Profitable Growth Through Strategic Innovations:  New Businesses, Partnerships, and Acquisitions                Jeff Golds...
WWW.ACUPOLL.COMConfession: I do not meet the #1 criterion fora highly acclaimed speaker•   I’m not from out of town•   How...
WWW.ACUPOLL.COMFocus Today on ROI• Not sexy … but powerfully important• Strong idea and a great product often are not enou...
WWW.ACUPOLL.COMUnderstand Your AudienceRaise Your Hand If You Have…•   Analyzed a market to identify a big new business op...
WWW.ACUPOLL.COM4 Strategies for High ROI Innovation1.   Attractive Markets               #1 Decision for finding profits a...
WWW.ACUPOLL.COM                                                         CLIFF NOTES ONLY4 Strategies for High ROI Innovati...
WWW.ACUPOLL.COM1. Market Selection Sets the Stage for Success  Often the single most important decision you’ll make      •...
WWW.ACUPOLL.COMWhy selling products to beauty salons was agreat opportunity…•   Unlikely millionaires•   Weak competition•...
WWW.ACUPOLL.COMStrategic Analysis to Pinpoint Great Markets  • Understand fundamentals – The 5 Cs      • Consumers, custom...
WWW.ACUPOLL.COMStrategic Analysis to Pinpoint Great MarketsTranslate platforms to products … the devil’s in the details of...
WWW.ACUPOLL.COMConsider How Opportunities Fit Your Portfolio                                             Greater Risk     ...
WWW.ACUPOLL.COMSuccessful Company Example:   Investment vs. Return*                                           *Results var...
WWW.ACUPOLL.COM2. The Power of Dramatic & Desirable Differences  Get the concept right!  •   Febreze failed twice before n...
WWW.ACUPOLL.COMWhat’s in a Concept?The unique & appealing proposition defining why target customers should buy your produc...
WWW.ACUPOLL.COMKnowledge Drives Odds of SuccessExpertise & Research Increase Potential … and Big Companies Invest in Both!...
WWW.ACUPOLL.COMKnowledge Drives Odds of SuccessExpertise & Research Increase Potential … and Big Companies Invest in Both!...
WWW.ACUPOLL.COMDon’t Be Afraid of a NicheOr to Zig When Others ZagBusinesses often don’t end up where they start:Special K...
WWW.ACUPOLL.COM3. Understand Components of Volume                                                         Example:Fourt-Wo...
WWW.ACUPOLL.COM4. Trial Generation Costs   Think Like a Direct Marketer!   Direct marketers are hawks on infomercial ROI! ...
WWW.ACUPOLL.COMCautionNever Believe …    “This is a big idea because all we need is 1% of a kabillion dollar market”      ...
WWW.ACUPOLL.COM5 Ways to Reduce Trial Generation Costs    1. Sales-   Is there someone whose customers may want or be requ...
WWW.ACUPOLL.COM  5 Ways to Reduce Trial Generation Costs  4. Trademark     Does someone have a trademark or source of cred...
WWW.ACUPOLL.COM4 Strategies for High ROI Innovation1.   Attractive Markets               #1 Decision for finding profits a...
WWW.ACUPOLL.COMCost of Funds Affects ROI and is Highly Variable•   What does $1 cost?     – Consumer Loans:        • Payda...
WWW.ACUPOLL.COMA Little About AcquisitionsSome Advantages• Often a proven business model• Visibility of current returns   ...
WWW.ACUPOLL.COM    Acquisitions Can Be Appealing Relative to    New Brand/Business Odds of Success•    Startup and new bra...
WWW.ACUPOLL.COMTips for Acquisition Search1.   Clearly define and align on objectives/criteria        • Includes why acqui...
WWW.ACUPOLL.COM                                                                                              WWW.ACUPOLL.C...
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Driving Profitable Growth through Major Strategic Innovations by Jeff Goldstein of Ingenuity Advisors, LLC and AcuPOLL Precision Research Inc.

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In recent years it has become evident that strategic innovation is critical to corporate success and even survival. Achieving success with new brands, flankers, business units, new ways to-go-to market and change the game licenses and partnerships requires deeper and more objective assessment of the consumer, the category and the competition. Jeff will discuss how profitably managing ROI on innovation is really about managing the risks of learning, fully understanding the costs of acquiring and retaining new users, and most of all, executing the core innovation elements with excellence. Mr. Goldstein’s presentation will provide an overview of key concepts for success in major new businesses, licensing/partnerships and acquisitions and will reveal common mistakes made by innovation managers and entrepreneurs. He will also discuss 5 models for licensing/partnerships, overlooked components of volume and thinking like direct marketers.

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Driving Profitable Growth through Major Strategic Innovations by Jeff Goldstein of Ingenuity Advisors, LLC and AcuPOLL Precision Research Inc.

  1. 1. Profitable Growth Through Strategic Innovations: New Businesses, Partnerships, and Acquisitions Jeff Goldstein, President AcuPOLL Precision Research, Inc. October 18, 2012 WWW.ACUPOLL.COM
  2. 2. WWW.ACUPOLL.COMConfession: I do not meet the #1 criterion fora highly acclaimed speaker• I’m not from out of town• However, I do have diverse experience: – Discovered, invented, patented, trademarked, developed, funded, launched, searched, bid, acquired, licensed, grown, and profited from innovation Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 2
  3. 3. WWW.ACUPOLL.COMFocus Today on ROI• Not sexy … but powerfully important• Strong idea and a great product often are not enough• Tough economy, and competitive maturing markets, require a more strategic approach Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 3
  4. 4. WWW.ACUPOLL.COMUnderstand Your AudienceRaise Your Hand If You Have…• Analyzed a market to identify a big new business opportunity• Developed a written concept for an innovationStand If You Have…• Conducted quantitative market research on your concept, product, or package IF YOU ARE SITTING, PLEASE WRITE THIS DOWN. (800) ACU-POLL … we’d be happy to help!Raise Your Hand If You Have…• Been involved with a volume forecast• Worked on a direct response or infomercial campaign• Interest in raising money to invest in a new business or innovation• Interest in tips on acquisitions Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 4
  5. 5. WWW.ACUPOLL.COM4 Strategies for High ROI Innovation1. Attractive Markets #1 Decision for finding profits and managing risk2. Strong Concepts Dramatic & desirable differences3. Strong Volumetrics Lessons from Snuggies4. Trial Generation Costs Think like a direct marketerIf there’s time and interest …1. Funding innovation How much does $1 of funding cost?2. Growth acquisitions Tips for acquisition search Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 5
  6. 6. WWW.ACUPOLL.COM CLIFF NOTES ONLY4 Strategies for High ROI Innovation1. Attractive Markets #1 Decision for finding profits and managing risk2. Strong Concepts Dramatic & desirable differences3. Strong Volumetrics Lessons from Snuggies4. Trial Generation Costs Think like a direct marketerIf there’s time and interest …1. Funding innovation How much does $1 of funding cost?2. Growth acquisitions Tips for acquisition search Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 6
  7. 7. WWW.ACUPOLL.COM1. Market Selection Sets the Stage for Success Often the single most important decision you’ll make • Play where you can win • Defines risk and return George Foreman Grill Over 100 million sold since 1994 Est. $200 million paid to George Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 7
  8. 8. WWW.ACUPOLL.COMWhy selling products to beauty salons was agreat opportunity…• Unlikely millionaires• Weak competition• Fragmented distributors• Great margins …until marketplace changes ruined it! Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 8
  9. 9. WWW.ACUPOLL.COMStrategic Analysis to Pinpoint Great Markets • Understand fundamentals – The 5 Cs • Consumers, customers, competition, company, and economic characteristics • Understand trends Wayne Gretzky: “skate where the puck is going, not where it’s been” Aging Beauty Look Younger Healthy Living Nutrition Fitness Self-Treatment Germ-Free Natural Organic Green Chemical-Free Specialization Ethnic Multi-Benefit Devices Licensing Celebrity/Music/Sports Endorsement Convenience Design Value Premiumization Pets as People … and other category-specific themes Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 9
  10. 10. WWW.ACUPOLL.COMStrategic Analysis to Pinpoint Great MarketsTranslate platforms to products … the devil’s in the details ofthe proposition!The Corporation in the Clouds story• 12 Platforms … 200 ideas … “but I don’t see a product I can launch!”• Demographics• Competition• Company Competencies Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 10
  11. 11. WWW.ACUPOLL.COMConsider How Opportunities Fit Your Portfolio Greater Risk “Innovation Ambition Matrix”NewMarkets/Channels 2 4ExistingMarkets/ 1 3Channels Existing New Products Products “Managing Your Innovation Portfolio,” Bansi Nagji and Geoff Tuff, Harvard Business Review, May 2012 Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 11
  12. 12. WWW.ACUPOLL.COMSuccessful Company Example: Investment vs. Return* *Results vary by industry Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 12
  13. 13. WWW.ACUPOLL.COM2. The Power of Dramatic & Desirable Differences Get the concept right! • Febreze failed twice before national success Trial • Odor Elimination test market Low • Fabric Refreshing / Freshness test market Med • Cleans Away Odor national launch High More recently, “a breath of fresh air” grew global share 1.5 pts. last quarter! Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 13
  14. 14. WWW.ACUPOLL.COMWhat’s in a Concept?The unique & appealing proposition defining why target customers should buy your product orservice instead of competitors’1. Customer Insight – The existing customer belief that illustrates the problem or unmet need your product addresses. It can reflect strengths, competitor weaknesses, habits, emotional concerns or wants, etc.2. Benefit (#1 in importance) – The functional or emotional promise you make that addresses the insight and motivates purchase3. Reason-to-Believe supports or explains why customers should believe this promise Scope Example Insight: The worst bad breath is in the a.m. and results in 80% of consumption Benefit: Scope fights morning mouth, the worst breath of the day RTB: Scope has two powerful ingredients that kill 99% of bad breath germs Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 14
  15. 15. WWW.ACUPOLL.COMKnowledge Drives Odds of SuccessExpertise & Research Increase Potential … and Big Companies Invest in Both!• Fundamentals: demographics, psychographics, needs, language, psychology, etc. • Focus groups and ethnographic research • Image, habits, practices, usage, attitudes, segmentation surveys• Applications: insights, concepts, advertising, product performance, packaging, promotions • In-market testing Odds With Expertise ofSuccess Without Expertise Amount of Customer Research Interaction Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 15
  16. 16. WWW.ACUPOLL.COMKnowledge Drives Odds of SuccessExpertise & Research Increase Potential … and Big Companies Invest in Both!• Fundamentals: demographics, psychographics, needs, language, psychology, etc. • Focus groups and ethnographic research • Image, habits, practices, usage, attitudes, segmentation surveys• Applications: insights, concepts, advertising, product performance, packaging, promotions • In-market testing Odds With Expertise ofSuccess Without Expertise Amount of Customer Research Interaction Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 16
  17. 17. WWW.ACUPOLL.COMDon’t Be Afraid of a NicheOr to Zig When Others ZagBusinesses often don’t end up where they start:Special K Aveeno Neutrogena Strivectin Pantene Arm & Hammer Can you own a niche and unique benefit, and earn while you learn?Febreze/Swiffer reached $1B in categories without competition… where they could most easily create a dramatic and desirable difference! – Febreze reinvented home fragrance for fabrics • Only then expanded into plug-ins, air sprays, candles, and cars – Swiffer reinvented cleaning for the convenience world, eliminating mops Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 17
  18. 18. WWW.ACUPOLL.COM3. Understand Components of Volume Example:Fourt-Woodlock Model Snuggies vs. Pedegg# Target HHs% ACV Distribution Difference between accessible and available% Awareness Marketed or inherited (foot traffic, ease to find, ease to notice)% Convert to Trial Driven by dramatic/desirable difference!# and price per first purchase # Triers & Trial $ Revenue% Repeat Rate Critical for growth over time# and price per repeat purchasePurchase frequency Can be more important than % Trial* # Repeaters & Repeat $ Revenue *Febreze example Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 18
  19. 19. WWW.ACUPOLL.COM4. Trial Generation Costs Think Like a Direct Marketer! Direct marketers are hawks on infomercial ROI! Revenue $x COGS/Other -$y They make sure they can cover trial generation costs Ad cost -$z Profits $P They creatively extend their revenue models • Regimens & add-ons/upsells • Recurring purchases • Retail halo / As Seen on TV You MUST have a visible path to ROI on trial generation! Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 19
  20. 20. WWW.ACUPOLL.COMCautionNever Believe … “This is a big idea because all we need is 1% of a kabillion dollar market” The Seafood De-Sheller Story Trial Generation Question: What does it cost to reach, interest, and close a sale on this 1%?!!! Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 20
  21. 21. WWW.ACUPOLL.COM5 Ways to Reduce Trial Generation Costs 1. Sales- Is there someone whose customers may want or be required to Funneling use your products or services?Partnerships – Dunnhumby and Kroger, Macy’s, Home Depot – Your Encore and P&G, Eli Lilly, etc. 2. Co- Does someone in a related category deliver or reach your Promotion prospective customers? – Tide samples in Maytag washers – LifeLock at Office Depot; America Online discs everywhere – Prenatal vitamin recommendation in pregnancy test kit instructions – Intel Inside – Digital affinity and lead gen programs 3. Joint Could a partnership bring together complementary Ventures capabilities? – P&G + Clorox Glad brand joint venture – Catalina Nielsen joint venture Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 21
  22. 22. WWW.ACUPOLL.COM 5 Ways to Reduce Trial Generation Costs 4. Trademark Does someone have a trademark or source of credibilityor Other Brand that would make your product more successful? License or – License: Tide Laundry Essentials, Febreze air filters, Mr. Clean Car Wash, SpongeBob Cheese Nips, Larosa’s Garlic Bread Endorsement – Co-Brand: Crest + Scope, Tide + Downy, Kraft Bagelfuls with Philadelphia Cream Cheese – Endorsement: ADA Seal, celebrity endorsement 5. Co-Location Does someone have a location that would make your product or service more successful? – Fast Food: Taco Bell + KFC, Starbucks in Target, McDonald’s in Walmart, Subway in gas stations – Sephora in JC Penny, Sunglass Hut in Macy’s – ATMs in hotels and casinos – Great Water Capital and Dinsmore & Shohl – Nail salons in airports Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 22
  23. 23. WWW.ACUPOLL.COM4 Strategies for High ROI Innovation1. Attractive Markets #1 Decision for finding profits and managing risk2. Strong Concepts Dramatic & desirable differences3. Strong Volumetrics Lessons from Snuggies4. Trial Generation Costs Think like a direct marketer and collaborate!If there’s time and interest …1. Funding innovation How much does $1 of funding cost?2. Growth acquisitions Tips for acquisition search Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 23
  24. 24. WWW.ACUPOLL.COMCost of Funds Affects ROI and is Highly Variable• What does $1 cost? – Consumer Loans: • Payday lender, credit card, home equity, margin, pledged asset loan• Rate % depends on the source, pitch quality, and amount you shop – Sources: friends/family, un/sophisticated angel, venture firm, mezzanine, etc. – Pitch quality: management team, evidence of opportunity, proven and scalable revenue model, market size, margin on acquired users, etc. – Amount you shop: Chicken Soup for the Soul met with >100 publishers!• ROI objectives vary with the cost of funds, from a few % to 25-35% Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 24
  25. 25. WWW.ACUPOLL.COMA Little About AcquisitionsSome Advantages• Often a proven business model• Visibility of current returns – Much less risk than a new business of investing and achieving $0• May provide brands, scale, competencies or other benefits• Buying a “sellable” assetSome Disadvantages• Feasibility and timing are unpredictable (i.e. moon and stars must align)• Seller expectations & competition set the price Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 25
  26. 26. WWW.ACUPOLL.COM Acquisitions Can Be Appealing Relative to New Brand/Business Odds of Success• Startup and new brand success rates are extremely low• P&G is the gold standard for new brands in CPG but has many failures – Developed 32 in ’80s: 16 launched (50%), 8 national (25%), 5 profitable early ‘90s (16%) – Many failures in ’90s/’00s: HomeCafe, Fit, Torengos, Dryel, Thermacare*, Kandoo*, Culinary del Sol, Juvian, etc. *Never reached expectations, subsequently sold Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 26
  27. 27. WWW.ACUPOLL.COMTips for Acquisition Search1. Clearly define and align on objectives/criteria • Includes why acquire (sales, brand, technology, etc.)2. Focus on attractive markets3. Focus on opportunities that are dramatically and desirably different4. Understand how company competencies fit5. Formulate new vision before assessing opportunity6. Determine what it’s worth … and when to walk Copyright © 2012 AcuPOLL Precision Research, Inc. All Rights Reserved. 27
  28. 28. WWW.ACUPOLL.COM WWW.ACUPOLL.COMFuture Interest Areas• Innovation Success Models• Schemas, Conceptual Blends, and Frames of Reference• Any reason to call us at (800) ACU-POLL• The 3 Gs: Grow, be Grateful, and Give backQuestions? Copyright 20122012 AcuPOLL Precision Research, Inc. Copyright © © AcuPOLL Precision Research, Inc. All Rights Reserved. 28

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