Wednesday, July 29, 2009

Three Levels of Innovation

These insights were extracted from an article titled:

Where innovation creates value.
FEBRUARY 2009 • Amar Bhidé
I thought this was an interesting way to define innovation, particularly for technology companies. I suggest going to the full article which talks about the impact of globalization on innovation and how it might affect the U.S. economy going forward.

"Innovation involves the development of new products or processes and the know-how that begets them. New products can take the form of high-level building blocks or raw materials (for example, microprocessors or the silicon of which they are made), midlevel intermediate goods (motherboards with components such as microprocessors), and ground-level final products (such as computers). Similarly, the underlying know-how for new products includes high-level general principles, midlevel technologies, and ground-level, context-specific rules of thumb. For microprocessors, this know-how includes the laws of solid-state physics (high level), circuit designs and chip layouts (midlevel), and the tweaking of conditions in semiconductor fabrication plants to maximize yields and quality (ground level).

Technological innovations, especially high-level ones, usually have limited economic or commercial importance unless complemented by lower-level innovations. Breakthroughs in solid-state physics, for example, have value for the semiconductor industry only if accompanied by new microprocessor designs, which themselves may be largely useless without plant-level tweaks that make it possible to produce these components in large quantities. A new microprocessor’s value may be impossible to realize without new motherboards and computers, as well.

New know-how……also requires interconnected, non- technological innovations on a number of levels. A new diskless (thin-client) computer, for instance, generates revenue for its producer and value for its users only if it is marketed effectively and deployed properly. Marketing and organizational innovations are usually needed; for example, such a computer may force its manufacturer to develop a new sales pitch and materials and its users to reorganize their IT departments."

Wednesday, July 22, 2009

Playing Well With Others
How to improve the relationship between the marketing and R&D departments—and increase the chance of coming up with successful new products
WSJ, June 22, 2009

This is a very important article from our own at Kellogg. At the end of the article, I summarize a framework I have used effectively that break down the barriers defined herein for the implementaion phase of an offering.

"Why can’t marketing and research and development play nice?

Both functions are essential to developing successful new products. But the two departments don’t get along nearly as well as senior management thinks. .
How big is the gap? Huge. According to a survey we conducted, some 69% of senior managers described relations between marketing and R&D as collegial, but only 34% of mid-level managers saw the relationship that way.

When we asked staff in each department what they thought about the staff in the other, the comments were even more revealing. R&D employees complained that marketers give them poor data, that the marketing department is too insistent about certain product features or benefits, and that marketers are mainly useful in developing launch plans rather than in actually coming up with new products.
Marketing, meanwhile, had its own beefs: R&D doesn’t include marketers early enough in the product-development process; R&D doesn’t understand marketing, or what it brings to the process; R&D takes the credit when a product succeeds, and blames marketing if a product doesn’t sell.

Such complaints are hallmarks of a dysfunctional product-development process. Both marketing and R&D have indispensable roles to play, but neither can reach its full potential without the other. Companies where such divides exist are more likely to miss out on the kinds of breakthrough products and market-research discoveries that can drive growth and profits for years.

In what follows, we share our strategies for getting both sides to engage more productively from the earliest stages of a product’s development.

1. Make sure everybody recognizes the value that each department brings to the process—and how one side complements the other.
While R&D tends to focus on technical issues and hard data, marketing zeroes in on what customers want and how much they will pay. In essence, R&D staff should be masters of the art of the possible, while marketers should master the art of the valuable, or knowing what people want and will pay for.
Marketers are seldom equipped to solve technical problems. Similarly, R&D often can’t see the difference between what a product can do and what its potential customers actually want it to do. Even in cases where developers engage directly with customers, the ability to ask the right questions and generate reliable, robust market insights is a complex skill honed over years.
One can discover many things that are technically possible, yet may have little or no value. On the other hand, a company may identify a valuable customer need but lack the technical know-how to satisfy it.
The point is not that R&D can’t learn to think a bit like marketers. They should be encouraged to do so. But don’t expect either side to perform the other’s tasks exceptionally well.
To boost mutual awareness, a number of companies we interviewed require their R&D professionals to articulate and, if possible, quantify the value of their work in terms of what it means to the customer. This often brings R&D and marketers together early in a project. Some companies also encourage or even require marketers to be technically proficient enough to be partners with R&D.

2. If one department or the other is dominating a company’s process for developing new products, bring the two more into balance.
It’s surprising how often one side is in the driver’s seat. At technology-based companies, R&D tends to hold the upper hand. At consumer-goods makers, it’s marketing. Each situation has its disadvantages.
When marketing has too much control, it stifles the creativity of engineers, who often feel they don’t have the time or backing to think of things beyond what the marketers want. At one consumer-goods company, both marketing and R&D professionals agreed that because of an incessant drive to follow predetermined launch dates—dates that were typically dictated by marketing—product advances were only incremental. R&D had to forgo technical opportunities because it was so often under deadline pressure.
Conversely, where R&D is king, marketing often is called in only at the end of the product-development process, when it’s time to develop a launch plan. At one company we’re familiar with, a company planned a major product launch after nine of its competitors were already selling a very similar product. The company conceded that its product had no advantage over the others. This company clearly should have gotten marketing involved in the development process much earlier.
One of the best ways to bring marketing and R&D more into balance is to create cross-functional teams to discover unmet needs of current or potential customers. A collaborative approach helps both sides experience each other’s contributions, and ensures both are at the table from the beginning.

3. Have the two sides speak a common language.
This is crucial for the departments to work together. They need to be able to communicate with each other, especially when it comes to understanding how a potential product relates to a customer need.
At a major oil company where the marketing staff was often put off by highly technical reports from R&D, senior management began requiring R&D to base its reports for marketing and sales on how the proposed new technologies would specifically help customers. A cover sheet for all technical briefings was created that required the speaker to describe all of the critical points in layman’s terms. A lot of researchers at the company said they found this challenging at first, but over time it improved their ability to collaborate with colleagues in other functions, not just marketing. The approach helped others across the company better understand the company’s underlying technologies.

4. Get out of your silos—up to a point.
The natural inclination for either department may be to stay inside one’s silo. But that is counterproductive. For instance, when R&D teams are excited about new technological opportunities, they should reach out to other business units and let them know what they’re working on. They should be advocates for the direction they think a product or technology should take.
However, they shouldn’t become solely focused on fulfilling the wishes of the different business units, which are generally focused on what they can sell today and in the relatively near future. Because of the focus on quarterly results, it is difficult for most business units to devote substantial resources to opportunities that might not blossom for three or more years. The challenge thus is building a portfolio that supports the incremental needs of current businesses, as well as long-term growth opportunities.

5. Focus on the consumer.
When both sides are encouraged to think in terms of what customers want, it helps clarify thinking about product designs and how resources should be allocated. When engagement and thinking in terms of customer needs become routine, everyone has a common vision for what is being developed and why…….
…..When marketing and R&D together are truly focused on understanding and acting on customer needs, it makes both of their jobs easier and their results more productive.
A few years ago, General Electric Co. of Fairfield, Conn., started a line of kitchen appliances called the Café Series, for people who love to cook and entertain. Marketing helped develop the concept of kitchen as café; industrial designers and other technical staff gave the appliances—refrigerators, stoves, dishwashers and ovens—a look and features that incorporated the café concept. Both R&D and marketing spent time with consumers cooking in their kitchens and taking notes.
Companies most capable of bringing R&D and marketing together around what really matters to customers will build a powerful competitive weapon. It’s not easy. But if it were, there’d be no money in it.

Culture Clash
• The Situation: Different priorities and ways of thinking often create gaps in understanding between marketing and research-and development staff.
• The Problem: Such gaps often mean that one side dominates the development of new products, giving short shrift to the other. When marketing dominates, R&D can be under too much pressure to hit on breakthrough ideas. When R&D dominates, new products can lack marketable strengths.
• The Solution: Companies should help both sides learn to appreciate each other’s strengths, and encourage them to work closely together at the earliest stages of product development."

In my teachings and practice I deploy a framework called the Opportunity Map (developed by MacMillan and McGrath and described in their fabulous book the Entrepreneurial Mindset, HBR Press). One aspect of this framework is that it forces all functions involved in developing and marketing an offering to define the key uncertainties associated with the offering. So, the marketing and full capability (technical, manufacturing, delivery, etc.) uncertainties are defined and the implementation plan is designed to resolve the uncertainties iteratively. The common language among the functions is the uncertainties. If done correctly, this framework forces the functions to work together in defining a common workflow for a successful introduction and does not allow one to get far ahead of the other. It tends to brake down the silos and force the organization to be customer focused since there are always uncertainties associated with the customer.

Tuesday, July 21, 2009

Selling Your Ideas

With all the work we do in planning and implementing our strategies, if you can’t sell your ideas either to your customers or internal organizations, more often than not you will be less than fully successful.

I have come across a new book called PowerPoint® Presentations That Sell published by McGraw Hill that is one of the best. The back cover describes the book as:

It’s time to rethink your approach to PowerPoint® presentations. Rather than oversee data-filled information sessions, you need to tell a compelling story that holds your audience’s attention while selling your ideas.

PowerPoint®Presentations That Sell helps business professionals efficiently structure presentations that address audience’s needs, while providing the necessary tools to create slide elements. With sample slides on every page (the book is written as a slide deck), this unique guide explains how to:
• Format and organize slides to emphasize your main points
• Select and create compelling charts using data
• Use shortcut techniques to create slides faster
• Create a memorable, focused conclusion

Ending with a case study displaying each presentation tip in action, PowerPoint® Presentations That Sell replaces the same old features and benefits with actionable recommendations in a dynamic package guaranteed to get results."

When I reviewed the book with the author, I changed almost all my PowerPoint® slides and I have been doing presentations and lectures almost as long as PowerPoint® has been a product.
For full disclosure, the author is Adam B. Cooper (a management consultant at a leading global consultancy), my son!

The book can be ordered from Amazon for $12.89:

Monday, July 13, 2009

How to Thrive in Turbulent Markets
HBR February 2009
HBR Reprint #: R0902F
by Donald Sull

This is a great article and I strongly urge you order it for its full impact.

Donald metaphorically compares running a business today with a prize fight:

"Uncertainty is the defining characteristic of any boxing match. Fighters
and trainers can study the tapes of past fights or select sparring partners who
simulate an opponent’s style, but they cannot predict a blow-by-blow chronology
of a fight, foresee spikes in confidence, foretell the errant punch that splits
an eyebrow, or anticipate a wily foe’s deliberate shift in tactics…..
Uncertainty is also the defining characteristic of business competition today….
Many managers consider the recent global credit crunch and resulting economic
meltdown to be a one-off—that right hook they never could have seen coming.
Nothing could be further from the truth. In a report, the accounting firm
PricewaterhouseCoopers even summarized the decade ending in 2006 as “10 years of high-speed change” characterized by “unsettling twists and turns,” recounting a
series of events that confounded executives’ plans"

He defines two key characteristics that must be developed to win in this environment:

"Companies can, like the contender Ali, employ agility to spot and exploit
changes in the market. Alternatively, they can rely on their powers of
absorption to withstand market shifts. Some, however, combine both approaches
and display “agile absorption”—the ability to consistently identify and seize
opportunities while retaining the structural characteristics to weather changes.
In unstable times, cultivating and using both capabilities in combination can
help companies not only survive but emerge as true market leaders. "

Three forms of agility were identified:

"Operational agility: is a company’s capacity, within a focused business
model, to find and seize opportunities to improve operations and processes
Portfolio agility: is the ability to quickly and effectively shift
resources, including cash, talent, and managerial attention, out of
less-promising units and into more-attractive ones.
Strategic agility: is the ability to spot and decisively seize the game changers is the essence of strategic agility."

The author highlights 10 forms of absorption with a full description in the article:
"….firms can build absorption in several ways. The obvious levers include
size, diversification, and a war chest of cash. Other factors (high customer
switching costs, low fixed costs, and a powerful patron) can also buffer a firm
against environmental changes, although in less evident ways."

This analysis is reminiscent of an earlier positing highlighting the importance of companies being ambidextrous ( –the ability to run different processes for different reasons. Here, companies must be both agile and tough, skills that will impact the very culture of your company.

Tuesday, July 07, 2009

First to Market Strategy

Over the past few months I have had interesting dialog with my students and clients on the viability of adopting a follow-the leader strategy. The logic is to allow the leader to take the risk of developing and delivering a new offering and then you come in with a strong counterpoint with less risk and cost. I believe we are seeing more and more cases where the first-to-market, if done correctly, can present tremendous barriers to the late comer.

At issue is whether the leader can build a system around the offering that links the buyer to the offering’s functionality, economics (life time costs), and most importantly emotive benefits. I believe as networking continues to grow and dominate the business horizon, more often than not systems will be introduced vs. just products (or single services).
The ultimate example is Apple’s iPhone. The following depicts just a few applications associated with the business side of the iPhone.

The challenge of a newcomer, Palm’s new Pre smart phone, was highlighted in a recent article and exemplifies my belief:

Apps Deficit Hurts Palm in Rivalry With iPhone , By JENNA WORTHAM, NYT June 24, 2009

"By all accounts, Palm’s new Pre smartphone is elegant and powerful. On sale for
just a few weeks, it has a crisp touch screen, a pull-out keyboard aimed at
e-mail devotees and a new operating system that can manage multiple applications at the same time
(functionality is great).....
…(however) Industry experts and programmers say that the company needs to cultivate a system of developers eager to write and publish small useful programs, or applications, for the Pre and its core software, WebOS. Palm also needs to provide an easy way for Pre users to download, pay for and install those apps, similar to Apple’s App Store……
…..So far, Palm is off to a slow start. Palm’s App Catalog has just
a few dozen apps, even as Apple boasts that iPhone users can download 50,000
apps that do everything from receiving baseball videocasts to unlocking a rental
….The competition is not standing still. Last week, Apple upgraded the
iPhone’s software and began selling a new, faster model…
…..Palm is urging customers and developers to be patient. “We’ve never really said that we’re in a race with Apple,” said Derick Mains, a spokesman for the company. Rather than compete with Apple on the volume of applications, “we’re building a catalog of quality apps in the store,” Mr. Mains said. (
I think they are in a race!!)…..
….The concern for Palm is that competition for developers’ attention is much
more intense now
(This is a new form of competition. It is difficult to create a
system on your own and therefore competition for the support partners can be as
intense as the competition for the customers) …..
…..For Palm to thrive, the company will have to convince developers that writing WebOS applications will be

There are some critical issues to be sensitive to:

• If you are the leader, try to drive the interaction with the buyer to the emotive state by developing as complete a system as possible. Apple achieved what Slywotzky calls creating The Standard (see earlier posting where the players in the network build their offers around your system (the 50,000 applications)
• If you are number two, really understand what you are competing with. By all measures, the Pre is at least as good as the iPod functionally and in fact has many advantages. However, Palm must realize (and they do)it is competing with the system not just the product:

"… a world crowded with iPhones, BlackBerrys and other smartphones, success for the Pre — and possibly the survival of Palm itself — is going to take a lot more than a well-designed device"

I believe one of the classic analyses of defining competitive positions was by Adrian Slywotzky in his classic “Profit Zone” where he defined a series of Strategic Control points: