Improving Marketing’s Role
in Innovation
Philip Kotler
GE-Crotonville
May 12, 2011
Agenda
• Innovation is a Necessary Strategy for Growth
• How Some Companies Are Pursuing Innovation
• Winning at Innovation: The A to F Model
• Marketing’s Role in Innovation
Innovation as a Growth Strategy
“A business has two—and only two—basic functions:
marketing and innovation. Marketing and innovation
produce results: all the rest are costs.” Peter
Drucker
“While great devices are invented in the laboratory,
great products are invented in the Marketing
Department.”
William H. Davidow
"Most innovations fail. And, companies that don't
innovate die.“ Henry Chesbrough
Most Companies Are Not
Organized for Innovation
• Innovation is not a natural inclination of companies.
• “Executives say innovation is very important, but their
companies’ approach to it is often informal, and leaders lack
confidence in their innovation decisions.“ McKinsey report.
• Most companies expect ideas and initiatives to come either
naturally, or through creativity training, or through setting up
skunk works.
How companies approach innovation: A McKinsey Global Survey. McKinsey
Quarterly., October 2007
But Some Companies are
Well-Organized for Innovation
• Apple, 3M, P&G, Sony, Samsung, General Electric, LG, Toyota,
Nike, Google, Amazon, Harley Davidson, Lego, IBM, Google,
Micorsoft and many others.
• Consider that 3M with its 38 core technologies manages to
place 50,000 products and 2,000 brands on the market.
• "We think of innovation as a creative and nonlinear concept.
But that does not mean that it is not manageable. At Procter &
Gamble we can manage innovation because we have a clear
definition of innovation”. A. G. Lafley, former CEO of P&G
Why Innovate?
• Deindustrialization in the U.S.
• Emerging countries are showing higher growth and
will become increasingly competitive
• New areas begging for innovation
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Protecting the environment
The need for new sources of energy
Robotics
Artificial intelligence
Genetic engineering and biotech
Body engineering
3d printing
Nanotechnology
New social media
Disruptive Technologies
• OLD
• NEW
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Photographic film
Wired telephones
Store retailing
Classroom education
Offset printing
General hospitals
Open surgery
Cardiac bypass surgery
Manned fighters
Full service stock brokerage
Digital photography
Mobile telephones
On-line retailing
Distance education
Digital printing
Outpatient clinics
Endoscopic surgery
Angioplasty
Unmanned aircraft
On-line stock brokerage
Source: Clayton M. Christensen, The Innovator’s Dilemma, p. xxix.
Tomorrow Will Be Different
Yesterday
Today
Tomorrow
Ford
Toyota
Cherry
Department stores
Wal-Mart
Internet retail
Digital Equipment
Dell
RIM Blackberry
Delta
Southwest, Ryan Air
SkyWest, Air taxis
IBM
Microsoft
Linux
At&T
Cingular
Skype
Sony DiskMan
Apple iPod
Cell Phones
Source: Clayton Christensen
The Pressing Need for Creativity
• Left brain workers will have less to do because most
of their work can be done by software programs.
• This means that persons will need to develop their
right brain creative capacity for getting new ideas.
• However creativity does not equal invention nor
does invention equal innovation.
Source: See Daniel Pink, Drive.
Are You Really Innovating?
• Most companies call it innovation when they make
product extensions, modifications, upgrades and
tweaks.
• We need some breakthrough, game-changing, bolder
product-innovation initiatives in the development
pipeline.
Adapted from Robert Cooper, “The Innovation Dilemma: How to Innovate When
the Market is Mature.” (To be published in Journal of Product Innovation
Management, 2011)
A Balanced New Product Portfolio
A
Few big
strategic bets
Portfolio of new ventures,
prototypes, projects.
Many incremental quick wins
and continuous Improvements.
Source: Rosabeth Moss Kanter
Types of Innovation
• Product and service incremental
innovation
• Business model innovation
• Marketing innovation
• Solution innovation
Business Model Innovation
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FedEx
IKEA
Barnes and Noble
Aldi’s
Whole Foods
Starbucks
Facebook
Zara
Car 2 Go
Dell Computer
Club Mediterranee
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Mayo Clinic
Southwest Airlines
CNN
Cirque du Soleil
iTunes
Grameen Bank
Starbucks
Skype
Marketing Innovations
• Incentive innovations
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Credit cards
Rebates
Zero-interest financing
Gift certificates
Coupons
Guarantees and warranties
Subscription selling (Book of the Month Club)
Installment buying
Informercials
• Retailing innovations
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Self-service stores
Self-checkout
Coupon feeds
Hypermarkets
Category killer stores
Differentiated stores with same chain (Best Buy)
Exclusive lines of merchandise (Target: Michael Graves, Martha
Stewart)
– Selling on TV (Home Shopping Network)
– Selling on the Internet
– GROUPON
Solution Innovation:
GE Power Division Looks for
Box 3 Type Innovations
• a carbon tax,
• the forced closure of coal plants,
• the rise of biomass waste,
• the soaring demand for new generating capacity in
China,
• a standard of at least 40 miles per gallon for cars,
• distributed power made by small generators like fuel
cells.
Why Do Innovations Fail?
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Poor forecasting
Missing features
Overpricing
Competitors are underestimated
Product is too complex
Poor communication campaign
Weak distribution support
Costs are higher than expected
A high level executives pushes without hard data.
Poor teamwork between R&D, Marketing and Sales.
Why Product Development
is Getting More Difficult
• Shortage of important new product ideas.
• Rising cost of new product development.
• Increasing social and regulatory constraints.
• Shorter life span of successful products because
of rapid competition.
The Role of Marketing in the
Innovation Process
• Contrast Searle vs. Abbott’s view of marketing.
• There are those who believe that marketing should be a
specialized department whose resources are drawn upon as
needed by the sales and other departments.
• Others believe that marketing should be a leading player in
developing the future growth plan of the company.
• If Steve Jobs was in your marketing department, which position
would you take on the role of marketing?
Innovation and Your Company
• Where do you focus your search for innovation
(inside or outside of the firm)?
• How do innovative ideas flow in your firm (top down
or bottom up)?
• How are innovative ideas developed (build internally
or buy)?
• Where is the innovation organization located?
• How is the innovation process managed (formal
processes or informal processes)?
Fernando Trias de Bes and Philip Kotler, Winning at Innovation. The A-to-F Model (Palgrave, 2012)
Exhibit 2
Fernando Trias de Bes and Philip Kotler, Winning at Innovation. The A-to-F Model (Palgrave, 2012)
Roles vs. Stages
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A-B-C-D-E(F) could change to:
A-B-C-A-F-D-B-D-F-E-C-E
Or to something as simple and brief as:
A-D-E
Fernando Trias de Bes and Philip Kotler, Winning at Innovation. The A-to-F Model (Palgrave, 2012)
Fernando Trias de Bes and Philip Kotler, Winning at Innovation. The A-to-F Model (Palgrave, 2012)
EACH PLAYER’S NORMAL CONTACTS
Fernando Trias de Bes and Philip Kotler, Winning at Innovation. The A-to-F Model (Palgrave, 2012)
EACH PLAYER’S TOOLS
Fernando Trias de Bes and Philip Kotler, Winning at Innovation. The A-to-F Model (Palgrave, 2012)
EXAMPLE OF ONE NEW PRODUCT DEVELOPMENT PLAN
Fernando Trias de Bes and Philip Kotler, Winning at Innovation. The A-to-F Model (Palgrave, 2012)
EXAMPLE OF BUDGETING THE NEW PRODUCT DEVELOPMENT PLAN
Fernando Trias de Bes and Philip Kotler, Winning at Innovation. The A-to-F Model (Palgrave, 2012)
Relation of
Development and Marketing
• How do the mindsets of Development and Marketing differ?
– R&D people are the Masters of the Possible.
– Marketing professionals are the Masters of the Valuable.
• What are the levels of engagement between Development
and Marketing in your company?
• What are the potential contributions of marketing to the
various stages in the innovation process?
• What steps can your company take to improve the working
relationship between Development and Marketing ?
Involve Marketing in
Discovery, Development, and Launch
• Participate in investigating the therapeutic fields to invest
in.
• Study the most feasible clinical pathways to FDA approval
and patenting.
• Develop segmentation, targeting, and positioning.
• Develop brand elements: product name, logo, slogan,
dosage size, delivery system, packaging.
• Use communications to pre-condition the market before the
launch (ex: Lipitor).
• Develop the best launch process with sales force,
distribution, and communications.
The CEO’s View of Marketing
Will Affect the Rate of Innovation
• 1P
CEO
• 4P
CEO
• STP CEO
• ME
CEO
P&G and Open Innovation
• Connect and develop: Instead of only internal vs outsource
for innovations, P&G works both.
• P&G looks for adjacencies and for new technologies to
acquire.
• P&G looks at their categories (cleaning, personal hygiene)
and studies hot needs and resolving contradictions.
– A shortening product that doesn’t include animal fat but cooks and
tastes like it does. Crisco
– A potato chip that doesn’t get stale when the bag is open. Pringles.
– A good tasting cookie with virtually no calories.
Which Innovations Succeed?
• Cooper and Kleinschmidt found that the number-one
success factor in B2B is a unique, superior product. Such
products succeed 98% of the time, compared to products
with a moderate advantage (58% success) or minimal
advantage (18% success).
• Another key factor is a well-defined product concept of the
target market, product requirements, and benefits before
proceeding.
• Products designed solely for domestic markets tend to
show a high failure rate, low market share, and low growth.
Yet only 17% of the products in their study were designed
with an international orientation.
Take Aways
• If you don’t innovate, you will fail. And if you do
innovate, there is a chance you will fail.
• Every firm has the capability of learning the
processes of innovation that will increase the
chance of innovation success.
• There are tools and contacts for each player in the
innovation process to manage the process better.
• Companies are increasingly moving to open
innovation in the search for new ideas and wider
expertise.
• Findings are available on the main factors that
correlate with success in innovation.
• A key feature of success is to align development
personnel with marketing personnel.
“Within five years. If you’re in the
same business you are in now,
you’re going to be out of business.”