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Innovation for Marketers
Andrew Hatcher
Kiran Kapur
Charles Nixon
Diploma Guide -Iinnovation for Marketers sample chapter
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responsibility for any errors or omissions, however caused. No responsibility for loss or damage
occasioned to any person acting, or refraining from action, as a result of the material in this
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Published by Cambridge Marketing Press, 2015
© Cambridge Marketing Press, 2015.
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Diploma Guide -Iinnovation for Marketers sample chapter
Introduction
Innovation for Marketers i
Page
Introduction
About the Authors (iii)
How to Use this Guide (v)
Additional Study Resources (vi)
Section 1: Entrepreneurial Marketing
Introduction 1
Chapter 1: Marketing and Entrepreneurship
1.1 Integrating Marketing and Entrepreneurship 3
1.2 Converting Ideas into Opportunities 19
1.3 New and Traditional Marketing Approaches 22
Chapter 2: An Entrepreneurial Response to Change
2.1 Competitive Marketing Solutions with Limited Resources 33
2.2 Entrepreneurial Approaches to New Product
and Service Development 41
2.3 A Compelling Proposition 50
2.4 Effective Leadership of Entrepreneurial Teams 62
Section 2: Innovation
Chapter 3: The Innovative Organisation
3.1 What Kinds of Innovation Can Exist? 73
3.2 What Does An Innovative Organisation Look Like? 98
3.3 Assessing Levels of Innovation and Creativity 109
3.4 Using External Influences to Drive Innovation 115
Chapter 4: Innovation In Marketing
4.1 Creating Innovative Marketing Teams 123
4.2 Innovation across the Marketing Value Chain 140
4.3 Implementing Marketing Innovation 149
Introduction
ii Innovation for Marketers
Section 3: The Marketing Champion
Chapter 5: The Role of Internal Marketing
5.1 The Role of Internal Marketing in Supporting Innovation 161
5.2 Internal Marketing, Leadership and Other Business Functions 181
5.3 The Internal Marketing Plan 187
5.4 New Ideas and Digital Media 191
Chapter 6: Marketing-led Organisational Change
6.1 Analysing the Context of Change in an Organisation 201
6.2 Planning and Executing a Change Programme 222
6.3 Engaging Stakeholders in Organisational Change 233
6.4 Measuring Success 237
Index 245
Introduction
Innovation for Marketers iii
About the Authors
Andrew Hatcher BSc MBA FCMC Chartered Marketer
Andrew initially studied as a Mechanical Engineer before joining Reuters, the information
company as a journalist. He then spent 15 years with the company around the world in a
variety of technology, sales and marketing roles ultimately working with the Greenhouse,
Reuters’ corporate venture capital arm, based in New York. He subsequently established an
internal incubator for Reuters in three centres around the world before setting up a new
electronic trading venture in Singapore.
After Reuters, Andrew moved to Cambridge in the UK and has been involved in setting up a
number of companies including Investing for Good which offers philanthropists a structured
way to invest in charities, The Working Knowledge Group which delivers enterprise activities
to students in Higher and Further education and, most recently, the Applied Knowledge
Network which develops training courses and software applications focused on strategic
planning.
Andrew has been involved in marketing training since 2003 and has since delivered
programmes for a wide variety of clients including Statoil the Norwegian State oil company,
British Telecom, Yell, Smith & Williamson, NTT DoCoMo and Eversheds among many others.
He is the co-author of Inventuring – Why big companies must think small, which is a
handbook for corporate venture capitalists; of The Cambridge Marketing College
Handbook: Services Marketing published by Cambridge Marketing Press; and of the Metrics
for Marketers Guide.
Andrew is a fellow of Cambridge Marketing College and has many years’ experience
teaching at both the CIM Diploma in Professional Marketing and Postgraduate Diploma
levels.
Kiran Kapur BA MPhil (Oxon) FCMC Chartered Marketer
Kiran has worked predominantly in Financial Services and has expertise in customer
relationship marketing and customer communications. As a consultant, she has worked as
project manager for companies including Liverpool Victoria, Barclays, London Life and
Cazenove.
She has taught a wide variety of courses at Cambridge Marketing College since 1999. She is
the Distance Learning & Overseas Course Director, with responsibility for the College’s
overseas expansion and a Fellow of the College. She has been a CIM examiner since 2004.
Her publications include the Assessing the Marketing Environment Study Guide published by
Pearson Education in 2009, and The Cambridge Marketing Handbook: Law for Marketers
published by Cambridge Marketing Press in 2015. She is also the author of the Guide: The
Customer.
She is a trustee of Jimmy’s Cambridge, a charity for homeless people.
Introduction
iv Innovation for Marketers
Charles W Nixon MBA FCIM FCAM FRSA Chartered Marketer
Charles began his career after studying History and Economics at Manchester University, a
degree that he says gives him a long term approach to strategy. He was first employed as
Government Relations Officer for Courtaulds (then the largest textile company in the UK)
where he liaised with civil servants and politicians on government policy. Whilst at Courtaulds
he was asked to explore the possibilities of the use of new mini computers in the field of
market research and intelligence. This led to his founding Courtaulds’ Office of Market
Intelligence for its Consumer Products Group and establishing one of the first computerised
marketing information systems in the UK.
After a short spell at the International Wool Secretariat as Senior Economic Analyst, Charles
went to Warwick Business School (WBS) to take one of its first MBAs. Whilst there he helped
write the Business Plan for the Warwick Science Park and so confirmed his interest in High
Technology. Following WBS he joined Arthur Andersen Management Consultants (now
Accenture) and spent time in Chicago and Geneva, before joining Mercury
Communications the then embryonic rival to BT. At Mercury, Charles was Head of Market
Research and Market Planning helping the new company segment its market, plan for
distribution, and research customer needs in order to introduce new products. In 1987 he
moved to the City of London and joined Extel Financial in time for the Big Bang and the city
revolution. These latter two posts gave Charles an insight in to the different ways UK
companies approach the market and marketing.
Following several years with Extel he was head hunted by Société Général to rebrand its
recently acquired UK Unit Trust Asset Management arm – Touché Remnant. However the lure
of WBS proved too strong and in 1992 he left the City to start Doctoral Research on the
Marketing of English Universities.
During this time Charles founded Cambridge Marketing College with Ian Brownlee in May of
1991. The College quickly established itself for its fresh and enthusiastic approach. Over the
next five years it steadily grew as a part time activity and in 1997 expanded with a second
college in Guildford and then a third in Manchester. In 1999, Charles became Chief
Executive of the College. Since then, the College has gone from strength to strength to
become the leading Professional Marketing College in Europe with 1,400 delegates at its
study centres around the UK and from over 100 countries worldwide.
Introduction
Innovation for Marketers v
How to Use this Guide
This Guide has been written specifically to assist marketers who are involved in both studying
the nature of and implementing innovation. It includes examples and activities to help
reinforce your learning, and recommended reading and website links for additional
information. We recommend that you work through the Guide from beginning to end
undertaking the exercises and supplementary reading included.
The Guide is part of a set, all written by professional marketers and tutors, designed to
provide clear and easy to read introductions to key marketing topics. The other Guides in this
set are: Strategy for Marketers, Digital Strategy and Metrics for Marketers.
Within the Guide you will find the following icons used:
This icon defines a key learning concept.
This icon identifies additional reading resources that can be used to gather extra
information or to reinforce learning about a particular concept.
This icon identifies tasks that are useful in widening your knowledge and applying
the concepts to your own organisation.
This icon identifies real-life examples that illustrate the key issues discussed.
This icon identifies websites with further information on the key issues discussed.
This icon identifies videos available online to reinforce your learning.
Introduction
vi Innovation for Marketers
Additional Study Resources
This Guide has been designed to provide you with all the core knowledge and skills you need
to understand the key concepts that support innovation in marketing environments.
However, marketing is a constantly changing discipline and in order to be a first class
marketer you must keep up-to-date with what is going on around you. Consequently we
strongly recommend that you read widely around the subject for this (and every) topic.
CMC Tutor Blog, Scoop.it! and YouTube Channel
Tutor Blog: www.marketingcollege.com/blog
Scoop.it!: http://www.scoop.it/u/charles-nixon
YouTube Channel: www.youtube.com/channel/UC0_uEMPBTxuUr8hH1Ikl70w
Magazines and Journals
We strongly recommend that you read around the subject from the daily and weekly press
and marketing journals and widen your studies by looking at key trade magazines that serve
the industry. These include:
Ad Age www.adage.com
Cambridge Marketing Review www.marketingcollege.com/blog/cambridge-
marketing-review/
Campaign www.campaignlive.co.uk
Marketing www.marketingmagazine.co.uk
Marketing Week www.marketingweek.co.uk
Media Week www.mediaweek.co.uk
Cambridge Marketing Handbooks
The Cambridge Marketing Handbooks: Digital Marketing, Distribution for Marketers, Law for
Marketers, Marketing Communications, Marketing Philosophy, Marketing Planning, Pricing for
Marketers, Product Marketing, Research for Marketers, Services Marketing, and Stakeholder
Marketing, 2015, Cambridge Marketing Press
Introduction
Innovation for Marketers vii
Recommended Books
Nijssen E J, (2014), Entrepreneurial Marketing: An Effectual Approach, Abingdon, Routledge
Tidd J and Bessant J, (2013), Managing Innovation, 5th edition, Chichester, John Wiley
Ahmed P and Shepherd C, (2010), Innovation Management: Context, Strategies, Systems
and Processes, Harlow, FT Prentice Hall
Bjerke B, (2007), Understanding Entrepreneurship, Cheltenham, Edward Elgar Publishing
Blundel R, and Lockett N, (2011), Exploring Entrepreneurship: Practices and Perspectives,
Oxford, OUP
Hayes J, (2014), The Theory and Practice of Change Management, 4th edition, Basingstoke,
Palgrave Macmillan
Hogg C, (2014), The Handbook of Entrepreneurial Marketing: How to Align Marketing and
Promotion to New Products and Services, London, Kogan Page
Moore G, (2014), Crossing the Chasm: Marketing and Selling Disruptive Products to
Mainstream Customers, 3rd edition, New York, HarperBusiness
Ries E, (2011), The Lean Startup: How Constant Innovation Creates Radically Successful
Businesses, London, Portfolio Penguin
Sethna Z, Jones R and Harrigan P, (2013), Entrepreneurial Marketing: Global Perspectives,
Bradford, Emerald
Introduction
viii Innovation for Marketers
Useful Websites
The Chartered Institute of Marketing
www.cim.co.uk CIM website with information and access to learning
support.
www.cim.co.uk/insight/tools-
and-templates/study-resources/
Direct access to information and support materials for all
levels of CIM qualification (available to CIM Members).
www.cim.co.uk/cuttingedge Weekly roundup of marketing news (available to CIM
members), awards and forthcoming marketing events.
www.cim.co.uk/insight/marketin
g-library-resources/
EBSCO, Emerald, iLibrary and more.
Publications on line
www.ft.com Extensive research resources across all industry sectors,
with links to more specialist reports. (Charges may apply).
www.economist.com Useful links, and easily-searched archives of articles from
back issues of the magazine.
www.mad.co.uk Marketing Week magazine online.
www.brandrepublic.com Marketing magazine online.
Sources of useful information
www.esomar.org/ European Market Research Association.
www.asa.org.uk/asa/ Advertising Standards Association – useful for the Codes
of Practice.
www.marketresearch.org.uk The Market Research Society. Contains useful material on
the nature of research, choosing an agency, ethical
standards and codes of conduct for research practice.
www.statistics.gov.uk Detailed information on a variety of consumer
demographics from the Government Statistics Office.
www.data.gov.uk/publisher/ce
ntral-office-of-information
Government News.
www.quickmba.com/ Quick reference website for business models.
Wikipedia – A Note on its Use
Wikipedia is a good place to start any research on a new subject. Whilst content now goes
through some review to remove obvious errors of fact, the encyclopaedia is not definitive
and can be incorrect. Always check any information with a second source. Wikipedia is a
good source for other sources.
Innovation for Marketers
SECTION 1
ENTREPRENEURIAL MARKETING
Diploma Guide -Iinnovation for Marketers sample chapter
Introduction
Innovation for Marketers 1
Introduction
A word of caution. The world is moving at a fast pace and marketers need to think quickly.
This Guide has been written for those with a quick mind and a willingness to read widely. All
the concepts and references included are not spelled out, but are easy to find through
Google. So please read your Guide and then research the topics you do not at first
understand or about which you want to know more. Doing this is one of the first steps in
being effective at driving innovation!
In the 20th Century there was the Marketing Department. However as the discipline of
Marketing has become more widely accepted and understood, the standard techniques
have passed into mainstream Business Development activities. In the 21st Century the most
relevant department is better described as Marketing and Innovation. Because of the
external-facing function of the discipline, it is to marketers that the task of identifying new
opportunities and devising plans to exploit them, falls. And, as basic marketing practices
become more widely used by non-marketers, it falls to professional marketers to innovate in
order to stand out from the crowd.
This Guide was written following 15 years of delivering our MHT (Marketing for High
Technology) Programme for companies in and around the hugely successful Cambridge
technology cluster in the UK. Based on that experience and on the wider world of marketing,
the Guide looks at a wide spectrum of change: from disruptive innovations to creative new
ideas, from implementing major change programmes to managing evolutionary, small-scale
improvements. It looks at Innovation in terms of marketing practice and business
development; the marketing of innovative products and their organisations and marketing-
led internal change management.
Graffiti on the A14 highway leaving Cambridge (Photo: CWN, 2014)
Section 1: Entrepreneurial Marketing
2 Innovation for Marketers
Chapter 1: Marketing and Entrepreneurship
Innovation for Marketers 3
Chapter 1: Marketing and Entrepreneurship
The expected learning outcomes for this chapter are that you will understand the
relationship between marketing and entrepreneurship including being able to:
 Describe how the entrepreneurial process sits alongside core disciplines in marketing
 Describe the different ways in which business ideas can be translated into
entrepreneurial opportunities
 Assess the usefulness of both existing and new marketing approaches in a range of
entrepreneurial contexts
1.1 Integrating Marketing and Entrepreneurship
Many of us work for organisations that are well established, some for many decades or
centuries. As a result these companies have lost much of the original energy of their
founders. Instead they perpetuate the business through what is left behind of that original
entrepreneurial spirit.
For many established companies, it is the reinvigorating of the entrepreneurial zeal that is the
hardest task, as it is safer and (for staff) often easier to continue to gently evolve and please
the current customer than it is to find new ones with new offerings. (Throughout the Guide
‘offerings’ refers to consumer, B2B or not-for-profit products and services)
For others of us, we are privileged to be involved with the founding of a new business or
enterprise and we get to experience the joys and pains of corporate birth. In both situations
we are looking to gain and maintain a market lead or competitive advantage and as such
the customer is always at the heart of the successful enterprise.
There are times, however, when innovation is driven by necessity in order for organisations to
survive. In these periods (termed Creative Destruction by Schumpeter in 1942), marketing
plays a key role: not just understanding the traditional customer, but rather as the observer
and interpreter of macro trends; the identifier of opportunities and educator of consumers
and creator of markets (Schumpeter, 1942).
Creative Destruction
Creative destruction describes the continuous product and process innovation cycle
whereby outdated models and items are replaced by new ones. The process of creative
destruction is estimated to be the driving force behind productivity growth. Artificial
limitations to creative destruction can create significant negative short- and long-term
macroeconomic consequences
Section 1: Entrepreneurial Marketing
4 Innovation for Marketers
1.1.1 Creating Competitive Advantage
Organisations of all types in many contexts are faced with the challenge of gaining and
maintaining competitive advantage over their competitors. Developing that specific edge
can be critical in some cases, where it ensures survival, whereas for the majority it will provide
a way to stay ahead of the competition. In the last 10-15 years the focus on innovation as a
core competence has increased largely as the result of increased competition from
emerging economies, the ever faster cycle of new technologies, the rapid fall in the cost of
information and the increasing sophistication of the buyer.
Most analysts concur that any advantage from cutting costs and outsourcing have probably
already been exhausted and consequently in order to compete there are few options left
except to innovate a path to advantage. This has resulted in innovation moving from being
an interesting but expensive sideline to being adopted as a core competence and as a
result becoming sustainable.
A critical ingredient for creating and maintaining that advantage can often be the
presence, acceptance and effective implementation of innovative products, processes and
ideas. Being innovative in this environment means seeing things from new angles, having
broad perspectives, taking risks and being flexible. Developing the appropriate climate for
innovation in the workplace often involves not just changing the furniture but is more about
enabling employees to become idea observers, interpreters, identifiers, educators and
creators.
1.1.2 The role of marketing in driving innovation
Let’s look at each of these roles in turn:
1. Observer
2. Interpreter
3. Identifier
4. Educator
5. Creator
The role of marketing in driving innovation:
 Observer
 Interpreter
 Identifier
 Educator
 Creator
Chapter 1: Marketing and Entrepreneurship
Innovation for Marketers 5
1. Observer
Joseph Schumpeter and Nicolai Kondratieff both hypothesised the existence of Long
Business Waves (Schumpeter, op.cit.), (Kondratieff, 1979). These waves, which Schumpeter
christened Creative Destruction, occur roughly every 50 years and dramatically change the
dominant technology – wiping out an existing competitive advantage; generating new
opportunities. Schumpeter and Kondratieff demonstrated how this had occurred when
steam power was applied to factories in the early 19th Century; to farms and agriculture in
the late 19th Century and when electricity was applied to factories in the 1920s. More
recently it can be seen in computerisation and automation via microprocessors.
The impact of these waves was/is to destroy the old paradigm of business and replace it with
a new way of working. The consequence was mass unemployment of the work force as
capital adjusted to the new technologies and labour took time to retrain. This paradigm shift
can then be seen in the impact of micro-processors (PCs), the internet (www) and now in
mobility and interconnectedness (The Internet of Things) (Witchalls, 2013).
The original theories posited that long business waves occurred every 50 years, as evidenced
in 1879, 1929 and 1979. However, the latest wave of Mass Mobile computing power has
come much earlier and has caught many commentators by surprise. The change is dramatic
though still fluid. So what will be the impact of mobile devices which are always on and
personal? What will be the impact of the interconnectedness of 50 billion devices via the
internet let alone the incredible increases in processing power coming from the ‘second half
of the chess board’?( Brynjolfsson and Mcafee, 2014).
Environmental Scanning
Marketers need to constantly watch or scan the environment (to spot the next trends
(wearable technology?) and the new opportunities that accompany them; and monitor
emerging uncertainties.
Figure 1.1 The Kondratieff Wave Source:
http://blog.nationmultimedia.com/home/blog_data/5/5/images/kondratiev5.jpg
Section 1: Entrepreneurial Marketing
6 Innovation for Marketers
How do we do this?
• Reading source journals – (these are the ones that journalists use to find stories. They
are the scientific publications, e.g. Nature, Scientific America; the economic press,
e.g. F.T, Economist; the technology press, e.g. New Scientific, etc.).
• Scanning peripheral sectors – keeping a watching brief on sectors that could be a
substitute (remember Porter?) for what you do, e.g. mobile phone companies
entering the banking sector!
• Debate – be part of the new thinking; speak at conferences; become a member of
technical standards committees; but above all talk to your target audiences.
The standard and most obvious model to use here is Porter’s 5 Forces model, though this is
limited in the areas it looks at so you need to think more widely and include extended PESTER
analysis as well (Porter, 2008).
Figure 1.2 PESTER analysis of the macro external environment
Find the prime source journal(s) for your sector.
Chapter 1: Marketing and Entrepreneurship
Innovation for Marketers 7
To give you some examples of the current level of change in technology, look at
www.gartner.com. Gartner is a leading Management Consultancy and specialises in looking
at the latest technology opportunities. However they recognise that not all ideas come to
fruition – new ideas generate increasing expectations but then some fade as they fail to
take-off, leaving others to change our lives forever. Consequently they created the Hype
Cycle to separate the hype from the real drivers of a technology's commercial promise
(Gartner, 2015).
The Gartner Hype Cycles provide a graphic representation of the maturity and adoption of
technologies and applications, and how they are potentially relevant to solving real business
problems and exploiting new opportunities. It provides a view of how a technology or
application will evolve over time, providing a source of insight to manage its deployment
within the context of specific business goals.
Figure 1.3 The Gartner hype cycle
Observing is only part of the task; it is knowing what you see that is key. “Looking where all
are looking, seeing what no-one sees” is often considered to be a definition of genius – but
we need to do this if we are to be innovative.
2. Interpreter
How do we understand what we see? In The Adventure of the Blue Carbuncle Conan Doyle
describes Sherlock Holmes inspecting a battered bowler hat and then handing it to Watson
to see what he makes of it. Read the passage below and consider what is seen by Watson
but not interpreted.
Section 1: Entrepreneurial Marketing
8 Innovation for Marketers
Extract from The Adventure of the Blue Carbuncle by Sir Arthur Conan Doyle
“I beg that you will look upon it not as a battered hat but as an intellectual problem. And,
first, as to how it came here. It arrived upon Christmas morning, in company with a good
fat goose, which is, I have no doubt, roasting at this moment in front of Peterson’s fire. The
facts are these: about four o’clock on Christmas morning, Peterson, who, as you know, is a
very honest fellow, was returning from some small jollification and was making his way
homeward down Tottenham Court Road. In front of him he saw, in the gaslight, a tallish
man, walking with a slight stagger, and carrying a white goose slung over his shoulder.
As he reached the corner of Goodge Street, a row broke out between this stranger and a
little knot of roughs. One of the latter knocked off the man’s hat, on which he raised his
stick to defend himself and, swinging it over his head, smashed the shop window behind
him. Peterson had rushed forward to protect the stranger from his assailants; but the man,
shocked at having broken the window, and seeing an official-looking person in uniform
rushing towards him, dropped his goose, took to his heels, and vanished amid the labyrinth
of small streets which lie at the back of Tottenham Court Road. The roughs had also fled at
the appearance of Peterson, so that he was left in possession of the field of battle, and
also of the spoils of victory in the shape of this battered hat and a most unimpeachable
Christmas goose.”
“Which surely he restored to their owner?”
“My dear fellow, there lies the problem. It is true that ‘For Mrs. Henry Baker’ was printed
upon a small card which was tied to the bird’s left leg, and it is also true that the initials ‘H.
B.’ are legible upon the lining of this hat, but as there are some thousands of Bakers, and
some hundreds of Henry Bakers in this city of ours, it is not easy to restore lost property to
any one of them.”
“What, then, did Peterson do?”
“He brought round both hat and goose to me on Christmas morning, knowing that even
the smallest problems are of interest to me. The goose we retained until this morning, when
there were signs that, in spite of the slight frost, it would be well that it should be eaten
without unnecessary delay. Its finder has carried it off, therefore, to fulfil the ultimate
destiny of a goose, while I continue to retain the hat of the unknown gentleman who lost
his Christmas dinner.”
“Did he not advertise?”
“No.”
“Then, what clue could you have as to his identity?”
“Only as much as we can deduce.”
“From his hat?”
“Precisely.”
“But you are joking. What can you gather from this old battered felt?”
Chapter 1: Marketing and Entrepreneurship
Innovation for Marketers 9
“Here is my lens. You know my methods. What can you gather yourself as to the
individuality of the man who has worn this article?”
I took the tattered object in my hands and turned it over rather ruefully. It was a very
ordinary black hat of the usual round shape, hard and much the worse for wear. The lining
had been of red silk, but was a good deal discoloured. There was no maker’s name; but,
as Holmes had remarked, the initials “H. B.” were scrawled upon one side.
It was pierced in the brim for a hat-securer, but the elastic was missing. For the rest, it was
cracked, exceedingly dusty, and spotted in several places, although there seemed to
have been some attempt to hide the discoloured patches by smearing them with ink.
“I can see nothing,” said I, handing it back to my friend.
“On the contrary, Watson, you can see everything. You fail, however, to reason from what
you see. You are too timid in drawing your inferences.”
“Then, pray tell me what it is that you can infer from this hat?”
He picked it up and gazed at it in the peculiar introspective fashion which was
characteristic of him. “It is perhaps less suggestive than it might have been,” he remarked,
“and yet there are a few inferences which are very distinct, and a few others which
represent at least a strong balance of probability. That the man was highly intellectual is of
course obvious upon the face of it, and also that he was fairly well-to-do within the last
three years, although he has now fallen upon evil days. He had foresight, but has less now
than formerly, pointing to a moral retrogression, which, when taken with the decline of his
fortunes, seems to indicate some evil influence, probably drink, at work upon him. This may
account also for the obvious fact that his wife has ceased to love him.”
“My dear Holmes!”
“He has, however, retained some degree of self-respect,” he continued, disregarding my
remonstrance. “He is a man who leads a sedentary life, goes out little, is out of training
entirely, is middle-aged, has grizzled hair which he has had cut within the last few days,
and which he anoints with lime-cream. These are the more patent facts which are to be
deduced from his hat. Also, by the way, that it is extremely improbable that he has gas
laid on in his house.”
“You are certainly joking, Holmes.”
“Not in the least. Is it possible that even now, when I give you these results, you are unable
to see how they are attained?”
“I have no doubt that I am very stupid, but I must confess that I am unable to follow you.
For example, how did you deduce that this man was intellectual?”
For answer Holmes clapped the hat upon his head. It came right over the forehead and
settled upon the bridge of his nose. “It is a question of cubic capacity,” said he; “a man
with so large a brain must have something in it.”
“The decline of his fortunes, then?”
Section 1: Entrepreneurial Marketing
10 Innovation for Marketers
“This hat is three years old. These flat brims curled at the edge came in then. It is a hat of
the very best quality. Look at the band of ribbed silk and the excellent lining. If this man
could afford to buy so expensive a hat three years ago, and has had no hat since, then he
has assuredly gone down in the world.”
“Well, that is clear enough, certainly. But how about the foresight and the moral
retrogression?”
Sherlock Holmes laughed. “Here is the foresight,” said he putting his finger upon the little
disc and loop of the hat-securer. “They are never sold upon hats. If this man ordered one,
it is a sign of a certain amount of foresight, since he went out of his way to take this
precaution against the wind. But since we see that he has broken the elastic and has not
troubled to replace it, it is obvious that he has less foresight now than formerly, which is a
distinct proof of a weakening nature. On the other hand, he has endeavoured to conceal
some of these stains upon the felt by daubing them with ink, which is a sign that he has not
entirely lost his self-respect.”
“Your reasoning is certainly plausible.”
“The further points, that he is middle-aged, that his hair is grizzled, that it has been recently
cut, and that he uses lime-cream, are all to be gathered from a close examination of the
lower part of the lining. The lens discloses a large number of hair-ends, clean cut by the
scissors of the barber. They all appear to be adhesive, and there is a distinct odour of lime-
cream. This dust, you will observe, is not the gritty, grey dust of the street but the fluffy
brown dust of the house, showing that it has been hung up indoors most of the time, while
the marks of moisture upon the inside are proof positive that the wearer perspired very
freely, and could therefore, hardly be in the best of training.”
“But his wife – you said that she had ceased to love him.”
“This hat has not been brushed for weeks. When I see you, my dear Watson, with a week’s
accumulation of dust upon your hat, and when your wife allows you to go out in such a
state, I shall fear that you also have been unfortunate enough to lose your wife’s
affection.”
“But he might be a bachelor.”
“Nay, he was bringing home the goose as a peace-offering to his wife. Remember the
card upon the bird’s leg.”
“You have an answer to everything. But how on earth do you deduce that the gas is not
laid on in his house?”
“One tallow stain, or even two, might come by chance; but when I see no less than five, I
think that there can be little doubt that the individual must be brought into frequent
contact with burning tallow—walks upstairs at night probably with his hat in one hand and
a guttering candle in the other. Anyhow, he never got tallow-stains from a gas-jet. Are you
satisfied?”
“Well, it is very ingenious,” said I, laughing;”
Source: (Conan Doyle, 2014)
Chapter 1: Marketing and Entrepreneurship
Innovation for Marketers 11
The key point here is to spot the indicators that lead to the bigger picture. In the Marketer’s
world we are looking for indicators of change that lead to scenarios of opportunity.
The first and obvious indicator is the pattern. There is evidence all around that people react
in different ways to PESTER events and forces. But when you can see a pattern forming in
these disparate acts then you can observe, predict and react e.g. seeing people using
fitness bands or reading blogs about a desire for a healthier diet allows the marketer to make
assumptions about the future.
The second indicator is the trend. With the pattern comes identification but we need to know
if this is an opportunity we can use. So we need to observe if and when the market is
nascent. We need to spot a trend. Here we need to collect indicative data of the growing
conformance to the pattern. standard market research and monitoring techniques should
be used.
3. Identifier
So how do we see new opportunities?
Through our observations we constantly have to reassemble our notions of satisfying needs
and we have to consider what new needs are created by the changes in the environment
as a result of the waves of creative destruction.
For example, if we extrapolate the increase in computing power from 8k to 32 gigabits on a
microchip, what do we do with this massive increase in processing power? What is more the
power is now portable; what can we do with it on the move to make life easier? Further still, if
we can embed it in clothing or a human body, what can we control with it? These are just
one set of questions from a couple of trends.
If we add to this the observable trend of an aging population, how can we combine the
two? And, finally, if we know we can sequence the DNA of any one person, what can we do
with the data?
Often the answers or new ideas seem to come from science fiction but in reality they are just
the application of desires for a better, broader life of experiences made possible by
imagination.
Discovery and creation theory
There are two contrasting (although some would argue complementary) theories of
entrepreneurship: Discovery Theory and Creation Theory. Whilst both assume that the aim of
entrepreneurs is to identify and exploit opportunities; they differ in their view about the origin
of opportunities and about the nature of entrepreneurs.
Discovery theory assumes that opportunities arise independently of any action taken by
entrepreneurs and are waiting to be discovered. Opportunities in a sector or market are
caused by exogenous shocks and are observable by anyone and therefore, in principle,
exploitable by anyone associated with that sector or market. The reason why some people
manage to successfully exploit a new opportunity and others do not is attributed to
differences between entrepreneurs and non-entrepreneurs, e.g. they may be more alert or
less risk averse.
Section 1: Entrepreneurial Marketing
12 Innovation for Marketers
Creation theory takes a different view. Opportunities are not created by exogenous shocks
but are created endogenously by the actions of entrepreneurs as they explore and develop
new offerings. They do not search; they act in order to create new market demand – and
observe how the market or customers react in turn. We will look at the role of Creator in more
detail later in this Section.
Discovery and Creation Theory
To find out more read Alavrez S A and Barney J B, (2007), Discovery and Creation:
Alternative Theories of Entrepreneurial Action, Organizações em contexto, Ano 3, 6,
December
One model to consider when trying to discover new opportunities comes from Murphy
(Murphy, 2011). Murphy recognised that theories about discovery are important to
entrepreneurism but that too many of them were based on the assumption that
opportunities were found by deliberate search or serendipitous discovery. He believed that
this oversimplified the nature of opportunities and developed a multi-dimensional model of
entrepreneurial discovery shown in Figure 1.4 below.
Figure 1.4 Murphy’s model of entrepreneurial discovery
Chapter 1: Marketing and Entrepreneurship
Innovation for Marketers 13
The model identifies 4 quadrants:
 Eureka (high serendipity/high deliberation)
 Deliberate Search (low serendipity/high deliberation)
 Legacy (low serendipity/low deliberation)
 Serendipitous Discovery (high serendipity/low deliberation)
and throws more light on the range of approaches taken to discovering opportunities.
Murphy’s full article is available online:
http://condor.depaul.edu/profpjm/pmurphy_files/Murphy%202x2%20(2011).pdf or use
google.
Having observed a pattern you then need to consider how to predict its trend. In this respect
Creation Theory is best summed up in that ‘no-one ever asked for a mobile phone’. You have
to create the market for it by educating people as to what is possible. Leaping from a basic
raw technical possibility to mass market service is unlikely unless the market can see the new
offering as analogous to a previous technology/offering. For example, the introduction of
the VCR cassette recorder for the home took nearly 30 years to reach 99% household
penetration. The DVD player took 10 -15 years to achieve the same penetration because it
was replacing an understood offering.
Mobile Communications
Originally mobile communication was developed for the military as mobile radio for
Command and Control. With the end of war and translation of the same technology into
civilian use it was applied to Emergency Services. However, it required a network and
considerable power to operate, so it stayed as a niche service for those sectors that saw
sufficient benefit to accept the cost of setting up a network and providing large expensive
battery packs.
As the value in speed of information became a pattern in other markets during the
nineteen seventies and eighties, especially in Financial Services and Sales Processing, the
technology was extended to small niche markets so networks could be set up in discrete
areas, such as the City of London, then the M25 belt or major arterial roads. However,
one-way mobile communications remained the norm for several years (known as
telepoint)!
However, with this nascent stage came the ability to gain economies of scale in
production and move down the learning curve. Thus more power, and smaller handsets
meant new general business users and with this came ubiquitous networks and then mass
social users.
At each of these stages in the evolution, different companies led the way or dominated.
Philips and Motorola in the early years, then when the Telepoint market arose it was
Hutchison with Rabbit; then Nokia rose with longer lasting battery life in their phones to
dominate the market, but then lost the trend by not seeing a new pattern of activity and
Apple took the lead with the iPhone.
Section 1: Entrepreneurial Marketing
14 Innovation for Marketers
Figure 1.5 below illustrates the shortening of the adoption curve for new technology in recent
years. Contrast the adoption of the telephone after 5 or 6 years (it had hardly got off the
ground) with the adoption of the cell phone (at over 25%).
Figure 1.5 Adoption of technology
4. Educator
Ask many entrepreneurs or high-tech start-ups what their customers want and they will tell
you that their customers don’t know: Because they do not understand the technology, they
are not scientists and do not understand what is possible.
Henry Ford’s response when asked what his customers would like if he asked them was “a
faster horse”.
This is where the ‘anticipating’ part of the definition of marketing comes in. It is through
experimentation and education of the customer that markets evolve or revolutionise. Those
on the inside of a company know what their technology is capable of delivering. They are in
advance of the market. The job of marketing here is to create the market, through
education and nurturing of understanding. This takes time and resources and it is often better
to be a close second to the first mover who spends most on market creation.
This is the difference between being market driven and market-driving. These approaches
come to market development from very different angles and the main characteristics of
each can be seen in Table 1.1.
Chapter 1: Marketing and Entrepreneurship
Innovation for Marketers 15
Market-driving Market-driven
Disruptive Reactive
Innovative Incremental
Creative Insignificant
Value Features
Agile Rigid
Competitive Tentative
Decisive Unsure
Clear Confused
Dynamic Static
Table 1.1 Characteristics of market driven vs. market driving
One of the most successful, recent books on Strategy has been Blue Ocean Strategy: How To
Create Uncontested Market Space And Make The Competition Irrelevant by W. Chan Kim
and Renee Mauborgne (Chan Kim & Mauborgne, 2005). The authors postulate that instead
of trying to find way to compete in crowded known markets (Red Ocean), we should look for
completely new markets that are apart from the crowd (Blue Ocean).
Section 1: Entrepreneurial Marketing
16 Innovation for Marketers
Blue Ocean vs. Red Ocean Strategic Thinking
Blue Ocean Strategy, suggested by W. Chan Kim and Renee Mauborgne, is a theory that
challenges traditional strategic thinking (Chan Kim & Mauborgne, 2005). It proposes that an
organisation will find the greatest success in markets where there is no competition, and
advocates that the greatest efforts should be spent in identifying such opportunities. Not
only is this theory new in its approach, the authors have been widely regarded as
disagreeing completely with conventional thinking such as Porter’s generic strategies.
The blue ocean is the metaphor for open space, tranquil and bountiful whereas the red
ocean is inhabited by competitive sharks which have bloodied the waters with repeated
attacks on rivals. It is colourful stuff, but there is substance beneath.
Firstly, the theory avoids any no-brainer tag by making it very clear that this is not about
diversification, i.e. new products or markets. Instead, organisations can retain their basic
core competences but reinvent the process of bringing themselves to market by looking at
the marginal gains that can be achieved by doing everything better, or differently, instead
of in a blind response to competition, in the heat of battle.
There are also consequences for how you do the external audit, since you may need to
gather information about markets that you had not previously considered. So in this way the
audit is at least partially driven by the anticipation of possible strategies (which you would
not have done last year!). This is an important example of how planning does not go in a
straight line. Just as audit information immediately feeds into strategic decisions, so the
anticipation of strategic options feeds into what is done in the audit.
In addition, the authors propose a model called the Four Actions Framework which breaks
the trade-off between differentiation and low cost. In doing so, the framework poses four
key questions:
 Raise – what factors should be raised well above the industry's standard?
 Eliminate – which factors that the industry has long competed on should be
eliminated?
 Reduce – which factors should be reduced well below the industry's standard?
 Create – which factors should be created that the industry has never offered?
You can find out more about Blue and Red Ocean thinking at:
http://www.blueoceanstrategy.com/
where you will also find a link to a webinar hosted by the Harvard Business Review
in which Rennée Mauborgne discusses Blue Ocean strategy and leadership.
Chapter 1: Marketing and Entrepreneurship
Innovation for Marketers 17
Observation and identification will get you into a rising market but it does not get you that
First Mover Advantage. There is much debate over the merits of being first to market but in
order to ‘own’ or lead a new market you have to be in very early on (if not to have created
it). To do this, you have to experiment and you have to be able to cope with uncertainties
and with failures.
Experimenting is a learning process otherwise known as ‘trial and error’; and many great
companies have stumbled on their way to the top: Apple with the Lisa computer and the
Newton Digital Assistant or Sony with its mini disk and DAT tape technology. Each time,
however, lessons are learnt by the company and the market is educated about what is
feasible. The downside, of course, is the impact on reputation and brand image.
Many companies do not see the opportunities of a new pattern until a product is launched
and the market created. Many great entrepreneurs who are market creators are
characterised by robustness, not to say ‘bloody-mindedness’ in their determination to drive
through new ideas to create new markets.
In discussing the early dilemmas of the SMART car I was concerned at the concept and its
positioning in the market. The concept was for a cheap, eco-friendly car for young, trendy
consumers. Yet it was being made by Mercedes (an expensive, old, industrial car brand) with
customer interchangeable side panels (environmentally wasteful) and boot space for “the
week’s shopping and a case of Perrier”. The founder, Nicolas Hayek, was convinced that the
market would understand the concept only once it had seen it and understood the
possibilities. The SMART Car has created a niche after 16 years but it still does not dominate
it.
This ‘build it and they will come’ approach was also tried spectacularly by The Sinclair
company when expanding beyond its successful home computer and calculator market.
The launch of the ‘revolutionary’ C5 car was carried out by a team convinced they had
found a need for a new emission-free car.
Figure 1.6 The Sinclair C5
It was a disaster.
Section 1: Entrepreneurial Marketing
18 Innovation for Marketers
For most innovative companies the approach is to build slowly at first and then more quickly
as the market responds. Often this is underpinned by seeding the primary source market of
users. By this we mean giving young staff, students or children access to the offering as they
are more likely to engage quickly, and then build relations with these users as they move into
the workplace and take up positions of influence.
5. Creator
On what basis do you set out to create a market? How do you manage the internal risks,
when you could be “betting the company on it ».?
For many, ‘gut’ instinct is what they go on. Jobs and Hayek did, but this is only possible if you
(co) own the company and can empathise with the customer. It is the latter aspect that is
critical in doing this successfully. Can you consume your own offering and be your own
customer? If so, then you have a good understanding of the market. However, if you are not
in the main target grouping you will need market research. After 10 years the creators of MTV
stopped making judgement calls on the business and started using market research when
they realised then were no longer in the target market.
In a traditional approach to creating a new market a separate division may be formed to
pioneer the creation and development, untrammelled by the structures and cultures of the
parent company. Such a strategy is famous in the development of the Personal Computer
(PC) by IBM. Here, the parent company was the leading mainframe supplier and saw
desktop computers as a threat to its dominance. Yet others within the firm saw the rise of
Apple, Atari and Commodore as a new dawn in productivity and recognised Moore’s Law
was not on IBM’s side. So they set up a ‘Skunk Works’ (originated by Lockheed Martin for
secret aircraft research), which was a secret team and development area to create a
working prototype. Once the product concept was proven, the company saw the
opportunity and launched the IBM PC. However, if this project had been proposed in parallel
with other computing ventures, IBM would not have allowed the development in the first
place and the world would be a different place.
For other organisations, the method is to externalise the development – either to a separate
company or offshore location in order to hide the activity until it is proven. A similar approach
can be taken with time. Here, companies (such as Xerox and Google) allow staff a certain
amount of time each week /month to devote to developing their own ideas and prototypes,
which they then present to the company for mainstream adoption. One very successful
result from one electronics company called Racal was Vodafone!
These are somewhat deliberate approaches to allowing new ideas to take shape. However,
in many companies, formal planning processes are weak and strategy – and hence
development – is ‘emergent’, evolving in response to what is happening in the market. This
emergent approach has its strengths in allowing constant evolution in response to change,
but may not allow the whole company to focus on the task, as would be the case with a
formal plan.
Chapter 1: Marketing and Entrepreneurship
Innovation for Marketers 19
Further Reading
1 D’Aveni R A, (1995), Coping with hypercompetition: Utilizing the New 7S Framework,
Academy of Management Executive, Vol 9(3), pp45-57. Available in EBSCO.
2 Charitou C D and Makrides C C, (2003), Responses to Disruptive Strategic Innovation,
MIT Sloan Management Review, Winter, pp.55-63. Available in EBSCO.
1.2 Converting Ideas into Opportunities
There are a number of different ways in which business ideas can be converted
into entrepreneurial opportunities:
 Intuitive, ‘gut feel’, insights
 Traditional business plans
 Developing business models
 Internal and external approaches
1.2.1 Intuitive vs. traditional approaches
With the considerable changes in the business environment over the last decade, there is
debate about the best way to exploit a given idea and convert it into a profitable
opportunity. Many of the standard practices of the past – local manufacturing, physical
distribution, off-line advertising - no longer easily apply. In addition traditional research and
planning processes may be too slow or, given the newness of the opportunity, there may not
be the data to populate the models. We need to add to this the rising role of crowdfunding
and peer-to-peer lending which reduces the requirement for traditional bank funding and
the detailed, formal business plans they required.
As countries now compete actively to generate businesses in order to grow their economies
it becomes easier for entrepreneurs to start up as evidenced by the “Ease of Doing Business”
surveys by The World Bank and The Economist that rate and rank the ease with which it is
possible to create a business indifferent countries. Companies are now able to exploit ‘gut –
feel’ or intuitive market insights without recourse to traditional funding and the constraints
that went with it. We will look at the merits of this approach in more detail in Section 1.3.1.
Section 1: Entrepreneurial Marketing
20 Innovation for Marketers
1.2.2 Developing innovative business models: the blank canvas approach
Several commentators over the last five years have developed new approaches to creating
innovative business models. Taking the ‘blank sheet’ approach they have created what they
are calling ‘canvases’ to guide entrepreneurs in developing new business market models.
The aim is to set the entrepreneurial spirit free and not to constrain it with linear planning
models. This resonates with several of the most successful US social media and internet
companies where instead of the usual business planning meetings that would occur in the
UK, they have multi-disciplinary ‘Growth Meetings’ to thrash out the next stage of
development.
Developing different business models requires insight and confidence. Resources are no
longer the main constraint. Access to resources can now be gained via the internet. The task
is knowing what resources are required and how to manage them.
Osterwalder and Pigneur see nine key building blocks for a successful model (Osterwalder
and Pigneur, 2010):
1. Customer insight
2. Value proposition
3. Channels
4. Customer relationships
5. Revenue streams
6. Key resources
7. Key activities
8. Key partnerships
9. Cost structures
Peter Fisk on the other hand sees the model developing from thinking differently (Fisk, 2014):
 Power of imagination
 Audacious – ideas with attitude
 Foresight – seeing the future and working back
 Ambition – what is your purpose
 Rethink – seeing things differently
 Questioning – redefining the problem
 Creativity and connection
He also addresses the downside of what to do with too many ideas and the need to focus.
Both of these approaches facilitate the ability to see opportunities and build a variety of
business models.
Chapter 1: Marketing and Entrepreneurship
Innovation for Marketers 21
Business Model Generation: A Handbook for Visionaries, Game Changers, and
Challengers by Osterwalder and Pigneur, John Wiley & Sons, 2010.
Gamechangers: Creating Innovative Strategies for Business and Brand by Peter Fisk, John
Wiley & Sons, 2014.
Innovative Business Models
The Free or Freemium model
Whilst this concept was somewhat revolutionary when introduced, it is now widely accepted
that many services can be provided seemingly free. Business models have now developed
where the income stream is delivered through advertising or through the ‘bait and hook’
approach, where initial services are offered free and additional or enhanced services are
offered at a price. Examples here are obviously many of the Apps that are freely available
but require in-App purchases to gain the best of the software. Or the ‘Paywall’ model for
newspapers where headline information is available free, but in depth analysis is available at
a price. Examples here are Skype, Google and Newspapers such as The Times and Financial
Times.
The Long Tail model
This concept was developed when organisations began to consider the idea of deselecting
products in the book or music industry that were no longer mainstream. In the old physical
world these products took up a considerable amount of storage and stock which was costly.
In the new business model of the dematerialised product there is no cost in holding this
particular type of ‘long tail’ or limited appeal product. Examples here are the bookselling
sector which can still sell titles long after they are no longer bestsellers, by utilising either
ebook downloads or print on demand. It also applies in a variation to Lego which allows
users to generate their own kits from the brick styles available on the web.
The Unbundled Business
This is an intriguing concept whereby the operations of a company which may have been
seen as integrated if we use the old Value Chain model, can now be unbundled and
distributed to other companies, suppliers or indeed customers, and the company now
concentrates on the aspect where it can gain the greatest return. Examples here are Telcos
where they have outsourced the infrastructure to others and in-sourced new innovative
content services .
The Open Business model
This is the concept of externalisation of almost any aspect of the company. It is possible to
source new ideas from customers, to develop products with suppliers, to outsource delivery
to distributors and indeed even to create products with competitors. Examples here are
Proctor and Gamble crowdsourcing new products and the GSK Patent Pool, which allows
others to exploit the patent for third world drugs.
Section 1: Entrepreneurial Marketing
22 Innovation for Marketers
Unconstrained by the internality of old business approaches where everything had to be
internalised or under the company’s direct control, the 21st Century business externalises all
but the idea.
1.3 New and Traditional Marketing Approaches
There is a range of mainstream and new marketing approaches which are
appropriate in different entrepreneurial contexts:
 Deliberate vs. emergent approaches
 Exploiting gaps in dynamic markets
 Market tests vs. market research
 Market sizing and potential in incipient and latent markets
 Competing and collaborating
 Market entry via niches and highly segmented markets
 Exploitation of market adjacencies
 Short-term ploys (see Chapter 2), cannibalisation and hypercompetitive markets
 Innovative use of social media and ICT
 Modifying the marketing mix in entrepreneurial contexts (see Chapter 2)
There are many different ways in which business ideas are converted into entrepreneurial
opportunities. We have already touched on some of these – now let’s consider some
additional alternatives.
1.3.1 Deliberate versus emergent strategies
The standard theory of marketing would demand that we create a plan for what we are
about to execute. For all the reasons that we know and believe, the creation of a marketing
plan is the best way to focus an enterprise’s attention and resources on the opportunities
ahead.
Strengths of planning:
 Focuses the effort of staff
 Gains agreement and commitment
 Provides clear leadership
 Allows balanced assessment of risks and rewards
 Sets out roadmap for the enterprise to follow
Chapter 1: Marketing and Entrepreneurship
Innovation for Marketers 23
When creating a marketing plan the first stage is to carry out an audit, then to assess the
strengths and weaknesses of the organisation versus the opportunities and threats. However,
this presupposes that we have not yet identified an opportunity and therefore need to take
a balanced approach to those opportunities that may exist in the environment. Using
techniques such as gap analysis and Ansoff’s famous matrix presupposes that the
opportunity in the marketplace is developmental from the current starting position. However,
for entrepreneurs the situation is usually reversed in that the opportunity has been spotted
and then the plan needs be constructed. For the entrepreneur there may be no original
starting position in terms of an existing company and therefore many of the standard
business planning models do not readily apply.
Finding and exploiting gaps in existing marketplaces is not that easy when those markets are
highly dynamic. Organisations that currently believe that they can gain significant market
share growth by being two times better than they are at the moment are outpaced now by
organisations that believe that they can be 10 times better than the incumbents in the
market (Fisk, op.cit.). Secondly, the analysis that goes into the audit takes time and carrying
out the research for such an audit process may well show the hand of the company to its
competitors.
The 21st-century world circumstances change quickly and as a result strategies and plans
need to be constantly updated. However the process of planning, which was created at
least 50 years ago, is not quick enough to respond to the changing environment.
Consequently entrepreneurs develop a more emergent strategy which reflects the pace of
the environment.
Strengths of Emergent Strategies:
 Quick to respond
 Easily adaptable
 Easily shareable with modern social media
However this approach has its drawbacks.
Strengths Weakness
Gut feel Passion
Drive
Motivation
Speed
Limited explanation
Exists only in head of leader
Hard to disseminate
Business planning Dissemination
Co-ordination
Communication
Easy to compare for external
Time-consuming
Slower to respond
Dispassionate
Section 1: Entrepreneurial Marketing
24 Innovation for Marketers
funding
Table 1.2 ‘Gut feel’ vs. business planning
Constantly changing plans need to be constantly communicated. It may also be that, as
strategies change, not all of the consequences of the changing strategy are considered and
this can lead to waste of time, effort and resource, together with conflict.
The slower pace of a deliberate planning process does allow involvement of multiple groups
of people and fuller consideration of the consequences of any change. Emergent strategies
on the other hand whilst they can incorporate robust scenario planning tend to be applied
within organisations that are dynamic and changing on a frequent basis, and as such they
need to maintain rapid movement and to anticipate competitor moves without necessarily
looking at the consequences in terms of resources.
Emergent strategies can lead corporations up cul-de-sacs and leave them with requirements
to reverse out of the latest fancy technology or social media that seemed appropriate at the
time, but can soon be seen as the wrong move. In which case the organisation has wasted
its time and resources, and being small, these losses can be significant.
The dynamism of the marketplace is both an opportunity for entrepreneurs as well as a
threat. Spotting opportunities requires rapid reaction if they are to gain an advantage before
others move in. However there is the likelihood that the opportunities will cease as rapidly as
they began.
As we have already touched on, there are new business models arising which shun the
standard approach to profit maximisation. Firstly the model for many App based operations
is to gain as many users as possible through free pricing in order to sell advertising thereafter.
For others it is the opportunity to sell ‘in-App’ purchases that is the model. In essence size (of
the user base) matters.
A variant of this approach is to pay people to use the service! The model is again to gain as
big a user base as possible, though the attraction for the user is to earn money or discount.
Quidco and Groupon are classic examples here but also check out Qustodian which pays
users to review adverts and Apps (Roberts, 2012).
Qustodian
Read John Roberts, co-founder and MD UK of Qustodian, Qustodian Case Study in The
Cambridge Marketing Review, Issue 4, Autumn 2012.
You can find more on new business models in Section 3.1.7.
Chapter 1: Marketing and Entrepreneurship
Innovation for Marketers 25
1.2.2 Is the opportunity worth it?
This brings us to the thorny issue of market sizing. How do you estimate the scale of the
opportunity when the product has not yet been created? How can you assess the likelihood
of potential customers purchasing a product that is not yet a reality? This is a very real
problem faced by people such as Steve Jobs at Apple and Hayek at Smart. There are three
main responses:
 concept testing
 involvement of potential customers in the product development process
 creation of working prototypes that can be demonstrated.
In the standard new product development (NPD) process we would find that the
involvement of customers at an early stage is now considered essential. The problem with this
approach in highly dynamic markets is that the consumer may not even understand the
concept at this stage. If the concept being discussed is not analogous to an existing method
or means of solving a problem then the consumer will have difficulty relating to the benefit
that is offered.
Consider the standard concept of a mobile phone earlier this century. A mobile phone was
used to make phone calls and had very little other functionality other than perhaps texting.
Consider therefore the concept testing of a single device that would allow you to surf the
internet, to take photographs, to play music, etc. The consumer would have a great deal of
difficulty in valuing such a proposition (except as discrete devices), or indeed being
convinced that such technology was possible. This is where the entrepreneur’s problem really
lies.
If the opportunity is significant and ground breaking how do you explain this to people who
do not understand the problem that would be solved or understand the technology that
could supply the solution?
The obvious answer here is to educate a group of customers to be in the forefront of, not
only market understanding, but the technological solution. These customers will then
become your advocates and your mavens who will tell the world about your offering. They
will then hopefully take you over the tipping point from fed to main stream. See Malcolm
Gladwell's book The Tipping Point: How Little Things Can Make a Big Difference for more on
this approach (Gladwell, 2002).
In other markets, where technology is not so costly, the prospect of doing market research
may well be super-ceded by actually producing the product itself to see customers’
reaction. One of the common considerations when doing market research is the cost versus
gain conundrum. Market research can be costly and especially so when it is defining in
words and pictures concepts which are better seen in reality. Consequently it can be
possible to produce the product (or Beta version) and get customer reaction to the real
offering at a lower cost than it would be to carry out market research on a theory in a
statistically significant way.
However there is also the issue of ‘showing your hand’ to the competition. By carrying out
market research or attempting to educate the marketplace in an open way (perhaps by
using social media), you are exposing your concept to your competitors and may therefore
be giving them an insight into your strategy.
Section 1: Entrepreneurial Marketing
26 Innovation for Marketers
Market Test vs. Research
In some circumstances it can be more effective (and cost effective) to produce trial batches
of a new product to test the market rather than carry out market research. Here the cost vs
benefit equation of market research is very important. It may be far more expensive to
produce the trial batches than undertake some market research, but the result from a ‘real’
market reaction to the product versus a simulated response in a questionnaire may provide
far more insight into the consumers’ engagement with the product. Market testing as
opposed to questions about a hypothetical new offering is likely to be far more effective with
a brand new idea or technology with which consumers are currently unfamiliar.
1.2.3 Collaborate or compete
The introduction into the discussion of competitors raises very real issues today. Do we
collaborate or compete? Indeed we now have the term ‘co-opetition’ where we do both.
For entrepreneurial companies the problem can often be that they see opportunities which
they are unable to fulfil. Their resources, manpower and funding may be insufficient or they
may be unable to access the full potential of the marketplace with their own resources in a
short timescale before their main competitors. This then leads to the idea of collaborating
with others who are in adjacent markets or who may offer a simple access route to the new
market.
1.2.4 We all have a book in us
For many, the idea of writing a book is a long cherished dream. For some, the prospect of
setting up a publishing company and revolutionising what is a traditional marketplace has
been a very attractive opportunity. However, the writing and publishing of a book is only part
of the job, and for many has proved to be the greatest joy then followed by the biggest
problem. How do you get the book to market? How do you make it discoverable so that
readers can buy it?
Few new publishing houses have been established in the last five years despite the massive
growth in the software to self-publish and the social media to distribute them. The solution for
successful organisations wishing to exploit self-publishing is to find a collaborator in distribution
and publicity. The creation of platforms such as Amazon's self-publishing programme has
been massively instrumental in revolutionising the sector. The point to note is that the
technology alone is not enough to change the market.
The obvious benefits of collaboration are that the entrepreneurial company gets assets that
it lacks and the collaborator gets products to fill its channel to market, and therefore makes
better capacity utilisation of its resources. Today the concept of ‘not created here’ is not
really applicable anymore. Companies do not have to do it all themselves and increasingly
the quickest way to exploit ways to new markets is to find partners.
Chapter 1: Marketing and Entrepreneurship
Innovation for Marketers 27
1.2.5 So how do we get to market?
For entrepreneurs the challenge is cost and speed. Having seen an opportunity, the
challenge is to secure as much of it as quickly as possible with limited resources before the
competition. The balance is in not creating a market opportunity that is too big and thereby
open to competition.
Figure 1.7 The technology life cycle
As we have already touched on there is something to be said for first mover advantage.
However, in most examples the first mover is not the most successful company in the long
term. It is the company that is able to exploit the full marketing mix including distribution and
marketing communications that is the winner in the longer term. First movers often create a
market and expose the new opportunity to others, but are unable to satisfy all customer
requirements, nor are they able to expand and offer new product variations to a hungry
market. In today’s environment they seek the exit strategy of being acquired by the ‘big
boys’.
The obvious solution is the creation of a niche market which is highly defensible and which
the entrepreneurial company can make its own. A key way to do this is to gain considerable
levels of loyalty from the customers in the niche and thereby defend itself against the appeal
of larger corporations who have limited track record in this area. The best method of doing
so is obviously through detailed segmentation and the gaining of a very clear understanding
of the users’ requirements and preferences in the sector. In addition the use of crowdfunding
ties customers in to being defensive of the sector against competitors.
For many organisations with an existing product range, movement into new areas is often
best achieved through what is termed market adjacencies. This is the move you would see in
an Ansoff matrix into new markets and potentially into diversified fields (Ansoff, 1957).
Section 1: Entrepreneurial Marketing
28 Innovation for Marketers
Figure 1.8 Ansoff’s matrix
Ansoff proposed 4 strategies:
 Firstly, market penetration i.e. the improved use of the existing marketing mix to gain
sales. This often forms the main element of a short term strategy, addressing those
obvious areas where the company is not following good marketing practice or
causing the organisation to be deliberately more savvy in winning incremental
business.
 Thereafter there are the options of product development and market development.
Here the risks of the unknown need to be considered plus the considerable cost of
product or market development. These strategies tend to address gaps in the
product range and in overseas or alternative markets.
 Finally there is the diversification option. This is the most risky and costly option.
However, bear in mind that the most substantial part of Ansoff's book was about
diversification and the gradual means by which it can be achieved, it was not about
the other three boxes and in this we have some very powerful tools.
Chapter 1: Marketing and Entrepreneurship
Innovation for Marketers 29
General Motors
As an example to illustrate the Ansoff matrix strategies:
1. Market penetration – GM produces and sells cars in the USA
2. Market development – GM sells and then produces and sells cars in Europe
3. Product development – GM provides finance to purchase new cars
4. Diversification – GM develops a manufacturing control system and its own telecoms
network. It now manufactures and sells around the world.
The essential aspect to consider in using Ansoff’s model for strategy making is the degree of
risk inherent in each strategy and the associated costs. You need to understand that the
degree of risk rises exponentially from market penetration to diversification. You need to be
clear where the risks lie in your proposed strategy.
You should also consider the expanded matrix (see Figure 1.9 below) that includes an
intermediate step between both existing and new markets and existing and new products,
which provides a slightly lower risk option in each case and may enable the company to
grow at a more manageable pace rather than immediately taking larger, riskier steps into
new product or new market development.
Figure 1.9 Expanded Ansoff’s matrix
Section 1: Entrepreneurial Marketing
30 Innovation for Marketers
In the expanded matrix the first expansions are to find new customers in existing markets or
similar (new) markets for existing products. The next expansion is to invest in similar
technologies that can be used to develop extended products enabling the company to
move into similar (new) markets that are adjacent to the ones already being served. Within
this stage one of the options is for the company to become its own customer using its
products or components in other products e.g. from cars to tractors – the tractor division
consuming components or similar engines from the car division. The final expansions are to
move into new products (first for existing markets) and then for new markets.
Figure 1.10 An interesting idea! (Photo: CWN 2012)
Establishing a presence in adjacent markets can have a negative impact on traditional
product sales. This cannibalisation effect eats into the profitability of the traditional product
and can cause it to become loss making, so careful management of the introduction of new
adjacent products is needed to balance the decline of the PLC of the established product
as the new one rises.
A contemporary example is the balancing of fall and rise of the iPod and iPhone. As the
once hyper-popular MP3 player market is replaced by the same functionality on a
Smartphone then the sales of the former decline. The same was true of the decline of the
VHS cassette machine on one side with the rise of the DVD player on the other.
1.2.6 Hyper-competitive markets
A hyper-competitive market can occur at several stages in the technology lifecycle (when
company shake outs happen) but are particularly prevalent at the take-off stage (see Figure
1.7), when the number of firms entering the market is greatest. As the technology or product
concept is seen to work in the market and early adoption starts, companies pile into the
market place, each with a slightly different offering and all trying to gain dominance. At this
time ‘First Mover’ advantage is often lost as more marketing savvy companies steal a lead
over technology/product orientated companies. This is a wild time when there are few (if
any) standards by which the consumer can judge competing offers.
In addition, there is usually limited inter-operability between competing offerings so
consumers become embedded with one product. Classic examples have been VHS vs,
Betamax; the QWERTY keyboard; and audio cassettes vs. mini disks vs. DAT tapes. In nearly all
instances the best technology lost!
We will return to ‘First Movers’ in Section 3.1.8.
Chapter 1: Marketing and Entrepreneurship
Innovation for Marketers 31
1.2.7 New digital approaches
Finally in this section we need to consider the use of new digital approaches. The use of the
internet allows entrepreneurs to ‘punch above their weight’ and gain exposure and
interconnection with markets that would previously only have been possible for large
companies.
The following is a checklist of areas to consider:
 New Product Development (NPD):
o Collaborative ideas generator
o Crowd sourcing via social media
o Fundraising via peer-to-peer lending/crowdfunding
o Researching of technologies and consumer behaviour with academia
o Researchgate
 Product development via internet collaboration e.g. outsourcing of coding,
etc.
 Launching – Raising awareness via targeted social media and journalist
networks
 Distribution
 Third party sales sites e.g. Amazon, eBay, Etsy, etc.
o App building
o Social media business sites, e.g. Facebook for business, company
pages on Google + and LinkedIn
Section 1: Entrepreneurial Marketing
32 Innovation for Marketers
INNOVATION FOR MARKETERS
INDEX
Diploma Guide -Iinnovation for Marketers sample chapter
Index
Innovation for Marketers 233
4Ps of entrepreneurship ..............................34
—A—
Adoption of technology .........................7, 14
Aikido strategy.........................................38-39
Ansoff's matrix ................................... 22, 28-29
—B—
Belbin's team roles...................................64-65
Born-global organisations.................193, 203
Boundary spanner..............................105, 108
Business models ...................20, 21, 25, 50-51,
83, 87, 148, 152
—C—
Change agent............................................211
Change programme................... 1, 163, 201,
222-223, 227-229, 238
Change team.....................68, 222, 228, 230,
232, 236
Co-creation................. 86, 115, 122, 141-144,
191, 196
Collaboration................................. 27, 92, 121
Collaborative structures............................120
Competencies............42, 48, 53, 65, 85, 102,
136, 188, 189, 208, 215, 217
Compliance ............... 224, 228, 237, 239-240
Conflict...................................................69, 133
Co-ordination......................22, 161, 179, 180,
187, 188
Corporate strategy .... 46, 104, 171-173, 189
Cost model....................................................90
Creative climates.......................................106
Creation theory .......................................11-13
Creativity......................... 73-75, 109, 110, 113
Cross-functional teams .....................129, 131
Crowdsourcing ...42, 115, 121, 140, 142, 146
Cultural web........................................229, 237
Customer orientation.........108, 175-178, 182
—D—
Design............................................ 33, 122, 222
Diffusion..............................73, 95-97, 136, 137
Discovery theory...........................................11
Diversity ....................69-70, 110, 113, 193-195
—E—
Ecosystems ...........................................117-118
Emergent strategy ..................................22-24
Employees ..................168, 181, 183, 191, 212
Empowerment............................................ 171
Entrepreneurial teams......................33, 62-63
Entrepreneurship ................................3, 11, 34
Evaluation....................44, 110, 113, 115, 157,
188, 219, 223
Experimentation ......................... 14, 72, 74-75
—F—
Fast follower .............................................92-94
First mover.................................... 17, 30, 92-94
Five factor theory....................................... 232
Forecasting......................47, 52, 59, 61-62, 92
—G—
Gen Y/digital natives................................. 191
Globalisation.............................. 117, 201-203
Group development ..............................68-69
Guerrilla marketing ................................33, 36
—H—
Herzberg's two-factor theory ................... 169
Human Resource Management (HRM)........
182-183
Hype cycle ..............................................7, 205
Hyper-competitive markets ....................... 30
—I—
Ideagoras ............................................121, 146
Innovation:
Advertising............................................... 156
Closed........................................................ 81
Disruptive................................................... 76
Incremental .........................................83-84
Networks................. 115, 117, 140, 147-148
Open.......................................................... 82
Paradigm .................................................. 80
Platform ...............................................73, 79
Index
234 Innovation for Marketers
Position.......................................................80
Pricing ......................................................152
Process....................................... 79, 153-154
Product ..............................................79, 154
Radical..................................................84-85
Social media...........................................158
Supply chain ...................................147, 155
Sustaining ............................................75, 77
Internal communication .......................38, 70
Internal marketing.............161-164, 181, 187,
190, 198
Internal marketing plan.................... 187-189
Invention ............................................ 73-75, 79
—J—
Judo strategy ................................................36
—K—
Knowledge management......... 40, 135-137,
161, 173
Kondratieff wave............................................ 5
Kotter's 8 step framework ................. 230-231
—L—
Leadership .....................62, 98, 113, 131, 181,
185, 222-224, 226
Learning theory...........................222, 231-232
—M—
Macro external environment...............6, 202
Market orientation ....................... 98, 107-108
Market pull................................................85-86
Marketing mix................ 27, 28-33, 36, 38, 47,
49, 58, 162, 187, 190, 193
Maslow's hierarchy of needs............ 166-167
McClelland's motivation needs theory ........
168-169
McKinsey 7S model ............................ 220-222
Measurement............................. 109, 110, 113
Micro external environment.....................205
Motivation................................... 164, 166, 170
—N—
Networking ..................38, 148, 150, 158, 180,
191, 198, 205
New Product Development (NPD)....25, 31,
41, 46, 49, 64
—O—
Objectives ................................... 131, 187-189
Ocean strategy.......................................15-16
Online discussion........................................ 144
Organisational structures.................100, 111,
119-120, 148, 197, 211, 220
—P—
Partnerships ....................36, 39, 140, 161, 218
PESTER analysis................................................ 6
Porter's 5 forces model.................................. 6
Porter's value chain ...............52-53, 218, 222
Power..................................... 20, 201, 211, 230
Profit.................................................. 54-56, 186
—R—
Ratios .........................................................55-56
Recruitment..................98, 123-124, 129, 162,
182, 183, 186, 187, 194, 231
Research commons ...........................120-121
Resistance to change.......212, 227, 233-234
Resource based view (RBV).............218, 222
Resources ......................20, 33, 110, 112, 131,
201, 215, 240
Revenue model......................................51, 88
Rewards ..........................28, 82, 127-128, 167,
170-171, 185, 212, 230
Risk..................................70, 116, 145, 219, 240
Index
Innovation for Marketers 235
—S—
Satisfaction .... 40, 91, 128-129, 153, 163-166,
170, 175, 181, 183-185, 187, 238, 241
Schumpeter.................................................3, 5
Self-managing teams........................ 131-132
Service-profit chain............................184, 186
Stakeholders......................................233, 2325
Strategic alliances.............................. 115-117
—T—
Teams........................... 62, 64, 68-71, 123, 194
Technology life cycle ............................30, 67
Technology push .....................................85-86
Transactional leadership...................100, 111
Transformational leadership....... 99-100, 111
—U—
Unlearning behaviour................................174
User trials............................................... 140-141
—V—
Value chain innovation...............................91
Value Grid.................................................53-54
Virtual teams .........................................62, 194
VRIN framework.................................. 218-219
Vroom's expectancy theory ....................170
—W—
Wheel of creativity............................. 109-110
—Y—
Yerkes-dodson curve......................... 215-216
Index
236 Innovation for Marketers

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Diploma Guide -Iinnovation for Marketers sample chapter

  • 1. Innovation for Marketers Andrew Hatcher Kiran Kapur Charles Nixon
  • 3. Publisher’s Note Every possible effort has been made to ensure that the information contained in this book is accurate at the time of going to press, and the publishers and authors cannot accept responsibility for any errors or omissions, however caused. No responsibility for loss or damage occasioned to any person acting, or refraining from action, as a result of the material in this publication can be accepted by the editor, the publisher or any of the authors. Published by Cambridge Marketing Press, 2015 © Cambridge Marketing Press, 2015. Cambridge Marketing Press Cygnus Business Park Middlewatch, Swavesey Cambs CB24 4AA, UK Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licences issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the above address. The right of Cambridge Marketing College to be identified as the author of this work has been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. ISBN Paperback: 978-1-910958-09-4 eBook-eReader: 978-1-910958-10-0 eBook-PDF: 978-1-910958-11-7 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Design and layout by Cambridge Marketing Press Printed and bound by CPI/Antony Rowe, Chippenham, Wiltshire
  • 5. Introduction Innovation for Marketers i Page Introduction About the Authors (iii) How to Use this Guide (v) Additional Study Resources (vi) Section 1: Entrepreneurial Marketing Introduction 1 Chapter 1: Marketing and Entrepreneurship 1.1 Integrating Marketing and Entrepreneurship 3 1.2 Converting Ideas into Opportunities 19 1.3 New and Traditional Marketing Approaches 22 Chapter 2: An Entrepreneurial Response to Change 2.1 Competitive Marketing Solutions with Limited Resources 33 2.2 Entrepreneurial Approaches to New Product and Service Development 41 2.3 A Compelling Proposition 50 2.4 Effective Leadership of Entrepreneurial Teams 62 Section 2: Innovation Chapter 3: The Innovative Organisation 3.1 What Kinds of Innovation Can Exist? 73 3.2 What Does An Innovative Organisation Look Like? 98 3.3 Assessing Levels of Innovation and Creativity 109 3.4 Using External Influences to Drive Innovation 115 Chapter 4: Innovation In Marketing 4.1 Creating Innovative Marketing Teams 123 4.2 Innovation across the Marketing Value Chain 140 4.3 Implementing Marketing Innovation 149
  • 6. Introduction ii Innovation for Marketers Section 3: The Marketing Champion Chapter 5: The Role of Internal Marketing 5.1 The Role of Internal Marketing in Supporting Innovation 161 5.2 Internal Marketing, Leadership and Other Business Functions 181 5.3 The Internal Marketing Plan 187 5.4 New Ideas and Digital Media 191 Chapter 6: Marketing-led Organisational Change 6.1 Analysing the Context of Change in an Organisation 201 6.2 Planning and Executing a Change Programme 222 6.3 Engaging Stakeholders in Organisational Change 233 6.4 Measuring Success 237 Index 245
  • 7. Introduction Innovation for Marketers iii About the Authors Andrew Hatcher BSc MBA FCMC Chartered Marketer Andrew initially studied as a Mechanical Engineer before joining Reuters, the information company as a journalist. He then spent 15 years with the company around the world in a variety of technology, sales and marketing roles ultimately working with the Greenhouse, Reuters’ corporate venture capital arm, based in New York. He subsequently established an internal incubator for Reuters in three centres around the world before setting up a new electronic trading venture in Singapore. After Reuters, Andrew moved to Cambridge in the UK and has been involved in setting up a number of companies including Investing for Good which offers philanthropists a structured way to invest in charities, The Working Knowledge Group which delivers enterprise activities to students in Higher and Further education and, most recently, the Applied Knowledge Network which develops training courses and software applications focused on strategic planning. Andrew has been involved in marketing training since 2003 and has since delivered programmes for a wide variety of clients including Statoil the Norwegian State oil company, British Telecom, Yell, Smith & Williamson, NTT DoCoMo and Eversheds among many others. He is the co-author of Inventuring – Why big companies must think small, which is a handbook for corporate venture capitalists; of The Cambridge Marketing College Handbook: Services Marketing published by Cambridge Marketing Press; and of the Metrics for Marketers Guide. Andrew is a fellow of Cambridge Marketing College and has many years’ experience teaching at both the CIM Diploma in Professional Marketing and Postgraduate Diploma levels. Kiran Kapur BA MPhil (Oxon) FCMC Chartered Marketer Kiran has worked predominantly in Financial Services and has expertise in customer relationship marketing and customer communications. As a consultant, she has worked as project manager for companies including Liverpool Victoria, Barclays, London Life and Cazenove. She has taught a wide variety of courses at Cambridge Marketing College since 1999. She is the Distance Learning & Overseas Course Director, with responsibility for the College’s overseas expansion and a Fellow of the College. She has been a CIM examiner since 2004. Her publications include the Assessing the Marketing Environment Study Guide published by Pearson Education in 2009, and The Cambridge Marketing Handbook: Law for Marketers published by Cambridge Marketing Press in 2015. She is also the author of the Guide: The Customer. She is a trustee of Jimmy’s Cambridge, a charity for homeless people.
  • 8. Introduction iv Innovation for Marketers Charles W Nixon MBA FCIM FCAM FRSA Chartered Marketer Charles began his career after studying History and Economics at Manchester University, a degree that he says gives him a long term approach to strategy. He was first employed as Government Relations Officer for Courtaulds (then the largest textile company in the UK) where he liaised with civil servants and politicians on government policy. Whilst at Courtaulds he was asked to explore the possibilities of the use of new mini computers in the field of market research and intelligence. This led to his founding Courtaulds’ Office of Market Intelligence for its Consumer Products Group and establishing one of the first computerised marketing information systems in the UK. After a short spell at the International Wool Secretariat as Senior Economic Analyst, Charles went to Warwick Business School (WBS) to take one of its first MBAs. Whilst there he helped write the Business Plan for the Warwick Science Park and so confirmed his interest in High Technology. Following WBS he joined Arthur Andersen Management Consultants (now Accenture) and spent time in Chicago and Geneva, before joining Mercury Communications the then embryonic rival to BT. At Mercury, Charles was Head of Market Research and Market Planning helping the new company segment its market, plan for distribution, and research customer needs in order to introduce new products. In 1987 he moved to the City of London and joined Extel Financial in time for the Big Bang and the city revolution. These latter two posts gave Charles an insight in to the different ways UK companies approach the market and marketing. Following several years with Extel he was head hunted by Société Général to rebrand its recently acquired UK Unit Trust Asset Management arm – Touché Remnant. However the lure of WBS proved too strong and in 1992 he left the City to start Doctoral Research on the Marketing of English Universities. During this time Charles founded Cambridge Marketing College with Ian Brownlee in May of 1991. The College quickly established itself for its fresh and enthusiastic approach. Over the next five years it steadily grew as a part time activity and in 1997 expanded with a second college in Guildford and then a third in Manchester. In 1999, Charles became Chief Executive of the College. Since then, the College has gone from strength to strength to become the leading Professional Marketing College in Europe with 1,400 delegates at its study centres around the UK and from over 100 countries worldwide.
  • 9. Introduction Innovation for Marketers v How to Use this Guide This Guide has been written specifically to assist marketers who are involved in both studying the nature of and implementing innovation. It includes examples and activities to help reinforce your learning, and recommended reading and website links for additional information. We recommend that you work through the Guide from beginning to end undertaking the exercises and supplementary reading included. The Guide is part of a set, all written by professional marketers and tutors, designed to provide clear and easy to read introductions to key marketing topics. The other Guides in this set are: Strategy for Marketers, Digital Strategy and Metrics for Marketers. Within the Guide you will find the following icons used: This icon defines a key learning concept. This icon identifies additional reading resources that can be used to gather extra information or to reinforce learning about a particular concept. This icon identifies tasks that are useful in widening your knowledge and applying the concepts to your own organisation. This icon identifies real-life examples that illustrate the key issues discussed. This icon identifies websites with further information on the key issues discussed. This icon identifies videos available online to reinforce your learning.
  • 10. Introduction vi Innovation for Marketers Additional Study Resources This Guide has been designed to provide you with all the core knowledge and skills you need to understand the key concepts that support innovation in marketing environments. However, marketing is a constantly changing discipline and in order to be a first class marketer you must keep up-to-date with what is going on around you. Consequently we strongly recommend that you read widely around the subject for this (and every) topic. CMC Tutor Blog, Scoop.it! and YouTube Channel Tutor Blog: www.marketingcollege.com/blog Scoop.it!: http://www.scoop.it/u/charles-nixon YouTube Channel: www.youtube.com/channel/UC0_uEMPBTxuUr8hH1Ikl70w Magazines and Journals We strongly recommend that you read around the subject from the daily and weekly press and marketing journals and widen your studies by looking at key trade magazines that serve the industry. These include: Ad Age www.adage.com Cambridge Marketing Review www.marketingcollege.com/blog/cambridge- marketing-review/ Campaign www.campaignlive.co.uk Marketing www.marketingmagazine.co.uk Marketing Week www.marketingweek.co.uk Media Week www.mediaweek.co.uk Cambridge Marketing Handbooks The Cambridge Marketing Handbooks: Digital Marketing, Distribution for Marketers, Law for Marketers, Marketing Communications, Marketing Philosophy, Marketing Planning, Pricing for Marketers, Product Marketing, Research for Marketers, Services Marketing, and Stakeholder Marketing, 2015, Cambridge Marketing Press
  • 11. Introduction Innovation for Marketers vii Recommended Books Nijssen E J, (2014), Entrepreneurial Marketing: An Effectual Approach, Abingdon, Routledge Tidd J and Bessant J, (2013), Managing Innovation, 5th edition, Chichester, John Wiley Ahmed P and Shepherd C, (2010), Innovation Management: Context, Strategies, Systems and Processes, Harlow, FT Prentice Hall Bjerke B, (2007), Understanding Entrepreneurship, Cheltenham, Edward Elgar Publishing Blundel R, and Lockett N, (2011), Exploring Entrepreneurship: Practices and Perspectives, Oxford, OUP Hayes J, (2014), The Theory and Practice of Change Management, 4th edition, Basingstoke, Palgrave Macmillan Hogg C, (2014), The Handbook of Entrepreneurial Marketing: How to Align Marketing and Promotion to New Products and Services, London, Kogan Page Moore G, (2014), Crossing the Chasm: Marketing and Selling Disruptive Products to Mainstream Customers, 3rd edition, New York, HarperBusiness Ries E, (2011), The Lean Startup: How Constant Innovation Creates Radically Successful Businesses, London, Portfolio Penguin Sethna Z, Jones R and Harrigan P, (2013), Entrepreneurial Marketing: Global Perspectives, Bradford, Emerald
  • 12. Introduction viii Innovation for Marketers Useful Websites The Chartered Institute of Marketing www.cim.co.uk CIM website with information and access to learning support. www.cim.co.uk/insight/tools- and-templates/study-resources/ Direct access to information and support materials for all levels of CIM qualification (available to CIM Members). www.cim.co.uk/cuttingedge Weekly roundup of marketing news (available to CIM members), awards and forthcoming marketing events. www.cim.co.uk/insight/marketin g-library-resources/ EBSCO, Emerald, iLibrary and more. Publications on line www.ft.com Extensive research resources across all industry sectors, with links to more specialist reports. (Charges may apply). www.economist.com Useful links, and easily-searched archives of articles from back issues of the magazine. www.mad.co.uk Marketing Week magazine online. www.brandrepublic.com Marketing magazine online. Sources of useful information www.esomar.org/ European Market Research Association. www.asa.org.uk/asa/ Advertising Standards Association – useful for the Codes of Practice. www.marketresearch.org.uk The Market Research Society. Contains useful material on the nature of research, choosing an agency, ethical standards and codes of conduct for research practice. www.statistics.gov.uk Detailed information on a variety of consumer demographics from the Government Statistics Office. www.data.gov.uk/publisher/ce ntral-office-of-information Government News. www.quickmba.com/ Quick reference website for business models. Wikipedia – A Note on its Use Wikipedia is a good place to start any research on a new subject. Whilst content now goes through some review to remove obvious errors of fact, the encyclopaedia is not definitive and can be incorrect. Always check any information with a second source. Wikipedia is a good source for other sources.
  • 13. Innovation for Marketers SECTION 1 ENTREPRENEURIAL MARKETING
  • 15. Introduction Innovation for Marketers 1 Introduction A word of caution. The world is moving at a fast pace and marketers need to think quickly. This Guide has been written for those with a quick mind and a willingness to read widely. All the concepts and references included are not spelled out, but are easy to find through Google. So please read your Guide and then research the topics you do not at first understand or about which you want to know more. Doing this is one of the first steps in being effective at driving innovation! In the 20th Century there was the Marketing Department. However as the discipline of Marketing has become more widely accepted and understood, the standard techniques have passed into mainstream Business Development activities. In the 21st Century the most relevant department is better described as Marketing and Innovation. Because of the external-facing function of the discipline, it is to marketers that the task of identifying new opportunities and devising plans to exploit them, falls. And, as basic marketing practices become more widely used by non-marketers, it falls to professional marketers to innovate in order to stand out from the crowd. This Guide was written following 15 years of delivering our MHT (Marketing for High Technology) Programme for companies in and around the hugely successful Cambridge technology cluster in the UK. Based on that experience and on the wider world of marketing, the Guide looks at a wide spectrum of change: from disruptive innovations to creative new ideas, from implementing major change programmes to managing evolutionary, small-scale improvements. It looks at Innovation in terms of marketing practice and business development; the marketing of innovative products and their organisations and marketing- led internal change management. Graffiti on the A14 highway leaving Cambridge (Photo: CWN, 2014)
  • 16. Section 1: Entrepreneurial Marketing 2 Innovation for Marketers
  • 17. Chapter 1: Marketing and Entrepreneurship Innovation for Marketers 3 Chapter 1: Marketing and Entrepreneurship The expected learning outcomes for this chapter are that you will understand the relationship between marketing and entrepreneurship including being able to:  Describe how the entrepreneurial process sits alongside core disciplines in marketing  Describe the different ways in which business ideas can be translated into entrepreneurial opportunities  Assess the usefulness of both existing and new marketing approaches in a range of entrepreneurial contexts 1.1 Integrating Marketing and Entrepreneurship Many of us work for organisations that are well established, some for many decades or centuries. As a result these companies have lost much of the original energy of their founders. Instead they perpetuate the business through what is left behind of that original entrepreneurial spirit. For many established companies, it is the reinvigorating of the entrepreneurial zeal that is the hardest task, as it is safer and (for staff) often easier to continue to gently evolve and please the current customer than it is to find new ones with new offerings. (Throughout the Guide ‘offerings’ refers to consumer, B2B or not-for-profit products and services) For others of us, we are privileged to be involved with the founding of a new business or enterprise and we get to experience the joys and pains of corporate birth. In both situations we are looking to gain and maintain a market lead or competitive advantage and as such the customer is always at the heart of the successful enterprise. There are times, however, when innovation is driven by necessity in order for organisations to survive. In these periods (termed Creative Destruction by Schumpeter in 1942), marketing plays a key role: not just understanding the traditional customer, but rather as the observer and interpreter of macro trends; the identifier of opportunities and educator of consumers and creator of markets (Schumpeter, 1942). Creative Destruction Creative destruction describes the continuous product and process innovation cycle whereby outdated models and items are replaced by new ones. The process of creative destruction is estimated to be the driving force behind productivity growth. Artificial limitations to creative destruction can create significant negative short- and long-term macroeconomic consequences
  • 18. Section 1: Entrepreneurial Marketing 4 Innovation for Marketers 1.1.1 Creating Competitive Advantage Organisations of all types in many contexts are faced with the challenge of gaining and maintaining competitive advantage over their competitors. Developing that specific edge can be critical in some cases, where it ensures survival, whereas for the majority it will provide a way to stay ahead of the competition. In the last 10-15 years the focus on innovation as a core competence has increased largely as the result of increased competition from emerging economies, the ever faster cycle of new technologies, the rapid fall in the cost of information and the increasing sophistication of the buyer. Most analysts concur that any advantage from cutting costs and outsourcing have probably already been exhausted and consequently in order to compete there are few options left except to innovate a path to advantage. This has resulted in innovation moving from being an interesting but expensive sideline to being adopted as a core competence and as a result becoming sustainable. A critical ingredient for creating and maintaining that advantage can often be the presence, acceptance and effective implementation of innovative products, processes and ideas. Being innovative in this environment means seeing things from new angles, having broad perspectives, taking risks and being flexible. Developing the appropriate climate for innovation in the workplace often involves not just changing the furniture but is more about enabling employees to become idea observers, interpreters, identifiers, educators and creators. 1.1.2 The role of marketing in driving innovation Let’s look at each of these roles in turn: 1. Observer 2. Interpreter 3. Identifier 4. Educator 5. Creator The role of marketing in driving innovation:  Observer  Interpreter  Identifier  Educator  Creator
  • 19. Chapter 1: Marketing and Entrepreneurship Innovation for Marketers 5 1. Observer Joseph Schumpeter and Nicolai Kondratieff both hypothesised the existence of Long Business Waves (Schumpeter, op.cit.), (Kondratieff, 1979). These waves, which Schumpeter christened Creative Destruction, occur roughly every 50 years and dramatically change the dominant technology – wiping out an existing competitive advantage; generating new opportunities. Schumpeter and Kondratieff demonstrated how this had occurred when steam power was applied to factories in the early 19th Century; to farms and agriculture in the late 19th Century and when electricity was applied to factories in the 1920s. More recently it can be seen in computerisation and automation via microprocessors. The impact of these waves was/is to destroy the old paradigm of business and replace it with a new way of working. The consequence was mass unemployment of the work force as capital adjusted to the new technologies and labour took time to retrain. This paradigm shift can then be seen in the impact of micro-processors (PCs), the internet (www) and now in mobility and interconnectedness (The Internet of Things) (Witchalls, 2013). The original theories posited that long business waves occurred every 50 years, as evidenced in 1879, 1929 and 1979. However, the latest wave of Mass Mobile computing power has come much earlier and has caught many commentators by surprise. The change is dramatic though still fluid. So what will be the impact of mobile devices which are always on and personal? What will be the impact of the interconnectedness of 50 billion devices via the internet let alone the incredible increases in processing power coming from the ‘second half of the chess board’?( Brynjolfsson and Mcafee, 2014). Environmental Scanning Marketers need to constantly watch or scan the environment (to spot the next trends (wearable technology?) and the new opportunities that accompany them; and monitor emerging uncertainties. Figure 1.1 The Kondratieff Wave Source: http://blog.nationmultimedia.com/home/blog_data/5/5/images/kondratiev5.jpg
  • 20. Section 1: Entrepreneurial Marketing 6 Innovation for Marketers How do we do this? • Reading source journals – (these are the ones that journalists use to find stories. They are the scientific publications, e.g. Nature, Scientific America; the economic press, e.g. F.T, Economist; the technology press, e.g. New Scientific, etc.). • Scanning peripheral sectors – keeping a watching brief on sectors that could be a substitute (remember Porter?) for what you do, e.g. mobile phone companies entering the banking sector! • Debate – be part of the new thinking; speak at conferences; become a member of technical standards committees; but above all talk to your target audiences. The standard and most obvious model to use here is Porter’s 5 Forces model, though this is limited in the areas it looks at so you need to think more widely and include extended PESTER analysis as well (Porter, 2008). Figure 1.2 PESTER analysis of the macro external environment Find the prime source journal(s) for your sector.
  • 21. Chapter 1: Marketing and Entrepreneurship Innovation for Marketers 7 To give you some examples of the current level of change in technology, look at www.gartner.com. Gartner is a leading Management Consultancy and specialises in looking at the latest technology opportunities. However they recognise that not all ideas come to fruition – new ideas generate increasing expectations but then some fade as they fail to take-off, leaving others to change our lives forever. Consequently they created the Hype Cycle to separate the hype from the real drivers of a technology's commercial promise (Gartner, 2015). The Gartner Hype Cycles provide a graphic representation of the maturity and adoption of technologies and applications, and how they are potentially relevant to solving real business problems and exploiting new opportunities. It provides a view of how a technology or application will evolve over time, providing a source of insight to manage its deployment within the context of specific business goals. Figure 1.3 The Gartner hype cycle Observing is only part of the task; it is knowing what you see that is key. “Looking where all are looking, seeing what no-one sees” is often considered to be a definition of genius – but we need to do this if we are to be innovative. 2. Interpreter How do we understand what we see? In The Adventure of the Blue Carbuncle Conan Doyle describes Sherlock Holmes inspecting a battered bowler hat and then handing it to Watson to see what he makes of it. Read the passage below and consider what is seen by Watson but not interpreted.
  • 22. Section 1: Entrepreneurial Marketing 8 Innovation for Marketers Extract from The Adventure of the Blue Carbuncle by Sir Arthur Conan Doyle “I beg that you will look upon it not as a battered hat but as an intellectual problem. And, first, as to how it came here. It arrived upon Christmas morning, in company with a good fat goose, which is, I have no doubt, roasting at this moment in front of Peterson’s fire. The facts are these: about four o’clock on Christmas morning, Peterson, who, as you know, is a very honest fellow, was returning from some small jollification and was making his way homeward down Tottenham Court Road. In front of him he saw, in the gaslight, a tallish man, walking with a slight stagger, and carrying a white goose slung over his shoulder. As he reached the corner of Goodge Street, a row broke out between this stranger and a little knot of roughs. One of the latter knocked off the man’s hat, on which he raised his stick to defend himself and, swinging it over his head, smashed the shop window behind him. Peterson had rushed forward to protect the stranger from his assailants; but the man, shocked at having broken the window, and seeing an official-looking person in uniform rushing towards him, dropped his goose, took to his heels, and vanished amid the labyrinth of small streets which lie at the back of Tottenham Court Road. The roughs had also fled at the appearance of Peterson, so that he was left in possession of the field of battle, and also of the spoils of victory in the shape of this battered hat and a most unimpeachable Christmas goose.” “Which surely he restored to their owner?” “My dear fellow, there lies the problem. It is true that ‘For Mrs. Henry Baker’ was printed upon a small card which was tied to the bird’s left leg, and it is also true that the initials ‘H. B.’ are legible upon the lining of this hat, but as there are some thousands of Bakers, and some hundreds of Henry Bakers in this city of ours, it is not easy to restore lost property to any one of them.” “What, then, did Peterson do?” “He brought round both hat and goose to me on Christmas morning, knowing that even the smallest problems are of interest to me. The goose we retained until this morning, when there were signs that, in spite of the slight frost, it would be well that it should be eaten without unnecessary delay. Its finder has carried it off, therefore, to fulfil the ultimate destiny of a goose, while I continue to retain the hat of the unknown gentleman who lost his Christmas dinner.” “Did he not advertise?” “No.” “Then, what clue could you have as to his identity?” “Only as much as we can deduce.” “From his hat?” “Precisely.” “But you are joking. What can you gather from this old battered felt?”
  • 23. Chapter 1: Marketing and Entrepreneurship Innovation for Marketers 9 “Here is my lens. You know my methods. What can you gather yourself as to the individuality of the man who has worn this article?” I took the tattered object in my hands and turned it over rather ruefully. It was a very ordinary black hat of the usual round shape, hard and much the worse for wear. The lining had been of red silk, but was a good deal discoloured. There was no maker’s name; but, as Holmes had remarked, the initials “H. B.” were scrawled upon one side. It was pierced in the brim for a hat-securer, but the elastic was missing. For the rest, it was cracked, exceedingly dusty, and spotted in several places, although there seemed to have been some attempt to hide the discoloured patches by smearing them with ink. “I can see nothing,” said I, handing it back to my friend. “On the contrary, Watson, you can see everything. You fail, however, to reason from what you see. You are too timid in drawing your inferences.” “Then, pray tell me what it is that you can infer from this hat?” He picked it up and gazed at it in the peculiar introspective fashion which was characteristic of him. “It is perhaps less suggestive than it might have been,” he remarked, “and yet there are a few inferences which are very distinct, and a few others which represent at least a strong balance of probability. That the man was highly intellectual is of course obvious upon the face of it, and also that he was fairly well-to-do within the last three years, although he has now fallen upon evil days. He had foresight, but has less now than formerly, pointing to a moral retrogression, which, when taken with the decline of his fortunes, seems to indicate some evil influence, probably drink, at work upon him. This may account also for the obvious fact that his wife has ceased to love him.” “My dear Holmes!” “He has, however, retained some degree of self-respect,” he continued, disregarding my remonstrance. “He is a man who leads a sedentary life, goes out little, is out of training entirely, is middle-aged, has grizzled hair which he has had cut within the last few days, and which he anoints with lime-cream. These are the more patent facts which are to be deduced from his hat. Also, by the way, that it is extremely improbable that he has gas laid on in his house.” “You are certainly joking, Holmes.” “Not in the least. Is it possible that even now, when I give you these results, you are unable to see how they are attained?” “I have no doubt that I am very stupid, but I must confess that I am unable to follow you. For example, how did you deduce that this man was intellectual?” For answer Holmes clapped the hat upon his head. It came right over the forehead and settled upon the bridge of his nose. “It is a question of cubic capacity,” said he; “a man with so large a brain must have something in it.” “The decline of his fortunes, then?”
  • 24. Section 1: Entrepreneurial Marketing 10 Innovation for Marketers “This hat is three years old. These flat brims curled at the edge came in then. It is a hat of the very best quality. Look at the band of ribbed silk and the excellent lining. If this man could afford to buy so expensive a hat three years ago, and has had no hat since, then he has assuredly gone down in the world.” “Well, that is clear enough, certainly. But how about the foresight and the moral retrogression?” Sherlock Holmes laughed. “Here is the foresight,” said he putting his finger upon the little disc and loop of the hat-securer. “They are never sold upon hats. If this man ordered one, it is a sign of a certain amount of foresight, since he went out of his way to take this precaution against the wind. But since we see that he has broken the elastic and has not troubled to replace it, it is obvious that he has less foresight now than formerly, which is a distinct proof of a weakening nature. On the other hand, he has endeavoured to conceal some of these stains upon the felt by daubing them with ink, which is a sign that he has not entirely lost his self-respect.” “Your reasoning is certainly plausible.” “The further points, that he is middle-aged, that his hair is grizzled, that it has been recently cut, and that he uses lime-cream, are all to be gathered from a close examination of the lower part of the lining. The lens discloses a large number of hair-ends, clean cut by the scissors of the barber. They all appear to be adhesive, and there is a distinct odour of lime- cream. This dust, you will observe, is not the gritty, grey dust of the street but the fluffy brown dust of the house, showing that it has been hung up indoors most of the time, while the marks of moisture upon the inside are proof positive that the wearer perspired very freely, and could therefore, hardly be in the best of training.” “But his wife – you said that she had ceased to love him.” “This hat has not been brushed for weeks. When I see you, my dear Watson, with a week’s accumulation of dust upon your hat, and when your wife allows you to go out in such a state, I shall fear that you also have been unfortunate enough to lose your wife’s affection.” “But he might be a bachelor.” “Nay, he was bringing home the goose as a peace-offering to his wife. Remember the card upon the bird’s leg.” “You have an answer to everything. But how on earth do you deduce that the gas is not laid on in his house?” “One tallow stain, or even two, might come by chance; but when I see no less than five, I think that there can be little doubt that the individual must be brought into frequent contact with burning tallow—walks upstairs at night probably with his hat in one hand and a guttering candle in the other. Anyhow, he never got tallow-stains from a gas-jet. Are you satisfied?” “Well, it is very ingenious,” said I, laughing;” Source: (Conan Doyle, 2014)
  • 25. Chapter 1: Marketing and Entrepreneurship Innovation for Marketers 11 The key point here is to spot the indicators that lead to the bigger picture. In the Marketer’s world we are looking for indicators of change that lead to scenarios of opportunity. The first and obvious indicator is the pattern. There is evidence all around that people react in different ways to PESTER events and forces. But when you can see a pattern forming in these disparate acts then you can observe, predict and react e.g. seeing people using fitness bands or reading blogs about a desire for a healthier diet allows the marketer to make assumptions about the future. The second indicator is the trend. With the pattern comes identification but we need to know if this is an opportunity we can use. So we need to observe if and when the market is nascent. We need to spot a trend. Here we need to collect indicative data of the growing conformance to the pattern. standard market research and monitoring techniques should be used. 3. Identifier So how do we see new opportunities? Through our observations we constantly have to reassemble our notions of satisfying needs and we have to consider what new needs are created by the changes in the environment as a result of the waves of creative destruction. For example, if we extrapolate the increase in computing power from 8k to 32 gigabits on a microchip, what do we do with this massive increase in processing power? What is more the power is now portable; what can we do with it on the move to make life easier? Further still, if we can embed it in clothing or a human body, what can we control with it? These are just one set of questions from a couple of trends. If we add to this the observable trend of an aging population, how can we combine the two? And, finally, if we know we can sequence the DNA of any one person, what can we do with the data? Often the answers or new ideas seem to come from science fiction but in reality they are just the application of desires for a better, broader life of experiences made possible by imagination. Discovery and creation theory There are two contrasting (although some would argue complementary) theories of entrepreneurship: Discovery Theory and Creation Theory. Whilst both assume that the aim of entrepreneurs is to identify and exploit opportunities; they differ in their view about the origin of opportunities and about the nature of entrepreneurs. Discovery theory assumes that opportunities arise independently of any action taken by entrepreneurs and are waiting to be discovered. Opportunities in a sector or market are caused by exogenous shocks and are observable by anyone and therefore, in principle, exploitable by anyone associated with that sector or market. The reason why some people manage to successfully exploit a new opportunity and others do not is attributed to differences between entrepreneurs and non-entrepreneurs, e.g. they may be more alert or less risk averse.
  • 26. Section 1: Entrepreneurial Marketing 12 Innovation for Marketers Creation theory takes a different view. Opportunities are not created by exogenous shocks but are created endogenously by the actions of entrepreneurs as they explore and develop new offerings. They do not search; they act in order to create new market demand – and observe how the market or customers react in turn. We will look at the role of Creator in more detail later in this Section. Discovery and Creation Theory To find out more read Alavrez S A and Barney J B, (2007), Discovery and Creation: Alternative Theories of Entrepreneurial Action, Organizações em contexto, Ano 3, 6, December One model to consider when trying to discover new opportunities comes from Murphy (Murphy, 2011). Murphy recognised that theories about discovery are important to entrepreneurism but that too many of them were based on the assumption that opportunities were found by deliberate search or serendipitous discovery. He believed that this oversimplified the nature of opportunities and developed a multi-dimensional model of entrepreneurial discovery shown in Figure 1.4 below. Figure 1.4 Murphy’s model of entrepreneurial discovery
  • 27. Chapter 1: Marketing and Entrepreneurship Innovation for Marketers 13 The model identifies 4 quadrants:  Eureka (high serendipity/high deliberation)  Deliberate Search (low serendipity/high deliberation)  Legacy (low serendipity/low deliberation)  Serendipitous Discovery (high serendipity/low deliberation) and throws more light on the range of approaches taken to discovering opportunities. Murphy’s full article is available online: http://condor.depaul.edu/profpjm/pmurphy_files/Murphy%202x2%20(2011).pdf or use google. Having observed a pattern you then need to consider how to predict its trend. In this respect Creation Theory is best summed up in that ‘no-one ever asked for a mobile phone’. You have to create the market for it by educating people as to what is possible. Leaping from a basic raw technical possibility to mass market service is unlikely unless the market can see the new offering as analogous to a previous technology/offering. For example, the introduction of the VCR cassette recorder for the home took nearly 30 years to reach 99% household penetration. The DVD player took 10 -15 years to achieve the same penetration because it was replacing an understood offering. Mobile Communications Originally mobile communication was developed for the military as mobile radio for Command and Control. With the end of war and translation of the same technology into civilian use it was applied to Emergency Services. However, it required a network and considerable power to operate, so it stayed as a niche service for those sectors that saw sufficient benefit to accept the cost of setting up a network and providing large expensive battery packs. As the value in speed of information became a pattern in other markets during the nineteen seventies and eighties, especially in Financial Services and Sales Processing, the technology was extended to small niche markets so networks could be set up in discrete areas, such as the City of London, then the M25 belt or major arterial roads. However, one-way mobile communications remained the norm for several years (known as telepoint)! However, with this nascent stage came the ability to gain economies of scale in production and move down the learning curve. Thus more power, and smaller handsets meant new general business users and with this came ubiquitous networks and then mass social users. At each of these stages in the evolution, different companies led the way or dominated. Philips and Motorola in the early years, then when the Telepoint market arose it was Hutchison with Rabbit; then Nokia rose with longer lasting battery life in their phones to dominate the market, but then lost the trend by not seeing a new pattern of activity and Apple took the lead with the iPhone.
  • 28. Section 1: Entrepreneurial Marketing 14 Innovation for Marketers Figure 1.5 below illustrates the shortening of the adoption curve for new technology in recent years. Contrast the adoption of the telephone after 5 or 6 years (it had hardly got off the ground) with the adoption of the cell phone (at over 25%). Figure 1.5 Adoption of technology 4. Educator Ask many entrepreneurs or high-tech start-ups what their customers want and they will tell you that their customers don’t know: Because they do not understand the technology, they are not scientists and do not understand what is possible. Henry Ford’s response when asked what his customers would like if he asked them was “a faster horse”. This is where the ‘anticipating’ part of the definition of marketing comes in. It is through experimentation and education of the customer that markets evolve or revolutionise. Those on the inside of a company know what their technology is capable of delivering. They are in advance of the market. The job of marketing here is to create the market, through education and nurturing of understanding. This takes time and resources and it is often better to be a close second to the first mover who spends most on market creation. This is the difference between being market driven and market-driving. These approaches come to market development from very different angles and the main characteristics of each can be seen in Table 1.1.
  • 29. Chapter 1: Marketing and Entrepreneurship Innovation for Marketers 15 Market-driving Market-driven Disruptive Reactive Innovative Incremental Creative Insignificant Value Features Agile Rigid Competitive Tentative Decisive Unsure Clear Confused Dynamic Static Table 1.1 Characteristics of market driven vs. market driving One of the most successful, recent books on Strategy has been Blue Ocean Strategy: How To Create Uncontested Market Space And Make The Competition Irrelevant by W. Chan Kim and Renee Mauborgne (Chan Kim & Mauborgne, 2005). The authors postulate that instead of trying to find way to compete in crowded known markets (Red Ocean), we should look for completely new markets that are apart from the crowd (Blue Ocean).
  • 30. Section 1: Entrepreneurial Marketing 16 Innovation for Marketers Blue Ocean vs. Red Ocean Strategic Thinking Blue Ocean Strategy, suggested by W. Chan Kim and Renee Mauborgne, is a theory that challenges traditional strategic thinking (Chan Kim & Mauborgne, 2005). It proposes that an organisation will find the greatest success in markets where there is no competition, and advocates that the greatest efforts should be spent in identifying such opportunities. Not only is this theory new in its approach, the authors have been widely regarded as disagreeing completely with conventional thinking such as Porter’s generic strategies. The blue ocean is the metaphor for open space, tranquil and bountiful whereas the red ocean is inhabited by competitive sharks which have bloodied the waters with repeated attacks on rivals. It is colourful stuff, but there is substance beneath. Firstly, the theory avoids any no-brainer tag by making it very clear that this is not about diversification, i.e. new products or markets. Instead, organisations can retain their basic core competences but reinvent the process of bringing themselves to market by looking at the marginal gains that can be achieved by doing everything better, or differently, instead of in a blind response to competition, in the heat of battle. There are also consequences for how you do the external audit, since you may need to gather information about markets that you had not previously considered. So in this way the audit is at least partially driven by the anticipation of possible strategies (which you would not have done last year!). This is an important example of how planning does not go in a straight line. Just as audit information immediately feeds into strategic decisions, so the anticipation of strategic options feeds into what is done in the audit. In addition, the authors propose a model called the Four Actions Framework which breaks the trade-off between differentiation and low cost. In doing so, the framework poses four key questions:  Raise – what factors should be raised well above the industry's standard?  Eliminate – which factors that the industry has long competed on should be eliminated?  Reduce – which factors should be reduced well below the industry's standard?  Create – which factors should be created that the industry has never offered? You can find out more about Blue and Red Ocean thinking at: http://www.blueoceanstrategy.com/ where you will also find a link to a webinar hosted by the Harvard Business Review in which Rennée Mauborgne discusses Blue Ocean strategy and leadership.
  • 31. Chapter 1: Marketing and Entrepreneurship Innovation for Marketers 17 Observation and identification will get you into a rising market but it does not get you that First Mover Advantage. There is much debate over the merits of being first to market but in order to ‘own’ or lead a new market you have to be in very early on (if not to have created it). To do this, you have to experiment and you have to be able to cope with uncertainties and with failures. Experimenting is a learning process otherwise known as ‘trial and error’; and many great companies have stumbled on their way to the top: Apple with the Lisa computer and the Newton Digital Assistant or Sony with its mini disk and DAT tape technology. Each time, however, lessons are learnt by the company and the market is educated about what is feasible. The downside, of course, is the impact on reputation and brand image. Many companies do not see the opportunities of a new pattern until a product is launched and the market created. Many great entrepreneurs who are market creators are characterised by robustness, not to say ‘bloody-mindedness’ in their determination to drive through new ideas to create new markets. In discussing the early dilemmas of the SMART car I was concerned at the concept and its positioning in the market. The concept was for a cheap, eco-friendly car for young, trendy consumers. Yet it was being made by Mercedes (an expensive, old, industrial car brand) with customer interchangeable side panels (environmentally wasteful) and boot space for “the week’s shopping and a case of Perrier”. The founder, Nicolas Hayek, was convinced that the market would understand the concept only once it had seen it and understood the possibilities. The SMART Car has created a niche after 16 years but it still does not dominate it. This ‘build it and they will come’ approach was also tried spectacularly by The Sinclair company when expanding beyond its successful home computer and calculator market. The launch of the ‘revolutionary’ C5 car was carried out by a team convinced they had found a need for a new emission-free car. Figure 1.6 The Sinclair C5 It was a disaster.
  • 32. Section 1: Entrepreneurial Marketing 18 Innovation for Marketers For most innovative companies the approach is to build slowly at first and then more quickly as the market responds. Often this is underpinned by seeding the primary source market of users. By this we mean giving young staff, students or children access to the offering as they are more likely to engage quickly, and then build relations with these users as they move into the workplace and take up positions of influence. 5. Creator On what basis do you set out to create a market? How do you manage the internal risks, when you could be “betting the company on it ».? For many, ‘gut’ instinct is what they go on. Jobs and Hayek did, but this is only possible if you (co) own the company and can empathise with the customer. It is the latter aspect that is critical in doing this successfully. Can you consume your own offering and be your own customer? If so, then you have a good understanding of the market. However, if you are not in the main target grouping you will need market research. After 10 years the creators of MTV stopped making judgement calls on the business and started using market research when they realised then were no longer in the target market. In a traditional approach to creating a new market a separate division may be formed to pioneer the creation and development, untrammelled by the structures and cultures of the parent company. Such a strategy is famous in the development of the Personal Computer (PC) by IBM. Here, the parent company was the leading mainframe supplier and saw desktop computers as a threat to its dominance. Yet others within the firm saw the rise of Apple, Atari and Commodore as a new dawn in productivity and recognised Moore’s Law was not on IBM’s side. So they set up a ‘Skunk Works’ (originated by Lockheed Martin for secret aircraft research), which was a secret team and development area to create a working prototype. Once the product concept was proven, the company saw the opportunity and launched the IBM PC. However, if this project had been proposed in parallel with other computing ventures, IBM would not have allowed the development in the first place and the world would be a different place. For other organisations, the method is to externalise the development – either to a separate company or offshore location in order to hide the activity until it is proven. A similar approach can be taken with time. Here, companies (such as Xerox and Google) allow staff a certain amount of time each week /month to devote to developing their own ideas and prototypes, which they then present to the company for mainstream adoption. One very successful result from one electronics company called Racal was Vodafone! These are somewhat deliberate approaches to allowing new ideas to take shape. However, in many companies, formal planning processes are weak and strategy – and hence development – is ‘emergent’, evolving in response to what is happening in the market. This emergent approach has its strengths in allowing constant evolution in response to change, but may not allow the whole company to focus on the task, as would be the case with a formal plan.
  • 33. Chapter 1: Marketing and Entrepreneurship Innovation for Marketers 19 Further Reading 1 D’Aveni R A, (1995), Coping with hypercompetition: Utilizing the New 7S Framework, Academy of Management Executive, Vol 9(3), pp45-57. Available in EBSCO. 2 Charitou C D and Makrides C C, (2003), Responses to Disruptive Strategic Innovation, MIT Sloan Management Review, Winter, pp.55-63. Available in EBSCO. 1.2 Converting Ideas into Opportunities There are a number of different ways in which business ideas can be converted into entrepreneurial opportunities:  Intuitive, ‘gut feel’, insights  Traditional business plans  Developing business models  Internal and external approaches 1.2.1 Intuitive vs. traditional approaches With the considerable changes in the business environment over the last decade, there is debate about the best way to exploit a given idea and convert it into a profitable opportunity. Many of the standard practices of the past – local manufacturing, physical distribution, off-line advertising - no longer easily apply. In addition traditional research and planning processes may be too slow or, given the newness of the opportunity, there may not be the data to populate the models. We need to add to this the rising role of crowdfunding and peer-to-peer lending which reduces the requirement for traditional bank funding and the detailed, formal business plans they required. As countries now compete actively to generate businesses in order to grow their economies it becomes easier for entrepreneurs to start up as evidenced by the “Ease of Doing Business” surveys by The World Bank and The Economist that rate and rank the ease with which it is possible to create a business indifferent countries. Companies are now able to exploit ‘gut – feel’ or intuitive market insights without recourse to traditional funding and the constraints that went with it. We will look at the merits of this approach in more detail in Section 1.3.1.
  • 34. Section 1: Entrepreneurial Marketing 20 Innovation for Marketers 1.2.2 Developing innovative business models: the blank canvas approach Several commentators over the last five years have developed new approaches to creating innovative business models. Taking the ‘blank sheet’ approach they have created what they are calling ‘canvases’ to guide entrepreneurs in developing new business market models. The aim is to set the entrepreneurial spirit free and not to constrain it with linear planning models. This resonates with several of the most successful US social media and internet companies where instead of the usual business planning meetings that would occur in the UK, they have multi-disciplinary ‘Growth Meetings’ to thrash out the next stage of development. Developing different business models requires insight and confidence. Resources are no longer the main constraint. Access to resources can now be gained via the internet. The task is knowing what resources are required and how to manage them. Osterwalder and Pigneur see nine key building blocks for a successful model (Osterwalder and Pigneur, 2010): 1. Customer insight 2. Value proposition 3. Channels 4. Customer relationships 5. Revenue streams 6. Key resources 7. Key activities 8. Key partnerships 9. Cost structures Peter Fisk on the other hand sees the model developing from thinking differently (Fisk, 2014):  Power of imagination  Audacious – ideas with attitude  Foresight – seeing the future and working back  Ambition – what is your purpose  Rethink – seeing things differently  Questioning – redefining the problem  Creativity and connection He also addresses the downside of what to do with too many ideas and the need to focus. Both of these approaches facilitate the ability to see opportunities and build a variety of business models.
  • 35. Chapter 1: Marketing and Entrepreneurship Innovation for Marketers 21 Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers by Osterwalder and Pigneur, John Wiley & Sons, 2010. Gamechangers: Creating Innovative Strategies for Business and Brand by Peter Fisk, John Wiley & Sons, 2014. Innovative Business Models The Free or Freemium model Whilst this concept was somewhat revolutionary when introduced, it is now widely accepted that many services can be provided seemingly free. Business models have now developed where the income stream is delivered through advertising or through the ‘bait and hook’ approach, where initial services are offered free and additional or enhanced services are offered at a price. Examples here are obviously many of the Apps that are freely available but require in-App purchases to gain the best of the software. Or the ‘Paywall’ model for newspapers where headline information is available free, but in depth analysis is available at a price. Examples here are Skype, Google and Newspapers such as The Times and Financial Times. The Long Tail model This concept was developed when organisations began to consider the idea of deselecting products in the book or music industry that were no longer mainstream. In the old physical world these products took up a considerable amount of storage and stock which was costly. In the new business model of the dematerialised product there is no cost in holding this particular type of ‘long tail’ or limited appeal product. Examples here are the bookselling sector which can still sell titles long after they are no longer bestsellers, by utilising either ebook downloads or print on demand. It also applies in a variation to Lego which allows users to generate their own kits from the brick styles available on the web. The Unbundled Business This is an intriguing concept whereby the operations of a company which may have been seen as integrated if we use the old Value Chain model, can now be unbundled and distributed to other companies, suppliers or indeed customers, and the company now concentrates on the aspect where it can gain the greatest return. Examples here are Telcos where they have outsourced the infrastructure to others and in-sourced new innovative content services . The Open Business model This is the concept of externalisation of almost any aspect of the company. It is possible to source new ideas from customers, to develop products with suppliers, to outsource delivery to distributors and indeed even to create products with competitors. Examples here are Proctor and Gamble crowdsourcing new products and the GSK Patent Pool, which allows others to exploit the patent for third world drugs.
  • 36. Section 1: Entrepreneurial Marketing 22 Innovation for Marketers Unconstrained by the internality of old business approaches where everything had to be internalised or under the company’s direct control, the 21st Century business externalises all but the idea. 1.3 New and Traditional Marketing Approaches There is a range of mainstream and new marketing approaches which are appropriate in different entrepreneurial contexts:  Deliberate vs. emergent approaches  Exploiting gaps in dynamic markets  Market tests vs. market research  Market sizing and potential in incipient and latent markets  Competing and collaborating  Market entry via niches and highly segmented markets  Exploitation of market adjacencies  Short-term ploys (see Chapter 2), cannibalisation and hypercompetitive markets  Innovative use of social media and ICT  Modifying the marketing mix in entrepreneurial contexts (see Chapter 2) There are many different ways in which business ideas are converted into entrepreneurial opportunities. We have already touched on some of these – now let’s consider some additional alternatives. 1.3.1 Deliberate versus emergent strategies The standard theory of marketing would demand that we create a plan for what we are about to execute. For all the reasons that we know and believe, the creation of a marketing plan is the best way to focus an enterprise’s attention and resources on the opportunities ahead. Strengths of planning:  Focuses the effort of staff  Gains agreement and commitment  Provides clear leadership  Allows balanced assessment of risks and rewards  Sets out roadmap for the enterprise to follow
  • 37. Chapter 1: Marketing and Entrepreneurship Innovation for Marketers 23 When creating a marketing plan the first stage is to carry out an audit, then to assess the strengths and weaknesses of the organisation versus the opportunities and threats. However, this presupposes that we have not yet identified an opportunity and therefore need to take a balanced approach to those opportunities that may exist in the environment. Using techniques such as gap analysis and Ansoff’s famous matrix presupposes that the opportunity in the marketplace is developmental from the current starting position. However, for entrepreneurs the situation is usually reversed in that the opportunity has been spotted and then the plan needs be constructed. For the entrepreneur there may be no original starting position in terms of an existing company and therefore many of the standard business planning models do not readily apply. Finding and exploiting gaps in existing marketplaces is not that easy when those markets are highly dynamic. Organisations that currently believe that they can gain significant market share growth by being two times better than they are at the moment are outpaced now by organisations that believe that they can be 10 times better than the incumbents in the market (Fisk, op.cit.). Secondly, the analysis that goes into the audit takes time and carrying out the research for such an audit process may well show the hand of the company to its competitors. The 21st-century world circumstances change quickly and as a result strategies and plans need to be constantly updated. However the process of planning, which was created at least 50 years ago, is not quick enough to respond to the changing environment. Consequently entrepreneurs develop a more emergent strategy which reflects the pace of the environment. Strengths of Emergent Strategies:  Quick to respond  Easily adaptable  Easily shareable with modern social media However this approach has its drawbacks. Strengths Weakness Gut feel Passion Drive Motivation Speed Limited explanation Exists only in head of leader Hard to disseminate Business planning Dissemination Co-ordination Communication Easy to compare for external Time-consuming Slower to respond Dispassionate
  • 38. Section 1: Entrepreneurial Marketing 24 Innovation for Marketers funding Table 1.2 ‘Gut feel’ vs. business planning Constantly changing plans need to be constantly communicated. It may also be that, as strategies change, not all of the consequences of the changing strategy are considered and this can lead to waste of time, effort and resource, together with conflict. The slower pace of a deliberate planning process does allow involvement of multiple groups of people and fuller consideration of the consequences of any change. Emergent strategies on the other hand whilst they can incorporate robust scenario planning tend to be applied within organisations that are dynamic and changing on a frequent basis, and as such they need to maintain rapid movement and to anticipate competitor moves without necessarily looking at the consequences in terms of resources. Emergent strategies can lead corporations up cul-de-sacs and leave them with requirements to reverse out of the latest fancy technology or social media that seemed appropriate at the time, but can soon be seen as the wrong move. In which case the organisation has wasted its time and resources, and being small, these losses can be significant. The dynamism of the marketplace is both an opportunity for entrepreneurs as well as a threat. Spotting opportunities requires rapid reaction if they are to gain an advantage before others move in. However there is the likelihood that the opportunities will cease as rapidly as they began. As we have already touched on, there are new business models arising which shun the standard approach to profit maximisation. Firstly the model for many App based operations is to gain as many users as possible through free pricing in order to sell advertising thereafter. For others it is the opportunity to sell ‘in-App’ purchases that is the model. In essence size (of the user base) matters. A variant of this approach is to pay people to use the service! The model is again to gain as big a user base as possible, though the attraction for the user is to earn money or discount. Quidco and Groupon are classic examples here but also check out Qustodian which pays users to review adverts and Apps (Roberts, 2012). Qustodian Read John Roberts, co-founder and MD UK of Qustodian, Qustodian Case Study in The Cambridge Marketing Review, Issue 4, Autumn 2012. You can find more on new business models in Section 3.1.7.
  • 39. Chapter 1: Marketing and Entrepreneurship Innovation for Marketers 25 1.2.2 Is the opportunity worth it? This brings us to the thorny issue of market sizing. How do you estimate the scale of the opportunity when the product has not yet been created? How can you assess the likelihood of potential customers purchasing a product that is not yet a reality? This is a very real problem faced by people such as Steve Jobs at Apple and Hayek at Smart. There are three main responses:  concept testing  involvement of potential customers in the product development process  creation of working prototypes that can be demonstrated. In the standard new product development (NPD) process we would find that the involvement of customers at an early stage is now considered essential. The problem with this approach in highly dynamic markets is that the consumer may not even understand the concept at this stage. If the concept being discussed is not analogous to an existing method or means of solving a problem then the consumer will have difficulty relating to the benefit that is offered. Consider the standard concept of a mobile phone earlier this century. A mobile phone was used to make phone calls and had very little other functionality other than perhaps texting. Consider therefore the concept testing of a single device that would allow you to surf the internet, to take photographs, to play music, etc. The consumer would have a great deal of difficulty in valuing such a proposition (except as discrete devices), or indeed being convinced that such technology was possible. This is where the entrepreneur’s problem really lies. If the opportunity is significant and ground breaking how do you explain this to people who do not understand the problem that would be solved or understand the technology that could supply the solution? The obvious answer here is to educate a group of customers to be in the forefront of, not only market understanding, but the technological solution. These customers will then become your advocates and your mavens who will tell the world about your offering. They will then hopefully take you over the tipping point from fed to main stream. See Malcolm Gladwell's book The Tipping Point: How Little Things Can Make a Big Difference for more on this approach (Gladwell, 2002). In other markets, where technology is not so costly, the prospect of doing market research may well be super-ceded by actually producing the product itself to see customers’ reaction. One of the common considerations when doing market research is the cost versus gain conundrum. Market research can be costly and especially so when it is defining in words and pictures concepts which are better seen in reality. Consequently it can be possible to produce the product (or Beta version) and get customer reaction to the real offering at a lower cost than it would be to carry out market research on a theory in a statistically significant way. However there is also the issue of ‘showing your hand’ to the competition. By carrying out market research or attempting to educate the marketplace in an open way (perhaps by using social media), you are exposing your concept to your competitors and may therefore be giving them an insight into your strategy.
  • 40. Section 1: Entrepreneurial Marketing 26 Innovation for Marketers Market Test vs. Research In some circumstances it can be more effective (and cost effective) to produce trial batches of a new product to test the market rather than carry out market research. Here the cost vs benefit equation of market research is very important. It may be far more expensive to produce the trial batches than undertake some market research, but the result from a ‘real’ market reaction to the product versus a simulated response in a questionnaire may provide far more insight into the consumers’ engagement with the product. Market testing as opposed to questions about a hypothetical new offering is likely to be far more effective with a brand new idea or technology with which consumers are currently unfamiliar. 1.2.3 Collaborate or compete The introduction into the discussion of competitors raises very real issues today. Do we collaborate or compete? Indeed we now have the term ‘co-opetition’ where we do both. For entrepreneurial companies the problem can often be that they see opportunities which they are unable to fulfil. Their resources, manpower and funding may be insufficient or they may be unable to access the full potential of the marketplace with their own resources in a short timescale before their main competitors. This then leads to the idea of collaborating with others who are in adjacent markets or who may offer a simple access route to the new market. 1.2.4 We all have a book in us For many, the idea of writing a book is a long cherished dream. For some, the prospect of setting up a publishing company and revolutionising what is a traditional marketplace has been a very attractive opportunity. However, the writing and publishing of a book is only part of the job, and for many has proved to be the greatest joy then followed by the biggest problem. How do you get the book to market? How do you make it discoverable so that readers can buy it? Few new publishing houses have been established in the last five years despite the massive growth in the software to self-publish and the social media to distribute them. The solution for successful organisations wishing to exploit self-publishing is to find a collaborator in distribution and publicity. The creation of platforms such as Amazon's self-publishing programme has been massively instrumental in revolutionising the sector. The point to note is that the technology alone is not enough to change the market. The obvious benefits of collaboration are that the entrepreneurial company gets assets that it lacks and the collaborator gets products to fill its channel to market, and therefore makes better capacity utilisation of its resources. Today the concept of ‘not created here’ is not really applicable anymore. Companies do not have to do it all themselves and increasingly the quickest way to exploit ways to new markets is to find partners.
  • 41. Chapter 1: Marketing and Entrepreneurship Innovation for Marketers 27 1.2.5 So how do we get to market? For entrepreneurs the challenge is cost and speed. Having seen an opportunity, the challenge is to secure as much of it as quickly as possible with limited resources before the competition. The balance is in not creating a market opportunity that is too big and thereby open to competition. Figure 1.7 The technology life cycle As we have already touched on there is something to be said for first mover advantage. However, in most examples the first mover is not the most successful company in the long term. It is the company that is able to exploit the full marketing mix including distribution and marketing communications that is the winner in the longer term. First movers often create a market and expose the new opportunity to others, but are unable to satisfy all customer requirements, nor are they able to expand and offer new product variations to a hungry market. In today’s environment they seek the exit strategy of being acquired by the ‘big boys’. The obvious solution is the creation of a niche market which is highly defensible and which the entrepreneurial company can make its own. A key way to do this is to gain considerable levels of loyalty from the customers in the niche and thereby defend itself against the appeal of larger corporations who have limited track record in this area. The best method of doing so is obviously through detailed segmentation and the gaining of a very clear understanding of the users’ requirements and preferences in the sector. In addition the use of crowdfunding ties customers in to being defensive of the sector against competitors. For many organisations with an existing product range, movement into new areas is often best achieved through what is termed market adjacencies. This is the move you would see in an Ansoff matrix into new markets and potentially into diversified fields (Ansoff, 1957).
  • 42. Section 1: Entrepreneurial Marketing 28 Innovation for Marketers Figure 1.8 Ansoff’s matrix Ansoff proposed 4 strategies:  Firstly, market penetration i.e. the improved use of the existing marketing mix to gain sales. This often forms the main element of a short term strategy, addressing those obvious areas where the company is not following good marketing practice or causing the organisation to be deliberately more savvy in winning incremental business.  Thereafter there are the options of product development and market development. Here the risks of the unknown need to be considered plus the considerable cost of product or market development. These strategies tend to address gaps in the product range and in overseas or alternative markets.  Finally there is the diversification option. This is the most risky and costly option. However, bear in mind that the most substantial part of Ansoff's book was about diversification and the gradual means by which it can be achieved, it was not about the other three boxes and in this we have some very powerful tools.
  • 43. Chapter 1: Marketing and Entrepreneurship Innovation for Marketers 29 General Motors As an example to illustrate the Ansoff matrix strategies: 1. Market penetration – GM produces and sells cars in the USA 2. Market development – GM sells and then produces and sells cars in Europe 3. Product development – GM provides finance to purchase new cars 4. Diversification – GM develops a manufacturing control system and its own telecoms network. It now manufactures and sells around the world. The essential aspect to consider in using Ansoff’s model for strategy making is the degree of risk inherent in each strategy and the associated costs. You need to understand that the degree of risk rises exponentially from market penetration to diversification. You need to be clear where the risks lie in your proposed strategy. You should also consider the expanded matrix (see Figure 1.9 below) that includes an intermediate step between both existing and new markets and existing and new products, which provides a slightly lower risk option in each case and may enable the company to grow at a more manageable pace rather than immediately taking larger, riskier steps into new product or new market development. Figure 1.9 Expanded Ansoff’s matrix
  • 44. Section 1: Entrepreneurial Marketing 30 Innovation for Marketers In the expanded matrix the first expansions are to find new customers in existing markets or similar (new) markets for existing products. The next expansion is to invest in similar technologies that can be used to develop extended products enabling the company to move into similar (new) markets that are adjacent to the ones already being served. Within this stage one of the options is for the company to become its own customer using its products or components in other products e.g. from cars to tractors – the tractor division consuming components or similar engines from the car division. The final expansions are to move into new products (first for existing markets) and then for new markets. Figure 1.10 An interesting idea! (Photo: CWN 2012) Establishing a presence in adjacent markets can have a negative impact on traditional product sales. This cannibalisation effect eats into the profitability of the traditional product and can cause it to become loss making, so careful management of the introduction of new adjacent products is needed to balance the decline of the PLC of the established product as the new one rises. A contemporary example is the balancing of fall and rise of the iPod and iPhone. As the once hyper-popular MP3 player market is replaced by the same functionality on a Smartphone then the sales of the former decline. The same was true of the decline of the VHS cassette machine on one side with the rise of the DVD player on the other. 1.2.6 Hyper-competitive markets A hyper-competitive market can occur at several stages in the technology lifecycle (when company shake outs happen) but are particularly prevalent at the take-off stage (see Figure 1.7), when the number of firms entering the market is greatest. As the technology or product concept is seen to work in the market and early adoption starts, companies pile into the market place, each with a slightly different offering and all trying to gain dominance. At this time ‘First Mover’ advantage is often lost as more marketing savvy companies steal a lead over technology/product orientated companies. This is a wild time when there are few (if any) standards by which the consumer can judge competing offers. In addition, there is usually limited inter-operability between competing offerings so consumers become embedded with one product. Classic examples have been VHS vs, Betamax; the QWERTY keyboard; and audio cassettes vs. mini disks vs. DAT tapes. In nearly all instances the best technology lost! We will return to ‘First Movers’ in Section 3.1.8.
  • 45. Chapter 1: Marketing and Entrepreneurship Innovation for Marketers 31 1.2.7 New digital approaches Finally in this section we need to consider the use of new digital approaches. The use of the internet allows entrepreneurs to ‘punch above their weight’ and gain exposure and interconnection with markets that would previously only have been possible for large companies. The following is a checklist of areas to consider:  New Product Development (NPD): o Collaborative ideas generator o Crowd sourcing via social media o Fundraising via peer-to-peer lending/crowdfunding o Researching of technologies and consumer behaviour with academia o Researchgate  Product development via internet collaboration e.g. outsourcing of coding, etc.  Launching – Raising awareness via targeted social media and journalist networks  Distribution  Third party sales sites e.g. Amazon, eBay, Etsy, etc. o App building o Social media business sites, e.g. Facebook for business, company pages on Google + and LinkedIn
  • 46. Section 1: Entrepreneurial Marketing 32 Innovation for Marketers
  • 49. Index Innovation for Marketers 233 4Ps of entrepreneurship ..............................34 —A— Adoption of technology .........................7, 14 Aikido strategy.........................................38-39 Ansoff's matrix ................................... 22, 28-29 —B— Belbin's team roles...................................64-65 Born-global organisations.................193, 203 Boundary spanner..............................105, 108 Business models ...................20, 21, 25, 50-51, 83, 87, 148, 152 —C— Change agent............................................211 Change programme................... 1, 163, 201, 222-223, 227-229, 238 Change team.....................68, 222, 228, 230, 232, 236 Co-creation................. 86, 115, 122, 141-144, 191, 196 Collaboration................................. 27, 92, 121 Collaborative structures............................120 Competencies............42, 48, 53, 65, 85, 102, 136, 188, 189, 208, 215, 217 Compliance ............... 224, 228, 237, 239-240 Conflict...................................................69, 133 Co-ordination......................22, 161, 179, 180, 187, 188 Corporate strategy .... 46, 104, 171-173, 189 Cost model....................................................90 Creative climates.......................................106 Creation theory .......................................11-13 Creativity......................... 73-75, 109, 110, 113 Cross-functional teams .....................129, 131 Crowdsourcing ...42, 115, 121, 140, 142, 146 Cultural web........................................229, 237 Customer orientation.........108, 175-178, 182 —D— Design............................................ 33, 122, 222 Diffusion..............................73, 95-97, 136, 137 Discovery theory...........................................11 Diversity ....................69-70, 110, 113, 193-195 —E— Ecosystems ...........................................117-118 Emergent strategy ..................................22-24 Employees ..................168, 181, 183, 191, 212 Empowerment............................................ 171 Entrepreneurial teams......................33, 62-63 Entrepreneurship ................................3, 11, 34 Evaluation....................44, 110, 113, 115, 157, 188, 219, 223 Experimentation ......................... 14, 72, 74-75 —F— Fast follower .............................................92-94 First mover.................................... 17, 30, 92-94 Five factor theory....................................... 232 Forecasting......................47, 52, 59, 61-62, 92 —G— Gen Y/digital natives................................. 191 Globalisation.............................. 117, 201-203 Group development ..............................68-69 Guerrilla marketing ................................33, 36 —H— Herzberg's two-factor theory ................... 169 Human Resource Management (HRM)........ 182-183 Hype cycle ..............................................7, 205 Hyper-competitive markets ....................... 30 —I— Ideagoras ............................................121, 146 Innovation: Advertising............................................... 156 Closed........................................................ 81 Disruptive................................................... 76 Incremental .........................................83-84 Networks................. 115, 117, 140, 147-148 Open.......................................................... 82 Paradigm .................................................. 80 Platform ...............................................73, 79
  • 50. Index 234 Innovation for Marketers Position.......................................................80 Pricing ......................................................152 Process....................................... 79, 153-154 Product ..............................................79, 154 Radical..................................................84-85 Social media...........................................158 Supply chain ...................................147, 155 Sustaining ............................................75, 77 Internal communication .......................38, 70 Internal marketing.............161-164, 181, 187, 190, 198 Internal marketing plan.................... 187-189 Invention ............................................ 73-75, 79 —J— Judo strategy ................................................36 —K— Knowledge management......... 40, 135-137, 161, 173 Kondratieff wave............................................ 5 Kotter's 8 step framework ................. 230-231 —L— Leadership .....................62, 98, 113, 131, 181, 185, 222-224, 226 Learning theory...........................222, 231-232 —M— Macro external environment...............6, 202 Market orientation ....................... 98, 107-108 Market pull................................................85-86 Marketing mix................ 27, 28-33, 36, 38, 47, 49, 58, 162, 187, 190, 193 Maslow's hierarchy of needs............ 166-167 McClelland's motivation needs theory ........ 168-169 McKinsey 7S model ............................ 220-222 Measurement............................. 109, 110, 113 Micro external environment.....................205 Motivation................................... 164, 166, 170 —N— Networking ..................38, 148, 150, 158, 180, 191, 198, 205 New Product Development (NPD)....25, 31, 41, 46, 49, 64 —O— Objectives ................................... 131, 187-189 Ocean strategy.......................................15-16 Online discussion........................................ 144 Organisational structures.................100, 111, 119-120, 148, 197, 211, 220 —P— Partnerships ....................36, 39, 140, 161, 218 PESTER analysis................................................ 6 Porter's 5 forces model.................................. 6 Porter's value chain ...............52-53, 218, 222 Power..................................... 20, 201, 211, 230 Profit.................................................. 54-56, 186 —R— Ratios .........................................................55-56 Recruitment..................98, 123-124, 129, 162, 182, 183, 186, 187, 194, 231 Research commons ...........................120-121 Resistance to change.......212, 227, 233-234 Resource based view (RBV).............218, 222 Resources ......................20, 33, 110, 112, 131, 201, 215, 240 Revenue model......................................51, 88 Rewards ..........................28, 82, 127-128, 167, 170-171, 185, 212, 230 Risk..................................70, 116, 145, 219, 240
  • 51. Index Innovation for Marketers 235 —S— Satisfaction .... 40, 91, 128-129, 153, 163-166, 170, 175, 181, 183-185, 187, 238, 241 Schumpeter.................................................3, 5 Self-managing teams........................ 131-132 Service-profit chain............................184, 186 Stakeholders......................................233, 2325 Strategic alliances.............................. 115-117 —T— Teams........................... 62, 64, 68-71, 123, 194 Technology life cycle ............................30, 67 Technology push .....................................85-86 Transactional leadership...................100, 111 Transformational leadership....... 99-100, 111 —U— Unlearning behaviour................................174 User trials............................................... 140-141 —V— Value chain innovation...............................91 Value Grid.................................................53-54 Virtual teams .........................................62, 194 VRIN framework.................................. 218-219 Vroom's expectancy theory ....................170 —W— Wheel of creativity............................. 109-110 —Y— Yerkes-dodson curve......................... 215-216