June 2008

IN THIS ISSUE

A Letter from CEO Michael Dunn

When people discuss innovation, the conversation inevitably turns to nifty products or services that in one way or another have enriched and enlarged, if not revolutionized our everyday lives. The iPod, Facebook, Wii. I encounter a lot of fans of the Swiffer Sweeper. And anything Google gets high marks, as well.

What most people don’t think about, though, is the 99 percent perspiration (to adapt a phrase) that is expended in coming up with the kind of novel thinking that anticipates – if not shapes – the public’s needs. 

Businesses, however, are thinking about it. A lot.  Most realize that the ability to innovate successfully is a huge differentiator in an increasingly complex and competitive marketplace. They’re sweating about how to do it better – and what systems, processes, mindset, and culture must be created and fostered to get there.

Innovation – and all its facets – is an area we’ve been delving into more and more. This issue of our newsletter discusses some of the issues and topics that we’re exploring with our clients and friends.

We share a brief overview of our 2008 Innovation Best Practices study in “Prophet Study Shows How Strongest Innovators Succeed,” and dig into the topic of Open Innovation in Associate Partner Jennifer Dominiquini’s, “Dispelling the Myths About Open Innovation.”  We also feature an article by Vice-Chairman, David Aaker titled, “Branding Innovation.”

Finally, be sure to check out the “News and Events” section, as we have expanded our team, and think you’ll enjoy learning more about the amazing talent that has come on board recently, including, Academic Partner Tülin Erdem, a Leonard N. Stern Professor of Business and Professor of Marketing at the Stern School of Business, New York University, and others.

Hope you have an enjoyable summer!

Best,

[Signed, Michael Dunn]

Michael Dunn
CEO & Chairman
m_dunn@prophet.com

Prophet Study Shows How Strongest Innovators Succeed

The ability to tap into innovation’s promise as a source of organic business growth is an elusive goal for many businesses. But Prophet’s newest Best Practices Study reveals how “model” innovators do it – with approaches that point the way toward better innovation success for others.

We found that the strongest innovators have a catalyst leading the way – a leader who ‘walks the talk’ when it comes to growing and sustaining a culture for creative thinking. That’s not so surprising, perhaps, as the most successful businesses generally have this kind of visionary leadership. But what distinguishes the model innovators further, however, is the way these catalysts have cast the widest possible nets, both within and outside of the organization, to find inspiration.”

Learn more about our findings by downloading our executive summary.

Dispelling the Myths About Open Innovation

By Jennifer Dominiquini

Open Innovation is widely considered one of the best routes to innovation success. But while the concept is increasingly familiar, considerable confusion exists around what Open Innovation is and what it isn’t. Dispelling three of the prevailing myths about Open Innovation will clear up the confusion.

Myth #1: Open Innovation is an R&D thing

Open Innovation has, in fact, been widely applied to R&D activities. But opportunities exist to utilize this approach elsewhere in the innovation chain. Extending the concept further upstream to harness consumer insights and inspiration creates tremendous potential to enhance new offerings and strengthen brands. Prophet defines Open Innovation as the way in which a company searches for and sources insights, knowledge, capabilities, technologies, products, services, and business models. It’s a broader definition that underscores the approach’s flexibility and fruitfulness.  

Boeing’s development of its new 787, the Dreamliner, is a prime example. In launching it, Boeing effectively leveraged Open Innovation connections to create enthusiasm and buzz. It started with a series of videos and its Web site, where Boeing actively engaged potential customers, passengers and enthusiasts. They did more than explore the plane – they actually named it! Going further, Boeing enlisted 120,000 people from various stakeholder groups to join its World Design Team, an Internet-based global forum encouraging participation and feedback during final stages of development. And external partners like Starbucks, Disney and Wal-Mart are being studied to help Boeing ensure an enhanced customer experience.

Myth #2: Open Innovation applies only to external networks

The ability to transfer knowledge throughout organizations is critical to internal innovation, requiring processes that motivate all employees to participate. Democratizing innovation enhances the quality and quantity of new ideas and engenders greater enthusiasm and buy-in as momentum escalates. Typically, however, the concept of Open Innovation has bypassed the internal network, and instead is applied to external sources and partners – from vendors to academics to customers. But imagine the power and impact created when strong internal networks link with expansive external networks.

P&G’s Connect & Develop program has established it as a leader in Open Innovation. Internally, this has involved teams that cross functions as well as brands, resulting in such offerings as the Mr. Clean AutoDry Carwash System. Externally, it has aimed to develop and improve relations with expert partners, with a goal – exceeded in 2007 – of driving half of P&G’s innovations through outside collaboration.

Myth #3: Open Innovation is hard to manage, and costs a bundle, too

With an endless supply of customers, suppliers, outside researchers and various other groups to harness as part of an Open Innovation strategy, putting one in place must require a big budget, right? Wrong. Various businesses have benefited from Open Innovation at a relatively small cost.

Lego, for example, leveraged its strong brand equity to attract lead users and bring them on board to innovate its robotics offering. A strong base of qualified and passionate customers was drawn in at very little cost by offering a series of enticing benefits, like the chance to buy a beta version of the product and the opportunity co-create new features.

Open Innovation is catching on in a big way with businesses willing to tap into the inventiveness of their employees, their customers, their business partners and myriad other sources in the world around them to achieve relevance, differentiation and solid growth. Those that look beyond the myths to understand the realities of fully powered internal and external innovation networks are poised for the greatest success.

For the complete article, click here.

Branding Innovation

By David Aaker

If there’s one aspect to innovation that seems to be overlooked as the topic heats up with the media, in books, among educators, and as a strategic imperative for corporate leaders it’s this: How innovations should be branded.

Too often, an innovation is hidden within existing offerings, which negates its power as a differentiator. Take Amazon’s feature allowing it to recommend books or other products based on a customer’s interests as reflected by their purchase history. It was never branded and thus became a commodity feature common to many e-commerce sites. Amazon didn’t make that mistake a second time when it unveiled One-Click, a branded service that goes a long way in defining Amazon as a leader in what’s become a messy marketplace.

Here are the drawbacks to simply sliding innovations into an existing offering. First, many in the marketplace are neither motivated nor able to sort out claims and what lies behind them. Customers cope by ignoring what they see as confused or contradictory competitive claims, so those claiming to be “new and improved” simply fade in the muddled environment. Second, any dramatic, visible improvement may well be copied by competitors, negating any belief by customers that a unique point of differentiation has been achieved.

So how can a business recognize when the opportunity represented by an innovation will be more fully realized with the help of a brand? Three questions must be addressed:

  1. Is it a significant advance? Westin’s Heavenly Bed, created in 1999, was truly a better bed. The custom-designed mattress set featured 900 coils, three versions of a cozy down blanket for three climates, three high-quality sheets, and five goose-down pillows. It was noticeably and experientially superior.
  2. Is the advance meaningful to customers? Enough so that it will alter their behavior and loyalty patterns? The ultimate level of impact is when the innovation defines a new category by changing what people buy. The Heavenly Bed addressed the very heart of what a hotel room experience should be: the provision of a good night’s sleep. And it created an entirely new subcategory of hotels with premium beds. During its first year, hotels featuring the Heavenly Bed saw a 5 percent increase in customer satisfaction and increased occupancy, among other measures.
  3. Will it merit investment over time? An innovation worth branding also warrants active management over time, including investments to improve the offering and to engage in brand-building efforts. The value of the branding effort will depend on the value of the business it will support. That involves issues like its profitability, the intensity of current and potential competitors, and the potential to maintain the innovation-based differentiation. The Heavenly Bed did impact the Westin offering and influenced a large business. The effort to extend the branded innovation helped prolong its market impact, with such follow-ups as the Heavenly Bath and the Heavenly Online Catalog.

Branding an innovation involves more than just applying a name and a logo. It takes the creation of a brand that’s supported by a strategy, and an actively managed brand-building program. While not all innovations merit a brand, the decision should be incorporated into the overall innovation strategy.

The above text was drawn from an article placed in California Management Review, fall 2007.

Recommended Reading

Innovation Quest: Catalytic Leaders Set the Pace [PDF]
By Kevin O'Donnell
Innovation appears to be the holy grail of our times.  But the innovation quest is long, laborious and not for the faint of heart. Success requires strong leadership setting the pace: a catalyst and change agent who has the vision, desire and ability to enlist and inspire others to the cause. (Marketing News, June 1, 2008)

The Advertising Show: Focus on Marketing Effectiveness and Innovation [Podcast]
By Andrew Pierce
Andrew Pierce, Senior Partner, talks about innovation and marketing effectiveness in this segment from The Advertising Show. (The Advertising Show, June 6, 2008)

Most frequently downloaded from www.prophet.com

Brand Portfolio and Brand Architecture in Single Brand Companies [PDF]
By Sarah Essex and Teresa Schrezenmaier
In this article, we discuss how single-brand companies can utilize brand portfolio and architecture to maximize business results.

Other articles of interest

An Unlikely Promoter Drives Nokia’s Push in Hollywood
New York Times, June 23, 2008
Tero Ojanpera, a veteran Nokia executive, is not a fan of “American Idol,” although he says he enjoys it from time to time. And when he tried to watch a recent episode of “Hannah Montana,” one of his sons switched the channel.  But four years ago, Mr. Ojanpera and his colleagues in the research center had an epiphany: that entertainment was crucial to the future of Nokia, the Finnish mobile phone maker.

Emerson Electric's Innovation Metrics
BusinessWeek, June 5, 2008
Large companies, where data-driven decision-making rules the roost, have long sought ways to measure innovation. Emerson Electric thinks it has the answer

Design Thinking
Harvard Business Review, June 1, 2008
Thinking like a designer can transform the way you develop products, services, processes—and even strategy.

For additional interesting articles and factoids on the subject of Innovation, check out Prophet’s blog — BackPocket.

News and Events

Michael Dunn, Chairman and CEO of Prophet, was named one of 2008’s Top Consultants by Consulting Magazine. Click here to learn more about this prestigious honor.

We have recently added a wealth of new talent to our team. We would like to welcome Fred Geyer, who will join us as a partner in Chicago; and Vanessa Cohen, our newest partner in the London office.

Another great addition is Tülin Erdem, an Academic Partner to Prophet, and Professor of Marketing at the Stern School of Business at New York University. Tülin will consult exclusively with our clients, and brings an extensive research background, particularly focused on brand management and equity, consumer choice, econometric modeling, and pricing.

Our letters to the editor have been getting some attention lately, including two from our London leadership team. Vanessa Cohen wrote to the editor of Marketing Week about how innovation and superlative branded customer experience drive superior brand performance. In an interview with Responsables.biz, the Spanish Corporate Social Responsibility website, Prophet partner Joseph Gelman talks about brand creation and management, the implications of associating social and environmental attributes with a brand, as well as the challenges and fallacies of green branding. *Please note, this interview is in Spanish.

Spotlight on Speaking

ANA Marketing Accountability Conference
July 14–15 — Dana Point, CA
Prophet is proud to sponsor this event, featuring high level marketers discussing their successes and failures in driving the accountability of their organization.  Register for the event now and take advantage of the buy one get one free admission. Click on the above link for more details.

MarketingProfs Web Seminar: The Monsanto Story
August 7
Andrew Pierce from Prophet and Donna Heckler, Brand Strategy Lead at Monsanto will be discussing the journey Monsanto is taking to optimize its brand portfolio to focus on future growth.

2008 CMO Leadership Forum
September 4 — Chicago, IL
Prophet is sponsoring this event and will be hosting a panel on the topic of marketing effectiveness, using themes and key messages from Michael Dunn's forthcoming book The Marketing Accountability Imperative. The panel will be populated with Chief Marketing Officers who will share their stories of the benefits and lessons learned from their marketing effectiveness initiatives. 

European Chief Marketing Officer Conference
September 25 — Zurich, Switzerland
Prophet is proud to sponsor this first-of-its-kind European CMO Summit, themed "The Future of Marketing." Featured speakers include our own David Aaker, who will be discussing his forthcoming book, Spanning Silos: The New CMO Imperative; and Michael Dunn, who will also be discussing his forthcoming book focused on marketing effectiveness titled, The Marketing Accountability Imperative. Register now! Early bird registration ends July 31.


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