Marketing Innovation Leads the Way  by Ken Bernhardt Regents' Professor Robinson College of Business, Georgia State University Atlanta Business Chronicle - March 19, 2004 A recent survey of 350 CEO's conducted by Accenture found that only 1 in 10 said their organizations excelled at innovation. This was in spite of the fact that three-quarters of the executives said they had a sufficient number of worthwhile ideas and over half indicated their organizations had a culture that encouraged innovation.   Other recent studies, such as one conducted by Chris Zook of Bain & Company, have reported that after 3 years of cost cutting and downsizing, at the top of most CEO's agenda is profitable growth. Executives over the years have quoted the CEO of Unilever, Sir Michael Perry, who said "Our 3 top priorities are first, innovation; second, innovation; and third, innovation. And if you are still not sure, it's innovation." The implications of failure to innovate were demonstrated at last month's Marketing Awards for Excellence (MAX Awards) program sponsored by Georgia State University's Robinson College of Business Marketing Department and Atlanta Business Chronicle. The keynote speaker, Peter Schwarzenbauer, CEO of Porsche Cars North America, told the story of how Porsche ceased being innovative in the 1980's and saw their sales decline from 30,000 cars in 1986 to 3713 in 1993, a decline of almost 90 percent of its market. After a series of innovations, including the introduction of the performance-oriented Cayenne SUV, Porsche's sales are again over 30,000 cars per year. The finalists and winners of the MAX Awards, which are given for marketing innovations developed in the state of Georgia during the previous year, demonstrated that innovation can take place in virtually any product category. The 3 winners included a carpet company, a lawnmower manufacturer, and a producer of paper towel dispensers. These are not categories where one thinks of technology or marketing innovation. Nevertheless, the Grand Winner, Interface, Inc., found a way to overcome a number of challenges to develop a "random" design pattern carpet tile that eliminated concerns over matching dye lots and enabled commercial and residential consumers to install any pattern in any direction at any time. As an added benefit, the product had a number of environmental advantages. Georgia Pacific was given a MAX Award for its innovative en-Motion paper towel dispenser. The electronic, touchless towel dispenser system solves a major consumer problem given today's concerns about SAR's, hepatitis, flu germs, etc. Not only does the dispenser enable consumers to obtain towels without touching the dispenser, it saves adopters money by keeping people from taking more towels than they need and requiring less refilling labor. The third winner, Honda's Power Equipment Division, based in Alpharetta, showed how clever use of technology could help consumers. Honda developed the HRX lawnmower that allows simultaneous distribution of clippings to both the ground and a grass bag. The finer clippings result in fewer stops to empty the bag and more environmentally healthy mulch for the lawn.  Other finalists for the award, including large companies and small ones, demonstrated that marketing innovation can come in many forms but there are important commonalities.  The key is identifying true product advantages that have significant market potential, meet consumer needs, and offer competitive advantage. How do these and other successful, innovative companies do it? They have new product/service development processes that start with a clear strategy.  They have a well-defined target market and do a great job up front of identifying, screening, and analyzing new product ideas. As a result, they are able to devote the bulk of their product development resources to ideas that are likely to be successful. They dedicate resources to the process and concentrate on truly new things that benefit consumers and solve consumer problems instead of me-too products.  There has been considerable research done on why so many new products and services fail. The failure rate is typically reported as somewhere between 50 and 80 percent. Why is this rate so high? Every study that has examined this issue has found that a major reason is lack of product uniqueness or superiority. Insufficient or faulty marketing research is often the cause. Poor strategy planning, improper timing, and poor communication are all reasons that have been identified. This includes poor positioning or segmentation, under-budgeting, too long a cycle time for the development process, and over or under-pricing the product. Insufficient resources, a risk-averse culture, company politics, and loss of objectivity all are contributors to new product failure as well. Many companies are more focused on competitors than on potential customers, so they always lag behind the true market needs. Another "trap" is being over-focused on current major customers. These customers are the ones most likely to be satisfied with what you are offering now, so often are not particularly interested in the kinds of innovative new products that would attract new customers to the company. So, it is clear that while it is critically important to innovate to be successful in today's increasingly complex marketplace, it is also a very challenging task. There are lots of ways to screw up, but as the MAX Award winners have learned, doing it right has huge payoffs.