Books on product development
marketing
Matching marketing to the type of innovation
1July 10, 2012
by Olaf Kowalik
in marketing
…the processes firms use to manage incremental innovation are not only not applicable to but may also be detrimental to the management of radical innovation. The firm’s challenge is to manage both types of innovation simultaneously.
Types of innovation
Incremental versus (breakthrough) radical innovation: Incremental innovations are continuations of or minor improvements to existing products and services which are built with existing technology and processes. Breakthrough innovations create new markets by introducing entirely new offerings that are based on changes to fundamental production methods.
Product versus process innovation: New products provide functional improvements, enhanced ease of use, or higher performance and are delivered as the final output of an organization’s efforts. New products can embody either incremental or breakthrough innovation. New processes result in increased efficiency or effectiveness in the techniques used for producing a firm’s goods. New processes can also encompass the discovery of new scientific or fabrication processes. One company’s product innovation can turn into another company’s process innovation as in the case of manufacturing tools produced by one company to be used in the factory of a different company.
Architectural versus component innovation: Architectural innovation is considered to work at the platform level (the way in which components of a larger system interact, can be configured and add value). Architectural innovation can frequently be radical given its impact to a broader ecosystem. Conversely, component innovation builds new components or sub-parts of existing technology platforms.
Sustaining versus disruptive innovation: This is the domain of Clayton Christensen’s Innovator’s Dilemma. Sustaining innovations target high end, demanding customers with expensive and/or high margin solutions that offer improved performance and features. Low-end disruptive innovation offers a “good enough” solution for low-end customers who cannot afford, or do not need, the high end solutions currently available. Eventually, low-end disruptions move up-market and disrupt the business models of the companies that provide those solutions. New-market disruptions convert non-customers into new customers and create new markets through delivery of new technologies.
Organizational innovation: Organizational innovation spans the creation of new strategies, new business models, and business practices. Business strategy innovations can include changes to financial management methods or an emphasis on social innovation. Changes to promotion methods, pricing, supply chain, or pricing are classified as marketing innovations.
Innovation can occur in various stages of the supply chain and not be visible to the end user. For example, extraction and processing of fuels may change dramatically, but the experience at the pump or at the thermostat does not.
The contingency model for high technology marketing
market planning that explicitly recognizes and accounts for the strategic distinction between market-driven and innovation-driven research goes a long way toward yielding better corporate performance
The right marketing strategy to choose is contingent on the type of innovation a company creates. Specifically, the type of interaction between the research and development group and the marketing team depends on the type of innovation being brought to market. In supply-driven markets, technology superiority is critical to success so a strong research & development group is required. The type of market research tools that are effective also changes–for breakthrough innovations, traditional market research will not likely be useful. The role of advertising is frequently more important in incremental markets where offerings are well understood and audiences are defined. Finally, entirely new products and services may be priced at a premium because they offer new value that is not available elsewhere.
In incremental innovation, found often in mature markets, the marketing function becomes more critical because the customer base and their needs are typically more well known. Because of their knowledge of and experience with the product and its benefits, customers can play an active role in product development. Standard market research tools can be used as marketing takes the lead role in defining the offer. Likewise, standard management controls and formal planning can be effective for this type of innovation. Advertising can be effectively used to stimulate demand in targeted market segments and pricing strategies need to take the competitive landscape into account.
incremental innovation moves along an existing technology trajectory (S-shaped curve)
producers of a mature product who have achieved high volume in their production processes have a strong incentive to make only incremental innovations that leverage their investments in existing technological platforms, potentially making them less open to radical change and more vulnerable to obsolescence.
Overall, incremental innovation extends existing products and processes in markets where product attributes are well defined. Competitive advantage is acquired through lower production costs and products are frequently developed in direct response to competitive dynamics. The book classifies this type of innovation as “demand-side” or “customer pull”, indicating that much of the impetus for change and improvement comes from the buyer.
Competitive advantage for a breakthrough technology is typically found in the superior functional performance that the new innovation offers over existing methods or products…typically…a leap to a new S-shaped curve.
Because radical innovation is developed by an R&D group that often hasn’t specifically thought about a particular commercial market application during the development process, the technology is pushed into the market to see where it might best be utilized. These innovations are created independently of the vision of the uses they might serve.
By contrast, breakthrough innovation occurs when new technologies create new markets, most often initiated by inventions from research and development teams. This type of innovation provides superior functional performance when compared to the existing technology; specific market opportunities and needs are secondary priority. This is a “supply-side market” with “technology push.”
An over-reliance on incremental innovation can diminish “the focus and capacity of companies to engage in truly breakthrough innovation” so both approaches must be managed thoughtfully. The authors caution that “marketers should not confuse the nature of the innovation with the potential payoff and wrongly assume that breakthrough innovations will have a large payoff.” Similarly, spreadsheets and traditional financial tools can eliminate a company’s ability to innovate.
Selecting the type of innovation to start with
Geoff Tuff from the Monitor Group discusses Doblin’s Ten Types of Innovation for classifying innovations based on a value chain view (finance, process, offering, and delivery). This is similar to the framework presented in Marketing of High-Technology Products and Innovations and covers many of the same types of innovation avenues. Although product performance innovation is the most popular type of innovation, successful companies allocate their innovation efforts throughout their value chain. Moreover, only 4% of the product innovations studied returned their initial investment. When this finding is taken into account and product innovations are compared to the other nine types by cumulative return on capital, business model and customer experience innovation turn out to be the most successful. Tuff calls these two types of innovation “integrative” because he says, “it is almost impossible to implement business model or customer experience innovation without impacting multiple other types of innovation along the way.” To effectively manage these different types of innovation, the guidelines from Marketing of High-Technology Products and Innovations are a good complement.
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Disruption, Conventions, and Vision
0December 16, 2011
by Olaf Kowalik
in marketing
In Disruption
Disruption must be cultivated like a discipline.
Dru views Disruption as a way of thinking and finding opportunities. It is methodical to the extent that it is achieved through a cycle of finding widely accepted assumptions (conventions), developing discontinuous and differentiated concepts (disruptions), while guided by a strong point of view (vision). However, he does not prescribe a sequence to these steps because creating a disruptive campaign can’t be achieved in a formulaic manner. Likewise, since creativity cannot be scripted, the Disruption method “strives to be open” and non-linear.
One of the tools Dru describes in the book is the “Disruption World Bank”, an agency-wide on-line repository of disruptive case studies that serve to stimulate new thinking and provide patterns for new creative ideas. This resource is used for training, inspiration and reinforcing the vision-convention-disruption model through examples.
Disruption
Each time we discover a universal attitude or behavior, something that embraces the greatest number of people, and we capitalize on it befor the competition does, we find the seed of a disruptive campaign.
Dru finds that, for advertising campaigns, sources of disruptive ideas “lie at the crossroads where three groups–advertisers, consumers, and agencies– converge.” Marketers and advertisers typically create tangible ideas; consumer insights can be made available for the second group, and advertising “registers” serve as a framework for the third. Advertising registers are a way of thinking about the level at which a campaign hits consumers: top of mind awareness, highlighting an attribute, emphasizing a benefit, staking out a territory, reflecting a value, or claiming a role. Tangible marketing ideas, consumer insights, and advertising registers provide the signposts for disruptive opportunities.
Dru introduces the concept of a “disruption interval”–the the time between when the client briefs and the agency and when the agency brief the creative team. This time is usually very short, but it is also very rich. This gap must be defended because it’s where the central creative idea is formed.
Conventions
Unlearning is a discipline.
Never seize upon the first idea that simply contradicts the convention.
Conventions are departure points for creating intrusive strategies which in turn lead to unexpected executions.
Since conventions are the hidden assumptions that underlie much of our work and discourse, they are not easy to identify. Conventions are not simply negations of prevailing attitudes or believes so “it is usually not enough to say or do the opposite of what others do or say.”
Dru says “conventions are not narrow. They unify people. They are not opinions shared by one group in particular.” One the road to identifying conventions one must unlearn basic tenets and identify widespread common beliefs and attitudes. Then, one can overturn a convention “through a disruption, within a framework of a clear and well-defined long-term vision.”
Vision precedes convention because the strength of the guiding idea provides the force to up-end the status quo. Identifying conventions in the absence of a guiding vision does not focus creative efforts sufficiently for a disruptive result.
Always asking “why” will lead you to ask “why not?” A “discipline of doubt” enables an organization to continually question itself and its frame of reference. This continual reflect enables initiating and energizing the virtuous cycle of Disruption.
Vision
In order to define a vision, the entrepreneur brings together two worlds. His inner world and the world around him. His imagination confronts reality. If the two meet, the brand will be strong.
When you close your eyes, you see your inner world. When you open them, you see the outside world as it presents itself.
If you keep one eye open and the other one closed, your sight is blurred, but you find your vision.
When you look through a telescope, you have to close one eye if you want to see farther.
For Dru, vision is developed by understanding not only the competition, the client’s business, and the consumer, but also by identifying a long-lasting selling idea. The selling idea must be flexible enough to support multiple implementations and take the brand or company confidently into the future.
This book is visionary in its own right. Published in 1996, it had a website of its own and the final two chapters are focused on how internet media will transform the agency industry. Dru describes the multi-disciplinary digital agency of today and begins that section with this introduction: “As the final lines of this book were being written, the navigational software, Netscape, has been public for six months.” Dru is currently the Chairman of TWBA.
I have been fighting all my life so that the briefing to the creatives will be a very special moment.
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Further reading
Writing your value proposition
1June 9, 2011
by Olaf Kowalik
in marketing
He views value propositions as more than just a marketing exercise–he links it directly to sales effectiveness: “Complex sales are accomplished through one-on-one human communications, not brochures, websites, mission statements or any other marketing devices…So, your sales people need language and rationale to help them persuade other human beings that your value proposition addresses their primary needs and concerns.”
Palomino’s I3 framework breaks down into three parts:
- Innovation – what’s new?
- Indispensability – what’s useful?
- Inspiration – what’s wow?
A strong value proposition…is the basis from which you can develop a well-grounded marketing message that addresses the concerns of your specific customers within a target organization.
Palomino’s definition of a value proposition is: “A set of promises, based on capabilities and credibility of the offering party, that helps prospective customers understand how an offering uniquely addresses specific problems, opportunities, and challenges.”
One of the keys of developing a solid value proposition is getting a handle on your differentiating factor. Palomino points out that although there aren’t a lot of truly different offerings in the market, a good starting point for discovering differentiating attributes is to look across the entire value chain. Many companies, even those who deal in commodities, can offer value elsewhere in the value chain to differentiate their offerings. He references The Discipline of Market Leaders and suggests that looking at customer intimacy, product differentiation, and operational excellence are some good entry points for thinking about differentiation.
To begin the process of crafting your value proposition, Palomino recommends looking at all the assets at your disposal, unaddressed needs in the market place, and a competitive analysis. From there, you’re ready to begin a process of framing, refining, testing, supporting, and adjusting your value proposition (all based on the I3 framework).
The first step, framing, is done by filling out the I3 framework for your specific offering. Palomino is looking for the reaction: “I’ve never seen that before” for Innovation. For indispensability, he asks us to consider whether our product or service will be useful over the long term and whether it integrates well with the customer’s context and environment. With respect to Inspiration, he asks whether your product’s design is a “tipping point” for the purchase decision.
Next, refining the value proposition takes the form of “We offer our sports utility vehicle to outdoor enthusiasts delivering extreme terrain navigability through a built-in winch and hydraulic lifts.” Testing the statement through several iterations looks like:
- “Without our sports utility vehicle, the outdoor enthusiasts would not realize the ability to extract themselves from muddy terrain.”
- “The outdoor enthusiasts would not realize the ability to extract themselves from muddy terrain without our winches and hydraulic lifts.”
- “The outdoor enthusiast requires winches and hydraulic lifts.”
Testing also involves looking at the marketplace to understand your position relative to a competitor. Finally, he outlines how to position and simplify your offering.
Palomino concludes the book by observing that you can’t stop at a great value proposition–you have to extend it out to your sales cases. For him, the sales cases are: the business case, financial case, technical case, competitive case and decision process case. Weaving these together with the I3 framework provides sales teams with a clear conversational path to closing sales.
The Strategic Planning Gap
0May 24, 2011
by Olaf Kowalik
in marketing
In addition to evaluating growth strategies, downsizing or terminating existing businesses must be considered.
There are several ways to bridge the gap: intensive growth (identifying further growth opportunities within existing businesses); integrative growth (building or acquiring businesses that are related to current businesses); and diversification growth (adding businesses that are unrelated to existing businesses). For intensive growth opportunities, businesses should review four types of growth:
- current markets/current products: market-penetration strategy
- new markets/current products: market-development strategy
- current markets/new products: product development strategy
- new markets/new products: diversification strategy
Some options for intensive growth include identifying new customer groups within existing sales areas, developing additional distribution channels, or selling in new markets, such as those in other countries. Several intensive growth strategies are profiled in the presentation below based on Ansoff’s growth matrix.
This Inc. magazine article considers intensive growth strategies from the perspective of a “ladder” of increasing risk.
After examining intensive growth strategies, the next step is to consider integrative growth strategies. Integrative growth typically involves backward, forward, or horizontal integration with an industry. Acquiring or establishing partnerships with suppliers, distributors and competitors are common integrative growth strategies.
Diversification growth can be achieved through several strategies. A concentric strategy would involve offering a new product or service to a different group of customers. A horizontal strategy would involve selling related new products to existing customers. Finally, a conglomerate strategy would consist of creating an entirely new set of products or services.
In this video, Kotler shares his high level perspective on how the definition of marketing has changed over the years:
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Kotler says the mantra of marketing is: “Create, Communicate, and Deliver Value to a Target market at a Profit”. He says “create value” equates to product management; “communicate value” is brand management (communicating excitement and differentiation) and “deliver value” is customer management. He goes on to talk about the changes in each of these disciplines.
Product management was making things from the inside and then ask sales and marketing to “get rid of it.” Today companies like Procter and Gamble connected with scores of scientists outside their walls to solve problems. It’s no longer about closed doors. P&G will tap scientists anywhere in the world to solve problems. For example, P&G found someone to help them print on potato chips. Those are examples of open innovation which leverages outside experts and resources to create new products and services.
Brand management used to be packaging, name, and logo. Brand management now is a promise and inspires everything you do. Today, it defines the way you act. It is emotional. It used to be going after the consumer’s mind and your heart. Now, we want not only mind- and heart-share, we also want spirit share. A share of something more than just narrow interests. Customers often choose civic and caring firms (i.e., corporate social responsibility).
Customer management is no longer having a database of customers reached through direct mail and on-line. Now, companies want to co-create products and advertising through open innovation.
Market positioning
0May 12, 2011
by Olaf Kowalik
in marketing
In High Intensity Marketing
I don’t serve markets. I create them! — Akio Morita
Customers
Selecting who you will serve with your product or service is a fundamental part of market positioning. Traditionally, this is done by segmentation, with a segment defined as: 1) homogeneity within; 2) heterogeneity between; 3) ability to effectively reached and served; and 4) large and profitable enough to justify marketing effort.
In The Innovator’s Solution, Clayton Christenson puts forward an argument for segmenting customers by “jobs to be done”. He gives the example of a milkshake, which is used for many different jobs by different customers.
Competitors
Defining oneself by one’s competitors has many drawbacks (see video below), but Mootee favors a focused approach which avoids head-on competition. He quotes Keniche Ohmae (a senior partner at McKinsey & Co. who created the three C’s framework expanded on above) as advising large scale deployment of resources to a single strategic function to dominate and then following with expansion into adjacent spaces.
Cost structure and channel choice
A channel is “the set of interdependent organizations involved in the process of making a product or service available for consumption or use.” Channels include all the processes and touch points along the path from production to consumption. Channels can be single or multi-tiered and the design of a channel can affect the type of product or service that can be delivered. Channels should be designed according to customer need.
Competitive advantage
Mootee points out that “all market strategy has a life limit and this means continually innovating to build new sources of competitive advantage.” Like Andy Grove, Mootee recommends being paranoid and not resting on your laurels or stopping to celebrate current advantages.
Next, as a company decides where and how to compete, it has four choices:
- Evolutionary play, mass markets — lots of competition here
- Evolutionary play, niche markets — this may be an attractive market until larger competitors step in
- Revolutionary play, mass markets — the Wii and Kinect probably fit here
- Revolutionary play, niche markets — Mootee gives the early personal computer market as an example here
Finally, a company must choose product-level positioning along three axes: design, technology, and service delivery. Mootee says “Design, technology and service components work together to trigger stimulations to the senses, the heart, and the mind.” Many products are developed with high design attributes, high technology attributes, or both. Service is less frequently thought of as an important component of product development. High design, technology, and service attributes are characteristic of Nike footwear products as well as their recent technology integrations like Nike ID.
“Freedom from your competition comes from customer focus” — Salim Virani
For a different view on market positioning, watch this video from Salim Virani. Virani says that positioning should be done relative to demand, not supply—just because something is in short supply does not mean that there is demand for it. He points out that positioning should connect supply to demand and that positioning should be relative to other customer problems. He says that by positioning your product or service relative to the competition, you therefore box yourself in to defining yourself relative to the competition, rather than in terms of the needs your customer has.
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Post-Modern Marketing
0May 8, 2011
by Olaf Kowalik
in marketing
In most markets today, the innovations that create the greatest wealth are based on the invention of new business models rather than the application of new technologies.
Business model innovation is a hot topic, championed by Alex Osterwalder, Anders Sundelin, and others. Looking at the components of a business model and the value network gives great insights into new ways of creating compelling offerings. Google is an often-cited case of insights into structural elements of the status quo. Business model innovation can be highly disruptive to incumbents and can be harder to copy given all the moving pieces involved (sales, marketing, product development, partnerships, and customer relationships). Amazon is a great examle of a company that evolves business models and uses technology in the service of disruptive offerings like associate program sales, cloud computing, and electronic books.
Here’s a video of Osterwalder describing the business model innovation process:
The invention of any new business models is ultimately grounded in a unique insight into the needs of customers
Putting customer insights at the center of business strategy has been a key theme of recent marketing models. This approach was popularized by Ideo and the concept of anthropological investigation into customer needs, problems, and behavior. The User Experience (UX) discipline is another fairly recent contribution to the idea that all good business and product design comes from a keen understanding of the end customer. In this video, Jeff Bezos outlines “everything I know”–and the first thing he knows is that “Amazon exists to obsess over customers.” He says “given a choice between obsessing over competitors and obsessing over customers, we’ll always choose obsessing over customers”:
Unique insights into customers are more likely to emerge from market experimentation than the analysis of market data
He notes that “almost all learning…is experiential..thus, the art of learning is mainly a question of creating experiences that lead to new insights.” This is a key tenet of Customer Development, which espouses the creation of “minimum viable products” and “pivoting” in response to learning about the customer.
Steve Blank, Eric Ries, and Patrick Vlaskovits are all key leaders of the Customer Development and Lean Startup movement. Steve Blank outlines the key points of Customer Development in this video:
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Finding hidden opportunities in your consumption chain
1May 7, 2011
by Olaf Kowalik
in marketing
When considering supplying a new product or service, one starting point is to think about the entire lifecycle of the way value is delivered to discover new points of differentiation. The Consumption Chain is a way of looking at your total product and user experience in the context of creating a new product or service. By asking the question “Is there a unique way of delivering value” at each step in the consumption chain, you can get ideas about new ways to solve problems and “jobs to be done”. The framework is similar to Service Design, in which the whole product experience is designed.
The consumption chain is typically portrayed as a lifecycle view:
- Awareness: How do people become aware of their need for your product or service?
- Search: How do people find your current (or upgraded) offerings?
- Selection: How your customers make their final selection?
- Order and Purchase: How do consumers order and purchase your product or service?
- Delivery: How is your product or service delivered? What happens when your product or service is delivered?
- Payment/Financing/Receipt: How is your product or service paid for?
- Installation: How is your product installed?
- Storage: Is your product stored?
- Transportation: Is your product moved from one place to another?
- Use: How are your customers really using your product?
- Service: What do consumers need help with when they use your product?
- Repairs: How is your product repaired or serviced?
- Returns: Can your product be returned or exchanged?
- Final Disposal: What happens when your product is disposed of or no longer used?
Considering the consumption chain gets you thinking not only about all the customer touch points, but also about all the organizations which support your product and how your product truly lives in its lifecycle. As you work your way through the chain, distribution channels are a natural extension. Customer service and all extended touch points with your customer are included.
The consumption chains also a great complement to your business and revenue model. Understanding the sequence within which your product or service is experienced.
In this video, Ian MacMillan (co-author of Discovery-Driven Growth
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Michael Porter’s essential strategy finding is that “Good strategy is not competing to be the best, but competing to be unique. The worst error in strategy is to compete with rivals on the same dimensions.” With this in mind, taking a close look at your consumption chain is a great place to start when innovating.
Additional Reading
- SmallBizU has a good overview of consumption chain analysis that identifies the phases of the customer journey and provides key questions for all phases.
- Consumption chain analysis is mentioned in this summary of The Entrepreneurial Mindset by Rita Gunther McGrath & Ian C. MacMillan as one technique of identifying new opportunities for growth.
Strategic Marketing
0October 14, 2010
by Olaf Kowalik
in marketing
Mohr, Sengupta, and Slater present a proactive approach to marketing in Marketing of High-Technology Products and Innovations (3rd Edition)
The authors argue for focus in strategic direction due to the importance of coordinating the approach. They note that marketing activities can be owned by a marketing department, product management group, strategic planning team, or senior management. Research and analysis are key competencies which support strategy formation.
Functional marketing activities include the traditional “4 P’s”: product, price, promotion, and place known as the “marketing mix”. The authors note that the responsibility for these three functional areas are often spread across several organizational units. Successful companies can effectively manage these activities in a coordinated way across organizational boundaries and focus on “the moment of truth” customer touch points. Keeping in mind that every touch point with the customer can strengthen or weaken the relationship is a good focus for integrated marketing activities.
Tactical activities, like creation of collateral, although important, are not equivalent with “marketing”.
Strategic
- Which markets to compete within
- Which segments to target
- What value to offer customers within target segments
- Selection of a competitive position in the market
Functional
- Decisions related to price, product, place, and promotion
- Relationships between functional groups related to marketing decisions
Tactical
- Creation of marketing collateral and communication
- Events, advertising, and communication strategy
The authors outline a classic “plan, do, check, act” framework for strategic market planning, the purpose of which is to create competitive advantage.
Assess Resources and Competencies
- Superiority: customer value, rareness
- Sustainability: durability, inimitability
Key marketing competencies for high-tech companies include gathering and using market intelligence; relationships with customers, partners, and distributors; service delivery; product development; go to market capabilities, and supply chain management.
Inimitability is increased by three factors: 1) degree of difficulty for other firms to observe the source of competitive advantage; 2) degree of difficulty for other firms to acquire similar sources of competitive advantage; 3) degree of difficulty for another firm to replicate the competitive advantage.
Answer Key Strategy Questions
- Who are our customers?
- What is our value proposition?
- How do we create and deliver value?
The authors recommend a “bifocal vision” which asks “who are our customers now?” and “who should our customers be in five years?” For value propositions, they list three types: 1) “all benefits” which simply states the benefits the customer will receive from the offering, without necessarily understanding whether or not the customer values the benefits; 2) “favorable points of difference” which compares a company’s offering to those of its competitors; 3) “resonating focus” which uses the most important buyer needs to establish the value proposition.
Select Strategy Type
- Product Leader (Prospector) – market pioneer, first mover advantage, targets innovators and early adopters
- Fast Follower (Analyzer) – attempts to improve product leader’s products and services through innovation, pricing, advertising/distribution, changing the rules of the game
- Customer Intimate (Differentiated Defender) – targets the early and late majority customers
- Operationally Excellent (Low-Cost Defender) – provides highest quality, price, and ease of purchase
Create Organization Processes and Structure
- Formal vs Emergent processes
- Create a market-driven organizational structure – organize around customers, not products
Measure Marketing Performance with a marketing dashboard