessment should include a look at the reputation of the brand. Where the reputation is strong, the launch gets a boost.

Fifth, while manufacturers launch cars, dealers sell them. The dealer’s willingness to put his best sales people on the new product, advertise vigorously, finance, carry and merchandise (a fancy word for trick out) the requisite inventory is all a reflection of the dealer’s confidence in the franchise. Brands that enjoy a high level of dealer confidence and exclusive dealership facilities have a more effective channel for launching a new vehicle.

 Full article:
http://online.wsj.com/article/SB10001424052970204886304574308202570479912.html

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Looking for ideas in all the right places … different right places

July 31, 2009

Ken’s Take: Lots is written on how to be innovative. This is a nice checklist of frequently used methods …

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Extracted from WSJ, “In Search of Innovation”, Bessant, June  23, 2009

When companies try to come up with new ideas, they too often look only where they always look. That won’t get them anywhere.

If you want to understand why some companies lack innovative ideas, think about the man who can’t find his car keys.

His friend asks him why he’s looking for the keys under the lamppost when he dropped them over on the lawn. “Because there’s more light over here,” the man explains.

Innovative ideas, however, don’t really come from nowhere. Instead, they are typically at the edge of a company’s radar screen, and sometimes a bit beyond: trends in peripheral industries, unserved needs in foreign markets, activities that aren’t part of the company’s core business.

In other words, they have to look away from the lamppost.

None of this is easy to do. But companies that succeed may just recognize the next great opportunity, or looming threat, before their competitors do.

Here are nine examples of practices with the potential to produce a company’s eureka moment.

BUILD SCENARIOS
Many companies use teams of writers with diverse perspectives to create complex scenarios of what future markets may look like. The writers try to imagine detailed opportunities and threats for their companies, partners and collaborators. An oil company that wants to explore energy opportunities in cities of the future, for example, might want to work on scenarios with writers from construction, water and utility-management companies.

SPIN THE WEB
A few companies have created Web sites that act as literal marketplaces of ideas. InnoCentive.com is a site where people and companies look for help in solving scientific and business challenges. Posters of challenges sometimes offer cash rewards for solutions: Amounts have ranged from $5,000 to $1 million. Problem solvers can be professionals, retired scientists, students or anyone who can answer a problem that has stumped a company’s own researchers.

ENLIST LEAD USERS
Ideas and insights from so-called lead users can be the starting point for new markets, products and services.

Lead users are innovators themselves. They tend to be people working in or using products in a specific market who are frustrated by the tools, goods or services currently available and yearn for something better. Many medical devices, for example, originate from sketches drawn by surgeons, surgical nurses and other medical staff who feel driven to experiment with new ideas because current products aren’t meeting their needs. They are often supportive, and tend to tolerate product failures as part of a process that helps bring about improvements.

DEEP DIVE
Interest has surged in market research that uses detailed, firsthand observation to learn more about consumers’ needs or wants. Deep diving is one of many terms used to describe the approach, which resembles an anthropological study in the way researchers immerse themselves in the lives of the target consumers.

Such approaches can help uncover underserved or unserved markets and give clues to new directions and new frames in which to search for innovative ideas.

PROBE AND LEARN
Some companies design probe-and-learn strategies that study opportunities in segments of markets the company isn’t active or strong in. This strategy goes further than deep diving by actively experimenting with new ideas in a new context. The experiments might not always work, but they will give valuable insight about future directions of markets.

MOBILIZE THE STAFF
By engaging more of its own workers in the search for innovation, a company can broaden its vision. For example, the duties of procurement, sales or finance groups can be expanded to include learning about trends they encounter that ordinarily might be considered not of primary interest to the company.

CATER TO ENTREPRENEURS
Innovation can bubble up inside a company as well—when the organization follows practices that favor it.

Clear policies that reserve blocks of time for scientists or engineers to explore their own ideas have worked well at some companies. At 3M Co., based in St. Paul, Minn., scientists can spend 15% of their time on projects they dream up themselves, and the company has set procedures to take bright ideas forward, including grants and venture funding. Google Inc. takes a similar approach, allowing researchers to devote 20% of their schedules to play time, pursuing their own ideas and projects.

It helps to have an established pathway to make sure the best new ideas get taken forward. In some cases, informal networking has pushed innovations to the forefront—below the radar screen of formal corporate systems.

START A CONVERSATION
Sometimes innovations arise when different departments talk to each other. But what’s the best way to start the conversation?

Many companies set up so-called communities of practice, which are typically internal Web sites where employees are encouraged to share knowledge and skills important to the company.

BREED DIVERSITY
Close, long-term relationships—depending too much on the same customers, partners or suppliers for innovation ideas—can reinforce old ways of doing things and make changing a frame of reference difficult.

Some companies seek innovation partners with whom they wouldn’t normally work, and who might bring a fresh perspective. Some companies are also recruiting staff with very different perspectives to spice up their knowledge mix e.g.  experienced entrepreneurs. Such characters aren’t afraid to challenge corporate perspectives and to make waves. As one manager put it, they create a little grit to stimulate the oyster to produce pearls.

full article:
http://online.wsj.com/article/SB10001424052970204830304574133562888635626.html

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Tough times all over: The days of the $330 Coach purse could be over…

July 27, 2009

Summary: Adapting to a more frugal consumer, Coach has created the less pricey Poppy line, revamping its product mix to lower its average bag price to $290

* * * * *

Excerpted from Business Week, “Coach’s Poppy Line Is Luxury for Recessionary Times”,June 18, 2009

The Coach brand  brand had emerged from its modest origins in the 1940s to become an emblem of the working woman and then, remarkably, a favorite among the fashion-conscious. It had created the very conceit of affordable luxury.

But, even before the recession Coach had become too expensive. “We have a long history of being a very grounded $200 handbag business,” he says. “Beginning around 2001 we started moving up and became a $300 handbag business. Then we reached $330. And the customer came right with us.  Until we reached our natural limits,” .

So began a nearly yearlong quest to design a line of purses and accessories that could be priced to fit the times without cheapening, or otherwise damaging, Coach’s image.

The resulting collection, which will be introduced in late June, is called Poppy. It’s more youthful, eclectic and spontaneous. The average price will be $260, about 20% less than the usual Coach purse.

The main pieces in the Poppy collection were tested in nine Coach stores and 23 department stores in April and May. And for the first time, Coach let people make online purchases through Facebook. Two $198 bags, the Groovy and the Glam, did better than Coach expected. But one didn’t do quite as well: That was the Spotlight, which sells for $298.

* * * *

Factoids

Coach spends about $5 million annually on that customer research.  It frequently surveys customers about their outlook and tastes; it carefully tests new designs; it measures almost everything.   Every three months it surveys some 20,000 women online about the Coach brand as well as about their economic expectations and spending habits.

Coach’s gross margins had been above 75% for the past five years. But during the recession, as the company has lowered prices at its factory stores, its margins have fallen to 72.4%. By comparison, brands such as Polo Ralph Lauren and Tiffany have margins of less than 60%.

Full article:
http://www.businessweek.com/magazine/content/09_26/b4137040272361.htm

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Microsoft tries again … with Windows 7 @ intro prices

July 10, 2009

Ken’s Take: It’s almost incomprehensible that a company with Microsoft’s tech savvy and  heft could have blown it as badly as they did with Vista.  For their sake, Windows 7 had better be an acclaimed product. You can only shoot and miss so many times.

The intro pricing expense makes sense except the $10 discount is simply leaving money on the table.  Do they really think that it will motivate any incremental purchases?

* * * * *

Excerpted from WSJ, Microsoft Plans Lure for Windows 7, June 26, 2009

The product

Windows 7 is a critical test of whether Microsoft can polish the reputation of its operating system after Windows Vista suffered early technical problems.

While Windows remains by far the most dominant software for running PCs, Vista’s problems were exploited relentlessly by Apple  in marketing campaigns for Macintosh computers. Macs have gained market share steadily over the past few years.

So far, early reviews of test versions of Windows 7 have been favorable.

* * * * *

The pricing

Microsoft announced a plan to encourage pc users to move to a much anticipated new version of its operating system, Windows 7 …  scheduled for release in late October.

Until July 11, consumers can preorder an upgrade copy of Windows 7 Home Premium through retailers for $49.99.

Most new PCs coming out starting in October will have Windows 7 preinstalled.

Any consumers who buy new PCs running its current Windows Vista operating system from now until Jan. 31 will receive free upgrades to Windows 7. 

For consumers who bought PCs prior to the free upgrade program, Microsoft said it will charge $119.99 for Windows 7 Home Premium — expected to be the most popular version for consumers — instead of the $129.99 upgrade price for the comparable version of Windows Vista.

Full article:
http://online.wsj.com/article/SB124593802040653741.html#mod=testMod

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The 10 Commandments of Innovation & Entrepreneurship …

June 25, 2009

Ken’s Take: Kawasaki has a track record, so worth listening to. Note especially #1 re: mission statements and #5 re: rolling the DICEE

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Knowledge@Wharton, “Ten Commandments from Entrepreneurial ‘Evangelist’ Guy Kawasaki”, June 10, 2009

Guy Kawasaki  became the second software “evangelist” at Apple Computer, where his job from 1983 to 1987 was to convince people to create software for the Macintosh. Kawasaki fondly recalls his colleagues at Apple as visionary, driven and “arguably the greatest collection of egomaniacs in the history of California — though the record has subsequently been broken by Google.”

Here are Kawasaki’s “Ten Commandments” for innovation and entrepreneurship:

1. Make meaning, not money. “Most companies founded on the concept of making money pretty much fail …  focus on making their product or service mean something beyond the sum of its components “.  Nike “turned $2.50 of raw materials into something that stands for efficacy and power and liberation.  Apple has done it with the Mac and the iPhone.

2. Make a mantra, not a mission statement. Bland, generic company mission statements — about “delivering superior-quality products and services for our customers and communities through leadership innovation and partnerships” — serve no one  …  keep it short and define yourself by what you want to mean to consumers. FedEx is about “peace of mind.” To get everyone internally and externally on the same page, explain why your organization exists and how it meets customers’ needs and desires.

3. Jump curves. Innovating is harder than just staying a little bit ahead of competitors on the same curve. “If you’re a daisy-wheel printer company, the goal is not to introduce Helvetica in another point size. The goal is to jump to laser printer”.

4. In product design, “roll the DICEE.” That’s an acronym. “D” is for deep, which to Kawasaki means thinking about features that go beyond the norm. One of his favorite “deep” ideas: Fanning Reef sandals, which have a bottle opener built into the sole. “I” is for intelligence, as seen in the design of Panasonic’s BF-104 flashlight, which uses batteries of three different sizes to accommodate the random mix of extra batteries many people have around the house. “C” is for complete — or being not just a product, but including support and service. The first “E” is for elegance: Beauty matters, according to Kawasaki. The second “E” is for emotive. “Great products generate strong emotions: Think Harley Davidson, Macintosh.”

5. Don’t worry, be “crappy.” This doesn’t mean ship a bad product, but “your innovation can have elements of crappiness to it,” Kawasaki said. Twitter has a litany of flaws, but it is changing people’s habits.

6. Polarize people. Try to be all things to all people and you often ship mediocrity. The boxy Toyota Scion xB looks ugly to some people but very cool to its devotees.

7. Let 100 flowers blossom. You never know where the flowers will emerge, so let them grow. Innovations may attract unexpected and unintended customers. Think of Avon Products’ Skin-so-Soft cream, which became popular as a mosquito repellent.  Learn who’s buying your product, ask them why and give them more reasons. “That’s a lot easier than asking people who aren’t interested ‘why not,’ and trying to change their minds.”

8. Churn, baby, churn. Always improve. Listen to customers for ideas. Once the product reaches the hands of customers, it’s time to start listening to their feedback.

9. Niche yourself. Find your place. A product or service does not need to be unique if it delivers extraordinary value to a select group.

10. Follow the 10-20-30 rule when pitching to venture capitalists. That means no more than 10 PowerPoint slides, a limit of 20 minutes for the pitch, and using a 30-point font size in the presentation (to keep it simple). The goal of such pitches isn’t to walk home with a check,  it’s to “not be eliminated” from consideration.

Full article:
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2258

Innovators’ success formula … don’t listen to users

May 12, 2009

Excerpted from HBS Working Knowledge, “Radical Design, Radical Results” by Julia Hanna, February 19, 2009

* * * * *

When furniture designer Herman Miller presented a prototype of its sleek, mesh Aeron chair to a consumer focus group, many asked if they could see a finished, upholstered version.

Innovative product design can be a risky proposition. Yet as consumer purchases become increasingly driven by emotion, the competitive advantage gained by how a product “speaks” to a customer is clear. Just think about how Apple began its resurrection in 1998 with the unthinkable design of computers made of translucent blue, orange, and pink plastic, the original iMac.

Despite the importance of industrial design, little theory exists on how companies might go about creating a successful design strategy.

“Researchers have been investigating technological innovation for decades, but we know almost nothing about how companies manage design innovation.” .

For a study, Profs. Verganti and Dell’Era focused on the Italian furniture industry… they also divided the corresponding sample of 100 manufacturers into innovators and imitators.

Verganti says that design innovation often involves a high degree of uncertainty in terms of market success. “It’s very hard to understand what people want,” he says. “If I make a car that can brake in 10 yards instead of 50, that’s a quantifiable advantage that is easy to understand. But if I decide to create a computer out of translucent, colored plastic, it’s much more subjective. People will love it, or they won’t.”

Focus groups and market research can help to define a product, of course, but Verganti has found that design-driven innovation is not user-centered. Instead, it comes from within the organization. “Rather than being pulled by user requirements,” he wrote recently, “design-driven innovation is pushed by a firm’s vision about possible new product meanings … that could diffuse in society.”

“Apple is a company that is pushed by a vision,” Verganti says. “Steve Jobs has said that the market doesn’t always know what it wants. Companies that do radical innovation do not listen to users; they eventually value market feedback, but first they propose things to the users.”

In the face of this market uncertainty, Verganti has found that companies adopt one of three different strategies:

  1. Launch and see. The company launches a variety of products, and then measures market reaction to each, relying on the selective capability of consumers to determine which products to focus on.
  2. See and launch. The company employs some sort of research process and then launches products based on its findings.
  3. Wait and see. The company allows others to experiment with various products, observes what is most successful, and reacts accordingly.

In Verganti’s study of the Italian furniture industry, one would expect those who wait and see to have the least amount of variety in their product line. After all, if the imitators decide to stand back and observe what is most successful, wouldn’t they choose to copy just a few, choice products? Conversely, it would seem that the innovative companies would probably have higher levels of variety in their products because of the experiments they conduct.

Instead, the results showed just the opposite.

While the cost of experimentation in the furniture industry is relatively low, Verganti and his colleague found that the innovator companies actually used a see and launch strategy, conducting research in order to understand what sort of product language might be most successful. (This research is less of the focus-group variety and more of a broad-based assessment of cultural trends and scenario building.)

“Innovators avoid proposing a wide range of product signs and languages as a way to protect brand identity,” says Verganti. “They tend to adopt strategies that allow customers to easily reconnect specific product signs to their brands.”

In contrast, imitators show a greater variety in their product portfolio. They observe what innovators do and how the market reacts. But the feedback they receive is initially so ambiguous, with several languages coexisting, that they eventually imitate everything.

“The confusion that this creates in the market is called semiotic pollution,” Verganti says. “Imitators can be successful if they wait four or five years to determine what they should produce. But in the beginning it’s not clear which product is the winner. So when it comes to product languages, imitation is a very expensive strategy.”

Do these findings have implications beyond the design-heavy world of the Italian furniture industry? Regardless of the product in question, Verganti believes that companies need to consider the importance of design.

“In every industry, sooner or later, there is a radical change in the language of its products,” he says. “So the point for companies is, do they want to lead the change, or do they want to suffer the change?”

Edit by NRV

Full article:http://hbswk.hbs.edu/item/5850.html

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A car company that knows how to create value …. hint: not based in Detroit

April 22, 2009

Ken’s Take: In marketing, there’s a concept know as “product augmentation” —  adding features and services to a “core product” in order to deliver more differentiating benefits to target customers.  Hyundai seems to have hit the target with its assurance program.

* * * * *

Excerpted from Brandchannel, “Marketing Strategies that Build Value” by Barry Silverstein, April 6, 2009

Value building is not a new concept. In good times and bad, smart brand marketers have always recognized the need to build value and differentiate—to make their brands a little better than competitors by adding a new feature, creating a special promotion or forging a unique alliance with another brand.

What’s different today is the targeted relevance of value building. Faced with a protracted global economic recession, established brands are searching for ways to add maximum value without cheapening their image or undermining profits. Some brands are out-smarting and out-performing their competitors because of value-building strategies.

One breakthrough example of value building is occurring in, of all places, the automotive industry. While most car manufacturers and dealers are slashing prices and offering deep discounts, one car maker is leveraging the impact of the economy on consumers by offering something simple yet powerful and timely: peace of mind.

In early 2009, the Korean auto company Hyundai introduced a program called Hyundai Assurance in the US market. It made a bold promise: “Finance or lease any new Hyundai, and if in the next year you lose your income, we’ll let you return it.” Hyundai recently enhanced the offer, renamed Hyundai Assurance Plus: “If you lose your income, we’ll make your payments for 3 months while you get back on your feet, and if that’s not enough time to work things out, you can return the car with no impact on your credit.”

Hyundai built additional value into Hyundai Assurance by broadly defining the ways in which loss of income might occur. Hyundai included the following “life-changing events” in its promise: involuntary unemployment, physical disability, loss of driver’s license due to medical impairment, international employment transfer, self-employed personal bankruptcy and accidental death. Obviously the company thought carefully about the current economic environment and consumers’ potential misfortunes.

Ironically, when Hyundai cars first entered the marketplace, they were not well regarded; in fact, Hyundai was perceived as a lower-quality brand in its early days. But following in the footsteps of the Japanese automakers, Hyundai kept making its cars better and better. Ten years ago, Hyundai stunned the industry by introducing the best automobile warranty in the US—a “safety net” that gave customers the confidence they needed to purchase a vehicle from Hyundai. Hyundai Assurance is essentially a thoughtful extension of that original value-building strategy.

In January 2009, after the introduction of Hyundai Assurance, Hyundai’s sales were up more than 14 percent over January 2008. “Hyundai had the largest sales increase of any automaker, and it was one of only three with any increase at all,” reported CNNMoney.com. 

In March 2009, Hyundai started offering low-rate loans on three car brands, in addition to cash-back incentives. Dave Zuchowski, vice president of sales for Hyundai Motor America, told Automotive News, “We’re looking for [Hyundai] Assurance to drive traffic and then the new rebates to help close the deals” (“Hyundai Piles On Incentives,” March 9, 2009).

Another way brands can practice value building is to promote exclusivity and offer consumers something of unique value for a limited time. The recent introduction of the 70th Anniversary Platinum Edition of the Disney movie Pinocchio typifies the category.

The Pinocchio release is just the latest in a series of Disney Platinum Editions—part of a larger value-building strategy by Disney to release original movies from the “Disney vault” for limited time periods, thus increasing their perceived value. 

Disney is already one of the world’s most recognized brands, so why do they need to issue Platinum Editions? Because Platinum Editions reinforce the image of the brand. Once the limited-release time period is over, the Platinum Edition movies are no longer available through traditional retail channels—they become “out of print” collector’s editions—and the Disney brand maintains its aura of exclusivity.

A third path to value building is more conventional but just as effective: using add-ons that enhance the value of a brand and reinforce the brand purchase decision. Apple’s iPhone stands out in this area. While it was a legitimate breakthrough brand in its own right, the iPhone was high priced and, by some standards, a risky and unproven technology. Apple rapidly overcame those early objections by opening up the iPhone to developers. The result was an iPhone “App Store” with thousands of applications for the iPhone, some of them free. In March 2008, more than 100,000 developers had downloaded the iPhone Software Development Kit in a period of just four days. By the end of 2008, Apple had recorded over 100 million application downloads.

Still, Apple succeeded in demonstrating that it was once again a pioneering technology brand, and that the iPhone was an added-value platform—one that could provide a mind-numbing quantity of applications unlike any other communications device on the market. 

These brand marketers know that value building is an important means of keeping their brands fit—and creating strong bonds with customers who are seeking the best value…especially in these economic times.

Edit by NRV
Full article:
http://www.brandchannel.com/start1.asp?fa_id=472

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Extreme Entrepreneurship: Products for Bottom of Pyramid

April 15, 2009

Excerpted from Fortune, “Products for the other 3 billion” By Michael V. Copeland, April 1, 2009

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Jim Patell … operates out of Stanford’s design school, where he teaches a class called Entrepreneurial Design for Extreme Affordabilitythe class mission: to teach a new generation of entrepreneurs to use their business and engineering smarts to design and sell products – profitably – for the developing world.

Some of the students – a mix of would-be MBAs, engineers, and designers – truly are do-gooders, but a fair number think building good, cheap products is a skill any corporation would value.

“We can fill a gap, with an approach that goes beyond a fast profit motive.”

For the smart, ambitious students in his classes  …professional success and saving the planet aren’t mutually exclusive.

Two such budding entrepreneurs … make cheap, solar-powered lights to replace the kerosene and diesel lamps so common in the developing countries of Asia and Africa.

 

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Often the approach involves combining cutting-edge technology with widely available products that are moving down the cost curve.

One application … make cheap, solar-powered lights to replace the kerosene and diesel lamps so common in the developing countries of Asia and Africa.

D.light, for example, marries next-generation light-emitting diodes (LEDs), proprietary power-management tools, and increasingly cheap solar panels. As a result, D.light is able to offer poor communities an affordable alternative to kerosene, which is ubiquitous but hazardous … The D.light lamps sell for about $25, steep for someone earning $1 per day, but … the quality of light was so good that people with the D.light lamps were able to do more work at night and increase their income.

* * * * *

Empowering would-be customers is one of the mantras of Patell’s class … Patell doesn’t expect every student to start a company, but he does demand that every product in the class offer poor consumers tools for their own microenterprises.

* * * * *

Capitalists in Silicon Valley are starting to take notice of the projects coming out of the Stanford course. In November, D.light secured $6 million in funding from … venture capital firms, to ramp up production and get its lamps into markets, initially in India and Africa … the financiers think D.light can model itself after another successful enterprise in the developing world: the cellphone industry.

Device manufacturers … are selling millions of handsets in rural parts of India, China, and Africa, places that in many cases don’t have centralized electricity. But even some of the poorest of the poor will pony up several months’ salary for the benefits of connectivity …

Edit by SAC

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Full Article:
http://money.cnn.com/2009/04/01/technology/copeland_developing.fortune/index.htm

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The key to fighting private label…innovation

April 2, 2009

Excerpted from Reuters, “Foodmakers tout innovation to battle imitation” by Nicole Maestri, March 19, 2009

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If imitation is the best form of flattery, foodmakers are finding themselves dealing with an inordinate number of compliments these days.

As the recession crimps household budgets, retailers like Wal-Mart  and Target are increasingly looking to woo shoppers with their own private label, or store brand, food items that often look very similar to name brand products but are sold at lower prices.

Foodmakers are defending their turf … they say that they are the ones who develop innovative new products and spend marketing dollars to draw shoppers into retailers’ stores.

They acknowledge that retailers are giving them a run for their money, introducing better products at a faster pace and squeezing out tertiary brands in the process… Seeking to woo frugal shoppers, retailers are giving more shelf space to their own brands and stepping up promotions… The question now looms as to whether retailers will make the leap from simply imitating name brand foods to innovating on their own.

“The entire retail trade has become energized very quickly to bring out products that compete with branded package food,” 

Wal-Mart is relaunching its Great Value private brand, adding more than 80 new products, like double-stuffed sandwich cookies and organic cage-free eggs.

Consumers really take notice of private label products when the price gap between a name brand item and a store brand one reaches more than 30 percent.

Cexclusively on price is potentially a good short-term tactic, but long-term you really want to build your brand and what it stands for in consumers’ minds.”

If you introduce a new product, no one really knows what the price of that product should be,” he said. That allows foodmakers to set an initial price and build in a hefty margin before imitators come into the space, he said. It can also help sell higher-priced items amid a recession.

Unilever’s Bertolli frozen dinners, which are marketed as “restaurant quality.” While they may be more expensive than other frozen dinners, they are priced “at about a 40 percent value to take-out food or restaurant food.”

Shoppers feel like they are getting a deal when they buy Bertolli because they spent less than they would have in a restaurant, even though the meals are more expensive than other items in the frozen food aisle.

With retailers increasingly eyeing private label, it has become crucial for foodmakers to make sure they have the No. 1 or No. 2 brand in their categories. Brands that cannot distinguish themselves face losing shelf space.

“I wouldn’t want to be a number three, four or five brand that wasn’t differentiated.”

While the recession may create chaos as retailers and foodmakers compete for thrifty shoppers, it remains to be seen if private label can keep its allure once the tough times recede.

“As we get out of this recession, will consumers then look back to their favorite brand or not?”

Edit by NRV

Full article: http://www.reuters.com/article/ousiv/idUSTRE52I5P420090319?sp=true

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Unilever Sees More Isn’t Always Better With Ideas

March 30, 2009

Excerpted from Harvard Business Review, “Nurturing Good Ideas” by Jan van den Ende and Bob Kijkuit, April 2009

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Managers know that simply generating lots of ideas doesn’t necessarily produce good ones. What companies need are systems that nurture good ideas and cull bad ones—before they ever reach the decision maker’s desk. Our research shows that tapping the input of many people early in the process can help ensure that the best ideas rise to the top.

It’s not uncommon for companies’ idea-generation activities to produce thousands of ideas. Reviewing all of them to find the best is resource intensive and doesn’t guarantee high-quality results …

Some firms, however, are taking steps to systematically improve the quality of ideas before they’re submitted for review. They’re encouraging employees to first discuss ideas with their colleagues to gain insights about their technical and market feasibility or how they fit with company objectives, which will either enhance the ideas’ value or lead to their early and appropriate demise.

Consider how this works at Unilever, where we followed the development of ideas at the company’s food labs in a 14-month study. Employees there usually discussed an idea with colleagues and, based on their feedback, made changes in the idea before submitting it. People who tapped colleagues outside their departments were more successful; discussing an idea with them increased its chances of adoption, whereas discussions with colleagues from the same department didn’t.

Interestingly, communication with friends or trusted colleagues appeared to aid adoption, probably because their input tended to be richer and offered more constructive and critical feedback, leading to more substantial changes to the idea itself. What’s more, the greater the number of perspectives an employee got, the higher his idea’s chances of being adopted were.

Other firms take a similar tack. At the biotechnology research company KeyGene, management advises employees to discuss ideas with others before submitting them to a review committee …

This approach to idea development offers a clear payoff in efficiency and in the quality of ideas. But it has another benefit as well: It enhances motivation by improving the odds of success and reducing the chance that an employee will invest unduly in an idea that’s likely to fail.

Edit by SAC

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Full Article:
http://hbr.harvardbusiness.org/2009/04/nurturing-good-ideas/ar/1

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Are these things stripped down computers or phones on steroids?

February 5, 2009

An example of a disruptive innovation …

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Excerpted from Knowledge@Wharton, “The Net Impact of Netbooks?”, November 26, 2008

PC makers Hewlett-Packard, Dell, Lenovo, Acer and Asus are increasingly thinking big about small netbooks — portable computing devices that can cost anywhere from $200 to $500 and depend on the Internet for many computing tasks.

Research firm IDC estimates that 10.8 million netbooks will ship in 2008, just about a year after Asus launched what is considered the first device in the category. Asus has a 46% share of the netbook market..

Netbooks are mobile computers with screens ranging from 5 inches to 10 inches. Originally intended principally for the education market, they typically run Linux or Windows XP and need to connect to the Internet for heavy computing tasks.

Analysts  agree that netbooks will be disruptive to the PC industry, but it’s not clear in what way.

  • Will netbooks poach sales of laptops?
  • Are netbooks replacements for smartphones?
  • Will netbooks increase the popularity of cloud computing in which users store files on the Internet and manage them with web-based applications?

It’s too early to know where netbooks fit or how well they will ultimately sell among consumers, who are projected to buy about 70% of these devices.

Gartner notes in a recent research report that it is also possible netbooks will be viewed as deficient by consumers, who expect the capabilities of a fully featured PC.

Meanwhile, these small devices are proliferating. Qualcomm, a wireless semiconductor company, announced plans in November to launch its own designs for a “PC alternative” that would compete with netbooks. Qualcomm’s device, code-named Kayak, is being tested in Southeast Asia in early 2009.

The success of netbooks may ultimately rely on always-on Internet connections. Since these small PCs lack significant storage, they largely depend on the Internet to access content and documents. “Once Internet connectivity gets to the point where it’s everywhere, these devices become more viable. Dark spots and dead zones in wireless coverage are a hindrance to the netbook market.”

“If you think of what people do with their computers, it includes a) storing data and b) installing and using applications. Cloud computing will reach the masses on both these dimensions, and netbooks go hand in hand [with this]. More consumer data will move online [or into the cloud]. Users are now more comfortable with their data living in the cloud. Having your data online lets you do things like sharing it easily with your friends and accessing it anywhere.”

While netbooks are showing early popularity, experts at Wharton stopped short of declaring these devices to be runaway hits. They point out many uncertainties.

The first worry is the economy. To be sure, netbooks are inexpensive, but they are also a largely discretionary purchase at a time when the global economy is struggling. In developed markets, like the U.S. and Japan, netbook purchases could be delayed.

Another question is whether netbooks are really suited for emerging markets, as early proponents contend. In the U.S., netbooks can find Internet connectivity through multiple means, but the emerging markets are different. Ubiquitous Internet access may be a fundamental concern.

“The real use of netbooks may be for the amusement of bored teenagers whose needs for connectivity and diversion cannot be satisfied with an iPhone, [which is] not exactly a market that I expect to see emerging in the developing world.”

One thing is certain: The netbook category is worth watching because it is growing and evolving on the fly…

Full article:
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2107#

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Stubborn Customers Shun the Greatest Product Innovations …

February 4, 2009

Excerpted from MediaPost.com,”Stubborn Customers Shun The Greatest Product Innovations”,Kalehoff,  Mar 14, 2008

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40% to 90% of all new products fail.  According to Harvard prof John Gourville that’s because consumers are creatures of habit and they irrationally overvalue the benefits offered by products they’re already using. They despise having to change their behavior to use an innovation. Consequently, they often reject products that are objectively superior to the incumbents they’re already using.

Conversely, companies mistakenly mark their own innovation as a frame of reference, and therefore irrationally overvalue the benefits it provides. This deadly combination results in a “mismatch between what innovators think consumers desire – and what consumers really want.”

In response, Gourville suggests anticipating and managing consumer resistance to changes as innovation requires during adoption. Specifically, he recommends:

1. Gauge the Degree of Behavioral Change Required. For example, is your innovation an “Easy Sell,” which provides limited benefit and limited behavioral change? Or is it a “Sure Failure,” offering few benefits and significant behavioral change? Is it a “Long Haul,” providing great benefit but also great behavioral change? Or is it a “Smash Hit,” offering tremendous benefit and little behavioral change?

2. Minimize Consumer Resistance. Not surprisingly, Gourville recommends making products that require little behavioral modification. Uniqueness and features – often marketers’ top selling points – can be detrimental. Second, market to new consumers who aren’t loyal to competing incumbents. Thirdly, market to consumers who “prize” the benefits they’d gain, or don’t value those they’d have to give up.

3. Manage Consumer Resistance. Gourville recommends bracing for slow adoption. Especially with “Long Haul” innovations, be careful to deplete marketing resources too quickly. Furthermore, consumers overvalue existing benefits of incumbent products by a factor of three, on average, while companies overweight the benefits to consumers by a factor of three – resulting in a nine-fold gap. To overcome the “9X Effect,” companies must introduce products with 10 times the benefit.

http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=78486&passFuseAction=PublicationsSearch.showSearchReslts&art_searched=gourville&page_number=0 

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Opposites Do Attract: Google and P&G Partner for Innovation

January 29, 2009

Excerpted from WSJ, ” A New Odd Couple: Google, P&G Swap Workers to Spur Innovation” By Ellen Byron, November 19, 2008

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At P&G the culture is so rigid, employees jokingly call themselves “Proctoids.”

In contrast, Google staffers are urged to wander the halls on scooters and brainstorm on public whiteboards.

Now, this odd couple thinks they have something to gain from one another — so they’ve started swapping employees … staffers have spent weeks dipping into each other’s training programs and sitting in on meetings … Closer ties are crucial to both sides.

P&G, the biggest advertising spender in the world, is waking up to the reality that the next generation of buyers now spends more time online than watching TV. Google craves a bigger slice of P&G’s $8.7 billion annual ad pie as its own revenue growth slows.

The struggle by these two heavyweights to formulate successful strategies highlights how tough it is for myriad other companies, from newspapers to auto makers, to profit from Americans’ rush online

P&G has a long history as a marketing innovator … But amid the shift to online media, P&G has stayed mostly on the sidelines so far … Tide is P&G’s single biggest brand in North America … It was also one of the first products to advertise on live television … Still, despite the shift among younger consumers toward online media, it is clear P&G’s marketing approach still prioritizes TV…

A big hurdle for Google is that many big ad agencies … still don’t make online strategies a priority. “The worst answer you can hear from an agency is, ‘Don’t worry, we have a group to handle interactive’ … Interactive isn’t a group, it’s everybody’s job”…

Consumer-products companies have been among the slowest to adopt online marketing because the traditional forms of marketing … are still reasonably effective

A recurring suspicion: It works only for products that people buy online…”Everyone has a mindset that it has to be transactional … But, Online campaigns,  can powerfully influence brand awareness among consumers.”

Edit by SAC

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While the corporate cultures of Google and P&G couldn’t be more dissimilar, the partnership is a merger of two of the best and promises interesting results.  It appears that P&G has been satisfied with and encouraged by the success of the first online campaigns to come out of the partnership.  If this relationship continues P&G is nearly guaranteed to increase its online spending and Google will be there to reap a portion of the benefits. 

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Full Article:
http://online.wsj.com/article_email/SB122705787917439625-lMyQjAxMDI4MjE3OTAxNTk3Wj.html

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Battling Private Label Rivals with Innovation …

January 28, 2009

Excerpted from BrandWeek,”OTC Drugmakers Seek Cures” by Elaine Wong, November 9, 2008

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Makers of branded cold and flu remedies are seeking their own antidotes for flagging sales. But will cash-strapped consumers cough up more money for “innovation?”

Tylenol is launching Tylenol Warming Liquids … that treat cough, sore throat and other cold symptoms via a formulation that delivers a warming sensation…

P&G is introducing Dayquil Plus Vitamin C, which includes 150% of the daily dose of the vitamin in the mix…

Robitussin … is promoting its DM Max mucus relief formula…“Robitussin DM Max has a double dose of mucus-fighting medicine”…

The efforts come as sales of most major OTC brands have declined by low-to mid-single and double digits thanks to advances by private label competitors. Sales of Children’s Tylenol, fell 14.2%…Robitussin’s … medications dropped 8.8%. Private label also prevailed in the tablet and packet category, up 18%…

Meanwhile, retailers have stepped up marketing efforts for their brands. Unlike previous cold/flu seasons … the drugstore is experiencing significant private label growth. The uptick reflects a mix of savvier retail marketing efforts, combined with a smarter and cash-strapped consumer, according to industry analysts.

“It’s the one category where it’s very clear and easy to see that the active ingredients in both national and store brands are identical” … Efforts like these are nothing more than attempts to gain greater market share. Research on vitamin C, in particular, shows no real effect in fighting or preventing colds. “It’s a cheap and easy way to distinguish your product from someone else’s”…

Edit by SAC

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OTC drugmakers know the benefits of choosing a private label OTC product with the same ingredients is clear for cash strapped consumers and are using innovation to add value to their products.  The brands must give consumers a reason to purchase their brand over less-expensive labels. This is becoming increasingly difficult as a recent Neilsen study showed that 62% of consumers perceived private label brands to be equal to name brands. 

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Full Article:
http://www.brandweek.com/bw/content_display/news-and-features/shopper-marketing/e3i8a864b21b4f19fc5d31ca97a9df8da2f

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Consumer choice modeling … how people decide to buy

January 15, 2009

Excerpted from Strategy+Business, “Tracking the Elusive Consumer”, by John Jullens and Gregor Harter, Novermber 11, 2008

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Consumer choice modeling … offers a better understanding of consumer preferences:
 
  • What does the consumer want?
  • Why do individuals prefer one product or service over another?
  • How, precisely, do most consumers make their purchasing decisions?

Recent work on the art and science of consumer behavior has refined, updated, and strengthened an analytical tool known as consumer choice modeling, initially developed in the 1960s by Daniel McFadden, a winner of the 2000 Nobel Prize in economics.

Simply put, this model examines the personal reasons for individual choices and provides techniques researchers can use to measure and predict those choices. By exploring why individuals make specific trade-offs among various product options, consumer choice modeling can determine the features that people in different economic and demographic strata are looking for and how much they are willing to pay.

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Originally, this technique suffered from a lack of sophistication. A typical implementation involved asking respondents to react to lengthy paper-and-pencil surveys offering a series of preconfigured and static product or service possibilities. Although some insight about consumer preferences was typically evinced, it was often shallow, limited by researchers’ inability to dynamically change the direction of the questioning on the basis of the responses.

However, advances in experimental designs and information technology now allow researchers to better approximate the shopping experience when asking questions by adjusting product choices in reaction to a person’s answers. By analyzing the responses from a representative sample of consumers (or potential future customers), researchers can produce econometric models that depict the relative weighting of specific product features and price points.

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Early in 2007, Booz & Co.applied consumer choice modeling to identify and measure the drivers of demand for mobile phones. One example::  Apple’s iPhone.

Long before the iPhone’s launch,  the Booz  model correctly predicted that it would be the most attractive overall offering to consumers despite its high price tag. 

Booz  surveyed more than 1,800 consumers by simulating the actual mobile phone purchasing process and asking people to compare their existing package with alternatives.

For example, owners of low-cost Sharp handsets running on pay-as-you-go carriers such as Virgin Mobile or Boost Mobile were offered a U$100-plus Samsung phone with Nextel service and a $250-plus LG phone with Verizon’s network. Respondents were asked, “If these two packages were your only alternatives, which one would you choose: Samsung/Nextel, LG/ Verizon, or neither?” and “If Samsung/Nextel were your only option, would you purchase it or continue to use your current package?”

The majority of the low-end and midlevel consumers were highly commodity driven. Other than by offering an attractive handset price, it is almost impossible to convince an individual to change his or her current mobile phone package. In fact, further analyses revealed that one-third of U.S. consumers are unwilling to change their wireless package, no matter how much the handset price is lowered.

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Of all phone users, owners of low-end handsets made by the Nokia  value their phone package the least. Consequently, these consumers are the most willing to switch to another carrier and handset — an opportunity for competitors to attack Nokia’s base by producing a low-cost package with a function or two that outpaces the relatively plain Nokia product.

The consumer choice model also revealed that owners of handsets made by Sony Ericsson , which tend to be highly designed, full-featured products, care much more than Nokia users about functionality, usage range, and purchase location (they prefer to buy their packages at stores that offer personal attention, rather than at Costco or Circuit City, for example). And although these customers, too, are price conscious, they’re willing to pay a premium to have their preferences met. A service provider could use these findings to target Sony Ericsson owners with a slightly less expensive offering that in all other ways matches their current package.

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Consumer choice modeling also has the ability to predict the impact of future products and services on the market. Booz  simulated the characteristics of “the ideal high-end phone” as consumers viewed it. From this, the survey gleaned that three primary factors — feature, design, and brand — are of paramount value to consumers considering a higher-priced model. These factors, of course, were exactly what Apple focused on in developing its blockbuster iPhone, launched in July 2007.

Significantly, as the model predicted, Apple stumbled when it came to price, which the survey showed matters at all levels of cell phone purchases.

At a price point of $599 for an eight-gigabyte phone, the research forecasted that Apple would have difficulty reaching a significant portion of the high-end market. But the same research suggested that performance would improve quickly as soon as Apple cut prices. In fact, that is precisely what happened: In September 2007, Apple discounted the phone by $200, and sales rose well over 1,000 percent in the succeeding quarter from sales in the prior three-month period. And in June 2008, CEO Steve Jobs announced a much faster eight-gigabyte iPhone — using AT&T’s state-of-the-art 3G network — for only $199, a move that further aligned Apple’s pricing with that of its peers and that will almost certainly improve the product’s market share.

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Consumer choice modeling yields valuable insights for demand-driven strategy development by providing customer value segmentation maps, measuring market share impact of new product–service combinations, and assessing overall brand equity. Perhaps most important, choice modeling can reveal sa­lient differences between managers’ beliefs about customers’ needs and preferences and customers’ actual needs and preferences. For managers seeking reliable feedback on how customers view their products and services, consumer choice modeling provides a rigorous way to turn customer-driven feedback into profitable and sustainable tactics for retaining or capturing market share.

Edit by DAF

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Full article:
http://www.strategy-business.com/resiliencereport/resilience/rr00064?pg=2

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Go green or go broke… your choice !

January 14, 2009

Excerpted from Brandweek, “Go Green Or Else!” By Elaine Wong, Dec 2, 2008

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Environmental legislation and climate changes could eat up as much as 47% of packaged goods companies’ profits by 2018 if they don’t adopt long-term sustainability measures  …

A report, Rattling Supply Chains … addresses long-term profitability of the packaged goods industry. The findings are based on “future analysis” of how much certain commodities will go up, including oil, cereal, soy and palm oil, and how they will fare under certain environmental, governmental policy and climate situations. The term used to describe these hypothetical scenarios is “ecoflation.”

Companies that can reduce their reliance on materials like plastic or paper, through sustainability initiatives, can cut costs when economic pressures cause price increases…Companies can expect a reduction of anywhere from 13 to 31 percent in earnings by 2013… if adequate sustainability measures are not taken….

Companies like P&G and Nestle have already implemented sustainability strategies. Nestle is placing more emphasis on sourcing materials locally to cut down on transportation. Meanwhile, P&G is cross-leveraging research and design teams across different brand categories…

These are just a few examples of the extent to which many companies have considered going green. Oftentimes, retooling a supply chain to be more sustainable involves “rethinking the product itself … It has as much to do with improving business practices as it does with improving environmental practices. In fact, the two go hand-in-hand.”

Edit by SAC

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Investing in sustainability reduces costs, but it can also have the added benefit of encouraging consumers to buy your product.  According to a recent IRI report, 50% of consumers consider sustainability efforts when purchasing consumer product goods.  Indicating that neither the product, nor the people (consumer) can be separated from the sustainability process.

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Full Article:
http://www.brandweek.com/bw/content_display/news-and-features/packaged-goods/e3i726f0f4961487c61bd28d01ac0630121?imw=Y

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Give me a jolt of Reb-A … but please, no calories

January 12, 2009

Excerpted from Ad Age, “Coke, Pepsi Jump on Zero-Cal Sweetener Reb-A” By Natalie Zmuda, Dec 18, 2008

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A new zero-calorie sweetener could boost the beverage industry — if only it can figure out how to market products containing the ingredient.

Coca-Cola and PepsiCo are rolling out products this month that will feature proprietary versions of Rebaudioside A, known as Reb-A.

Advertising messages are almost certain to take a variety of forms, and the products themselves could lead to confusion among consumers.

While consumers are accustomed to “diet” drinks containing a single calorie or none at all — and some of these new Reb-A products are likely to fill that bill — other products will have some calories …

In addition, there are two brand benefits to consider for marketing…some of the new beverages will likely be marketed as lower calorie, while others will be promoted as all natural. “The marketing and messaging is probably not going to be uniform…There’s not one single way of marketing these new beverages.”

Marketing efforts are likely to focus on education and sampling efforts to hook consumers…”In this case, because the ingredient is the differentiation of the product, it will be important to educate consumers about the value and the benefit of the sweetener…The key is to get people to get out and try these products and see for themselves that the products have a superior taste”…

It is unlikely Reb-A will find its way into flagship brands such as Diet Coke or Diet Pepsi…

A survey found that 22% of consumers are extremely interested in trying beverages using the sweetener…42% of those surveyed said they are not interested in trying beverages with Reb-A. Those consumers cited a myriad of issues ranging from safety and health concerns to taste to a preference for sugar…

Edit by SAC

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Beverage marketers would be wise to consider the same factors for Reb-A that technology innovations must overcome to ensure product adoption. 

These factors outlined by Everret Roger in Diffusion of Innovations are:

  • Relative advantage over existing options,
  • Compatibility with existing values, simplicity in being understood,
  • Simplicity — easy to understand and to use
  • Trialability on a low risk basis, and 
  • Observability —  the degree to which the innovation is conspicuous to others. 

The biggest hurdle for beverage marketers may be in Reb-A’s simplicity.  While it’s relative advantage in being all-natural is clear, consumers must understand this benefit for it to have value. 

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Full Article:
http://adage.com/print?article_id=133410

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Head to Japan, Not China for New Product Launches

November 20, 2008

Excerpted from Ad Age “Want to Know Where to Launch a New Product?” by Marissa Miley, October 28, 2008 

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The best place to introduce a new product: Japan. The worst place: China.

Those are among the findings of a new study…called “Global Takeoff of New Products: Culture, Wealth or Vanishing Differences,” which claims to be the first global analysis of its kind…

The study…looked at data for consumer household products over 50 years and across 31 developed and developing countries. To rank the countries, they created an “innovativeness metric” based on the time it takes for new products to take off in a particular country.

A product “takes off” in a country…when it has started to grow rapidly, moving from being used by a few people to being used by the mass market. The time it takes depends on a number of variables: the economic strength and cultural mores of the country, as well as the price and category of the product. Nations with the shortest time to new-product takeoff landed at the top of the list.

Japan, Norway and Sweden came in first, second and third, respectively. The U.S. came in sixth…Oddly, two of the countries normally considered fast-growing, India and China, were on the bottom…

The study can save marketers “a lot of time [and] get quick results…This ranking of countries tells you which to launch in first.” The authors recommend a “waterfall” approach to launches, staggering them from one country to the next, and they created a hazard model for the study to determine how many years it will be before products “take off” in a national market.

For the study, the co-authors analyzed two different kinds of consumer household products: “fun” products that provide entertainment, such as MP3 players and cellphones; and “work” products that improve work efficiency, such as microwaves and washing machines…”fun” products take off far more quickly than “work” products (7 yrs vs. 12 yrs), and therefore require different marketing strategies.

Fun products take off more quickly because they are “more glamorous, more visible…We don’t go house to house boasting about our vacuum cleaner, but we do for our cellphones.” In these cases, the authors suggest that marketers might benefit from using the “sprinkler” strategy, launching products in several countries at once.

Edit by SAC  

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Full article:
http://adage.com/cmostrategy/article?article_id=132082

 

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Long Tail ? No way. Give me Blockbusters.

November 12, 2008

Excerpted from HBS Online, “Long-Tail Economics? Give Me Blockbusters!”, John Quelch
September 10, 2008

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The importance of blockbusters has been challenged recently by Chris Anderson’s long tail theory that you can make money in many creative industries by selling specialized products to niche markets identified via the Internet.

For example, the new CEO of GlaxoSmithKline, the pharmaceuticals giant …  worries that a company is at risk if sales depend too much on one or two megabrands that could run into lawsuits from generic competitors or regulatory challenges.

On the other hand, the president of Warner Bros. (think Batman) aims “to take advantage of what has become a very global market by focusing on bigger films that require a bigger commitment.”

The pharmaceutical and entertainment industries are similar. R&D costs in both are high. Results are unpredictable. Drug research initiatives often result in dead ends but occasionally lead in an unexpected direction to a blockbuster result. Some big budget movies are flops, others are sleepers, still others meet expectations.

Of course, any company needs a portfolio of development projects, some with predictable sales results, others more risky. The former pay for the company’s daily bread and butter and fund R&D on future blockbusters.

More risky than pursuing blockbusters is not to pursue them, to condemn your enterprise to a lifetime of slave labor harvesting the long tail of micro-opportunities rather than imagining, pursuing, and marketing the global solution to an important, widely shared problem.

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What then makes a blockbuster? Here are the Five S’s, the five defining characteristics of blockbusters.

Sheer size. A blockbuster has a transformational impact on a company and an industry, often opening up new markets worldwide. Blockbusters break sales records and exceed expectations. Around 100 pharmaceutical brands exceed $1 billion in annual sales. Procter & Gamble has 23 such brands.

Speed. It’s not just the sales volume; it’s the speed of the sales trajectory. Remember that the original blockbuster was a bomb that could destroy an entire city block. Blockbuster brands address pressing consumer needs so well that they often enjoy vertical sales liftoff.

Scarcity. A blockbuster brand is often in such high demand that stock-outs and shortages occur in the market. Remember the consumer lines to buy the new iPhone?

Sustainability. A blockbuster brand is not a one hit wonder. It is a gift that keeps on giving. Look at the seven Harry Potter books and five companion movies. Adding DVD and merchandise sales, theme parks, etc., Advertising Age valued the Potter economy at $15 billion.

Sizzle. A blockbuster does not just address an important need. It does so in an exciting and accessible way. Pfizer’s Lipitor was not the first cholesterol reducer but superior marketing and sales made Lipitor number one.

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Full article:
http://hbswk.hbs.edu/cgi-bin/print?id=6014

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P&G’s Innovation Culture

October 31, 2008

Excerpted from Strategy + Business, “P&G’s Innovation Culture”
by A.G. Lafley,
Autumn 2008

The heart of a company’s business model should be game-changing innovation. This is not just the invention of new products and services, but the ability to systematically convert ideas into new offerings that alter the very context of the business.

A number of game-changing innovators are operating today, including such household-name enterprises as General Electric,  Nokia, Lego , Apple, Hewlett-Packard, Honeywell, DuPont, and Procter & Gamble.

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Procter & Gamble CEO A.G. Lafley has worked hard to make innovation part of the daily routine and to establish an innovation culture.

Lafley and his team preserved the essential part of P&G’s research and development capability — world-class technologists who are masters of the core technologies critical to the household and personal-care businesses — while also bringing more P&G employees outside R&D into the innovation game.

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The critical factors . .. include keeping a laser-sharp focus on the customer; establishing a disciplined, repeatable, and scalable innovation process; creating organizational and funding mechanisms that support innovation; and demonstrating the kind of leadership necessary for profitable top-line growth as well as cost reduction.

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When I became CEO of Procter & Gamble in 2000, we were introducing new brands and products with a commercial success rate of 15 to 20 percent. In other words, for every six new product introductions, one would return our investment. This had been the prevailing ratio in our industry, consumer packaged goods, for a long time.

Today, about half of our new products succeed. That’s as high as we want the success rate to be. If we try to make it any higher, we’ll be tempted to err on the side of caution, playing it safe by focusing on innovations with little game-changing potential.

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We sold off most of P&G’s food and beverage businesses so we could concentrate on products that were driven by the kinds of innovation we knew best.

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We also focused on creating a practice of open innovation: taking advantage of the skills and interests of people throughout the company and looking for partnerships outside P&G. This was important to us for several reasons.

First, we needed to broaden our capabilities.

Second, building an open innovation culture was critical for realizing the essential growth opportunity presented by emerging markets … the days of achieving automatic growth by entering new markets are essentially over.

A third reason for focusing on open innovation had to do with fostering teams. The idea for a new product may spring from the mind of an individual, but only a collective effort can carry that idea through prototyping and launch.

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“The Consumer Is Boss”

In the early 2000s, our people were not oriented to any common strategic purpose. We had a corporate mission to meaningfully improve the everyday lives of the customers we served. If 15 seconds with a deodorant or two minutes with a disposable diaper have made a small part of your life a little bit better, then we’ve made a difference.

We expanded our mission to include the idea that “the consumer is boss.” In other words, the people who buy and use P&G products are valued not just for their money, but as a rich source of in­formation and direction. If we can develop better ways of learning from them — by listening to them, observing them in their daily lives, and even living with them — then our mission is more likely to succeed.

We began by clearly and precisely defining the target consumer for each brand, and identifying subgroups of consumers for some brands.

We focused on a few big launches and on innovation that was meaningful to consumers, including distinctive packaging, provocative marketing, and delightful in-store experiences. We also took advantage of our global scale and supply chain to reduce complexity and enable a significantly lower cost structure.

We experimented with new ways to build social connections through digital media and other forms of direct interaction. We designed Web sites to reinforce consumer connections, to better understand consumers’ needs, and to experiment with prototypes.

For example, we show people digitally created alternatives in an onscreen vir­tual world. If the consumers we’re talking to have an idea, we can redesign it immediately and ask them, “Do you like that better? How would you use it?” It allows us to iterate very quickly. In effect, we are building a social system with the purchasers (and potential purchasers) of our products, enabling them to codesign and co-engineer our innovations.

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Integrating Innovation

We keep refining our product-launch model — from idea to prototype, to development, to qualification, to commercialization.

Scalability is critical at a company the size of Procter & Gamble. If we can’t scale our processes, they don’t have much value for us. In fact, scalability is often the justification for our existence as a multinational, diversified company.

In fostering this approach and building the social system to support it, the P&G leadership has had to be very disciplined. For instance, we are now set up to see many more new ideas. Last year, the business development group reviewed more than 1,000 external ideas. This year, they’ll see 1,500. We tend to act on about 5 to 7 percent of them.

In the past. Innovation used to travel primarily from developed markets to developing markets. Today, more than 40 percent of our innovation comes from outside the United States.

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The Talent Component

P&G used to recruit for values, brains, accomplishment, and leadership.

We still look for these qualities, but we also look for agility and flexibility. We believe the “soft” skills of emotional intelligence — fundamental social skills such as self-awareness, self-fulfillment, and empathy — are needed to complement the traditional IQ skills.

Curiosity, collaboration, and connectedness are easy to talk about but difficult to develop in practice. We have tried to carefully identify and ease out people who are controlling or insecure, who don’t want to share, open up, or learn — who are not curious. And in the process, we have discovered that most of our people are naturally collaborative.

We give our most promising people time in both functional and line positions, because we think our best leaders are great operating leaders and great innovation leaders. We also move people around geographically. We bring people into our Cincinnati headquarters from around the world, and we make a point of moving our headquarters people to our global businesses. Almost all of us have worked outside our home region. Almost all of us have worked in developing or emerging markets. And almost all of us have worked across the businesses.

We have also recently brought in people from outside to enable and stimulate creative thinking. This was unprecedented for a company that has traditionally hired only entry-level people and promoted from within.

Virtually every leading practitioner of our new design capability came from the outside as a mid-career hire. They arrived from BMW, Nike, and some of the best design shops in the world.

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The result of P&G’s focus on innovation has been reliable, sustainable growth. Since the beginning of the decade, P&G sales have more than doubled, from $39 billion to more than $80 billion; the number of billion-dollar brands, those that generate $1 billion or more in sales each year, has grown from 10 to 24; the number of brands with sales between $500 million and $1 billion has more than quadrupled, from four to 18. 

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Full article:
http://www.strategy-business.com/press/article/08304?pg=all

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Tapping the wisdom of workers …

September 18, 2008

Excerpted from WSJ: “Best Buy Taps ‘Prediction Market’- Imaginary Stocks Let Workers Forecast Whether Retailer’s Plans Will Meet Goals”, Sept. 16, 2008

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When executives at electronics retailer Best Buy  want to know if a new product or idea is likely to succeed, they can seek the opinion of rank-and-file employees by turning to the company’s “prediction market.”

The market, called TagTrade, allows Best Buy’s workers to trade imaginary stocks based on answers to managers’ questions. The market’s judgment has often proved to be more accurate than the company’s official forecasts.

Associated PressTagTrade is open to all of Best Buy’s 115,000 U.S. employees. The roughly 2,100 of them who choose to participate get $1 million in fake money to trade for a nine-month period. The top trader in the period wins a $200 gift certificate.

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Best Buy isn’t the only company using prediction markets as a way to tap the knowledge of front-line employees. Web-search giant Google Inc. uses them to solicit forecasts on everything from how many users its Gmail service will attract to whether products will launch on time. Other companies that have experimented with them include General Electric,Intel Corp. and Microsoft.

Best Buy’s chief executive, Bradbury Anderson, …  drives decision-making down the corporate ladder and information up toward the top. Mr. Anderson says narrowing the gap between management and workers helps to make his company more nimble and responsive to customers, while boosting sales and profits.

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Full article:
http://online.wsj.com/article/SB122152452811139909.html#printMode

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Clorox: Certified “Natural”

September 17, 2008

Excerpt from WSJ “Beauty Game: Being Viewed as Natural” September 10, 2008 

Proving that your brand is more authentic than the competition’s is always difficult for marketers.

For the increasingly crowded category of “natural” beauty products, that task is particularly challenging. That’s why Burt’s Bees, owned by Clorox Co., and a handful of other brands that try to minimize their use of synthetic ingredients have developed a certification process by which they can officially claim their right to call their products “natural.”

In August, Burt’s Bees products…began hitting store shelves affixed with a Natural Products Association seal. The sticker promises that at least 95% of ingredients are natural or derived from natural sources, that they have no “potential suspected human health risks” and that development processes haven’t significantly altered the effect of the natural ingredients, among other criteria.

Mike Indursky, Burt’s Bees’ marketing chief, led the brand’s involvement in the certification…Below, he discusses shoppers’ confusion with natural products..

WSJ: Why does Burt’s Bees need its naturalness certified?

Mr. Indursky: …97% of women told us they want some sort of regulation. We felt we had a responsibility to explain to people what natural is, and what natural isn’t, so they can make the most informed choice. We worked with the Natural Products Association and our competitors to develop the criteria.

WSJ: Since the standards are devised by the participating companies rather than a government agency, isn’t there a risk that this seal could be perceived as even more marketing hype?

Mr. Indursky: That would be risky if it weren’t for the National Product Association’s leadership over it, and their use of third-party certifiers. The brands have no inclusion over the certification process.

WSJ: As a marketer, how do you balance your brand’s natural stance with your parent-company’s brand, which is synonymous with bleach?

Mr. Indursky: There’s nothing to balance. Burt’s Bees is doing what it has always done, regardless of Clorox owning us. Clorox has been a fantastic supporter of ours, and our levels of sustainability and natural ingredients have only increased since we’ve been acquired.

Edit by SAC

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Savvy consumers are likely to be skeptical of companies that create their own certification programs.  One also has to wonder if consumers recognize the stark differences between brand ideologies within a company such as Clorox.  Unilever has received criticism for the opposing ideologies of two of its brands, Axe deodorant spray and Dove.  Clorox also owns “Green Works,” a line of environmentally friendly cleaning products. Both Burt’s Bees and Green Works offer brand promises of green and natural, while the Clorox namesake represents bleach, chemicals and environmental harm. 

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Full article:
http://online.wsj.com/article/SB122099934231816811.html?mod=todays_us_marketplace

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Product Innovation: Establishing & maintaining dominance …

September 9, 2008

Excerpted from Strategy & Business, “The Unique Advantage”, by Alexander Kandybin and Surbhee Grover, Aug. 26, 2008

Successful consumer packaged goods (CPG) innovators, those whose new products establish and maintain dominance in the marketplace, tend to focus on seven areas. None of them represents a “silver bullet” on its own, and many of them are common sense, but together they make innovation more difficult to copy and lead to greater returns and higher growth.

1. Technology and patents. New technologies … providie companies with a way to meet new consumer needs, including those that consumers don’t yet know they have.  Patents can sustain a meaningful advantage in the marketplace. 

2. Claims. Claims add substantial value when they are tied exclusively to a product and can be held for a significant period of time.

3. Ingredient synonymy. Arm & Hammer, Planters, and POM Wonderful, respectively, have each carved out an enviable position by becoming virtual synonyms for their category. Such domination affords pricing power for products that are essentially commodities.

4. Unique brand characteristics. Strong brands can build an identity in consumers’ minds that transcends products.

5. Product experience. Successful products have an emotional component that builds a bridge to consumers, becoming part of their lives.

6. Packaging.  Packaging innovation can leverage technology, emphasize unique brand characteristics, enhance the product experience, and in fact prove very difficult to duplicate.

7. Effective vertical integration. [Keeping things “in house” can protect proprietary technologies and “secret sauces” ]

Edit by DAF

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Full article:
http://www.strategy-business.com/press/article/08306?pg=all&tid=230

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Product Innovation: The perils of playing “small ball”

September 8, 2008

Excerpted from Strategy & Business, “The Unique Advantage”, by Alexander Kandybin and Surbhee Grover, Aug. 26, 2008

In mature, slow-growth industries such as food and consumer products … Companies often spend relatively little on R&D, and … their innovation results are marginal.

Much of the problem can be traced to conventional wisdom (that) the secret to growth … is to develop new products based on consumer needs, which are discovered through consumer research and focus groups. And  if a new idea is not great … marketing and advertising can always … turn a so-so concept into a hit.  And the first to market … will capture most of the profits.

This kind of thinking leads to … a long list of line extensions — new flavors of an established soda brand, say — rather than the kind of game-changing innovations that can make a real difference to the bottom line.

New products that stand alone longest in the marketplace, without serious competition, bring in the highest returns.

Meeting consumer needs is a necessary but no longer sufficient condition of sustainable innovation.  Rather than thinking about new products as a way to get customers excited for a little while, companies need to think about their innovation strategy as a way to build a high, hard wall between those customers and their strongest competitors … hifting some investment away from marketing and advertising toward the development of … game-changing new products … that are difficult to copy.  

Higher R&D spending does not guarantee success … (but) a minimum innovation investment is required for breakthrough thinking. Without it, companies tend to fill the pipeline with the “base hits” of line extension … falling into a self-created loop of low investment, low returns, and steady but slow growth … that provides the illusion that the company is succeeding

So, the tendency is for companies to focus on relatively small, often superficial line extensions that can be churned out quickly … but require inflated advertising budgets that reflect a defensive mind-set .. (and divert resources from)  breakthrough innovation … locking companies into a pattern of high marketing spending and a need for endless small launches.

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Mature companies also need a strategy for when difficult to copy ideas are in short supply. Here, we suggest defying conventional wisdom about being first to market. If a product can be copied, it’s often more profitable to be the copier.

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There will always be a place for line extensions backed with big campaigns and for being first to market. It is possible to gain additional benefits by building scale, amplifying the effects of hard-to-copy innovations by spreading them across multiple products.

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It’s even possible to gain scale of a kind with a highly nimble, prolific innovation organization. Launching a steady stream of good ideas, as P&G has done in home products in recent years, can give a brand a reputation for fresh thinking that transcends the individual ideas and translates into market share gains. 

Edit by DAF

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Full article:
http://www.strategy-business.com/press/article/08306?pg=all&tid=230

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