Tag Archives for innovation

The Brew-off: Starbucks vs. Green Mountain

Green logo used from 1987-2010, still being us...

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Adage reports that Starbucks will enter the single-serve coffeemaker market this holiday season. Green Mountain has largely created the category and continues to dominate it, followed by lesser known players Tassimo, Senseo, Nesspresso. Will this work for Starbucks?

Likely Starbucks will sell units and Green Mountain dropping 15% in trading after the announcement signals The Street agrees, but I think they are missing a core ingredient to this business model — Selection.

Mr. Schultz [CEO of Starbucks] pointed out that the at-home coffee machine will not cannibalize Starbucks’ own retail business. Also, he said, while Starbucks plans to offer only Starbucks-branded coffee for now, “we reserve the right to open the system to others, and we have not made that decision as of today.”

Without choice besides Starbucks, where does Mr. Schultz see volume coming from? Looks to me to be a “finger in the eye” of Kraft who distributes the Starbucks brand coffee in grocery channels. Shifting consumers from a bagged coffee to predictably higher margin per serving single-serve option will take a sizable investment from Starbucks.  This is a challenged business proposition with sizable investment to limit choice and market size this early in the game.

Keurig, the Green Mountain owned device, offers K-Cupswith almost every imaginable flavor or branded product from Starbucks to Dunkin Donuts to now iced tea and coffee products. What Keurig recognizes is that this is a network effect provided by the physical device and you have to serve the whole house along multiple need states (e.g. morning start caffeine, afternoon relaxation)  to generate growth.

I am curious to see where Schultz and Starbucks takes this and whether they see the opportunity here to create a real shift in how they have operated — from exceptionally designed, controlled choices for consumers to allowing the consumer to drive choice in their home.

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Kindle Fire vs. Apple iPad: A Story in Innovation Strategy

First, after a year away I am back to blogging. More to come on what I have been up to for the last year, but until then, please read on…

After reading tons of stories on the recent Fire launch and why we should “thank Amazon”, I found myself asking a different question: What is the innovation rationale for each product and will the Fire win or lose?

Wikipedia

Well it is hard to say for certain, but I will take some leaps to explain one view. It would seem that Apple had been eyeing the tablet space for some time and watched as other companies from HP to Toshiba had tried. In 2005, I was party to meetings where Intel and Asus were shopping 7-9″ screen devices to all manufacturers trying to drum up support for the form factor and their respective piece parts. What makes Apple’s story seemingly unique is that the consumer and the experience seemed to be at the heart of innovation as oppose to the previous attempts that were PCs made to look like a tablet (See picture of early HP design).

Why is this important? Well knowing the rationale for the innovation may give us all a window into how successful each will be. If Apple was starting with consumers and trying to build a better experience that was neither satisfied by the line of computers or new iPhone, what was Amazon’s rationale?

Amazon’s rationale seems to be more focused on a retail-dominate strategy, trying to increase the points of purchase (or store fronts). This is to say that Amazon as a e-commerce retailer has dominated its channel as the Best Buys and Circuit City’s of yesteryear did in physical stores. With increasing consumption and purchase occuring in mobile platforms versus on a computer, Amazon’s business model is under attack, especially in digital consumption. The primary competition in mobile purchase is Apples iTunes and App Store and with well over 100 million iPhones on the global market and 25 million iPads, Amazon has a lot of ground to make up.

To be fair, Amazon may feel that price conscious consumers will flock to the device. This is probably true for a mass market approach that make great holiday gifts, but will they still be happy with the device 6 months from now? As their recent earnings announcement and great analysis points to lower margins for some time to come and the company alludes to a “razor-razor blade” approach to making money, the strategy will only work if consumers continue to use the device and purchase at or above those that purchase the iPad and other devices. Is Kindle Fire really going to attract the most valuable consumers of digital content?

As a final rap up, the innovation rationale has delivered two different approaches to business that will make a great case study over the next year. Keep watching as consumers cast their votes (purchases). My bet is Apple wins and the Fire may turn out to be the next Zune.

Innovation as a growth engine: more than new products

A Redbox kiosk located at a Walgreens store in...
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This is the third in a series of short posts related to The CMO Agenda research. Informed by recent CMO conversations and CMG Partners‘ collective experience helping top marketers develop marketing strategy, we have compiled a list of seven ideas or jump starters for further conversation. These are meant to spark discussion, ideas, and action as we all enter a difficult 2009.

For many companies, innovation means creating a new product, but this is only one of many potential growth drivers. As a lead marketer, your job is to get close to your customers and find other ways to innovate and deliver value – through service, new methods of distribution or new avenues of consumption.

How can you achieve this level of innovation?

A consistent and constant review of your business model and practices can reveal many new opportunities. In other organizations, culture is the driving force which allows for employees to surface new ideas. I recently heard from Jeffrey Phillips, VP of Sales and Marketing for OVO and author of Make us more Innovative. Jeffrey focuses primarily on innovation processes necessary to build a sustainable innovation capability.

Some examples of innovation:

A recent example of a innovative concept I heard was at an HVAC equipment manufacturer. The company leadership decided that they are in the “refrigerated air” business vs. the air conditioner product business. This shift is thinking has many different implications from R&D to value delivered. One idea for commercializing this concept is to sell the service of refrigerated air like a utility. This would increase the number of touchpoints with customers and involves a deeper understanding your customers’ businesses to deliver on this new business model. While this is an innovative idea, it has not been commercialized yet which should be the yardstick for actual innovation.

You need creativity and invention, but until you can connect that creativity to the customer in the form of a product or a service that meaningfully changes their lives, I would argue you don’t yet have innovation. – A.G. Lafley, CEO of P&G in a recent BusinessWeek Interview

Another example that has been commercialized and can be seen in a grocery store near you — Red Box.  Red Box has redefined the video store rental model and all for $1 per day per movie. (Disclaimer: I use and love Red Box.) Red Box has a great value proposition that makes it difficult for the troubled Blockbuster to compete and is now in the sights of the CEO at Netflix as he states they are the chief rival now.

Mirror post at cmgpartners.com/blog

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Happy New Year, 2009 Marketing Trends

New Year's Eve fireworks in India
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Happy New Year to all! I have taken an extended leave from the blog, but am anxious to get going again.

With the new year comes lots and lots of predictions across every subject you can imagine. This year is destined to be tough for marketers as the economy most likely has a very slow recovery and consumers are ever so cautious. Because of this trend I doubt we will see much exciting happen in the form of new revolutionary ideas, at least from the big companies. Incrementalism will reign this year!

I do see three broad trends that have started to take shape and most likely are here for the foreseeable future and likely define the areas of innovation and creativity in 2009.

Micro and the resurgence of niche: This is all about the long tail and those small players that can carve out profitable niches be being different. Small players will thrive if they can crack the code on the next two trends.

Experience and engagement: As the old way of “push” marketing continues to degrade and turn off consumers, two-way communication and create a dialogue with your audience will be a necessity. I think this year the best of the best in this category will go way beyond social media tools to achieve this and actually provide Ritz Carlton type of personal service.

Consumers have more power: Customers are more educated that in the past and can now see through the veneer of differentiation whether on the cereal aisle or in large capital expenditures. What is key is for marketers and sales people to change the way they market and sell to ensure this trend is respected, understood. If it is ignored, cusotmers will not treat you kindly!

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Our customer minds are an illogical place

New email I just read from MarketingProfs.com looked at a 2004 study that shows consumers perceive longer packaging to have more volume vs. containers that are shorter. They also go on to highlight that unique packaging vs. standard bottles, etc. has the same effect. This is where a lot of “innovation” in consumer package goods is taking place and has taken place recently. I thought it was interesting and wanted to share…

Link to read the email: http://www.marketingprofs.com/news/customer-behavior/index.asp?nlid=641&cd=dmo121&adref=NcbW4a8