Building and Managing Capability for Marketing Innovation - Essay Example

Marketing Innovations Introduction: Business model innovation is becoming increasingly important in a world where competitors can easily imitate strategies. Business model innovation represents a higher order of innovation compared to product or process innovation. Many standard business functions have been undergoing radical transformations. Manufacturing no longer involves the mass production of standardized large lots, but the lean production of customized units of one. Not surprisingly, new voices have been calling for the reinvention of marketing. Today's marketers face new challenges. Consumers are time poor and information rich; they expect better quality, better services, lower prices and more value for their effort and money. New channels are proliferating, traditional distribution channels are consolidating, and competitors now come from all over the world, increasingly, with lower costs and sometimes of higher quality. By tapping multiple sources of competitive advantage, a new business model can help a company leapfrog competition. Companies need to keep examining their business model and their relevance for customers in an era of cutthroat competition. 2. Marketing and Innovation: 2.1. Definition: An innovation represents a significant improvement over what exists. A successful innovation generates a product or service that is valued highly by customers. As Peter Drucker (1988, 149-57) puts it, "innovation is the process of finding a new with a new capacity to create wealth. Innovation may improve the yield of existing resources or may provide more value or satisfaction to customers." Innovation may endow resources with a new capacity to create wealth. A radical process innovation may be much more disruptive than a minor or moderate product innovation. But, in general, it may be reasonable to say that a radical product innovation is more challenging than a radical process innovation. This is because process innovations are typically internally focused and many of the variables are under the organization's control. On the other hand, product innovations are externally focused and markets never cease to surprise. 2.2. Current market challenges: Markets always change faster than marketing. Peter Drucker, (1954) wrote that the business enterprises have two and only two basic functions: Marketing and Innovation. Marketing and innovation produces results; all the rest are costs. Today, companies unabashedly declare their wish to get closer to customers; marketing is actually loosing power to other functions in the corporation. New products are failing at a disturbing rate. Recent studies put the failure rate of new European consumer products at 80% (Nielsen, 1999). Consumer behaviors vary across time and space as well as by contingencies and changing images. In a world filled with choices, there are no sustaining themes or consumption patterns. Some of the reasons for new product failure are: a high level executive pushes a favorite idea in spite of negative market research findings; the idea is good but the market size is overestimated; the product is not well designed; the product is incorrectly positioned, ineffectively advertised or overpriced; the product is not well designed; the product is incorrectly positioned, in effectively advertised or overpriced; development costs are higher than expected; or competitors fight back harder than expected. Poor performance by Western nation firms in the area of new product development reflects excessive emphasis on profit maximization and risk avoidance. 2.3. Role of innovation in marketing: Marketing styles and innovations have an important role in achieving trade objectives. Marketing style may also influence the nature of a firm's approach to innovation. Only after an organization accepts that innovation should be driven by the need to meet customer aspirations rather than financial community's demand for profitability, does it become possible to evolve a more effective innovation management philosophy. Many companies are beginning to realize that their organizations are not really market and customer driven rather than they are product or sales driven. Although a company must be customer oriented in today's hypercompetitive economy, it must also be creative, instead of copying competitors' advantages and strategies, each organization has to build a capability in strategic innovation and imagination. This capability comes from assembling tools, processes, skills and measures that will enable the firm to generate more and better new ideas than its competitors (Hamel, 2000). These companies must watch trends and be ready to capitalize on them, which sometime means putting innovation above risk taking and efficiency. 2.4. Current marketing innovation practices: Current practice intimates that careful market research of customer's needs and creative development of differentiated products or services for well-defined segments will lead to success. In today's fast-changing environment innovation is at the heart of adding value to products and services, stimulating sales growth, and exploiting new markets. It is the art of making new connections, and continuously challenging the status quo - without changing things just for the sake of change.The capability to innovate and differentiate is a key success factor allowing leading companies to strive in the very competitive global textile and fashion environment. Too often, when thinking about innovation in fashion, much of the emphasis is directed towards the creative side. In reality, more often, once a specific marketing positioning is chosen, it is the complexity of manufacturing, supply chain management and servicing innovation that really differentiate winners. To create new ideas requires imaginative thinking. To apply those ideas requires a winning knowledge-oriented organization combined with a properly structured industrial set up. In repositioning and moving up-market, companies are required to face a much greater manufacturing complexity and often need to totally change their manufacturing management models and approaches to properly respond to the needs and requirements of top market segments. Too often, companies believe such a repositioning may be done without a total re-thinking of their manufacturing model. Implementation of a new product-mix "architecture" requires a rigorous redesign of many functions and activities, from material sourcing to sampling and prototyping, from order size optimization to working procedures, from quality control activities to customer service methodology. Strong focus on the specifics of the customer's strategic needs and with the support of a multidisciplinary team of marketing & strategy, design and technical experts companies are bound to succeed. Innovation through individual creativity, adopting and innovating the robust supply-chain channel as well as developing innovative business models and strong brand value is the key to success in a highly changing industry like, Fashion. Fashion industry invests huge sums to create new and original designs each session. Short product life cycle as less than 6 months, is one of the specific characteristics of the industry always keep it innovating its products, processes or the whole business model. Diesel S.p.A. (www.diesel.com)is an Italian based designer clothing company which produces apparel aimed at the lucrative 18 to 35-year-old market. Its innovation in marketing techniques through advertising puts it differently in the market. Diesel has attracted press attention with controversial advertising campaigns. The most recent (Spring/Summer 2007) dubbed "Global Warming Ready" featuring images of cities such as Paris, London and Venice after global warming has taken place. The image for Paris shows the Eiffel Tower surrounded by a tropical rainforest with a man walking a lizard. Prada, S.p.A. .( www.prada.com ) is a well-known Italian fashion company (also known as a "label" or "house") with retail outlets worldwide. Currently Prada is considered one of the most influential clothing designers in the fashion industry. The Prada look has certainly evolved over the years, and Miuccia is credited with many innovations in fabric and design. With all experimentation however, the caliber of the finished product has never wavered. Prada has gone on to open boutiques in dozens of cities and countries across the globe. The distinct silver Prada triangle is a status symbol all over Europe and North America. 2.5. Marketing innovation not as customer's need: Market research seldom leads to such breakthrough innovations (Lynn, Morone and Paulson, 1996). The inspiration for the radical business ideas of market driving firms came from vision arise such as Giorgio Armani of Armani (http://en.wikipedia.org/wiki/Giorgio_Armani) who saw the world differently and whose vision addressed deep-seated, latent, or emerging customer needs. If a definition of fashion is something of the moment, preoccupied with the new, then Armani has spent a career being devotedly anti-fashion. Armani's revolution has taken place 30 years ago, when he took the skeleton out of the traditional Savile Row suit, dispensed with the lining, moved the buttons, changed the proportions of the lapels, softened the shoulders, and invented, as if, hey presto, the deconstructed jacket. He gave us fluidity where previously only stiffness had been. So far it has proved itself to be extraordinarily elastic, and there is no evidence of his clientele deserting him. He has based his entire style on discretion and risen to the height of his profession on that style. Rather than focusing on obtaining market share in existing markets, these market drivers created new markets or redefined the category in such a fundamental way that competitors were rendered obsolete. Ultimately, these firms revolutionalized their industries by "driving" their market rules and all these firms are market drivers for three reasons: They trigger industry breakpoints, which change the fundamentals of the industry through radical business innovation, Visionary rather than traditional market research inspires their radical business concept and Rather than learning from existing customers, they often teach potential customers to consume their drastically different value proposition. 3. Managing marketing innovation: An extremely important issue in enhancing the innovation management process is to optimize the organizational structure and lines of authority for managing the new product development process. Poor track records for innovation may firms have revised their processes for managing new products. In some cases this has resulted in the creation of a new department to manage major product innovation project. Staffed with highly experienced managers, the new department is typically independent of the established products marketing operation, acquires access to resources across the entire organization by the creation of cross-functional teams and reports directly to the main board of the company. Once an organization has accepted that the goal of delighting the customer should drive the innovation process, then the next step is to abandon the classic 'not invented here' syndrome and widen the search for ideas to encompass sources from outside the firm. Relationship oriented firms have the advantage over their transactional counterparts because the former can turn to suppliers and /or customers to identify new opportunities for innovation. 3.1. Factors affecting marketing innovations: Consumers and organizational buyers (such as purchasing agents) are excellent in motivating and evaluating incremental innovation. However customers cannot usually visualize the revolutionary products, concepts or technologies themselves. Market driving organizations, instead coalesce around visionaries, who see opportunities where others do not an opportunity to fill latent, unmet needs or to offer an unprecedented level of customer value. In market driven organizations, generation and development of "the idea" is a combination of serendipity, inexperience and persistence. Major new- to- the world innovation typically occurs because of a highly entrepreneurial individual or organization decides to break free from existing customer satisfaction conventions and offer a radical new solution. This type of innovation is somewhat difficult to achieve in large firms serving established markets because internal orientation is towards discovering new ways to improving the quality value mix for existing products through emphasis on process orientation innovation. In view of this situation, therefore, it is critical for a firm to understand whether their marketing style is compatible with their innovation management aspirations. Companies, which are market drivers often creates havoc in the industry by destroying the industry segmentation that existed prior to the market drivers entry and replacing it with a new set of segments reflecting the new, altered landscape. Almost in every market driving firms, channel reconfiguration initiated the architectural innovation that yielded a unique business system. 3.2 Process of marketing innovations in a company: Successful incumbents often flounder in combining the radical innovations in value proposition and value network, primarily because their well-established new business development processes cannot accommodate the following features of marketing driving ideas. First, market-driving ideas are maverick and serendipitous in nature. Nobody can predict where such an idea will originate or who will generate it. Since most companies organize for efficiency, they react negative to surprises. The vast industry experience of established firms therefore becomes a barrier to driving markets. People cannot easily unlearn conventional wisdom, however irrelevant (Hamel and Prahalad, 1994). Secondly, market-driving ideas involves high risk for every successful radical innovation, in value proposition and value network, probably hundreds fail, when the high failure rate of radical innovation is combined with risk/reward ratio in most large organizations, pursuing market driving ideas is irrational for employees. Thirdly, the new business development process in most firms tends to disfavour and therefore squelch, innovative break through that might create new markets. When competing for attention resources and approval, incrementally innovative projects tend to edge out more radical ones. In most established firms, the new product development and new business development processes favour the triable, reversible, divisible, tangible and familiar. Projects must clearly benefit current customers, move in the organization direction and correspond with R & D investments, corporate image management, sales training and distribution- all of which rarely typify radically innovative offerings. Finally, established companies often perceive that they have too much invested in the status quo to risk destroying the existing industry and market. The greater the threat of cannibalization, the more intense is the resistance to innovative ideas. Although new entrepreneurial firms can single-mindedly pursue a make-or break, market driving innovative projects but the most established firms have too many obligations to chase only radical market driving ventures. They cannot pursue radical business innovation without improving the existing business and devoting much of their efforts to market driven activities, such as incremental innovation and traditional market research. Firms need to be ambidextrous, capable of simultaneously managing incremental as well as radical innovation (Tushman & O' Reilly, 1996). In the large organizations, many employees have radical business ideas. Top management must formalize processes to encourage out-of the box thinking and discover these hidden entrepreneurs within the firm. For example Gucci (www.gucci.com/) is a growing and dynamic business, which prides itself on the spirit and professionalism of its employees worldwide. Gucci continually seeks to attract industry-leading professionals who are entrepreneurial by nature and thrive within a flat, performance-orientated organization. The teamwork among Gucci's employees is the foundation of the company's success. Serendipity has played a role in the development of many radical new ideas. To allow for serendipity, Gucci continues to explore its roots. "La Pelle Guccissima" - entirely original, heat-printed signature leather - has been launched under Giannini's direction, and is destined to become the label's next icon, expressing in its workmanship and impeccable quality a strength that is singularly Gucci's. Louis Vuitton (http://www.louisvuitton.com/) company only markets its product through its own stores throughout the world, which allows it to control product quality and pricing, and to prevent counterfeit products entering its distribution channels. In addition, the company added a single online retailer to sell some of its products. In an effort to prevent counterfeiting, the company closely controls the distribution of its products. To generate new ideas or innovate, hiring a diverse group of people and putting them to work in contrasting pairs always pays creativity demands team diversity on function, age, gender, education, culture, mindset and life experiences. Even firms with a history of prior market-driving activity find it difficult to keep the fires of iconoclastic creativity stoked. Today's successful organizations and market drivers must beware of ossifying into the cautions, market driven be moth of tomorrow. For example, Levi Strauss & Co. (http://www.levistrauss.com/) has taken several promising new initiatives, which include: Revamping its core Levi's and Dockers product lines to make its products more innovative, market-relevant and appealing to consumers; Improving speed to market and responsiveness to changing consumer preferences; Launching the Levi Strauss Signature brand for value-conscious consumers in North America and Asia; Expanding licensing programs to offer more products that complement its core brand product ranges; Improving the economics of Levi's and Dockers brands for retail customers; Strengthening management team and attracting top talent to key positions around the world; Enhancing global sourcing and product innovation capabilities; Reducing cost of goods and operating expenses; Implementing a new business planning and performance model that clarifies roles, responsibilities and accountabilities and improves operational effectiveness. In the established organizations, a radical new concept will typically either fall outside the current business definition and target markets of the firm or threaten to destroy the firms existing business. When people pursue innovative market driving ideas within the existing structure, other priorities often hinder a speedy fruition. Developing an experimenting organization that seeks innovative solutions requires a tolerance for mistakes. Firms must probe and learn in market place, improving with each success. 4. Conclusion: Business model innovation demands the systematic building up of organizational capabilities. One of the golden rules of management is to change proactively when the times are good, not after the crisis has erupted. An innovation-oriented culture is all about creating right attitude among people. An action orientation is one of the most desirable traits needed in innovating companies. Innovation requires flexibility. People who can easily revise their beliefs can only accomplish generating different ideas and seeing old things in new ways. Marketing must become more innovative- but it must do so in a way that will help the organization to make discontinuous leaps. It must provide more business model and business concept innovation by finding underserved markets, developing radically new value propositions and creating new delivery mechanisms. Marketing cannot rely solely on R & D for new product development but also depends on innovative mindset and organization culture. In addition, innovation must be looked more tightly to marketing. History is replete with innovative new products and business ideas that have failed to succeed because of poor marketing. In incremental innovation, marketing's role is clear: Provide customer feedback and market researches well as manage the market launch process. For radical innovation and market driving ideas, the role of marketing is more obtuse and often contrary to deep-seated marketing beliefs. The challenge in these cases is to find a segment of the market for which the radical value proposition is attractive. This initial "innovator" segment is then used as the beachhead from which to improve the firm's attack on the more mainstream markets. So the market driving innovators put the sense of radical innovation starts at the top. Sony's president, Kunitake Ando declares, "Sony's mission is to take our own products obsolete; otherwise somebody else do it." (Nakamoto and Burt, 2003,19). With this attitude everyone in the company, including marketers, must always be aware that customers someone who has yet not found a better alternative. **************************************************************** References: 1. Drucker, Peter F. (1954). The practice of management, New York: Harper Collins, 1st Harper Business Edition published in 1993. 2. Hamel, Gary (2000), Leading the Revolution, Boston, MA: Harvard Business School press, Plume; 1st edition published in 2002. 3. Hamel, Gray and Prahalad, C.K. (1994), Competing for the future, Boston: Harvard business school press, 1st edition published in 1994. 4. Drucker, Peter F. (1988), The discipline of innovation, Harvard business review, Nov.-Dec., pp. 149-57. 5. Lynn, Gary S., Morone, Joseph G. and Paulson, Albert S. (1996), Marketing and discontinuous innovations: The probe and learn process, California Management Review 38:8-37. 6. Tushman, Michael L. & O' Reilly, Charles A. (1996), " Ambidexreous Organisations ", California Management Review 38, No. 4 8-30. 7. Nielsen, A.C. (1999), " New product introduction successful innovation/failure; Fragile boundary," A.C. Nielsen BASES and Ernst and Young Global client consulting, June 24, accessed from the website (www.uni-hamburg.de/fachbereiche-einrichtungen/fb03/ihm/rp18.pdf) on dated 28th Nov. 2007. 8. Nakamoto, Michiyo and Burt, Tim (2003), The father of Play station Envisages the Networked Home, Financial Times, 10 Feb., Pp.19. 9. Informations extracted from the website (http://www.levistrauss.com/) on dated 29th Nov. 2007. 10. Informations extracted from the website (http://www.louisvuitton.com/) on dated 29th Nov. 2007. 11. Informations extracted from the website (www.gucci.com/) on dated 29th Nov. 2007. 12. Informations extracted from the website (http://en.wikipedia.org/wiki/Giorgio_Armani) on dated 29th Nov. 2007. 13. Informations extracted from the website ( www.prada.com ) on dated 29th Nov. 2007. 14. Informations extracted from the website (www.diesel.com on dated 29th Nov. 2007. Read More