I keynoted @ Michigan Ross Tech Business Innovation Forum–great speakers & insights. Kudos to Professors Ravi Anupindi and M.S. Krishnan of Michigan Ross for organizing a nice event. Thanks to speakers, Chris Bosco (Accenture), Mike Minelli (24/7), Dan Newman, Sriram (Michigan Ross), Thomais Zaremba (Ford), Michael Osment (Taubman), and Dennis Maloney (Domino’s) for their fascinating views on omnichannel marketing.
Companies dream of creating game-changing innovations in their spaces. By definition, a game-changing innovation transforms customer behavior, competition and market outcomes in its industry. It dramatically alters the game by delivering substantially superior customer value, replacing existing alternatives. Such superior value can be generated by multifold increase in benefits or a drastic reduction in costs or both. Often such value can only be created through technological breakthroughs or ecosystem advances or both, which are hard to come by. Therefore, game-changing innovations rare.
In the paint industry, Sherwin-Williams (SW) may have created a game changing innovation. Calling it ‘Paint Shield,’ SW claims that the new paint kills bacteria on surfaces after about two hours of application and that this safeguard may last up to four years. If this is well accepted by the market, it add tremendous value to health care institutions, hotels, schools, cruise ships, day care centers, and homes. In particular, for the U.S. hospitals, it can potentially help save several lives lost to accidental bacterial infections and cut $30 billion in annual costs. This potential impact is only in theory.
In practice, however, Paint Shield’s success would depend on how effective it holds up against its own claims, how well it is marketed and serviced, and how easily it is embraced in the ecosystem. First, SW has to demonstrate its effectiveness in use by selling, tracking, and documenting its success in big hospitals before moving to market it to all its target audience. SW should also learn from these lead users and adapt its offering. This process can be slow initially but could be extremely rewarding later. The success of Salesforce.com is a classic case of battling against the existing ecosystem to succeed with a disruptive innovation. Second, since not every customer is ready to repaint its doors, walls, and ceilings at any given time, SW has to target those with immediate needs and make compelling initial offers to those prospects to induce them to repaint earlier than needed. Third, it should be prepared to cannibalize its own existing profitable offerings. Unwillingness or slowness to cannibalize has resulted in the downfall of many a heavyweight company. The likes of Xerox, Kodak, Nokia and Blackberry come to mind.
It is too early predict whether Paint Shield will be a game changer, but it is an exciting development among the humdrum of incremental innovations. Its success will depend on SW’s marketing strategies and actions.
by Venkatesh Shankar and Nicole Hanson
This article was published in Review of Marketing Research
In recent years, there has been a fundamental shift in the innovation architecture of global firms. Rapid growth of the middle class in emerging markets, led by China, India, Brazil and Russia, is fueling the need to create affordable innovations in local markets. Such local innovations tend to have a wider global appeal due to commonalities in consumer demand and infrastructure across many developing markets. Additionally, the severity of economic downturns in developed markets is creating increased consumer demand for affordable innovations. Thus, these innovations are reshaping the innovation architecture of many global firms, such as G.E., PepsiCo, and Hyundai. We propose a framework for analyzing: the effects of emerging markets on the innovation architecture; the potential innovation strategies that leverage these effects; and the consequences of these innovation strategies. We discuss the theoretical and managerial implications of our framework.
by Thomas Dotzel, Venkatesh Shankar, and Leonard L. Berry
This article was published in Journal of Marketing Research.
Service innovativeness, or the propensity to introduce service innovations to satisfy customers and improve firm value at acceptable risk, has become a critical organizational capability. Service innovations are enabled primarily by the Internet or people, corresponding to two types of innovativeness, e- and p-innovativeness. The authors examine the determinants of service innovativeness and its interrelationships with firm-level customer satisfaction, firm value, and firm risk and investigate the differences between e- and p-innovativeness in these relationships. They develop a conceptual model and estimate a system of equations on a unique panel data set of 1,049 innovations over five years, using zero-inflated negative binomial regression and seemingly unrelated regression approaches. The results reveal important asymmetries between e- and p-innovativeness. While e-innovativeness has a positive and significant direct effect on firm value, p-innovativeness does not. P-innovativeness has an overall significantly positive effect on firm value through its positive effect on customer satisfaction, but only in human-dominated industries. Both e- and p-innovativeness are positively associated with idiosyncratic risk, but customer satisfaction partially mediates this relationship for p-innovativeness to lower this risk in human-dominated industries. The findings suggest that firms should nurture e-innovativeness in most industries and p-innovativeness in human-dominated industries.
by Venkatesh Shankar, Gregory S. Carpenter, and Lakshman Krishnamurthi
This article was published in Journal of Marketing Research, 35 (February 1998), 54-70.
Although pioneers outsell late movers in many markets, in some cases, innovative late entry has produced some remarkably successful brands that outsell pioneers. The mechanisms through which innovative late movers outsell pioneers are unclear. To identify these mechanisms, we develop a brand-level model in which brand sales are decomposed into trials and repeat purchases. The model captures diffusion and marketing mix effects on brand trials and includes the differential impact of innovative and non-innovative competitors’ diffusion on these effects. We develop hypotheses on how the diffusion and marketing mix parameters of the brands will differ by market entry strategy (pioneering, innovative late entry, and non-innovative late entry). We test these hypotheses using data from 13 brands in two pharmaceutical product categories. The results show that an innovative late mover can create a sustainable advantage by enjoying a higher market potential and a higher repeat purchase rate than either the pioneer or non-innovative late movers, by growing faster than the pioneer, by slowing the pioneer’s diffusion, and by reducing the pioneer’s marketing spending effectiveness. Innovative late movers are asymmetrically advantaged in that their diffusion can hurt the sales of other brands, but their sales are not affected by competitors’ diffusion. In contrast, non-innovative late movers face smaller potential markets, lower repeat rates and less marketing effectiveness compared to the pioneer.
by Leonard Berry, Venkatesh Shankar, Janet Parish, Susan Cadwallader, and Thomas Dotzel
This article was published in MIT Sloan Management Review. 47 (Winter 2006), 56-63.
Many companies make icremental improvements to their service offerings, but few succeed in creating service innovations that generate new markets or reshape existing ones. To move in that direction, executives must understand the different types of market-creating service innovations as well as the nince factors that enable these service innovations.