Prophet Thought Leadership Newsletter

	A letter from CEO Michael Dunn
	"How Marketing Can Support the Innovation Imperative", by Mike Leiser
	Vice-Chairman David Aaker discusses, "The Relevance of Brand Relevance to Innovation"
	The Inside Track
	Recommended Reading
	Upcoming Events

A letter from CEO Michael Dunn

What do the Apple iPod and Hanes' “tagless” t-shirts have in common? They're both examples of innovation at its finest, and not just for the creative genius they represent. More importantly, they represent the reason why innovation should be the lifeblood of business: both have driven substantial top- and bottom-line growth to their parents.

It's a fact not lost on marketers. In surveying more than 300 senior marketers for Prophet's first annual The State of Marketing Survey, 62% cited new products and services as being a critical driver of business growth in the next 18 months.

But marketing needs to rise to the challenge. What is innovation after all, other than products and services that offer fresh thinking in a way that meets either the latent or unmet needs of customers? No one in the organization knows the customer better than marketing, which should be leading with its insights and instincts to advance the innovation process.

We've been doing a lot of work on this front lately, and the latest issue of our newsletter reflects how our thinking has evolved. Senior Partner Mike Leiser discusses the role of marketing in driving innovation, while Vice-Chairman David Aaker - in his regular contribution, discusses how brand relevance needs to be factored into the innovation equation. Finally, in his most recent Point column, Scott Davis weighs in, calling for improved collaboration and better use of brand assets to move marketing to a more dominant role in the innovation process.

In our Recommended Reading section, we share an article I recently authored for BrandWeek on the need for better collaborative efforts between marketing, as well as one by Christian Dorffer and Tim Munoz of our London office for CEO magazine on how CMOs can be the link between marketing's capabilities and corporate growth.

As always, we welcome your feedback.

Best wishes,

Michael Dunn

Michael Dunn
President & CEO
m_dunn@prophet.com

Building Great Brands and Businesses

How Marketing Can Support the Innovation Imperative
By Mike Leiser, Senior Partner

Innovation is a major hot button with business these days, given the ultimate goal of innovation as a key driver of organic business growth. As one survey of 940 senior managers found, all considered growing revenues through innovation as critical to success. Yet more than half were unhappy with their innovation investment returns – not surprising as 96% of all innovation attempts fail to beat ROI targets, according to separate study by the Doblin Group.

Marketing, as the keeper of customer intelligence and arbiter of brand relevance can and should lead the way in turning this around, but getting there is a process. Three of its most critical aspects follow:

Improved collaboration: The traditional model for innovation has been for engineers and R&D staff to focus on developing the next best thing. New offerings are generally based on what developers think customers want, not necessarily on research-driven customer insights.

While marketing can push toward improved collaboration as a means of bringing a more customer-centric focus to the process, achieving it involves cultural changes that must be led from the top. Moreover, marketing must earn its credibility to sit as a collaborative partner with designers or engineers, by leveraging its insights into the customer's relationship with the brand.

Research Leads to Insights: The savviest marketers are looking beyond the traditional research staples of focus groups and surveys to expand their understanding of customers in today's information-rich environment.

New technology, for example, enables marketers to analyze such “consumer-generated media” as blogs and other electronic forums, keeping the pulse of the online buzz around new products, brands and ad campaigns. Ethnography is another research approach increasing used by marketers with an eye toward innovation because it focuses on what customers actually do with products – not what they say they do.

The challenge to marketers is to remember that research is the springboard for creative thinking, not the final arbiter of tactical and strategic direction.

The role of brand: Brand is a valuable business asset with tremendous equity that can be leveraged to impact innovation. Marketers need to better understand its role and make it part of the underlying strategic dialogue.

First, consider brand as it's now commonly being viewed: as a representation of an understood, unique, consistent and differentiated experience for the user. Many successful businesses fail with their new product, service or market ventures because they weigh them solely against the traditional measures of market opportunity and organizational capabilities. What's missing from this equation is brand relevance.

Too much of a stretch on the brand relevance front will destine such efforts to failure, as evidenced by such famous flops as Harley Davidson cologne or Ben Gay aspirin. But ventures that meet the litmus test of all three measures stand the optimal chances of success at developing new capabilities and building new brand relevance.

Now is the time for marketers to lead the way on the innovation front. It's their insights that will fuel the process and help the business devise the kind of creative products, services and programs that render solid returns.

The Relevance of Brand Relevance to Innovation
By David Aaker, Vice-Chairman, Prophet

Consumers and corporate buyers, more mobile and better informed than ever before, are increasingly able to get precisely what they want when they want and at the price they're willing to pay. To meet these exacting desires, new and different products and services appear unceasingly. Entirely new categories and subcategories come into existence almost overnight, as existing ones change or fade.

In this fast-moving environment, management must pay attention to a new — and, for most, unfamiliar — attribute of the company's products, services, and brands: their relevance.

“Brand relevance” is a frequently used phrase that generally has not been well defined or explained. Fortunately, there is a simple way for executives to assess their brand's relevance, as it occurs when the following three conditions are met:

A product or service category or subcategory — defined by some combination of attributes, user groups, or other distinguishing characteristics — exists or emerges;
There is a perceived need or desire on the part of a customer segment for the category or subcategory;
The brand is in the set that segment considers material to the product category or subcategory.

Brand relevance is driven by different product class dynamics, such as when a new product or service dimension expands the boundaries of an existing category. The “eat and go” trend, for example, led Yoplait to develop Go-Gurt, delivered in a colorful nine-inch tube designed to enhance portability and to appeal to kids. Go-Gurt helped Yoplait forge ahead of Dannon, a brand it had trailed for decades, because it had created a new category in which Dannon was not relevant.

Customer needs also drive brand relevance, as they often drive the creation of a new product category or subcategory. In the beverage industry, the dual trends of wellness and the use of herbs and natural supplements have supported the huge new category of healthy beverages. Now this category contains a host of subcategories including enhanced teas, fruit drinks, and specialty waters.

How a company responds to emerging categories and subcategories in its field of endeavor can make the difference between market dominance, continuing viability, and slow death. Experience and logic indicate that, when it comes to brand disruption, firms come in three flavors:

Trend neglectors: Firms that are committed to and focused on their own model and believe that operational excellence will overcome market dynamics;
Trend drivers: Firms that participate in the creation of new product categories or subcategories;
Trend responders: Firms that closely track the emergence of trends and the evolution of subcategories, and take responsive action to keep their offerings current and relevant.

For the majority of companies, developing trend responsiveness capabilities is the best strategy, but it carries its own set of risks. The drive to maintain relevance can prompt a company to chase too many subcategories, both real and imagined, resulting in a diffused, ineffective, and expensive strategy. Companies need capabilities beyond the detection and evaluation of emerging subcategories — they require creative, powerful new offerings. Entering an emerging category without them is more likely to waste resources than to create relevance.

Creating a brand strategy around relevance may require developing a new brand, an endorsed brand, or a subbrand to carry the flag. If the necessary brand assets are not readily available to do this, they need to be built or acquired. Ultimately, staying relevant in dynamic environments requires an organization to become more outward looking, customer focused, flexible, and nimble — perhaps the toughest challenges of all.

This article is adapted from a contribution to a special report issued by Strategy & Business in June 2004.

For other recent articles written by David Aaker, please
click here.

The Inside Track

Kellogg on Branding

Look for it on Amazon and elsewhere in bookstores on Sept. 23: Kellogg on Branding (Wiley), the latest in the much-vaunted series compiled by the nation's top business school. Among the chapters by prominent authorities and business leaders is one by our own Scott Davis on “Building the Brand-Driven Organization.”

Our Expanding Talent Pool

We're happy to welcome Andrew Pierce as a Senior Partner and member of Prophet's Executive Committee. Considered by many as one of the nation's top consultants on marketing strategy development, he joined us from a long career at Lippincott Mercer and its parent, Mercer Management Consulting. Andy says: “The invitation to join Prophet was too exciting to pass up, as it's been gaining a reputation for its thinking and top-notch client assignments. I'm looking forward to the opportunity to help further shape its strong portfolio of offerings and influence its continued growth.”

We're also continuing to advance our homegrown talent, having recently promoted Jeff Smith to Partner. Jeff, who has worked in our offices in Chicago, Tokyo and, most recently, Zurich, has been instrumental in numerous client assignments, most notably with UBS.

Recommended Reading

Prophet's latest articles

Innovation: Moving Marketing's Capabilities, Insights Front and Center
Point, September 2005
In his regular column, Scott Davis explores the growing need for businesses, and particularly their marketing leadership, to look differently at what constitutes innovation, and create a culture that fosters and rewards it.

Internal Alliances Yield Outside Wins
Brandweek, August 2005
It's all about relationships in today's business world, and Michael Dunn points out that for marketers, this usually translates into a mandate to get closer to the customer to solidify the loyalty that helps drive top-and bottom-line growth.

Chief Marketing Officer: Strategy Dynamo or Creative Dreamer?
CEO, September 2005
Christian Dörffer and Tim Munoz discuss how the organization's senior-most marketing executives can position themselves to better serve as the missing link in the executive team – between marketing's capabilities and corporate growth.

Most frequently downloaded article from www.prophet.com

Leveraging the Corporate Brand
David Aaker's perspective on how a company can dial up the importance and role of the corporate (company) brand.