The Power of Unlearning Obsolete Marketplace Beliefs
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Transcript of The Power of Unlearning Obsolete Marketplace Beliefs
A Review of the Relationship Between Market Knowledge, Innovation and Firm Performance
Do People’s Basic Needs Really Change?
Food
Secu
rity Belonging
Mobility
Recreation
Love
Self-Fulfillment
Do People’s Basic Needs Really Change Or……Does Our Ability to Meet Them Simply Evolve?
Ask yourself one question when innovating a product or service?
Am I offering a better solution?
Better benefit delivery Better customer service Greater convenience Greater ease of use Same benefits at a lower price
Sometime it is better to ‘Lead the Customer’ than to be ‘Customer
Led’
If you can find more efficient, more effective or less costly ways to deliver the benefits that consumers seek, then do it, regardless of the experts.
Do not let the past be a prison for new ideas.
Do not limit your potential by employing a rigid brand identity tied to Attributes rather than Benefits
Reactive View Limits Change We are in the encyclopedia business We are in the station wagon business
Proactive View Enhances Change We are in the knowledge Business We are in the family transportation business
Attribute-based Narrow View
Benefit-Based Broad View
A Firm’s Marketing Culture Will Determine Its Ability to Evolve
A firm’s market orientation refers to its commitment to make customer satisfaction an organizing principle of the firm.
Firms with strong market orientations prioritize and utilize learning about customers and the market environment to evolve the brand.
(1) Customers (e.g., likes and dislikes, satisfaction, perceptions, etc.)
(2) The environmental factors that influence customers (e.g., technology, competition, the economy, socio-cultural trends, etc.)
Market Information
Responsiveness
Market Information
Dissemination
Market Information Generation
Market Orientation
Market Information Generation
The ability to understand the market and changes to the market in a timely manner
“We are slow to detect changes in our customers’ product preferences.”
“We are slow to detect fundamental shifts in our industry (e.g., competition, technology, regulation).”
Market Information Dissemination
The ability to rapidly disseminate knowledge to decision-makers
“When something important happens to a major customer or market, the whole business unit is informed about it within a short period.”
“When one department finds out something important about customers, it is slow to alert other departments.”
Market Information Responsiveness
The capability to rapidly adapt the marketing mix to change
“Even if we came up with a great marketing plan, we would probably not implement it in a timely fashion.”
“For one reason or another, we tend to react slowly to changes in our customers’ product or service needs.”
Houston, We Have a Problem:
Empirical Relationships Between Market Orientation and Performance weaken as one move “downstream”:
Market Orientation New Product Success: Strong
Market Orientation Profitability: Moderate
Market Orientation Market Share: Weak
The Limits of Market Orientation
A narrow focus on customers, channels and competitors without the ability to surface, discard and replace obsolete marketplace beliefs may hinder meaningful innovation .
Biggest Problems with Successful Organizations:
Management Arrogance
Rigid “Mental Models”
Biased Information Search Often Rules the
Managers will seek information only about aspects of the market they ‘think’ they do not understand.
They will presume other facts to be true and incorporate those in their situation analysis.
Often they are not correct.
Mental Models
Mental models, deeply held beliefs about how the marketplace works, create the paradigms in which strategic planning occurs.
Mental Models of the organization can constrain action:
1. We have only one key competitor.
1. Our customer values benefit “x” much more than benefit “y.”
1. Sales promotion is more important than advertising.
Theory-in-Use
Operational procedures, systems and practices will be limited by mental models
1. We rely on salesperson feedback to monitor our largest competitor.
2. To control costs, we optimize benefit “x” at the expense of benefit “y.”
3. 70% of our promotional budget is dedicated to trade and consumer sales promotion.
The Cultural Cure for Rigidity:Learning Orientation
Learning orientation may be defined as the degree to which a firm has the ability to surface, discard and replace obsolete mental models and theory-in-use
A strong learning orientation prevents flawed views of the world from corrupting the decision-making process
The Role of Learning Orientation
Market orientation is reflected by knowledge producing behaviors.
Learning orientation is reflected by a set of knowledge questioning values
Commitment to Learning
Shared Vision
Open-Mindedness
Learning Orientation
Measures:Commitment to Learning
A commitment to continuous learning
“The basic values of this organization include learning as key to improvement.”
“The collective belief in this unit is that once we quit learning, we endanger our future.”
Measures:Open-Mindedness
A commitment to question basic assumptions
“Managers in this business unit do not want their “view of the world” to be questioned.”
“Our business unit places a high value on open-mindedness.”
Measures:Shared Vision
A Cultural Understanding of Brand Identity and the Path to Brand Integrity
“There is a total agreement of our organizational vision across all levels, functions and divisions.”
“There is a clear philosophy of who we are and where we are going as a business unit.”
Market Orientation
Learning Orientation
▲ Market Share
▲ New Product Success
Adapt to Market
Lead Market
Interaction with Relative Market Share
▲ MS
Low MO High MO
High LO
Low LO
Three Levels of Innovation Associated with MO and LO
IMITATION (Weak MO-Weak LO )
A firm seeks to copy or closely approximate the most successful sport utility style developed by their competitors.
INCREMENTAL INNOVATION (High MO-Low LO):
A firm is constantly searching for unique ways to improve its sport utility vehicle, but does not want to stray far from the prototypical sport utility design utilized by most manufacturers.
RADICAL INNOVATION (High MO – High LO):
A firm is not only willing to introduce a radically new design to the sport utility vehicle category, it searches for ways to create a totally unique category that has the potential to replace the SUV market like the minivan replaced the station wagon.
Learning, Innovation and Firm Performance
Market Culture
(MO and LO)
Incremental Innovation
-Expressed Needs
-Customer Led
-Current Paradigm
Imitation
-Competitor Led
Radical Innovation
-Latent Needs
-Lead the Customer
-New Paradigm
New Produc
t Success
Generative Learning
Inquiry that leads to new mental models
Adaptive Learning
Inquiry within the context of existing mental models
Gleaning
No systematic inquiry
Market Learning Innovation Priority
Innovation Priority – New Product Success Correlations
Relationship with New Product Success
Imitation
Priority Negative
Incremental Priority Neutral
Radical Priority Positive
Balanced Incremental and Radical Innovation Priorities is Key
Weak
Culture
Strong
Culture
Imitation
Priority
33.5 18.1
Incremental
Priority
42.2 38.3
Radical Priority
26.3 44.2
Even the firms with the strongest market
cultures can’t radically innovate across all functions
Radical Innovation: Renders Current Practices/Technology Obsolete
Lower Cost: Innovation leads to basic benefit delivery at substantially lower cost than ever. Digital Photography, Web browsing software, Skype, online gaming
Superior Performance: Better Quality/New Benefits deliver substantially higher value. DVDs, SUVs, Smartphones, Lasik, Plasma TV
Category Destruction: At that point when both quality/benefits increase and cost decreases, the old
technology generally has no place to go and disappears.
No Firm Can Radically Innovate Every Function It Performs
At each level of the marketing mix (product, price, distribution, promotion)
Strategically (communication strategy) and tactically (media purchasing, message design, etc).
Technically (product design, production processes, R&D) and Logistically (inventory management, CRM, supply chain management)
Focus Your Radical Innovation Efforts Around Developing and Delivering your Core
Competency
Core Competency
Brand Identity
Focused Radical Innovation