Does innovation count if no one pays for it?

I've always liked the old existential riddle regarding a tree falling in the forest that no-one hears.  Did it really happen?  A more pragmatic or appropriate question might be, "Does it matter?"

If an innovation doesn't sell, it doesn't gain a higher price, a higher margin, or a greater share of market - I not only have to ask if it matters, I wonder if it can be called real or meaningful innovation...is it really innovation if no one values it enough to pay for it?

Innovation for the sake of exploration may very well be an important part of how we extend knowledge, understand the meaning of life, or someday discover cold fusion, but in the context of business, this question becomes simple to answer.  If no one is willing to pay for it - as far as business is concerned, it shouldn't matter.

This was illustrated quite graphically to me recently.  Amidst the imminent collapse of the U.S. auto industry, there has been quite a bit of criticism about a lack of innovative over the last few decades.  No one outside of GM and Chrysler is surprised to find that at the end of 2008, they are unable to operate without significant help from the US government - as fewer car buyers are willing to purchase their products every year.

I recently met a very smart person who has"big 3" auto companies as clients and asked him why he thought US car companies have stopped innovating.  His answer astonished me.

"US car companies have been delivering innovations at a terrific pace for more than ten years."

He wanted to talk about restructuring and the deals being made in Washington DC, but before he went deeper into the details of labor issues and unfunded pensions - I had to press him further on what those innovations are.

"Just look at the Hemi engine," he said, "the GT, the Cadillac, even the Hummer...these represent amazing technical advances that no one else can match...the amount of horsepower they are now putting under the hood is astonishing."

He was right. When you look around at modern American cars, the amount of pure power is astonishing.  The last time I drove a rental car, I was thrilled to pull out from a toll booth at a nearly criminal velocity.  It is amazing how much horsepower you get with an American car.  The engineers in Detroit have innovated many aspects of what's under the hood - and every year people have been able to accelerate just a little bit faster.

But...

I have one question...with most driving done in cities, and most city speed limits between 30 and 50 MPH, is shortening the time spent going from 0 to 60 MPH the most valuable thing to innovate?  I love being thrown back in my seat when I step on the gas - but is that worth $30,000 to me?  Are there other innovations that might create a new market, attract more customers and grow margins?  

In other words, has Detroit been innovating the wrong things all this time?

While Detroit increased their engine power,  companies elsewhere used innovation to create significant new business- Toyota produced a small hybrid car (with anemic acceleration, I might add) that has waiting lists of buyers willing to pay over $30,000 for essentially a small and slow car.  Zip Cars experienced explosive growth in major cities by challenging the concept of ownership - offering a new kind of hourly rental And there are several other promising innovations surfacing, including Better Place in Israel that is changing the entire model for fueling cars by offering swappable batteries for electric cars that consumers pay for by the mile - instead of by the gallon.

Other companies are trying to solve car user problems such as environmental impact, fuel costs, total price of ownership and convenience.

Detroit is improving acceleration.

I don't want to denigrate the astonishing engineering accomplishment of a Hemi engine.  I do, however, question it's value in a world of drivers spending hours a day in rush hour traffic moving at 20MPH.  It seems that auto buyers throughout the world are asking the same questions - and are waiting for more meaningful innovations - innovations they are willing to buy even if it costs more.

I'm surprised at how easily innovation teams can overlook this fundamental idea.

And so when I work with my clients in other industries, the lesson of Detroit sugessts a useful - and perhaps somewhat obvious - rule for everyone to use when evaluating what innovations to persue:

 

Innovation doesn't count unless someone wants to pay for it.

Is it Marketing or is it Nagging?

Communication is a central part of managing companies, of persuading markets or of leading governments. However, when people talk about communication, they often seem to be missing out on what the word actually means.

Inside organizations, when an individual or small group comes up with an idea, innovation, or plan of action, they hone it, make sure that they have worked out how best to make it work, how best to implement. Then, when the plans are all in place, they decide to "communicate" it to whomever has to live with the new idea.

Most professionals have spent time with change management and six sigma consultants. Well-trained employees talk about gaining "buy-in" for an idea - of communicating with key people and getting them to support the idea. In marketing departments, a value proposition is carefully constructed and then a series of communication strategies are used to communicate that value proposition to the target market. In politics, the message masters hone their talking points, then repeat them until the voters can recite them verbatim. Professionals are using a communications formula.

But the formula rarely works as well as it should. People hear the messages, but they don't always believe it. Audiences lose interest. Markets enjoy the commercials but don't buy the products. Voters focus more on a sigh than on a platform position. Why is that?

Perhaps there's more to communication than the current formula? Perhaps our assumptions about communication are flawed?

A central assumption is that communication is a one-way activity. The communicator talks and the audience receives the message. But look at the word "communication" itself. The first half of the word is "commun" - a root for "community" and "commune". Does this suggest that communicating is a group activity? And if it is, why do our formulas for communicating tend to only work in one direction: I talk and you listen?

As a test of that assumption, imagine your own family communications. Can a wife effectively persuade a husband telling him to put away his shoes over and over again? Can a father persuade a teen-age son to avoid smoking with a series of bullet points? Perhaps...but family counselors and other experts seem to suggest that a more effective (and more enjoyable) approach maybe to enter into a real conversation with family members, find out why they are doing what they are doing, make clear that you understand and value their point of view, discuss together how it might be possible to change - and maybe even come to a decision together that neither one thought of before.

Another way to look at it is - when you commune, you are learning. Communicating requires that you learn from the people you communicate to - what they need, what they want, what they know, how they might help solve a problem, how they can help you to do better. Too often, the assumption is that the speaker knows something and therfore needs to place that knowledge with the listener.

And why then, even though nagging family members doesn't work so well, do we insist on nagging our customers, colleagues and constituents? Why do we hire advertising and PR firms to nag the markets with greater skill and polish than we could manage? Why are we nagging?Instead of working on becoming more and more accomplished nags, perhaps we should change our assumptions and stop nagging altogether.

What would a company look like if it changed the communication assumption in order to listen and learn from the people?

A few months ago in the New York Times, I saw a company that has begun to find out. (http://www.nytimes.com/2008/03/01/business/01nocera.html?pagewanted=1) Mickey Drexler, the current CEO of the retailer J.Crew, has managed quite a turnaround for the company. As described by the NYT, key to his process is a constant and in-depth conversation with his customers and his employees.
"Visiting stores, quizzing the staff, critiquing everything in sight — and most of all, meeting customers — is at the core of how Mr. Drexler runs J. Crew. It’s also what makes him happiest. "
Mr. Drexler is known throughout the J.Crew chain for showing up in a store and talking with customers and salespeople and finding out what they like, what they don't like, what works and what doesn't. He delights in trying to persuade someone to put on a new outfit and tell him what they think of it. Instead of telling customers what they should buy, he asks customers what he should offer.

Mr. Drexler has found a way to market to his customers by constantly learning from them. He communicates the company's mission, values and strategy by listening to associates and customers - by "communing" with them.

How can other companies stop nagging their customers and commune like Mr. Drexler?

What is marketing...really?

I'm often perplexed by how most people seem to define the word "marketing".  Ask what a marketer does, and usually advertising comes to mind.  Marketers are seen as characters in an old movie starring Tony Randall looking for the commercial gimmick that will sell the latest product.

Even those who call themselves marketers have a Madison Avenue vision in their minds, and even if they are talking about the latest Internet based, new media, social media, branding or viral market gimmick, they are likely still thinking about some form of advertising.

And therefore Marketing is advertising...or is it?

Did Google advertise in order to become the giant they are today?  If I remember correctly, Yahoo had amazing advertising campaigns, while Google had none.  Was it advertising that created the frenzy for iPods and iPhones?  They had some good advertising, but perhaps there was something about the products themselves? Was it advertising that made millions of Americans thrilled to spend more than $3.oo for a cup of coffee at Starbucks?  I can't remember a single commercial for Starbucks but I do remember seeing everyone carrying around those cups.  Was it a commercial that created waiting lists for the Toyota Prius?  Or perhaps a car company actually delivered the first meaningful innovation in forty years and everyone started to notice.

In countless cases, people are persuaded to value and ultimately to buy an idea, a product or a service because companies marketed.  Advertising helped get the word out, but without something special to back up their claims, little could happen...even when they put commercials on the Internet.

So if advertising alone doesn't make a difference, what does?

An interview with computer hacker Virgil Griffith printed in the New York Times last week ("Internet Man of Mystery" by Virginia Heffernan, 11.23.08) put it surprisingly well, "You step back and look at the entire interacting, breathing system and pick out the counterintuitive, unbalanced, seldom-explored parts and look for a way for these parts to interact such that they play off each other, synergistically amplifying their power to influence everything else..."  Reading this, I was able to recognize a true marketer in Mr. Griffith, even if he was talking about hacking computer systems.

Marketing is a way to look at a market, understand the system of buyers, sellers, suppliers and clients - what makes it all tick, what is really happening underneath the lies we all tell ourselves, the slogans, the official descriptions and the talking points.  When a marketer understands how the system actually works and why - then they can change it.

They may change it with a new product or service, a new way to approach the market, a new way to make something or a new use for something.  But when a company is marketing, they are essentially innovating a new relationship with the market or redefining what the market means and how it works.  

That's why I believe that marketing at its core is actually Innovation.

...and advertising?  It can be a lot of fun. It can capture someone's attention.  It gets the word out. It gives people permission to enjoy or be proud of  buying your product.  But without meaningful innovation (marketing), how much is it really worth?

Advertising and all other forms of communication are powerful and important tools, but they in themselves do not market a firm, any more than a hammer and nails build a house.  Skillful carpentry skills alone cannot make a brilliant building - it's the vision of what could be - of how to make something better, of how to manipulate the existing system, materials and tools to create a new and more exciting world - it's innovation.

iPod innovated how people can interact with their music, movies and even their telephones.  Zune innovated nothing but spent some real dollars on advertising.  Ronald Reagan and Barack Obama's presidential campaigns innovated how the US could be governed and what the US could be in the future while their competitors merely communicated.  Actually, those two presidential campaigns are interesting cases.  Both presidents were brilliantly successful communicators - but they were not communicators alone...the skillful communications and advertising was put to use by their innovative visions for where the country should go.

Their unsuccessful opponents weren't bad communicators.  Jimmy Carter and John McCain both had skillful and experienced communications teams, they both were proven communicators who could influence people with their powerful rhetoric and they spent millions of dollars on advertising.  But they didn't have innovation and vision driving their words.  They weren't seeking an improvement to the systems, rather they were trying to make what exists a little better.

If you aren't innovating, I wonder if you are really marketing.  

A Few New Rules for Persuasion

Sales, marketing, leadership...all require that we get someone to do something they don't want to do - to change what their doing - to transform some aspect of their work or their life. There are a plethora of books, management training and consultant practices designed to help you manage, or lead change - and yet most people and organizations aren't very good at it.

Soren Kierkegaard once wrote, "...in order to save men's souls, one must first seduce them." Perhaps we need to improve our ability to "seduce" or "persuade" others?

But we have entire disciplines and industries dedicated to persuasion. Marketing is supposed to work magic - to persuade the masses to buy something they don't want. But how is it that companies can spend millions of dollars on award-winning advertising, but not sell more products? US auto manufactures are spending more on advertising today than they did when they had a commanding market share. The best ads from the best advertising firms only seem to work some of the time, even though advertisers are well trained, are following all the rules of good advertising, and have produced some of the best design, drama, music and humour in our culture today. Insurance ads can make me cry pretty reliably, but I still won't buy their annuities.

Why do public speakers, when they follow all the rules given to them in public speaking courses, still bore their audiences? It's difficult to stay awake when a speaker actually follows the template that we all had to learn in our high school and college public speaking courses.

How can a salesman, trained in the art of closing a sale, still be ineffective? When I was a salesman, I remember a sales manager giving up on explaining how to close in any scientific way. Most of the time he attributed it to "magic" when someone pulled it off.

The best professionals all follow the rules that they were given for persuading others...but so few pull it off. Could it be that they are following the wrong rules?

I think so.

Allow me here to map out a few rules that I have discovered that are very useful for "seducing men's souls". This is by no means comprehensive...and I find myself discoving new "rules" all the time - whether from my clients or from observation.

These rules can help a clumsy speaker persuade more effectively than a slick, polished orator. These rules can help a company create a powerful brand identity and grow sales without spending millions of dollars on advertising. And most important, these rules can help a leader persuade people to follow, to change, to transform - even if the leader doesn’t look or sound like a charismatic leader.

Seven New Rules of Persuasion

1. Be what you are.
   Pretending you’re something that you are not is not only dishonest; it undermines your ability to persuade. A speaker with a poor vocabulary that tries to impress with “big words” will appear less intelligent. A speaker that says, “I’m not that bright, but here’s what I know,” creates credibility. A company that promotes itself with impossibly grand or superlative statements can seem disingenuous, while a direct, honest, and simple statement can become far more inspirational – if it’s real.
   
   But it’s difficult to communicate what you are if you don’t know what that is. Much of my time as a consultant is spent helping companies and individuals understand their strengths, weaknesses and differentiators. Understand - then be what you are.
   
   Persuade authentically.
2. Tell the truth
   One should be honest, not only because it’s the right thing to do, but because it is more persuasive. Few believe a person who only talks about how great they are; everyone believes someone who can communicate their own limitations.
   
   And the limitations can usually demonstrate an attractive strength. For example, “Our airline only serves peanuts, but the flight will be inexpensive.”
   
   Persuade honestly.
3. Differentiation Means Different
   It’s generally understood that differentiation helps clarify value; that customers need to know how you, your product or vision is different and perhaps better than the alternatives. In practice, however, most communicate how similar they are to others. This often happens when a company or person doesn’t understand what makes them different, or when say what they think their audience wants to hear. That’s why, just as in rule #1, it’s essential to understand who you are and what makes you different.
   
   Differences are persuasive because they stand out, because they draw attention, because when making a choice between similar options, only the differences are important.
   
   Persuade differently.
4. One Thing
   A speech, an advertisement, a sales pitch – should always be about One Thing, because that is all your potential listener can act on or remember at any one time. Multiple themes diffuse the communication and its effect.
   
   The temptation “to educate” or to communicate every detail of a subject must be avoided at all costs. Instead, select the most persuasive thesis, and then support that thesis with three of the most persuasive facts.
   
   Persuade single-mindedly.
5. “The good, if brief, twice good; the bad, if little, less bad.”
   The above rule was actually formulated by the seventeenth century Jesuit priest and philosopher, Baltasar Gracian. It speaks for itself.
   
   Persuade briefly.
6. Lather, Rinse, Repeat…as Needed
   This rule was lifted from the back of a shampoo bottle, but also applies to persuasion. The greater a change one asks people to make, the more often they will have to be exposed to and reflect upon the persuasive argument. But don’t just say the same thing over and over again. If someone hears an idea from multiple perspectives, in different contexts, and at different times, they are more likely to take that idea on as their own.
   
   Persuade repeatedly.
7. Give credit away
   The most persuasive idea is the one we come up with ourselves. If that is the case, the most effective persuader will work to make everyone believe it is their own idea. Holding on to credit for a great idea is not as important as getting people to do what you want them to do.
   
   Persuade humbly.

"Winning Ugly" Marketing Strategy

One of my home town baseball teams, the Chicago White Sox, was described during the 1983 season by Doug Rader, manager of the Texas Rangers, as "Winning Ugly".  He was trying to dismiss the White Sox style of play which emphasized a kind of scrappiness and bull headed determination rather than consistently good hitting or pitching.  

Although I am not, strictly speaking, a White Sox fan, (I live on the north side of the city) I have always appreciated the way this phrase, "winning ugly", evokes an approach to challenges that can undermine a competitive field.  When you are out-classed, out-gunned, and without a legitimate chance of beating the competition - there may still be a way to win.

Too often, whether in baseball or in business, the habitual winners forget what the game is about. In baseball, players may think it's all about their personal averages, their titles, their style, or their endorsement deals.  A team that is thinking that way can be undermined by a team that understands that there is only one score that matters at the end of the game - who has the most runs...even if the winner got those runs in a clumsy manner.

Habitual winners in business can start to believe that the reasons they win have more to do with the coolness of their brand, their brilliant packaging, the elegance of their sales pitch, their advertising or how many magazine covers their CEO appears on.  Companies that think like that can be undermined by a competitor who understands that the winner is whomever sells the most stuff at the highest price and the lowest cost.  It doesn't matter how elegant your annual report is, whether you have the best sales materials, or how well designed your logo is.  Those are all great things to have, and depending on what the target customers respond to, they may even help you sell more stuff at a higher price...but it is also possible for companies to "win ugly" as well.

The "winning ugly" strategy is based on a kind of honesty - both about the game being played, and about the player. " I may not have the best marketing but...", can actually build credibility for a company.

Two assumptions are at play in any selling opportunity.  The seller assumes that the most attractive pitch will win the day, while the buyer assumes that everyone will exaggerate their claims to win them over.  Strangely, instead of addressing a buyer's inherent skepticism by providing credibility, most sellers will continue to reinforce that skepticism with great marketing materials. But marketing that inflates your image can also diminish your credibility.

And credibility is everything to the buyer.  Are you as good as your marketing?  Can one trust a product, service or idea to deliver as much as it seems?

A client I worked with specialized in business process outsourcing for commercial lending.  They had an outstanding shop of accounting and data processors who had, through Six Sigma methodology, computer systems and just plain bull-headed determinism, managed to drive more costs out of the process of servicing loans than anyone else in their industry.  

They had terrible marketing materials.  Every once in a while, they thought about updating their brochures and web site to make it look more stylish, more like their competitors, more elegant. But their CEO intuitively understood:  not only did they not have the budget to create a beautiful web site and high concept brochures to look as good as their competitors - but the very fact that their marketing was "ugly" demonstrated to prospects and clients their core value as an outsourcer.  Anti-slickness was their sales differentiator.

Marketing isn't just about incredible creative, strong messages, or the right image.  Sometimes a marketing strategist should consider "winning ugly".

How to "hack" marketing

There's something interesting about IT and computer culture that most people in Marketing haven't picked up on...something that may very well hold the key to persuasion strategies, and ultimately to selling a product or service:  Hacking.

Good IT developers take as a given that there are two steps to getting what they want.   

Step one:  figure out how a system actually works.

Step two:  figure out how to use that system to make it do what you want it to do.

Those two steps seem rather obvious, until you realize that great IT developers are most often"hackers" in disguise.  That is, they instinctively look for weaknesses, loop holes or structures that allow them to "game the system".  When a developer learns how a system works, they are less interested in the appearance of an application, but rather the gears, principals, and underlying code that make it work in the first place.

In the old days, hackers were seen at best as anti-social - at worst as criminals.  But now, the richest and most powerful men and women in the world are hackers.  Bill Gates is, perhaps, one of the richest and most well known, but hackers are running everything from our financial system, world-wide logistics and shipping, media and military security, to on-line retail to phone systems. 

And hackers aren't just working computers.  Hedge funds made a lot of money by hacking financial systems to come up with new financial structures. Southwest Airlines hacked the commercial airline business by understanding what was really driving costs as well as customers - then using it to their advantage.  The best real estate developers hack neighborhoods to find value in a parcel of land that no one else sees.

Unbeknownst to most people, every discipline and every industry has "hackers" - and almost always, they are the ones running things.

However, it's usually not too difficult to spot a hacker if you can watch them solve a problem. Most people when solving a problem will start by asking, "What did we do before?"  a hacker will ask, "How does this system really work?", followed by, "What do we want to get away with?" Once a hacker understands how a system works, then they can use or manipulate the systems rules to solve their problem.

Let me illustrate with a classic marketing hack:

One of the oldest rules of advertising has been Repetition.  The more you repeat something, the more likely people will believe what you say and act upon it.  That's why we see the same ads over and over again - why the same words, the same images and the same benefits are shown repeatedly.  

Here's how it works:  As a survival mechanism, people forget far more than they remember. Part of how we survive is by constantly editing what is important information and what is not.  If we weren't able to do that, we wouldn't be able to discern between information that leads to survival - such as where the good food is or how to avoid the hungry lion and information that we don't need, such as how a grey pebble at your feet looks just like the grey pebble that you stepped on two seconds ago.

However, if you keep seeing that grey pebble over an over again, especially if that grey pebble is fundamentally different from the white pebbles you usually see, you will pay attention to it - and you may remember it as important.

By repeating, "grey pebble" over and over again, the brain starts to register "grey pebble" - and if enough significance is created, it will be rememberd - and even cause someone to act upon it.

A blunt tool that most marketers use is:

Say the same thing, the same way, over and over again until people get it.

Sometimes this can work - but sometimes it can mostly annoy people.  Rarely does it actually build a brand (see my last posting).

A sophisticated hack - one that takes into account how the brain actually works - is to talk about the same thing, in different ways, from different people/sources,  at different times until people conclude that it is important.

In order for a repetition to really mean something, there are a couple of things that should be in place:

1. It has to be different.  If your grey pebble looks like all the other grey pebbles I'm walking on, and nothing of interest happens whenever I step on one, there is no reason for me to remember one over the other.
2. Information needs to come from multiple sources in a credible way. In other words, if one person keeps babbling on about grey pebbles, it can only rise to a certain level of importance.  It may even drop in significance - as one wonders why this person is so obsessed about grey pebbles.  If several people you meet during your day talk about the grey pebble, if there is debate about the significants of grey pebbles, if there are even disagreements about what it means  - then it must be important and true.  It's more credible if it isn't "sold" to you.  It's more important and more believable if you engage in a "dialogue" about it.

Instead of following a formula, instead of looking at how something was done before, instead of just marketing, one may want to consider hacking the market - and in the process begin the "dialogue".

Are we confusing "Branding" with brand?

Over the last 100 years or so, a kind of religious faith has emerged in business: the cult of Branding. Adherents to this faith believe that a brilliant logo, a compelling slogan and just the right name will build growth, margin and customer loyalty.

But does the "Branding" create a brand? Or is it the company and its customers?

Do slogans and advertisements persuade a market - or do they confirm what the market already knows?

The Priests of the "Branding" faith, (also known as brand consultants, advertising execs. and Chief Marketing Officers) will frequently point to successful companies that posses powerful brands that are valued or even loved by millions of people all over the world. The "priests" will then promise that if you follow them - if you change the look and feel of your name and logo, if you use a certain color, or a certain design template, a slogan, a communications framework or a set of talking points - then you too can have a powerful brand.

And so, the faithful go to these priests of branding - they give them dollars and time, they allow the priests to prod and poke their employees and customers - and then they change their signs, their slogans, their bullet points, brochures, advertisements and business cards.

And then, the priests declare the greatness of the new branding, and this is confirmed by the focus group testimonials, and perhaps even by awards from other priests.

But...with all this great new branding...for all this change...what does a company actually gain?

• sometimes the share price climbs a bit, for many investors adhere to the branding faith...but that bump in price will diminish as soon as expectations are not matched by results.
• sometimes employees with branding faith will swell with pride at their new and improved logo...but that will diminish over time, and as the realities of their work set in.
• sometimes a customer or two, curious about all the new words and pictures, will inquire...but unless there's something substantive to back up the changes in words, the customers will lose interest.

So...does "Branding" provide the magic of a powerful brand?

Or...is there another way besides "Branding" to create that magic?

I suspect that modern business has become confused by "Branding" and has missed what a brand actually is, why it is important, and how a company goes about getting one in the first place. The high priests of "Branding" may be right that brand is good - but they might not be really helping companies get there.

Are we confusing "Branding" with brand?