New Features Are Not Innovation

by Steve McKee

Dot one...Recognizing the remarkable success of Apple's iPhone, Palm launches the Pre, which (according to its ads), "does things iPhone can't." True enough, and as an iPhone user I must say that the Pre's exclusive features are appealing. There's just one problem--I don't believe for a minute that the iPhone won't adopt the same features within months. Given the time and psychological costs associated with switching not just my phone, but my service provider, I'm content to wait.

Dot two...Ford launches the all-new Taurus by touting "radar that monitors and alerts you when sensors detect vehicles in front of you..." and "hands-free, voice-activated communications and entertainment." Like those of the Palm Pre, these features are highly attractive and I would like to benefit from both when I purchase my next vehicle. In all likelihood, I will, because if they're as appealing to most people as they are to me, soon enough they'll be available options (if not standard equipment) on most cars.

Connecting the dots...good luck trying to differentiate your brand based on features. As Joseph B. White, automotive columnist for the Wall Street Journal put it in his review of Mercedes' new E550 Coupe, "Electronic gadgets such as radar-assisted cruise control or blind-spot hazard detection are falling down the technology-cost curve so fast that premium brands have only slits for windows of exclusivity on much of this hardware."

Slits for windows of exclusivity. It's true for cars, and it's true for cell phones. It's also true for computers. And hotels. And hamburgers (witness the recent scuffle between McDonald's and Carl's Jr over their "angus" burgers). Feature filching is a fact of life in just about every category of product or service. Unless an innovation is protected by intellectual property laws (and often in spite of that), not only can a given company not "own" it in consumers' minds, but by hanging its hat on a feature it may inadvertently be sowing seeds that its competitors will reap.

What, then, is a marketer to do? Keep innovating, of course - that's the ante. And when you do develop an exciting advance, do all you can to make the most of it. But keep in mind that it's not individual innovations that will build brand equity, it's your unique arc of innovation, presented in a credible, relevant, winsome and consistent context, that will ultimately differentiate your brand from its competition.

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Steve McKee is a BusinessWeek.com columnist, marketing consultant, and author of "When Growth Stalls: How it Happens, Why You're Stuck, and What To Do About It." Learn more about him at www.WhenGrowthStalls.com and at http://twitter.com/whengrowthstall.

Innovation Perspectives - Do you need an innovation strategy?

This is the sixth of several 'Innovation Perspectives' articles we will publish this week from multiple authors to get different perspectives on The Importance of Innovation Strategy:

by Jeffrey Phillips

I've thought for a while that it would be great to get a number of bloggers to write about the same topic, which would allow readers to have different perspectives about an innovation topic from noted (well, at least some of us are) experts in the field of innovation. Braden Kelley asked us to write about the need or importance of innovation strategy, so here's my response to his request.

First, let's set out that there is really no such thing as innovation strategy. Strategy is about setting out the vision and goals for your company, and what your long term objectives are. Most firms set out some vaguely worded strategy which does not lock them in too much, and which they ignore and settle into a comfortable middle ground. Innovation, on the other hand, is about finding new opportunities or new markets and creating new products, services or business models. Innovation should be in support of, and an enabler to, corporate strategy. There is no innovation strategy.

Now, once strategic goals are established, a firm should begin to ask itself, "How can innovation accelerate our goals and help us achieve differentiation or discover new markets or needs?" If you want to think of an innovation strategy, think of it as deciding whether the firm desires incremental or disruptive innovation, or open or closed innovation, or how much disruption or change the firm expects or can bear. Too many firms start innovation efforts without defining these parameters (what we call the facets of innovation) and trying to work with the project teams in this lack of definition is like watching tap dancers in a mine field. They rest very comfortably on ground that appears to be safe, and are completely unwilling to risk another step unless pushed.

What do successful firms do in regards to innovation and strategy? They define very clearly what they will and won't do, and what they expect from innovation and from the firm in general, then they empower (I hate that word) the team to do its best. Note that Apple (top down innovators usually in skunkworks) and Gore (bottom up innovators based on core capabilities) both follow this model and have radically different organizations, but expect people within the firm to understand the strategy and to innovate to achieve the strategic goals.

Closing doors by clearly defining your strategic goals is even more important than opening them. Too many firms are afraid to place clear limits and expectations on an innovation team, and so the team flounders from one seemingly valuable opportunity to another. Most firms fail to enunciate their strategies clearly and that hampers everyday operations, and it creates difficult distractions where innovation is concerned. Clarity is called for when the team is doing new, or difficult, or risky things. Leaving the team without an understanding of its mission and how the innovation efforts supports core business strategies or needs is almost criminal, and will usually result in failure.

So, the takeaway is this: innovation is an ENABLER to corporate strategy, and what innovation needs to succeed is clarity about what is important to the business and what risks and scope are offered by the management team for any innovation to succeed.


You can check out all of the 'Innovation Perspectives' articles from the different contributing authors on The Importance of Innovation Strategy by clicking the link in this sentence.

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Jeffrey Phillips is a senior leader at OVO Innovation. OVO works with large distributed organizations to build innovation teams, processes and capabilities. Jeffrey is the author of "Make us more Innovative", and innovateonpurpose.blogspot.com.

Don't Be Commoditized

by Steve McKee

The other day I met with about a dozen smart, aggressive CEOs, all of whom run successful companies. Most of them, like most of us, are struggling in the current economic environment.

The conversation turned to the pressure on margins they're facing, particularly in industries where distinguishing one competitor from another can be difficult. The question on the table ultimately became this: if you're operating in a "commoditized" industry, what choice do you have but to compete on price?

Plenty. I happen to believe that there is no such thing as a truly commoditized industry. Think about it - if milk or orange juice can be branded, anything can be. Even if your offering is virtually indistinguishable from what competitors provide, the way it's promoted and delivered - from packaging to timeliness to inventory management to the terms offered - can set your brand apart.

It all goes back to the fundamentals of marketing and the Four Ps. While your "product" might be very similar (even identical) to that of your competitors, there are three other Ps in the toolbox with which you can differentiate. For example, while Coke and Pepsi might take issue with being called commodities, to most people they are acceptable substitutes as far as the caramel-colored beverage in the bottle is concerned. Yet both companies relentlessly work to differentiate themselves along packaging, distribution and promotional lines, often with a great deal of success.

Don't cop out if you operate in a highly competitive industry, complaining about having to compete on price. It's not true. Find a way not to be "better", but "different," using all of the tools in the marketing toolbox. Accepting "commodity" status is a choice you make. Or don't.

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Steve McKee is a BusinessWeek.com columnist, marketing consultant, and author of "When Growth Stalls: How it Happens, Why You're Stuck, and What To Do About It." Learn more about him at www.WhenGrowthStalls.com and at http://twitter.com/whengrowthstall.

Beyond Product Innovation

One of the problems with innovation is that, in any given industry, it can get harder and harder over time to come up with the kind of ideas that totally reinvent things in a fundamental and significant way.

Take any vector of innovation and you get to some point where you may have just exhausted the possibilities. Look at today's automobile. It's essentially based on the same architecture we've been using for a hundred years - a wheel at each corner, a steering wheel on one side, an engine at the front or back, a gearbox, and so forth. So innovation in the automobile industry has got to the point where the car is a little bit better here, a little bit better there, but it's the kind of stuff you hardly even notice. Apart, maybe, from the new hybrid motors which have been quite a breakthrough. But, again, if you look at the car as whole, the change is quite cosmetic.

The same has happened in mobile phones. Back in the nineties, companies like Nokia were producing some very distinctive phones. At the time, they were the most stylish, the easiest to use and so on. But over time, with so many companies joining the fray, and so much being outsourced to the same suppliers, almost every mobile phone you pick up is just a variation on the same theme.

So, in any given industry, you may get to a stage where you have to think about shifting the basis of differentiation away from the physical. That's why Lexus puts so much effort into innovating around the dealer experience. A lot of people couldn't honestly tell a Lexus from a Mercedes, so the company has decided to made the dealer a huge part of the differentiation. Because, when everything else is the same, you have to innovate around whatever you have left.

Take Rexam, the world's leader supplier of beverage cans. They've spent years looking at tin cans and trying to figure out where they can be innovative.

And, of course, there are still one or two possibilities to do interesting things (i.e. resealable cans, different formats and sizes etc.), and every company needs to avoid getting blinded by its own orthodoxies. But, essentially, the beverage can hasn't changed its basic form for decades. So rather than it being the physical can itself, Rexam's basis for differentiation tends to come from all the stuff around the can - the parts of their business model that give them their unique advantage, particularly in terms of their global capability and the depth of their customer relationships.

Instead of thinking about innovation merely in terms of what you provide (i.e. your products and services), you should be looking at ways to innovate across the entire business model in an effort to meet important customer needs in unconventional ways.

For example, think about customer groups that you and your competitors may have been ignoring. Think about delivering what you provide in ways that would reinvent the customer experience - i.e. by making it easier or more enjoyable. Think about how you might break the dominant pricing paradigm in your industry. Ask yourself whether there any dimensions of differentiation which you and your competitors have not yet explored.

In other words, think about how you might be able to design your whole business model from the customer backward, looking at each and every component as an opportunity for innovation and competitive advantage. When you start to unpack your business model in this way, you will invariably discover lots of ways to dramatically redesign what you do - and how you do it - in order to create new value for the customer.

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Rowan Gibson is a global business strategist, a bestselling author and an expert on radical innovation.