MMU-DBA Advanced Marketing Marketing Strategy and Competitive Advantage

Competing through Innovation

 Understanding Innovation

through NPD process  Organising for Innovation

Marketing and Strategic Alliances Strategy Implementation

 Internal Marketing

MMU-DBA Advanced Marketing Day 6 Innovation, Alliances and Implementation

Pressures and spurs to innovation

Figure 13.1

New Products (New Inventions) seem to have a patterns in their failure

 The New Product Zoo an analogy for types of

new products firms come up with: Dinosaur Fit for museum Ostrich Blind to the future Flamingo beautiful but unsalable Pearl Source of profitable future

Intrinsic characteristics of innovations that influence an individual s decision to adopt or reject an innovation. Relative Advantage
   

How improved an innovation is over the previous generation. The level of compatibility that an innovation has to be assimilated into an individual s life. If the innovation is too difficult to use an individual will not likely adopt it. How easily an innovation may be experimented with as it is being adopted. If a user has a hard time using and trying an innovation this individual will be less likely to adopt it. The extent that an innovation is visible to others. An innovation that is more visible will drive communication among the individual s peers and personal networks and will in turn create more positive or negative reactions.

Compatibility Complexity orSimplicity Trialability Observability



Product uniqueness (innovativeness) or superiority Management's possession of market knowledge and marketing proficiency Presence of technical and production synergies and proficiency.
 Case in point GSK s Zantac success vs/ Wellcome s

not so successful ability to maximise new drug sales

Causes of new product failures

Figure 13.4

Can INNOVATION BE PLANNED

One Argument is that a formalised new product development processes can lead to new product success than an ad-hoc approach to product innovation

Invention is about generation of new ideas whether by research or any other forms of creativity Invention is the first occurrence of an idea for a new product or process, while innovation is the first attempt to carry it out in practice.


Fagerberg (2005)

An innovation takes place when the new idea is used in a company s production process or is first offered for sale in a market. Swann (2008)
So Innovation is much wider than invention it involves value adding, it s a process (from invention to market/consumer).

Idea, Screening, Business Analysis, Development, Testing and Launch Role of marketing in each phase Types of Products to be developed
 Classification is based on degree of newness to

company and customer (with implications for marketing)

Types of new products

Figure 13.6

The strategic role of new product types

Source: Based on Wong (1993)

Table 13.1

Figure 13.7

Mortality of new product ideas

Source: Wong (1993)

Table 13.2

Aids to thinking

Figure 13.9

Roadblocks and barriers to innovation

Some more Aids to thinking

Table 13.2

Three basic conditions

 Closeness to customers  Cross functional communications  Multi-functional team work  Classic Cases 3M, Google  Local cases DIGI, Air Asia.

It depends . When do established/large companies have the advantage?

 When the division of labour is important for

innovation (incremental innovations)

When do startup/small companies have the advantage?

 When the combination of previously distinct

knowledge is important for innovation (radical innovations)

Marketing and Innovation

Lead users are users of a product or service that currently experience needs still unknown to the public and who also benefit greatly if they obtain a solution to these needs. (von Hipple 1986) The Lead User market research method is built around the idea that the richest understanding of new product and service needs is held by just a few "Lead Users." They can be identified and drawn into a process of joint development of new product or service concepts with manufacturer personnel (Herstatt and von Hippel 1992)

Von Hippel argument that users are not passive recipients  Eg. PickUp trucks not designed in Detroit but in farms where users wanted more than a family saloon adapted by removing seats, welding on new parts, cutting off part of the roof etc thus prototyping the first model of pick up  Today pickup trucks - in innovation space of positioning in Thailand ? Concept LEAD USERS They not just adopt passively but either change or use innovatively products and services - leading to innovation  banana / chocolate milk lead users = moms  Medical devices lead users = medical practicioners Identify Lead users and they help in co-creation
von Hippel, Eric (1986) "Lead Users: A Source of Novel Product Concepts," Management Science 32, no. 7 (July):791-805.

http://www.youtube.com/watch?v=kbQ5mAEE1lk

Highly secretive industries where lead users may not feel comfortable or may not be able to disclose information and knowledge are not suited for this [lead user] process; The lengthy [nature of the lead user] process can prevent this methodology from being applied effectively in industries with really short term innovation cycles or where quick turnaround from research to market delivery is required;

http://techiteasy.org/2007/10/14/connecting-technology-tomarket-the-lead-user-methodology/ (accused on 14th Oct, 2007)

What co-creation is NOT Customer focus

What co-creation IS Co-creation is about joint creation of value by the company and the customer. It is not the firm trying to please the customer

Customer is king or customer is always right Delivering good customer service or pampering the customer with lavish customer service Allowing the customer to coconstruct the service experience to suit her context

What co-creation is NOT Mass customazation of offerings that suit the industrys supply chain Transfer of activities from the firm to the customer as in self-service

What co-creation IS Joint problem definition and problem solving Creating an experience environment in which consumers can have active dialogue and co-construct personalized experiences; product may be the same, but customers can construct different experiences

What co-creation is NOT Customer as product manager or co-designing products and services Product variety Segment of one Meticulous market research Staging experiences Demand-side innovation for new products and services

What co-creation IS

Experience variety Experience of one Experiencing the business as consumers do in real time Co-constructing personalized experiences Innovating experience environ-ments for new co-creation experiences

From

To

One-way Firm to consumer Controlled by firm Consumers are prey Choice = buy/not buy Firm segments and target consumers; consumers must fit into firms offerings

Two-way Consumer to firm Consumer to consumer Consumer can hunt Consumer wants to/can impose her view of choice Consumer wants to/is being empowered to co-construct a personalized experience around herself, with firm s experience environment

Prahalad & Ramaswamy 2004:12

Planetfeedback.com

Thecomplaintstation.com

The new trend: Customer-made The phenomenon of corporations creating goods, services and experiences in close cooperation with consumers, tapping into their intellectual capital, and in exchange giving them a direct say in what acutally gets produced, manufactured, developed, designed, serviced, or processed. TRENDWATCHINS.COM 2006
Epinions.com

About.com

True customer-made involves co-created goods, co-created services, co-created expriences. There are hundreds of thousands of experts, innovators, inventors and so on outside company walls and research labs, and innovation units at large corporations are increasingly NOT going it alone. TRENDWATCHING 2006

www.threadless.com and IKEA, Boeing ect

The IKEA contest fiffigafolket (ingenious people) asked amateur outsiders to send in clever designs for storing home media in the living room. Out of 5,000 ideas submitted, fourteen winners went to the IKEA headquaters to participate in a workshop and receive EUR 2,500, and the designs will actually get produced and end up in IKEA stores for all to see, buy and assemple. TRENDWATCHING 2006

34

35

A But the biggest money2000$us: 18 Mio USD sales winning designer gets is for Get: 800 submissions per week; Print: - this is great money for these and all this with in 2006, 35% profit margin products each week; this makes about 4 new guys. fun and less than 20 employees much 50,000 to 65,000 shirts a month.

36

Case of HTC
 Invested in Building Brand  Not for just sales growth  But for Dialogue with Customer

This Dialogue with Customer helps in product innovation

Branding Dialogues with Customer Innovation (Product Innovation)

MMU-DBA Advanced Marketing Day 6 Innovation, Alliances and Implentation

2001 top 500 global businesses had an average of 60 alliances each 1993 IBM reported 5% sales (outside pc s) were derived through alliances in 2001 IBM was managing 100,000 alliances which account for more than 30% of their income Vantage Partners survey of top 1000 US companies in 2001 found that had 20% of their income resulted from alliances ......

Vertically disaggregated organisations .. Functions of product design and development, manufacturing and distribution . Will be brought together and held in temporary alignment by a variety of market mechanisms (Miles and Snow 1984)

Market Complexity and risk

 Blurring market boundaries  Evaluating customer diversity  Borderless work / interlinked economy

Experience Economy
 Gen C (Creative Generation)

The Calyx & Corolla network organisation

Figure 16.1 Source: Adapted from Piercy (2002)

Cravens et al (1996) propose a model of network organisation types arguing that networks differed and can be classified in two important respects The type of Network Relationship
Highly collaborative to mainly transactional

The volatility of environmental change

Highly volatile means external relationships have to flexible (for termination) stable ones where enduring collaborations are attractive

Types of network organisation

Source: Adapted from Cravens et al. (1996)

Any Supply Chain Coordinator

C&C + Pharma firms with Biotech firms

Figure 16.2

Virtual Corporation Monster.com Jobstreet.com

Forms of collaboration and interorganisational commitment

(Figure 16.4)

Present a framework of how firms can achieve success with any individual alliance
 by considering critical factors at each phase of the

alliance life cycle.  by developing and institutionalizing firm-level capabilities to manage alliances.  Highlight the benefits of taking a portfolio approach to alliance strategy and management.

At the level of a single alliance of a firm,  firm should select a complementary, compatible, and committed partner at the time of alliance formation, and make relevant choices with respect to alliance design in terms of equity or contractual or relational governance, then the alliance is more likely to succeed. During the postformation stage,  alliance success depends on the effective use of relevant coordination mechanisms to manage the interdependence between the two firms, and the successful development of trust between partners as the alliance evolves.

Hence firms should Alliance Capability Development  a dedicated alliance function within a firm and  a set of institutionalized processes to accumulate and leverage alliance management know-how across the firm Relational Capabilities Also Capabilities are different for  Single Alliances  Alliance Portfolios

Alliance Capability Development can be applied to Acquisitions Management also

First choose appropriate coordination mechanisms to leverage the interdependence between the two separate firms. Second, need to build trust between the two firms such that employees in each firm work in the interests of both firms and are willing to share relevant know-how with each other for mutual benefit. Third, it needs to establish appropriate mechanisms to resolve or escalate any conflicts that might arise.

Table 16.1

Selecting the evaluation criteria for a global airline alliance

Source: Adapted from Cravens et al., 2000

Some interesting findings in the context of SMEs (from Ireland)

Nature/Governance
 To create add l revenue, to reduce costs, entering new

markets

Typology of Alliances
 Technology or market related like distribution channels,

diversification or sourcing raw materials  Scales Alliances

mfg ed in Ireland but finished in partner firm in Sweden helped to enter German Markets

MMU-DBA Advanced Marketing Day 6 Innovation, Alliances and Implentation

Strategic Inertia among executives Lack of stakeholder commitment Strategic Drift. Strategic dilution
 focus more on operational or tactical rather than

Failure to understand progress (no goals or related metrics) Initiative Fatigue or Impatience No Celebrating Success

Some aspects of Marketing Strategy

 Managing Relationships with Customers and

Managing relationships outside partners  Competitive Differentiation  Superior Service Quality

Requires implementation ability

 A route to planning and operationalising

implementation in strategic marketing is strategic internal marketing (Cespesdes and Piercy 1996)

Conventional Marketing Training focuses primarily on external environment of customers, competitors and markets and matching orgn resources to targets Implicit assumption that marketing strategy will sell itself

 But Implementing (marketing) strategy involves organisational change

And the organisation is made of people, culture, systems, structures and developments whose skills and resources, participation, support and commitment are needed to implement marketing strategy. Hence internal marketing programme needed to parrlel the marketing programme aimed at external market place

Services literature conceptualised employees as internal customers in the context of Bank marketing (Berry 1981) . Scholars from Nordic School of Services talk about use of internal marketing to achieve culture change in orgn s Internal Marketing types

 Focus on development and delivery of high standards of service quality

and customer satisfaction  Development of internal communications programme to win employee support  Systematic approach to managing adoption of innovations within organisation  Concerned with providing products and services to used inside the organisation

Internal Marketing can be seen as a Management philosophy of promoting the firm and its policies to employees as if they are the (internal) customers of the firm.

Comes from Services Marketing to improve quality Market Place largely dependent on the employees who are far removed from the strategy making process Hence need for Selling to the Staff As the product promoted is the persons job as a creator of the service and value Lot of training and development

Customer satisfaction the internal market and the external market

Figure 17.1

The service-profit chain establishes relationships between profitability, customer loyalty, and employee satisfaction, loyalty, and productivity. Profit and growth stimulated primarily by customer loyalty which is a result of customer satisfaction. Which comes from value being created by employees who are satisfied, loyal and productive

Source: http://hbr.org/2008/07/putting-the-service-profit-chain-to-work/ar/1

Table 17.1

The role of internal communications

Figure 17.2 Strategic Internal Marketing Internal and external marketing programmes

Internal marketing in a computer company

Table 17.2

Lack of Financial Measures of Internal Marketing Success Weak Management Cohesion

 The organisational location of internal marketing

No connection between internal stakeholders and external customers Suggestion

 apply integrated marketing communications

principles to internal marketing

Delivering value results from a complex set of processes and activities inside the organisation and also in a network of organisations
 Many of these processes or activities are not

owned by marketing or sales departments.

Cross functional linkages become critical

Cross-functional contribution to value processes

Figure 17.3

Marketing and Sales interface Marketing and HRM Marketing and Finance &Accounting Marketing, R&D and Production

Market Led Strategic Management Role of Marketing in Strategic Management & Market Orientation Marketing Environment Frameworks + Competitor Analysis and Customer Analysis Organisational Resources and Competitive Advantage Sustainable Competitive Advantage Different Routes Marketing Segmentation and Positioning Competing through New Marketing Mix Customer Management Competing through Innovation and Alliances Marketing Implementation and Internal Marketing