Innovation as a growth engine: more than new products

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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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CPG vs. Service Marketers: skill-sets and executive hiring decisions

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Recently, I posted a question on LinkedIn in a effort to get some outside opinion on marketing skill-sets and how that is driving hiring decisions. While I was underwhelmed by the number of answers I received — three in total — I was intrigued by two responses.

My Question: What are the pros and cons of hiring a traditional CPG marketer vs. a Service Marketer? More specifically, what is the rationale you are using to make this decision.

I further referenced the following examples: CPG – P&G, Unilever, Kraft;  Services – iTunes, Scottrade, Netflix. Primary basis in these examples was a consumer-to-consumer apples to apples comparison.

The Responses:

Tough question – The necessity to qualify past performances and the other integral parts of the hiring process can’t be overlooked, but on a macro level this is [my humble opinion].
The traditional service marketer is able to move left to right brain more fluidly, based on the career choice to associate themselves with something that is fundamentally “untouchable”. The career progression of being successful in any one of your service company examples shows a high level of measurement as well as creativity. In my experience, the ability to think on both sides of the brain has become integral to any top performing marketing exec.
Matt Gill, Senior Vice President, Pile and Company- Executive Recruiter for Marketing Talent

Your service examples are really consumer products in that they are tangible goods. However, to answer your question: a traditional CPG marketer is usually working with a tangible product of defined value and generally a defined brand image. He/she is used to dealing with measureable goals and defining strategies against share of market objectives. Tactical tools are known and also quantifiable, such as promotions, packaging, collateral support. A good CPG marketer knows how to use these tools to best effect. On the other hand, a service marketer is selling something that is usually very intangible and tough to measure in terms of cost and value to its intended users. As Matt says, there is more need for both the left and right side of brain to come up with strategies and programs that will be of relevance to the user. In my experience, successful marketers of intangible services can more easily and effectively cross over to traditional product marketing. It is much harder for a traditional CPG marketer to cross over to selling intangible services. – John Fricks, CEO at Frix Group – Marketing/Strategists

The Bottom Line:

Flexibility, versatility are the highlights in favor of service marketers provided by Matt and John. Matt’s point that top marketing executives need the “ability to think on both sides of the brain” is more associated with service marketers. CPG marketers need to demonstrate they can sell what you can not see — a great analogy to selling the value you can create for an organization.

At CMG Partners, we have been conducting qualitative research with a number of top marketing executives across a number of industries and find that those with a “seat” at the executive table are best at working across the enterprise to drive transformation or change that enables growth.

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Service brands: vision of the future?

As a marketer and consultant, I always find it difficult to explain what a brand is to people that are not familiar with the concept (e.g. my mom). This task of explaining things becomes increasingly difficult when the brand is not something you can touch or feel like a service.

Service Brands are populating the landscape today and I feel a strong desire to learn from them as many other marketers should. Why? Because the idea of customer engagement, loyalty, or the idea of employees living the brand are old news to the service brands that get it right. Sure, the work is never done, but they are light years ahead of the consumer packaged goods companies.

I have put together the below diagram as an example of how the landscape of product-to-service brands is complex:

Examples Service Brand Landscape

The Bottom Line:

Three brands to take a page from are: Scottrade, Netflix, and Red Hat.

  • Scottrade has mastered customer service in my opinion. I must admit that I have a couple of accounts with them and within hours of making a major transaction on-line the local office (1 mile away) calls to make sure everything went as I expected.
  • Netflix mastered a simple concept of adapting to consumers lives and taking away the hassle of the rental store and late fees. Simplicity is their virtue. The next chapter of on-line and downloads for movies will likely test them.
  • Red Hat sells “free software”. In the early days, they boxed free software and made it easy to buy. Now they are leading and prospering in the enterprise business software arena and wining more than their fair share. The company’s culture of transparency and openness that is shared with the open-source community which fuels the software is Red Hat’s greatest asset. How else could you actually sell free stuff?

Links of interest:

Chris Grams Blog – Senior Director of Brand Communications & Design, Red Hat

The Official Netflix Blog

Scottrade YouTube Channel

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TiVo on the slide; is this a death spiral?

In TiVo Swings to a Profit posted by The New York Times, it is clear the TiVo continues to shrink. It is a sad day for the small technology brand that could. Subscribers are now at 3.5 million from a peak of 4.4 million. Net subscriber additions are down and have been shrinking all year long.

Net Adds for TiVo Service as reported by tvbythenumbers.com

Net Adds for TiVo Service as reported by tvbythenumbers.com

The cable companies are the major immediate threat and have been, but in the larger context Apple (iTunes), Hulu, YouTube and other similar services are changing the consumption behavior for video content.

See my last post Netflix & TiVo join forces, it does not seem TiVo is positioned well even in the strategies they are employing to get out of this tough spot. It is time to rethink the business model.

The Bottom Line:

TiVo needs to pull themselves out of this death spiral, but it will take grand action not incrementalism. They could become a software and information services provider for the competition (cable and satellite TV providers). Cable companies love to outsource this type of thing and they have been on a whirlwind of deals to work together in wireless communications, advertising networks, and interactive TV initiatives.

Netflix & TiVo join forces

The Wall Street Journal just ran a story on the collaboration between Netflix and TiVo (http://online.wsj.com/article/SB122533284014583011.html).

This is a brillant play by both companies….

For Netflix:

  • Increased distribution to an avid fan base of TiVo users, who are by definition lead technology users (assuming they are not one in the same)
  • Providing a home entertainment device option for streaming content (Apple is looming with their Apple TV solution coupled with iTunes software)
  • Provides a proof point for the satellite and cable companies to deliver their content library

For TiVo:

  • Provides relevance again… the cable companies are really eating their lunch
  • Provides value by association (to something that is cool now) to an avid fan base
  • Differentiation in a commodity consumer electronic space

The bottom line: I think Netflix gets more out of this partnership strategically and could position them as a content supplier “middle man” between the movie studios and those companies that own the living room (e.g. Cable and satellite companies). If Netflix does not capitalize on this though, the TiVo outlet will probably not perform to the level that makes this a breakeven deal.