Marketing and innovation


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Cours de Klaus Oestreicher

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Marketing and innovation

  1. 1. Resources, Processes and Values Marketing Innovation Klaus Oestreicher
  2. 2. Abernathy & Utterback‘s Model Innovation Rate Time Product innovation Process innovation High rate of new entrants Exit strategies Few survivors Emergence of the standard design Innovators‘ & consumers‘ search for both sides acceptable product features
  3. 3. Innovation Augments Values <ul><li>Innovation is a key driver of businesses </li></ul><ul><li>Innovation has two linkages (Utterback. 1996, Christensen et al. 2004, Markides. 2008) </li></ul><ul><ul><li>Technology & </li></ul></ul><ul><ul><li>Market linkages </li></ul></ul><ul><li>Major recent innovation: the Internet </li></ul><ul><ul><li>It changed the world of businesses and consumers </li></ul></ul><ul><li>New emergent business models </li></ul><ul><ul><li>Dematerialised products </li></ul></ul><ul><ul><li>Online sales </li></ul></ul><ul><ul><li>P2P & c2c </li></ul></ul>Davenport, Leibold and Voelpel. 2006 Transferring experts from inside the firm Hiring experts from outside the firm Total organ. knowledge Market acceptance Per unit manufacturing cost Product reliability Revenues Product attractiveness
  4. 4. The Nature of Innovation <ul><li>But innovation inherits two streams </li></ul><ul><ul><li>Technology & </li></ul></ul><ul><ul><li>Market linkages </li></ul></ul>Technology: (Christensen. 2003, 2004; Christensen et al. 2004; Abernathy et al. 1983; Chesbrough et al. 2008; Chesbrough, 2006; Markides, 2008; Fagerberg et al. 2005; von Hippel, 2005)
  5. 5. Resources, processes & values <ul><li>Resources </li></ul><ul><li>Things & assets, which </li></ul><ul><li>organisations can buy, </li></ul><ul><li>sell, create or destroy: </li></ul><ul><li>Persons </li></ul><ul><li>Technology </li></ul><ul><li>Products </li></ul><ul><li>Equipment </li></ul><ul><li>Information </li></ul><ul><li>Money </li></ul><ul><li>Brand </li></ul><ul><li>Distribution channels </li></ul><ul><li>Process </li></ul><ul><li>Established ways to </li></ul><ul><li>transform </li></ul><ul><li>resources into products </li></ul><ul><li>or services, e.g.: </li></ul><ul><li>Hire or train somebody </li></ul><ul><li>R & D </li></ul><ul><li>Manufacturing </li></ul><ul><li>Planning & budget allocation </li></ul><ul><li>Market research </li></ul><ul><li>Allocation of resources </li></ul><ul><li>Values </li></ul><ul><li>Criteria of prioritisation responsible </li></ul><ul><li>For decision making, e.g.: </li></ul><ul><li>Cost structure </li></ul><ul><li>Revenues </li></ul><ul><li>Attention of customers </li></ul><ul><li>Size of opportunities </li></ul><ul><li>Ethics </li></ul>
  6. 6. RPV Theory (Christensen et al. 2004) <ul><li>Organisations adopt innovation, </li></ul><ul><ul><li>If their resources support it </li></ul></ul><ul><ul><li>If their processes facilitate to do what needs to be done </li></ul></ul><ul><ul><li>If their values allow priorisation of special opportunities </li></ul></ul>
  7. 7. RPV Theory (Christensen et al. 2004) <ul><li>Incumbents </li></ul><ul><ul><li>Are successful with sustainable innovation , since </li></ul></ul><ul><ul><ul><li>Their values prefer them </li></ul></ul></ul><ul><ul><ul><li>Their processes and resources are capable to overcome their problems </li></ul></ul></ul><ul><ul><li>Fail with disruptive technologies , since </li></ul></ul><ul><ul><ul><li>Their values are not appropriate for this type of innovation </li></ul></ul></ul><ul><ul><ul><li>Existing processes do not support to do, what they request </li></ul></ul></ul>
  8. 8. Innovation Needs Markets (Tidd et al. 2008, Oestreicher. 2007) Leadership & will to innovate The future of the market development needs to be addressed proactively  Effectiveness Appropriate structure Disruption will take place: Reengineering RPVs before it is too late (Christensen et al. 2002) Extensive communication Propagation of product benefits according to the customer’s & firm’s Value Chain (Porter. 2004) High involvement in innovation Collaboration: Innovation is rarely a result of a single Party (Hargadon. 2003) : Product  Infrastructure  Ecosystem (Adomavicius et al. 2008) External focus Embracing (hyper-)consumers’ new behaviour as new extended market opportunity (Lipovetsky. 2009) Learning organisation Following customers’ demand from pre-manufacturing to 1:1 market offer  Prosumer (Kotler et al. 2002)
  9. 9. Market Innovation: Mitchell et Coles / Abell / Hambrick and Frederickson Who innovates ? Who are the preferred clients? Where will the firm be active? What is innovated ? Which products and services does the firm offer? How will the firm achieve its objective? When will it be presented? Which is the firm’s value proposition? How will the firm win? Where will it be presented? How will the firm do this effectively? How will the firm obtain its revenues ? Why is it innovated? Which will be the firm’s speed and the sequences of its mouvements? How many RPV are used for presentation?
  10. 10. Overall Significance <ul><li>Each type of innovation requires corporations to develop different strategic answers </li></ul><ul><li>Innovation is different to invention </li></ul><ul><ul><li>Hence R&D is only as good as its transfer rate into value adding market propositions </li></ul></ul><ul><ul><li>Can R&D produce radical innovation competitive advantages are likely </li></ul></ul><ul><li>Market research in disruptive and radical environments fails since there is no market data </li></ul><ul><li>Incumbents flee upmarket, since their RPVs do not support such innovation </li></ul><ul><ul><li>Often they are held captive by customers </li></ul></ul><ul><li>Innovation is an important signal within the concept of permanent change </li></ul>
  11. 11. Vertical Vs Lateral Thinking (Kotler et al. 2005) Lateral marketing is not a replacement for vertical marketing. It compliments it
  12. 12. Questions of a Lateral Marketing Manager (Kotler et al. 2005) <ul><li>What other needs can I satisfy if I change my product? </li></ul><ul><li>What other needs can I incorporate into my product? </li></ul><ul><li>What non potential customer can I reach, if I change my product? </li></ul><ul><li>What other value can I offer my current consumer? </li></ul><ul><li>In what other situation can my product/services be used if I change it?  </li></ul><ul><li>What other products can cover the situation or uses of my current product? </li></ul><ul><li>What else can my product be used for ? </li></ul><ul><li>What other product can be generated stemming from my product? </li></ul><ul><li>What substitute can I generate in other to attack a given product? </li></ul>Kotler 2003
  14. 14. Six Ways to Create a Displacement (Kotler et al. 2005) <ul><li>Substitute </li></ul><ul><li>Invert </li></ul><ul><li>Combine </li></ul><ul><li>Exaggerate </li></ul><ul><li>Eliminate </li></ul><ul><li>Rearrange </li></ul>
  15. 15. The Nature of Lateral Marketing (Kotler et al. 2005) <ul><li>It is a methodological process which follows an ordered sequence. </li></ul><ul><li>It does not always form logical thinking. </li></ul><ul><li>Three steps of lateral marketing </li></ul><ul><ul><li>Choose a focus (product/services) </li></ul></ul><ul><ul><li>Provoke a lateral displacement to generate a gap </li></ul></ul><ul><ul><li>Propose (different) ways to connect the Gap </li></ul></ul>
  16. 16. Conclusion “ In a turbulent age, the only dependable advantage is reinventing your business model before circumstances force you.” Gary Hamel and Liisa Valikangas
  17. 18. Jobs-to-be-done Marketing Innovation Klaus Oestreicher
  18. 19. Some Critical Facts <ul><li>3,000 raw ideas result in just one new product </li></ul><ul><li>Only 1 of 4 products entering development goes to market </li></ul><ul><li>App 90% of new products do not survive the first 12 months in markets </li></ul><ul><li>5% of the remaining new products die in the next 12 months </li></ul><ul><li>A leading economy like Germany is said to waste annually € 40 billion by wrong innovation </li></ul>
  19. 20. <ul><li>Consumer </li></ul><ul><li>markets: </li></ul><ul><li>Geography </li></ul><ul><li>Demography </li></ul><ul><li>Psychography </li></ul><ul><li>Behaviour </li></ul><ul><li>(Attitudinal) </li></ul>(Wind et al. 1972, McDonald et al. 1995, Bonoma et al. 1983) Product Failure & Segmentation Design <ul><li>Business </li></ul><ul><li>markets: </li></ul><ul><li>Demography </li></ul><ul><li>Operating variables </li></ul><ul><li>Purchasing approaches </li></ul><ul><li>Situational factors </li></ul><ul><li>Personal characteristics </li></ul>Reality(?): “… customers don’t know what they want. They never will.” (Brown cited in Baker. 2007)
  20. 21. Product Failure & the Jobs-to-be-done Theory <ul><li>Customers buy products to do a job for them </li></ul><ul><li>Firms should offer solutions looked for since a long time </li></ul><ul><li>Firms use too obvious data </li></ul><ul><li>The risk to disconnect from customer(s) [segments] </li></ul><ul><ul><li>Real needs may be excluded </li></ul></ul><ul><li>Seek for the non-obvious </li></ul><ul><li>The corporate dilemma </li></ul><ul><ul><li>Market research and designs rely on [obvious] data </li></ul></ul><ul><ul><li>Market research in new markets failed up to 550% </li></ul></ul><ul><ul><ul><li>No reliable and valid data exists (Christensen. 2003, Christensen et al. 2003, 2004, Utterback 1996) </li></ul></ul></ul>
  21. 22. Innovation Owns Two Forces: (Abernathy et al. 1983, 1984) Technology & Market Linkages <ul><li>Hyper-competitive Schumpeterian markets challenge physical products: The Wind of Creative Destruction (Schumpeter. 1950) </li></ul><ul><ul><li>Any competitive advantage gained is transitory (D’Aveni. 1994) </li></ul></ul>(Innovation phases & strategic challenges [ based on Utterback [1996])
  22. 23. The Blu-ray Case Opportunities and Struggle
  23. 24. Product Failure & the CAC <ul><li>A conceptual approach may help to reduce the failure rate </li></ul><ul><ul><li>The C ustomer A ctivity C ycle (Vanderwerwe cited in Oestreicher. 2009) </li></ul></ul><ul><ul><ul><li>Breaking jobs-to-be-done down into single steps </li></ul></ul></ul><ul><ul><li>Firms may detect less obvious solutions </li></ul></ul><ul><ul><ul><li>Reduction of those steps </li></ul></ul></ul><ul><ul><li>Firms may find solutions customers look for </li></ul></ul><ul><ul><ul><li>The “non-obvious” – jobs-to-be-done </li></ul></ul></ul><ul><li>( Matzen et al. 2006, Vandermerwe in Kotler. 2002, Christensen et al. 2004 ) </li></ul>
  24. 25. CAC (simplified model)
  25. 26. Blu-ray Does Not Favour New Consumption Patterns <ul><li>The consumer will always abandon an existing solution in favour of a more ideal solution (for him/her) </li></ul><ul><li>What functions (“jobs-to-be-done” [Christensen et al., 2004] ) need to be delivered? </li></ul><ul><li>The pace of technological change facilitates an ideal outcome increasingly often </li></ul><ul><li>But </li></ul><ul><li>Incumbents tend to defend their status quo </li></ul><ul><ul><li>Theory of resources, processes and values (Christensen et al. 2004) </li></ul></ul>
  26. 27. Product Failure & the Transilience Map <ul><li>Subdivision of innovation: </li></ul><ul><ul><li>Degree of impact & effect </li></ul></ul><ul><ul><li>Technology & market linkages </li></ul></ul><ul><li>Product failure may find explanation by not sufficient facilitation of and impact on jobs-to-be-done </li></ul><ul><ul><li>Various degrees from incremental to radical innovation </li></ul></ul><ul><ul><li>Established markets v creation of new markets </li></ul></ul><ul><li>(Abernathy et al. 1983, 1984, Markides. 2008, Christensen et al. 2004) </li></ul>
  27. 28. <ul><li>Blu-ray fights to replace DVD </li></ul><ul><ul><li>It does not do a better job </li></ul></ul><ul><ul><li>It does not facilitate customers’ lives </li></ul></ul><ul><ul><li>Downloads do a better job and facilitate customers’ lives (CAC) </li></ul></ul>Example: Competing at Two Fronts
  28. 29. Blu-ray Is Not the Ideal Final Result … … since it is not any conceivable film, in perfect quality, on any medium, and free of charge” TRIZ theory
  29. 30. Assessment I Performance Time Sustainable Innovation Improved products for established markets Disruption from the inferior end Consumer expectations are exceeded by a business model of lower costs Trajectory of organisational improvements Trajectory of consumer expectations
  30. 31. Assessment II Measurement of different performance Time New market disorganisation Competition against Non-consumption Performance Time Sustainable Innovation Improved products for established markets Disruption from the inferior end Consumer expectations are exceeded by a business model of lower costs Non-consumers Context of non-consumers Trajectory of organisational improvements Trajectory of consumer expectations
  31. 32. Conclusion (Propositions) <ul><li>New products often fail since not doing a job facilitating customers’ lives (Christensen. 2003, Christensen et al. 2003, 2004, Kim et al. 1998, Utterback. 1996) </li></ul><ul><ul><li>Established segmentation misses the non-obvious difficult to detect (Christensen et al. 2004) </li></ul></ul><ul><ul><li>Consumers are increasingly erratic, nomadic, volatile, unpredictable, fragmented and unregulated (Lipovetsky. 2009) </li></ul></ul><ul><ul><li>But interlinked by a common experience, a shared emotion, the same passion (Lipovetsky. 2009, Rémy. 2009) </li></ul></ul><ul><li>“ Technologisation” & Consumer Culture Theory </li></ul>
  32. 33. Conclusion (Propositions) <ul><li>Firms do not sufficiently </li></ul><ul><ul><li>Differentiate by technological implications </li></ul></ul><ul><ul><li>Respect technology and market linkages </li></ul></ul><ul><ul><li>Consider impact on own established resources & capabilities </li></ul></ul><ul><li>Questions to ask: </li></ul><ul><ul><li>Which are the effects and impact of existing or substituting products against own new development(s)? </li></ul></ul><ul><ul><li>Which customer segments get a job done they look for? </li></ul></ul>