Given the current economic climate innovation is (of-course) somewhat of a hot topic. Everyone knows just how important it is in a recession. So it was interesting (but perhaps not surprising) to read that this Business Week survey had found that many companies are struggling to make their innovation efforts work. In Game Changing Strategies, Constantinos Markides talks about the difficulty in entering and succeeding in a market where established players are dominant without radical technological or business model innovation (and not just product innovation). Yet established companies find it difficult to innovate in this way, not least because most business model innovations do not make immediate economic sense for them, and so ultimately the majority of business-model innovations end up being introduced by newcomers to the market. Look at previous recessions – Hyatt, Burger King, Lexis Nexis, CNN, MTV, FedEx, Microsoft, Hewlett Packard, Wikipedia were all started in downturns. Google started in 1998, but became really successful following the launch of ad words in the dotcom downturn of 2000. Business Week notes that right now, "every aspect of business is fair game for reinvention" and that is no doubt precisely why big business, with its incumbent structures, legacy models, and inflexible functional silos, struggles.
Yesterday I stumbled across this interesting post from Venkatesh Rao at Xerox that talks about the inherent similarities and polarities between marketing and innovation in organisations. It was Peter Drucker (whom I seem to be quoting a lot recently) who said:
"Because the purpose of business is to create a customer, the business enterprise has two—and only two—basic functions: marketing and innovation."
Marketing and innovation are interdependent and interconnected, defining and giving rise to each other in turn. Venkatesh notes the many similarities (far more than there are polarities) between the two functions. To paraphrase: Both functions lay claim to the DNA of the organization but are systematically misunderstood; both are ideally in a balance; both frame their processes in terms of an "increasing certainty" funnel metaphor; both require a leap of faith at some point ( you are still left with incomplete information even after you factor in all the information you have); both revolve around the concept of differentiation; notions of creativity sit at the heart of both functions; and both have a love/hate relationship with a downstream partner function (production and sales).
This leads Venkatesh to a definition of the customer as "a novel and stable pattern of human behavior", and a definition of innovation as "a stimulus that causes a novel and stable pattern of human behavior to emerge". Both marketing and innovation explore the uncertainties of free human behaviour and stumuli and attempt to stabilize it into predictable patterns. There are many similarities, but equally the tensions between the two (caused by marketing looking at the customer, innovation at the stimulus) is important – if marketing became too product led, we'd have stuff nobody would buy; if innovation was too focused on the customer we'd end up "in a world of faster horses" (in reference to the Henry Ford quote: "If I had asked people what they wanted, they would have said faster horses").
In a comment to my previous post, Faris talked about how social marketing (or whatever we want to call it) "creates new engagement spaces that let customers get through the corporate firewall". I think the really interesting thing that's happening right now is how the emerging participative culture pushes both marketing and innovation out towards the customer at the same time.
The examples of customer involvement in product development are coming thick and fast. Harper Collins crowdsources new stories and writers, Vitamin Water and Walkers crisps new flavours, Marmite asking consumers to create an extra-strong variant of the brand. The model is now even moving into car design. GM has launched The Lab – "an interactive design research community in the making", and a place where they share ideas, inventions and pre-production vehicle designs, a place where their customers can get to know their designers, and their designers can get to know their customers ("Like a consumer feedback event without the one-way glass"). Fiat is using Facebook and Twitter alongside a dedicated crowdsourcing website to design a concept car to be presented at the 2010 São Paulo car show. Audi is inviting involvement through it's Facebook page in its participation in the Los Angeles Design Challenge to design a youth-oriented concept car for the year 2030. But perhaps the most interesting of all is the Rally Fighter, an off-road vehicle built by Local Motors. Every aspect of its design has been sourced from ideas contributed, e-mailed, and tweeted by a community of thousands of enthusiasts. The really interesting thing about it for me, is less that the process from sketch to finished product was completed at a fraction ($2 million) of the normal cost, than that the end result is so unsubtle. With so many opinions involved, one might have expected the finished car to be a paragon of mediocrity. Instead, we've ended up with what The Times describes as something that "looks like the sort of machine you would get if you asked a teenager to draw the sort of off-roader they'd drive if they were Batman".
Of-course, involving customers in this way means you have a ready made group of customer advocates. So it becomes the place where innovation meets (or collides with?) marketing. Perhaps what we're seeing here is not so much a new model for product development as a new model for the relationship between modern business and its customers.