INNOBLOG

• When Open Innovation Becomes A Gimmick: Lessons From Campbell Soup Company, by Stefan Lindegaard | Leadership+Innovation blog

  Lindegaard identifies what appear to be problems with Campbell's new open innovation initiative, including a lack of focus.

• Unraveling Complexity: The (Heretofore) Missing Link for Achieving Collaborative Innovation, by Chris Jones | Driving Innovation in a Digital World blog

  Musings on the role of social media in collaboration for innovation: "I now believe that innovation in complex ecosystems will depend on an improved collaboration process – a new middle ground for problem solving – that balances large-scale central organizational approach with grass-roots contributions by individuals."

• Social Technology Growth Marches on in 2009, by Josh Bernoff | Groundswell blog

  Forrester's newest report on the adoption of social media finds that "in 2009, more than four out of five online Americans are active in either creating, participating in, or reading some form of social content at least once a month. " Interesting as a view of technology adoption and also for insight into the changing "jobs" of those embracing social media.

• Happiness: A Buyer's Guide, by Drake Bennett | The Boston Globe

  New research into behavioral economics has proved that money doesn't buy happiness. However, the same research has shown that some things we spend money on -- such as providing great experiences like restaurant meals and vacations -- provide more happiness than spending money on material possessions. So should companies be innovating more around providing experiences for customers as opposed to goods?

RFID, SAP data center, dedicated Verizon network, Windows CE with touch screen interface…for flavored water? The cola wars have come a long way from blind taste tests in the local shopping center!

With the limited release this summer of the new Coca-Cola Freestyle machines (pictured at left), Coke is essentially introducing a new business model into the fountain drink industry, one with serious disruptive potential. The system is about the size of a small Coke machine you would see on the street but features a large touch screen interface and single dispensing position. The consumer simply navigates through 100 varieties of beverages and then the machine uses micro-doses of flavor from canisters stored inside to precisely mix up the selection. Profiled in this recent InformationWeek article, the Freestyle is a consumer and customer service tool, a network node, an inventory and supply chain manager, quality control, and business intelligence agent all in one. The integration of these various functions and their associated data streams offers Coke the rare opportunity to improve their performance on the sustaining curve while simultaneously introducing a disruptive play into the market (for more on these curves, see The Disruptive Innovation Primer).

On the sustaining front, Coke is offering its consumers a wider array of drink choices at the point of consumption. They hope this greater array of choices will delight many consumers who leave the fountain disappointed that their preferred beverage was not offered. They also hope the increased number of options will capture a significant portion of the non-consuming market who have traditionally selected water or no beverage at all as the options traditionally available at the fountain were not to their liking. Both of these are significant competitive advantages that will move Coke further up the sustaining curve. However, increasing the number of flavors alone will not yield transformative growth.

The real disruptive potential here lies in the data, not the drinks. By mixing flavors on site in the machine and capturing purchase behavior real time, Coke is better able to test new offerings and immediately respond to market insights around existing and emerging consumption patterns at a hyper-local level. Each point of purchase becomes a kiosk through which Coke can interact with its consumers and test their reactions to new formulas and new messaging. It is no longer dependent on limited and lagging sell through data from its restaurant customers, rather, it can decide which beverages to present to the consumers based on time of day and recent consumption patterns. Much like Zara has done in the apparel industry, Coke is virtually eliminating the time lag between trend identification and capitalization.

Coke also made sure to address the “jobs” of their channel partners, namely the restaurants selling the beverages. By opening up the data to these outlets, Coke is expecting them to play an active and informed role in increasing beverage revenues while the RFID-controlled, networked inventory and supply chain control system promises to address long-standing frustrations.

As the benefits of this smart system are realized, we expect to see other restaurant chains shifting from competing fountain suppliers to Coke. 

Humans are creatures of habit. We tend not to change our behavior unless the incentive to change is compelling. We prefer that things stay the same or change as little as possible, which makes it hard for us to break out of our set patterns and routines. 

Psychology shows us that breaking this status quo bias and developing new habits is one of the most difficult things to do. Yet companies develop innovative offerings and expect consumers to readily change existing habits and adopt new habits all the time!

Even if you have a solution that absolutely targets consumers’ problems dead-on and you know will delight them, consumers still need some help knowing when to turn to your solution and how to use it. You can use advertising and marketing to show them when and how to use your solution.

Consumer packaged goods companies do this particularly well. Just think of the Tide to Go commercial with the woman who is about to make a big presentation, spots a stain, quickly removes it with the handy Tide to Go pen that her coworker hands her, and confidently gives her presentation. To my mind this 30-second commercial is effective because it incorporates the following three key elements: 

1. Shows a circumstance where the job-to-be-done is acutely important and for which a solution either is not available or falls short.
   Removing a fresh juice stain on a blouse just minutes before a big presentation (yikes!)
2. Shows the consumer how the solution is used to effectively solve their job.
   Can be pulled out of a purse, quickly applied, and dry in the time span of an introduction
3. Makes it clear that your solution is the best out there for this job in this circumstance
   What else could this poor businesswoman have done? Go out there and make her big presentation with a stain on her shirt? Keep her audience waiting while she runs to the bathroom to apply cold water? With Tide to Go, she removes the stain and confidently delivers her presentation.

Remember, it is not enough to develop a great product, you need to crisply communicate when your solution can be used, how it works and why it’s the best solution to get the job done! 

The well-known marketing publication MarketingSherpa has just published a Strategy & Innovation case study (available free for about 10 days and only to subscribers afterward). The article describes our project last year to transition Strategy & Innovation from a bimonthly, paid, print publication to a biweekly, free, online publication. Innosight Marketing Director Gretchen Rice and I spoke with the MarketingSherpa reporter about why we felt we needed to make such a transition and how we did it.

Many of you are Strategy & Innovation subscribers and thus are aware of some of the things we told the MarketingSherpa reporter — that we felt if our priority was getting into the conversation about innovation and being able to share our insights, we needed to be able to distribute them more freely in a form that people could pass on. We're glad that it's worked out so well.

If you're a relatively new subscriber to Strategy & Innovation (or don't subscribe at all) you may want to go to the S&I page on our website and delve into our archives. There's a wealth of information in these articles that we're happy to share with you. Enjoy!

(Note: If you have not previously registered at our site, you will need to register once — a free and relatively painless process — to be able to access the content.)

Given the shaky state of the world economy, companies are in a tough spot: while there is the need to be fiscally conservative, it is more important than ever to push initiatives for current and future growth. However, attracting new customers can be an expensive process, and a common response to a financial crunch is cutting marketing and advertising budgets.

We here at Innosight always recommend that companies address nonconsumption, since doing so is the surest way to create new growth. But nonconsumption does not exclusively refer to noncustomers; an oft-overlooked dimension of nonconsumption is the nonconsuming occasion. In other words, consumers of your product may not be consuming in all the ways and at all the times that they could.

That’s why existing customers might be the easiest place to look for new growth. Among the population of consumers that already know and like a product, there may be barriers preventing them from more frequent consumption. Understanding these barriers to full consumption helps to illuminate solutions. Two disparate industries, pharmaceuticals and home cooking, illustrate what such solutions might look like.

Pharmaceuticals and Packaging

Although more than half of Americans take at least one prescription drug, massive nonconsumption exists in the form of medical noncompliance. Noncompliance is such as widespread problem, in fact, that the Boston Globe reported recently that the US economy loses $100 billion annually as a result. In addition, health insurers pay for expensive hospitalizations and procedures that might have been preventable, employers experience reduced employee productivity, and, of course, the patients themselves may face injury or death. And yet one of the major contributing factors to medical noncompliance is simple forgetfulness.

Accordingly, combating forgetfulness would be a logical way to boost sales for the pharmaceutical industry (not to mention reduce costs for health insurers). One new product that offers a potentially inexpensive and effective way to remind people to take their medication is Vitality GlowCaps, pill container lids that glow and eventually play a tune when it’s time to take your medicine. Already available for sale, the company believes that with volume, such technology could be a fairly cheap and ubiquitous part of medication packaging. Embedding such a sensor and alert system into pill bottles could eliminate the forgetfulness barrier, reducing nonconsumption among existing pharmaceutical users.

Home Cooking and Marketing

PAM cooking spray has long been a choice of home cooks for preventing cookies and muffins from sticking to the pan. Con-Agra has recently decided to push PAM into contexts in which consumers currently use other products like oil or butter, or in many cases, nothing at all. Con-Agra is banking on the idea that consumer awareness of PAM’s myriad uses is a barrier to consumption in those additional contexts.

A recent print and tv advertising campaign educates consumers that PAM spray can perform such tasks as helping cooks work with sticky food like popcorn balls, give baked potatoes a crispy skin, and prevent spaghetti from clumping while cooking.  Even simple marketing solutions — like printing additional use suggestions on packaging — could spell big returns if they overcome such awareness barriers.

It is worthwhile to periodically consider your existing customers and any barriers they might have to more frequent consumption. Opportunities like these may be low-hanging fruit for growth, without the need to create a new product or attract a new customer. Keep an eye out for them! 

The holidays are here. Get within 500 feet of a mall and you will be bombarded with sales signs, overwhelmed with Christmas carols, and swallowed by crowds of seasonal shoppers. While all of this may be overwhelming, there is one very good thing that comes with the hustle and bustle of the holidays – cookies.

I love cookies and there is no time of year more cookie-centric than the holidays. I have many fond memories of baking cookies with my mom, gleefully squishing Hershey’s kisses into the center of peanut-butter cookies and carefully painting icing on sugar cookies. This is why I was so fascinated by Arrowhead Mills’ “Bake with Me,” a line of baking mixes designed to encourage interaction between children and their caregivers. In addition to the baking mix, each box contains a promotional item, such as a cookie cutter or decorating stencil, to carry the interactive element from the box to the baking sheet.

Like most other baking products, there are sumptuous shots of sugar cookies, brownies, or cupcakes on the packaging, but what makes this packaging stand out on the shelf is that it also features a photo of a child in a chef’s hat happily mixing a bowl of batter. “The idea behind the package design was to develop a look that would really stand out on shelf to deliver the unique proposition; a fun activity for mom to do with their kids...,” explains Martha Seidner, a vice president at Smith Design, the agency responsible for design of the “Bake with Me” packaging.

All baking companies target functional jobs around taste, attractiveness of the food, nutritional value, and preparation time required. Arrowhead Mills has nailed the emotional jobs of parents, such as:

• Feel like a good parent
• Establish/reinforce my relationship with my kids
• Create lifelong memories with my kids

By targeting emotional jobs, “Bake with Me” effectively overcomes traditional resistance to baking mixes as less authentic (and lower quality) than baking from scratch by satisfying other (and arguably more important) jobs related to the parent-child relationship.

Well done! Now, let’s gather the family and friends and start baking some cookies.

On Tuesday Starbucks launched a nationwide promotion to boost its business during slow afternoons. The company is offering $2 Grande-sized cold beverages after 2 pm to people who bought something in the morning.

There are three things about this innovative approach that we like:

• It's creative and focuses on a non-consuming occasion: Starbucks is focusing on a non-consuming time of the day. The Job of "provide me with an afternoon treat and break from work" competes with snacks in the office, a walk outside, or a call to a friend on your cell phone, not just the Dunkin' Donuts next door
• It's relatively low-risk and easy to implement: Having people bring a receipt back in the afternoon for a discounted beverage is a less risky strategy then putting lots of money into new product development and equipment (which Starbucks did with their breakfast sandwiches and special ovens). The marketing costs are insignificant because they are focused on existing customers who walk through the door; this is less costly than attracting brand new customers through expensive television and radio advertisements
• It started with a small experiment: This particular promotion started on a small scale in three cities (Seattle, Miami, and Chicago) before going national

While we overall like the approach, we hope that Starbucks explicitly laid out the assumptions underpinning the success of this promotion and is keeping track of them, namely: 

• Customers will change their behavior and come back to a Starbucks the very same day for a cold (probably more calorie-laden) beverage
• Customers remember to use coupons and like to use coupons; there is no stigma associated with bringing back your receipt as a coupon at Starbucks
• Baristas will consistently tell people about the offer (this just reminds me of the “save 10 percent on your purchase credit card offers,” which I decline before the salesperson can even finish their sentence)
• The offer will create positive (not negative) buzz for Starbucks
• The promotion will grow the volume of business in both the morning and the afternoon, and neither group will be turned off by the long lines

The most important assumption in the list above is that neither the morning or afternoon group of customers is turned off by the long lines. Starbucks was not built as a volume business. How does a business built on “the Italian coffee house experience” manage the transition to meeting growth through volume? Could this be the start of a conscious shift in the Starbucks strategy from providing high-priced treats in a delightful experience to a lower-priced, higher volume business? What do you think? We’ll be looking to see how this pans out.

I have to give credit to the folks at advertising agency Modernista! for dismantling the company’s existing website in favor a “site-less” approach. In this disruptive move they’ve done much more than simply save on site design.

By foregoing the breadth of information available on a traditional site, they focus viewer attention on the company’s art and creativity. It’s a big win (and just plain cool).

The company’s new homepage consists only of a small menu that floats over the viewer’s referring site or over the Modernista! entry on Wikipedia. Click on the “Print work” menu tab and you’re directed to the company’s work as presented on Flickr; click on “TV work” and up pops a You Tube page with videos of Modernista!-created ads.

This new approach is different, budget and very simple. To many, it would be a leap down in terms of the traditional metrics that define good website design. The company’s “conventional” website was a resource-intensive, complex site that resembled a kooky (yes, I said it) haunted house. It was impressive yet overwhelming, flexing the firm’s creative muscle with more animation than most viewers could handle. The new site is perhaps less user-friendly for those expecting a traditional website structure, and offers less context for the depicted company work. The new format could also yield negative user-generated critiques of Modernista!’s work on the social media pages that serve as its website.

The trade-off for these drawbacks? A cleaner site that demonstrates the firm’s creativity, confidence in letting its ads speak for themselves and comfort incorporating Web 2.0 platforms in its work. The site has generated more blog traffic and buzz in a wider range of forums than a traditional website with fancier features would have done, with this blog post as a case in point. Isn't that the goal of a website as a marketing tool? And the move isn’t one that other leading advertising agencies are likely motivated to follow. Voila! Disruption.

But that’s just the web site. The real disruption will be if Modernista! applies a similar leap-down approach in developing client advertising campaigns that have worse performance on some traditional dimensions but are, perhaps, simpler and more affordable relative to conventional advertising.

Stuttgart is “going green.” The German city recently signed a letter of intent with Ultra Motor to implement an infrastructure to support eco-friendly scooter-bikes. Launch is expected in 10 months and the idea is catching on; according to BusinessWeek, Ultra Motor is currently in negotiations with 12 other major European cities.

Driving this effort is Ultra Motor’s new A2B Light Electric Vehicle (LEV) — a scooter-bike with a conscience. The tagline even has an anthropomorphic ring to it: “The heart of a bicycle. The soul of a scooter.”

Experience LEV technology: Hop on a comfortable seat surrounded by a lightweight, aluminum frame. Enjoy as much exercise as you choose by pedaling or cruising at 20 mph. Want to ride further? The standard range of 20 miles can be extended to 40 with the addition of a lithium ion battery pack. New technology provides one-third more force than electric motors; helpful when ascending hills or darting through traffic. A dashboard indicator signals energy remaining. Dwindling charge? Simply plug in.

Current customers of the A2B vehicle include commuters, students, employers, fleets, and local authorities. However, through our lenses, jobs define the marketing strategy and are linked to attributes:

Social job: “Have a positive impact on the environment”
The A2B is a zero emissions mode of transportation, powered by a lithium ion battery. The vehicle efficiently functions at approximately one-tenth the running cost of a gas-powered scooter.

Emotional job: “Allow me to enjoy my commute”
The rider is able to enjoy the outdoors and a quiet ride. The extended driving range provides freedom and the vehicle is easier to handle than a gas-powered scooter. Modular storage options are also available.

Functional job: “Provide a way for me to reduce transportation costs”
Savings are self-evident — no gas required. The A2B model is currently available in 20 states across the U.S. for about $2,200. In Stuttgart, a monthly subscription will cost $23; a mass transit pass costs $84.

In the spirit of business model innovation, Ultra Motor is exploring new networks of transportation, one of which will be utilized in Stuttgart. The “LEV City Initiative” outlines this potentially disruptive system featuring charging stations; purchase a subscription, locate a station, swipe your card and enjoy the ride.

We applaud Ultra Motor for encouraging consumers to “go green” in new ways. Learn more from the source at www.ultramotor.com. You’ll notice as the website loads, the screen cleverly notes: “Charging up.”

In almost all companies, market research is a critical part of the innovation process. Market research helps companies identify attractive opportunity areas, compare innovation initiatives, and fine-tune their strategic approach. It’s a pity then that companies frequently stumble when using market research to guide innovation decisions.

It’s not that market researchers are bad people. Almost all the market researchers I have met are good, thoughtful people. The tools of market research are—when used properly—good, useful tools. But something comes off the rails when innovation-seeking companies organize, execute, and use market research.

The four biggest flaws I see with traditional market research approaches are:

1. Talking to the wrong customers. It’s been more than a decade since Clayton Christensen described how the root of the innovator’s dilemma is a myopic focus on the most demanding customers in the market. Yet, many companies still spend a disproportionate amount of their time trying to understand the wants and needs of existing, demanding customers. Innovation opportunities almost always come from understanding a company’s worst customers or customers it doesn’t serve.

2. Asking the wrong questions. Many companies will ask customers, in essence, “What do you want?” Academics and practitioners more eloquent than I have described how customers can’t reliably answer that question. The focus has to be on the problem the customer is facing—and even that can be tricky because customers can’t always articulate problems that aren’t directly targeted by existing solutions. ...

Read the rest at Scott's Harvard Management blog, Innovation Insights.