Mak Joshi is a Product Marketing Manager in the Pharmaceutical Products Division at Abbott Labs. He has experience in development and delivery of high impact marketing campaigns, promotional materials and sales roll-outs, online marketing initiatives, new product development from ideation to launch in domestic and international markets, channel development, account management, Key Opinion Leader and advisory board development. His expertise includes analytical approaches to market segmentation and targeting, promotional effectiveness, optimal resource allocation and primary and secondary marketing research. Mak is a ASQ Certified Six Sigma Black Belt and has done significant innovative work applying Six Sigma principles to marketing programs and campaigns to achieve greater return on investment (ROI). Mak holds a bachelor’s degree in mechanical engg from University of Pune, a master’s degree in industrial engineering from North Dakota State University and an MBA from the University of Chicago Graduate School of Business.
Innovations in Marketing Mak Joshi Product Marketing, Abbott Labs Sept 10, 2008 Contents Marketing Fundamentals What’s wrong with some current Marketing approaches Innovating A More Robust Marketing Paradigm – – – – – – – The Current Marketing Paradigm A Robust Marketing Paradigm Getting the Most from your Marketing Dollars What is an Innovation in Marketing Marketing Innovation Myths The Innovation Gap between Theory and Practice The Innovative Marketing Organization Innovative Trends in Marketing Innovative Strategies for Product Lifecycle Management Conclusions Marketing Fundamentals Marketing Fundamentals The very essence of marketing is ‘satisfying customer needs’ The Marketing function develops a ‘value proposition’ to satisfy those needs An important function of Marketing is ‘promotion’ The Marketing function strives to develop a ‘sustainable competitive advantage’ through product features, technology, pricing, positioning and placement, and organizational learning All other functions are strategically aligned to meet Marketing’s objectives In today’s competitive global marketplace, – Companies face a singular challenge: • INNOVATE OR PERISH! What’s wrong with some current Marketing approaches? What’s wrong with some current Marketing approaches? Intuition and Inspiration drive the marketing process – NOT validated customer insights from a significant sample size Marketers are quick to act – Design and Validation are an after thought – Validation processes are inadequate and immature – Even Test Marketing is too immature Resource Allocation is haphazard – NOT validated through metrics and research – Does NOT fully leverage the marketing mix – Does NOT look to push the envelope What’s wrong with some current Marketing approaches? Lack of use and continual tracking of metrics for: – – – – – – a) Quality of innovative ideas b) Validation of customer insights c) Validation of value proposition d) Cost‐benefit of new product features e) Return on investment in innovation and f) Selection of marketing mix Lack of ownership of the overall innovation process, including the New Product Development process; – Innovation is someone else’s ‘job’ Internal innovation processes limited to R&D and technology investments and inhibited by “tried and tested” processes and thoughts Innovating A More Robust Marketing Paradigm The Current Marketing Paradigm The current Marketing paradigm is that of ‘Strategies and Tactics’: – Strategies tell us what to do – Tactics tell us how to do it This paradigm is limited because it misses a few important steps: – – – – – The focus is on ‘doing’ Innovation is not part of the process, hence we miss opportunities to innovate Customer centricity and measurement is limited and owned by Market Research Validation of ‘value proposition’ falls by the way side Performance measurement and metrics tracking are after the fact and do not lead to continuous improvement The current paradigm is inadequate A More Robust Marketing Paradigm Proposing A New Paradigm: – – – – – – Marketing is a science as well as an art Creativity and Innovation drive Marketing To leverage Creativity and Innovation fully, science needs to step in To be robust, the Marketing function needs the rigor of science The Marketing function is a process and project oriented environment Six Sigma is methodology that enables world class quality and continuous improvement to achieve highest levels of customer satisfaction – Applying principles of Six Sigma to the Marketing function provides the rigor it needs to be robust and customer centric, while feeding continuous improvement Robust Marketing with Six Sigma principles Six Sigma is a Method for utilizing Voice of the Customer to generate robust business results. These results are achieved by DMAIC method: Define Listen to the Voice of the Customer – Identify customer needs – Understand problems or pain points by market/ segment/ opportunity – Develop a charter to address these customer needs/pain points proactively Measure Analyze Innovate Control Characterize the existing process – Understand current effectiveness of the process – Decide performance objectives to achieve by converting customer needs to product specs Identify sources of variation – Understand relationship between input and output variables –Identify key process input variables (KPIVs) that drive output Innovate to develop a value proposition to optimize output –Validate using Voice of Customer, –Reduce or eliminate anticipated risks, –then Roll Out Control KPIVs –Document and monitor the gains –Assign accountability for sustaining gains Six Sigma is a Method‐ Distilling KPIVs Six Sigma is a Method of improving and controlling key process input variables (KPIVs). Define • Charter the Project • Capture Customer Requirements • Maps • Measurement Systems • Capability Analysis • Histogram • Control Chart • Fishbone Diagram • Cause and Effect Matrix Measure Analyze • Failure Modes and Effects Analysis • Multi‐Vari Studies • Design of Experiments (DOE) • DOE/ Evolutionary Operations • Control Plan • Statistical Process Control Charts Innovate and Control Y=f(X) & S=g(X) DMAIC Process Prioritizing Improvement Robust Marketing: A standardized process Standardization across the DMAIC process drives Marketing success using standardized tools and templates to: – – – – – – – – Listen to the Voice of the Customer Understand the competitive product offerings in the market Convert customer needs to product features Innovate to develop a high quality value proposition Validate value proposition before launch Reduce or eliminate anticipated risks in rolling out Deliver the value proposition, Monitor and Control delivery of value to customer To enhance performance, focus on standardized Leading Indicators (independent variables like number of sales calls, leads generated, customer pull through, message recall) rather than Lagging ones (dependent ones like sales revenue and market share) Tracking lagging indicators is just too late! Robust Marketing: An example: DEFINE Robust Marketing Define Capture Customer Requirements •Quality Function Deployment I •Advisory Panel •Marketing Research: Focus Groups, IDIs, Surveys Example Understand your customers' pain points A side effect of a drug is the biggest pain point Charter the Project Upper management sponsors proactively Robust Marketing: An example: MEASURE Robust Marketing Measure Characterize the process Understand current effectiveness of Value delivered •Return On Investment •Message Recall •Leads Generated •Number of sales calls •Customer Pull Through Example Map the value delivery process Understand where it stands today How big is this issue? How many physicians and patients does it affect? How does it keep physicians and patients from achieving their goals? In how many sales calls do we hear about it? How many times does it keep physicians from using our product? How do physicians and patients currently manage it? How do we communicate on this issue? How effective is it? Decide performance objectives to achieve Where would you like to be after? Changes in attitude Changes in prescribing behavior Changes in side effect management by physicians & patients Robust Marketing: An example: ANALYZE Robust Marketing Analyze Identify few KPIVs that drive output •Quality Function Deployment II •Regression •DOE •Multi‐Vari Studies Example Identify key drivers of product performance Communication frequency Message quality Sales aids/messaging tools Physician ads, Consumer ads, Sales calls Robust Marketing: An example: INNOVATE Robust Marketing Innovate Develop/Improve/Validate Value Proposition based on VOC •DOE •Pilot •Conjoint Analysis Example Develop a solution and validate with VOC Develop a side effect management strategy Develop a communication plan Validate side effects management strategy Validate communication plan with customer panels Reduce or eliminate risks in the process •Failure Mode Effects Analysis (FMEA) Anticipate and address risks FMEA for launch risk management Deliver the Value Proposition Roll out the marketing program/campaign Robust Marketing: An example: CONTROL Robust Marketing Control Control Leading Indicators (KPIVs) •Control Charts/ Control Plan •Call Plan •Audit Data Example Develop a Control Plan Marketing Control Plan Sales Call Plan Audit Data (message recall) Measure/Validate to ensure objectives were met Validate that solution meets objectives Changes in attitude of patients and physicians Changes in prescribing behavior of physicians Changes in side effect management by physicians & patients Monitor Output using Lagging Indicators •Sales Revenue •Market Share •Customer Satisfaction surveys Monitor Product Performance Sales Revenue of your product Market Share of your product Customer Satisfaction Surveys of product use Getting the Most from your Marketing Dollars Getting the Most from your Marketing Dollars Foster a culture of organizational learning and continuous innovation: This will ensure continuity and continuous improvement in programs and incremental ROI for tactics Tactics alone do not yield ROI, Execution plays a BIG role Innovative Tactics with good execution can deliver really high ROI Let the Metrics determine success of your individual tactics – Use metrics that leverage test‐control methodologies to determine ROI – Use continuous improvement to innovate existing tactics to improve ROI Getting the Most from your Marketing Dollars Optimize the marketing mix: – Use econometric simulation models to guide decision making‐ NOT instincts – Study your competitors’ actions, and then DIFFERENTIATE using INNOVATION – Leverage the marketing mix fully – Do NOT let your core competencies get in your way – Engage with your customers and always validate your value proposition – Be cognizant of the mechanism of action of each element of the marketing mix, its impact, and leverage the synergies between elements What is an Innovation in Marketing? Innovation in Marketing Innovation in Marketing is an innovation that satisfies customer needs and develops a competitive advantage through differentiation along one or more of the following performance characteristics: – – – – – – – Desired Product Features and Design Size Usability Quality Time Price Cost savings/ Incremental Revenues As a rule of thumb, a good innovation strives to achieve a multiple or division of 2 to improve performance characteristics, which is called the Innovation Rule of 2* Source*: Based on the Book: “Business Innovation in the 21st Century” by Praveen Gupta Marketing Innovation Myths Marketing Innovation Myths* Myth: Innovation should be driven by R&D, technology or a function dedicated to innovation Fact: Every marketing person is responsible for driving innovation Myth: Being creative with marketing projects will lead to innovation Fact: Creativity in itself is not enough for innovation. Companies need structure, processes and training of personnel to drive innovation Myth: Marketing Innovation is fostered at exotic locales with “out of the box” thinking through right brain activity of creative and artistic marketers Fact: Innovation requires utilization of the full brain and not merely the right brain; Innovation can become an every day habit for ordinary individuals who can innovate on demand within the confines of their own offices, given the right tools and processes Source*: Based on the Book: “Business Innovation in the 21st Century” by Praveen Gupta The Innovation Gap between Theory and Practice The Innovation Gap: Accenture and AMR Research Study after study discusses an “Innovation Gap” between Theory and Practice of Innovation Accenture Customer Innovation Network Study and AMR Research report: – 44% cite "demand insight" as the primary driver of product innovation; ahead of technology (35%) and design (21%) – New products fail because "the product did not meet customer needs“ – One in 15 ideas generated each year are actually launched – “Breakthrough" innovations take up to three years from idea to market – 73% saw "on‐time to market" of great importance in determining new product commercialization success, yet only 45% viewed themselves as successful Source: http://www.consumergoods.com; Article: “Studying Innovation” by Lori Castle The Innovation Gap: Booz Allen Hamilton A Booz Allen Hamilton study posed the question: "How do companies innovate successfully?“ to “high‐leverage innovators” "They can spend the most money, hire the best engineers, develop the best technology and conduct the best market research. But, unless their R&D efforts are driven by a thorough understanding of what their customers want, their performance may well fall short. Respondents whose innovation strategies are tightly aligned with overall corporate objectives had a 40 percent higher growth in operating income and 100 percent higher total shareholder returns than those whose innovation strategies were less aligned Companies that directly engaged their customer base had twice the return on assets and triple the growth in operating income than the others Source: http://www.consumergoods.com; Article: “Studying Innovation” by Lori Castle The Innovation Gap: Boston Consulting Group A survey of 940 senior executives by Boston Consulting Group (BCG) stated: – Increasing top‐line revenues through innovation has become essential to success in their industry – More than half of the execs were dissatisfied with the financial returns on their investments in innovation Innovation consultants Doblin, Inc. found that nearly 96% of all innovation attempts fail to beat targets for return on investment Source: http://www.businessweek.com/magazine/content/05_31/b3945401.htm; Article: “Get Creative!” The Innovative Marketing Organization Key Drivers for Innovation Success Key Drivers of Innovation Success are: – Innovation Culture driven by Executive Sponsorship (Corporate) – Structural Strategic Alignment of Functions for Innovation Success (Corporate) – Customer Centricity and Tools to validate customer needs and insights (Marketing) – Robust Processes that drive Innovation (Marketing) Structure and Culture for Innovation Success According to The McKinsey Quarterly 2008*, "Leadership and Innovation“, more than 70 percent of the senior executives surveyed say: – Innovation will be one of the top three drivers of growth for their companies in the next three to five years – 65% were only "somewhat," "a little" or "not at all" confident about their decision about innovation – Even starting to build an innovative organization is frustrating – Innovation managed on an "ad‐hoc" basis – First step is to "formally integrate innovation into the strategic‐ management agenda of senior leaders" Source*: http://www.consumergoods.com; Article: “Studying Innovation” by Lori Castle Structure and Culture for Innovation Success A separate McKinsey survey of global executives discovered that leadership was cited as the "best predictor of innovation performance" In an innovative culture, people feel that their ideas are valued and feel comfortable expressing and acting on them The culture that inhibits innovation is a "bureaucratic, hierarchical and fearful environment" To avoid such feelings, leaders must embrace innovation “by selecting innovation leaders and creating opportunities for managed experimentation and quick success“ General Electric has an executive responsible for innovation and developed its own structured methodology for innovation called CENCOR (Calibrate, Explore, Create, Organize, Realize) Source: http://www.consumergoods.com; Article: “Studying Innovation” by Lori Castle Innovative Trends in Marketing Innovative Trends in Marketing: E‐Marketing E‐Marketing is the utilization of electronic media (internet, mobile phones) to perform marketing activities such as promotion, customer research, pricing studies, customer relationship management and ongoing communication With the evolution of the internet and mobile technologies, e‐marketing has matured over the years Search engine marketing (SEM) and Search Engine Optimization (SEO): – Be where customers look for you and your information – Very low costs – Platform to position your products favorably ‘Segment of one’ Ability to track makes it unique Innovative Trends in Marketing: Social Media Marketing Social Media is an online gathering to discuss topics of common interest and network with individuals, e.g. LinkedIn, Facebook, Youtube, Sermo, Yahoo groups, discussion boards, blogs, etc. Can lead to mutually beneficial outcomes; Cannot be blatantly promotional Key success drivers: – Developing keen insights – Fostering and leveraging relationships – Aim to serve the community Here is a potential Social Media Marketing Strategy*: – – – – – Gain insights into the community of interest Build brand visibility and authority Influence and promote products and services Link for traffic and Search Engine Optimization Drive traffic for ad revenue models through quality content Source*: http://www.toprankblog.com/2008/03/social‐media‐marketing‐strategy/ Article: What is your Social Media Marketing Strategy? By Lee Odden on Mar 25th, 2008 in Online Marketing, Social Media Innovative Trends in Marketing: Viral Marketing Marketing techniques* that use pre‐existing social networks Produce increases in brand awareness to achieve marketing objectives Rely on self‐replicating viral processes, analogous to the spread of viruses Key drivers are: – Innovative messages – Innovative presentation Six simple principles of Viral Marketing** are: – – – – – – Gives away valuable products and services Provides for effortless transfer to others Scales easily from small to very large Exploits common motivations and behaviors Utilizes existing communication networks Take advantage of others’ resources Source: *http://en.wikipedia.org/wiki/Viral_marketing Source: **http://www.wilsonweb.com/wmt5/viral‐principles.htm, Article: The Six Simple Principles of Viral Marketing by Dr. Ralph F. Wilson, Web Marketing Today Innovative Strategies for Product Lifecycle Management Product Life Cycle Curve Product Lifecycle Management (PLM) is key to sustainable revenue growth and portfolio optimization and hence is an essential Marketing function. INTRODUCTION GROWTH MATURITY DECLINE Sales Volume Dollars Profit Loss 0 Time in years Innovative Strategies for Product Lifecycle Management The following ICIPS strategies can help maximize every phase of the Product Lifecycle: Innovate Speed To Market Innovative Product Lifecycle Management Strategies Collaborate Penetrate Integrate Innovative Strategies for Product Lifecycle Management Strategy 1: Innovate – – – – – Innovations drive profitability and increase customer satisfaction and loyalty Product and Service Innovations are essential to optimal PLM Innovations do not have to be fundamental* Innovations should be designed to stay ahead of changing customer needs e.g. Brand extensions, Line extensions, Product extensions and Service extensions Strategy 2: Collaborate – Collaborate with your customers or social networks to develop innovations – Collaborate to develop win‐win scenarios with customers – e.g. Performance based contracts, Complimentary service offerings, Continuing education Strategy 3: Integrate – Integrate vertically your offering with other players in the value chain – Optimize customer experience and build loyalty – Integrate innovations across products and from different functions/ departments – e.g. Oil industry locates and extracts oil, refines into products and distributes and sells them Source*: Based on the Book: “Business Innovation in the 21st Century” by Praveen Gupta Innovative Strategies for Product Lifecycle Management Strategy 4: Penetrate new markets – – – – – Find new uses for your products Develop new applications and environments for your products Enter global markets Leverage new technologies to redefine your markets e.g. Expand into international markets, leverage the 3G wireless platform capability to launch new products Strategy 5: Speed to Market – Bring out innovations rapidly to stay ahead of the competition and continue to dominate the market – Cut down the development time for new products – Develop intimacy with your customers to reduce the customer measurement and validation times – e.g. Speed to market for Google’s applications, Apple’s innovative iPod and iPhone platforms Conclusions Conclusions The current Marketing paradigm is inadequate to create a robust marketing process; The Robust marketing paradigm addresses those inadequacies and ensures a high return on investment Certain marketing innovation myths may be preventing companies from leveraging innovation fully to maximize growth There is a gap between Innovation Theory and Practice. The following key drivers of innovation can help bridge the Innovation Gap: – – – – Innovation Culture: Innovation Structure: Customer Centricity: Robust Innovation Processes: Corporate Corporate Marketing Marketing Innovative trends and lifecycle management strategies can help in extracting maximum value from our product portfolio In conclusion, Marketing has a big role to play in driving and fostering Innovation because of its proximity to the customer Acknowledgements Praveen Gupta: His Brinnovation methodology and excellent research has revolutionized the area of innovation The organizers of the Business Innovation Conference for giving me an opportunity to present my ideas My employer, bosses and colleagues for showing faith in my ideas and allowing me to take them to market My dad, who passed away on July 3, 2008, is my greatest inspiration and strength My family for their tremendous support and patience
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