Monthly Archives: January 2007

It’s not us, it’s you









The timeless art of demand creation!

One of the most coveted arts in the World of marketing is that of demand creation. You need to put in immense energy, tiring efforts and often flex the monetary muscle to create demand for your product, but ones you have that in place, it’s worth everything, and many times it last for a very long period. I can’t think of a better example to kick-off this discussion than what Rockefeller did to create demand for oil. John Davison Rockefeller, now more known for his philanthropic work, was an American industrialist who played a pivotal role in establishing the oil industry. Rockefeller distributed kerosene oil lamps for free to generate demand for kerosene. He also made sure that all the products that used kerosene as a fuel was cheap and available readily in the market. This created the never ending demand for oil in America. Rockefeller started a unique way of marketing in which out of two products, he subsidized the former which is basically useless until you keep buying the latter.

Many industries today follow the same route to create continuous demand for their products. Hardware companies like HP almost give away printers and copy machines for free and make all the money by selling cartridges. The basic principle here remains the same…more the printers in the market, more people will end up using them, hence creating the demand for cartridges. So in fact when HP sells a printer, it doesn’t actually sell a printer, it basically laid the foundation to create demand for cartridges. Most recently, the same concept is followed by the game console companies. Sony, Nintendo and Microsoft sell gaming consoles at subsidized value incurring a loss of up to $200 per piece just to make sure that the customer buys their console. This console sale creates a solid platform for selling the games which provides these companies most of their revenue in this industry. Some other industries following the same path are cell phones, software and cable television.

Another very common way to create demand is by letting people get used to a service for free or less and charging them to keep using it in the future. Everything from non-prescription drugs to online movie rentals to cellphone providers are trying this means to create demand. Ones a person gets addictive to the product or service, it becomes very hard for them to stop using it. Every ones in a while you get an offer by mail asking you to try something for free for a month. That’s the perfect spark, which leads to a long lasting demand for that product. Many subscription based services follow this model to attract customers and create demand for their product.

One unique way to create demand is by maintaining a “long tail”. This is getting very common in the Internet era, where companies have a luxury not enjoyed by the retailers with limited shelf space. This is how it works: you are looking for some particular novel written by your favorite writer long time back. You checked all the retail stores in the neighborhood but no one carry it anymore. Now you go to this book store on Internet which happens to have the novel. This makes this store take that special place on your to go list and next time you are looking for any book, you might directly end up here. So in a way by maintaining this long tail, which is accessed every ones in a while, these virtual stores on the Internet are creating a demand for their service. Same principle is being used by search engines, download services and online communities to create demand for their service on the Internet.

The great art of demand creation timeless. It was around ages ago, it is there now and it will be reinvented many times in the future as well. Marketing organizations use new methods every now and then to create demand for their products and services. How many people can live without a cell phone, a car or even an online search engine after using it for sometime? Most of us can’t, we got to have it creating continuous demand for either these products or the products required to run them.

Innovation in Product Development

Innovation is a word with varied definitions and interpretations. I think the definition that makes the most sense is the one given by Jet Blue CEO David Neeleman. He defines Innovation as trying to figure out a better way to do something. I think that’s very much true. Innovation is all about solving problems in a way better than ever done before. When we talk about product development, this definition makes even more sense. Customers are not looking for a product or service, they are looking for a solution of a problem. Addressing those pain points and making improvements in the existing products is innovation.

Innovation is the pursuit of perfection. It is very well said that perfection is a fine goal, but improvement is much more realistic. Perfection is something that is not achievable. There is always a better way to do anything. That is what innovation is – always trying to do something in a better way. What fuels the best innovators in the World? It’s the pursuit of perfection. Innovators can be in any field. One of the greatest innovators to idealize is Tiger Woods. He is someone who has taken the game of golf to the next level. If you ask him what keeps him going, the answer you will get is number 18. So what’s number 18? It’s not the number of majors Tiger Woods wants to win (to match Jack Nicklaus’s World record). It’s the perfect score is golf. The never achievable. That’s where he has set the bar and that’s what keeps him innovating.

Innovation is all about applying creativity. It’s trying to do more with less, get more resourceful, bring the costs down and develop products better than before. Innovation is something that really meets the needs of the society. An innovative product development is looking at what’s out there, what’s bugging the customers and then trying to fix it.

I think this paints a pretty clear picture of what is Innovation. But before we move any further, it’s very important to understand what is not Innovation. Innovation is not trying to hit the home run or finding a killer application. In fact there is nothing like a killer app. Whatever gets the name of the killer app, be it the IPod or the Xbox 360, it is actually improvement over something that already existed in the market. Of course both IPod and Xbox 360 are great innovations, but that’s because with the help of creativity and improvement these products tried to identify and meet the needs of customers in their respective markets. Innovation is not trying to solve problem not tied to anything. Till you don’t have something that solves a problem, you have not done any innovation. Creating something just for the sake of it is not innovation. And of course, last but not the least, innovation is not adding bells and whistles to a product to tick mark the checkbox features to out beat the competitor.

Toyota, the Japanese car maker, is the most common example cited for an innovative enterprise. This is one company that has market worth more than the market worth of all the other car makers in the World combined. So what fueled this amazing growth at Toyota? The millions of innovation that took place in the company over the years. Toyota defines Kaizen, or continuous improvement, as the base of innovation. They have some very simple principles that they follow to keep the innovative machine running. They implement small ideas as close to the front line as possible. They create a standard, follow it and find a better way to do the same thing. Standards are made by people at the front line, not by an uber committee sitting in an ivory tower. And more important than anything else, standards are made to be changed by doing something in a better way. Toyota believes in reflection of success. They evaluate the success and failure at various steps in product development. They focus of failures and try to find out ways to avoid them. The Toyota employees are not just making cars, they are continuously trying to find out better ways to make cars, and are trying to make a car that is better than the one out there.

So does your company believe in innovation? In order to answer this question, take a look at the products and services your company develops. Look at the value they provide to the customers. Are the customers better-off with the help of these products and services? Are these products better than the ones already available in the market? If yes, then you can claim that your company believes in innovation.

You got the solution, look for the problems

In a previous post titled One size doesn’t fit all, I mentioned about thermoplastic microspheres to adjust shoe size. I did a web search for thermoplastic microsphere and found that it has many other applications. In fact, DuPont is actively trying to research different places where they can use thermoplastic microspheres, along with adjusting shoe size for which it was primarily developed. The basic property of this material is it widens in width on applying heat, never to compress again. That means it can solve problem where you want to adjust the width and then keep that width constant. DuPont came up with some very interesting “problems” for which this is acting like a good solution. They are trying to use this as a solution for cancerous tumors in blood vessels. Thermoplastic microspheres can be injected in blood vessels having cancerous tumors, it will expand on applying heat and the tumor will compress and die (this is in clinical tests at this time). Another interesting use of this material is to inject it in wood floors to act like a foaming agent. Yet another use of it is to mix it with concrete to yield more consistent thickness in finished products. This is fascinating. Something that was developed to adjust shoe size has found application in fields as far as healthcare and construction.

This is a perfect example of how innovation can be used to reach to problems from a solution. There are lot of positives for such an approach. It distributes the cost of research and development amongst different problems, hence putting the cost down for each individual solution. This kind of applications prove that creativity has no limits. By applying creativity and looking at something from a completely different perspective, you can find different applications for it.

Thermoplastic microsphere is not a one-off thing where such innovations are possible. This kind of innovative approach has lead to great corporate successes as well. Take Google for example. The basic problem they addressed was finding information on the Internet. They defined the solution in form of a search engine that arranged the findings in an order defined by their page rank algorithm. Now they are applying the same solution to problems like finding stuff on Intranet, finding an email from years back, locating items on your desktop and so on. Another problem they faced was monetizing search. They found a solution in form of advertisement based revenue. This led to another “search” for problems on the web where applications can be monetized by serving relevant ads next to the content.

The Fast Company magazine recently had a story about a Chicago based design company, Inventables, that uses each of its solutions to solve more than one problems. This company has clients of the likes of Boeing, Motorola and Nike. They design solution for a particular problem and then look around for problems where the same solution can be applied. For example, they developed Impact-Absorbing Silicon for General Motors to create safer and more efficient car bumpers. This inch thick silicon absorbs the shock, even microvibration. So if you drop an egg on it, the egg doesn’t break. Now they started looking for more applications for this material. Some applications they found for the silicon were flooring under the baby crib and shatterproof flooring in a restaurant where every dish is breakable.

Looking at these examples, an algorithm seems to evolve for this problem search mechanism (yeah, I know it’s not a technical space, but can’t help!). Here’s the pseudo code:
WHILE a Problem [P0]
         Research and development
         Find Solution [S]

PROPERTY [UVP] = Uniqueness about [S] isolated from [P0]

Problems [P1…Pn] = Set of Problems
COUNT [c] = 1

IF [Pc] can be addressed by [UVP]
          Develop a solution for the problem using [S]
          [c] = [c] + 1

RESULT [R] = [P0…Pc]
         WHERE Solution = [S]