Marketing of Innovations PDF

The+Fuqua+School+of+Business+logo Marketing of Innovations Creating an Innovative Culture “The future is uncertain... but this uncertainty is at the very...

The+Fuqua+School+of+Business+logo Marketing of Innovations Creating an Innovative Culture “The future is uncertain... but this uncertainty is at the very heart of human creativity.” ~ Ilya Prigogine “The metaphor is perhaps one of man's most fruitful potentialities. Its efficacy verges on magic, and it seems a tool for creation which God forgot inside one of His creatures when He made him.” ~ Jose Ortega y Gasset 1 How do we generate long-ranging visions and ideas? Design-thinking Product design starts MUCH EARLIER than you think is necessary… Ideo: Nemours Children’s Hospital 2 minute explanation Stanford’s Design-Thinking Process Design Thinking (Stanford) Product design starts MUCH EARLIER than you think is necessary… “Yes AND…” First should not be last! Rich stories, joys & pains User needs User constraints Valuation Stanford’s Design-Thinking Process Competition  Uncertainty is the primary characteristic of the innovator’s environment. 5  Counterintuitive action is often required. The relationship between performance & technology life cycles Act before it makes sense Performance Limit of current technology New technology Current technology 6 Time  Counterintuitive action is often required. Network externalities Direct network externalities (aka demand-side increasing returns, bandwagon effects) – User value increases with new users Ericsson “Eiffel Tower” Telephone 1892 7 Sell individual goods in creative bundles/networks/packages.  Counterintuitive action is often required. Network externalities Indirect network externalities – User value increases with development of complements or related goods 8 Incentivize or underwrite complements.  Counterintuitive action is often required. Clay Christensen: Disruptive Innovation Innovators at the bottom of a market can steal away a bigger better firm’s Integrated Steel Mills vs Mini Mills business even if the big Sheet Steel (25-30%) firm is ALWAYS making Structural Steel (18%) Angle Iron (12%) the right decision in the Rebar (7%) moment. *Said Business School, Oxford, talk 9  So far, we see that… There are different timing strategies in the marketing of innovation There can be success in both pioneering and polishing – Choice determines customers, value propositions, and marketing objectives/focus The question becomes, “How do we facilitate the innovative organization?” 10 A Hierarchy of Creative Corporate Culture Why do one-off or ”lip service” tactics Individual to create creativity Effects in a firm ultimately fail? Group Effects Innovation Process + Formal +Emergent Strong Marketing Orientation © Wood 2008, 2009 11 A Hierarchy of Creative Corporate Culture Why do one-off or ”lip service” tactics Individual to create creativity Effects in a firm ultimately fail? Group Effects Innovation Process + Formal +Emergent Strong Marketing Orientation © Wood 2008, 2009 12  Marketing Orientation Principle definition: The extent to which a firm monitors, learns about, and internally shares customer and competitor trends in the market Firms that have stronger MO… – Have better financial performance (stronger in dynamic mkts) – Involve marketing executives in strategic planning & leadership – Place greater emphasis on customers than production concerns – Commit financially to market research – Commit time to learning and dissemination of info 13 Information Gathering: Priority Depends on Innovation Type! Product Leaders – Goal is to find latent and expressed needs – Information focus: observe use of current product, partner with lead users, stay abreast of latest technological advances Fast Followers – Goal is to improve on leader’s product while protecting core markets – Information focus: observe customer response to leader product; learn early adopter preferences; monitor competitor successes and failures Customer Intimate – Goal is to identify customer segments – Information focus: study consumers to differentiate early and late majority; study customer satisfaction with competitor products (defections/returns); understand late majority “hurdles” Operationally Excellent – Goal is to identify process opportunities – Information focus: study competitor processes; stay abreast of process innovations; study supply chain; study consumer buying 14 process & understand inconvenience or cost concerns  A Hierarchy of Creative Corporate Culture How do firms approach the Individual Effects innovation process? Group Effects Innovation Process + Formal +Emergent Strong Marketing Orientation 15 © Wood 2008, 2009  Formal Innovation Processes Firm uses pre-set planning and analysis process Written plans precede action Budgets, schedules, and metrics are well- defined Best in more predictable environments or with incremental innovations Example: Medtronics – Alternating annual strategic plan Bottom-up: BU assessment of environment, tech, trends, $ Top-down: CEO assessment of growth areas, tech, vision 16  Formal Innovation Processes Firm uses pre-set planning and analysis process Written plans precede action Budgets, schedules, and metrics are well- defined Best in more predictable environments or with incremental innovations Example: Medtronic – Alternating annual strategic plan Bottom-up: BU assessment of environment, tech, trends, $ Top-down: CEO assessment of growth areas, tech, vision 17 A popular example of a formal process is the Stage-Gate Model. 18  Emergent Innovation Process Uncodified, improvisational planning Often bottom-up and based on trial-and-error learning Top management serves as filter, matchmaker, and entrepreneur Best in highly uncertain environments Example: Apple, 1997 – Steve Jobs: “Our goal was to revitalize and get organized, and if there were opportunities, we’d see them. We just had to be ready to catch the ball when it’s thrown by life.” Linda Hill NASCAR 2020! Collective innovation 19  5 Takeaways 1. Innovative products/services are better when they use models (like design thinking, lead-user theory) that prioritize early contact with end-users. 2. The relationship between product performance and technology life cycle suggests that we consider new technologies that currently underperform compared to our existing product. 3. We must identify and act in accordance with direct and indirect network externalities. 4. Disruptive innovation is not evidence that big firms are bad at innovation because they are asleep at the wheel. 5. We must build up our firm’s Marketing Orientation and know whether we are using a formal or informal innovation process. 20