Innovation for Marketers

Andrew Hatcher

Kiran Kapur

Charles Nixon

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Published by Cambridge Marketing Press, 2015

© Cambridge Marketing Press, 2015.

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Introduction

Innovation for Marketers i

Page

Introduction

About the Authors (iii)

How to Use this Guide (v)

Additional Study Resources (vi)

Section 1: Entrepreneurial Marketing

Introduction 1

Chapter 1: Marketing and Entrepreneurship

1.1 Integrating Marketing and Entrepreneurship 3

1.2 Converting Ideas into Opportunities 19

1.3 New and Traditional Marketing Approaches 22

Chapter 2: An Entrepreneurial Response to Change

2.1 Competitive Marketing Solutions with Limited Resources 33

2.2 Entrepreneurial Approaches to New Product

and Service Development 41

2.3 A Compelling Proposition 50

2.4 Effective Leadership of Entrepreneurial Teams 62

Section 2: Innovation

Chapter 3: The Innovative Organisation

3.1 What Kinds of Innovation Can Exist? 73

3.2 What Does An Innovative Organisation Look Like? 98

3.3 Assessing Levels of Innovation and Creativity 109

3.4 Using External Influences to Drive Innovation 115

Chapter 4: Innovation In Marketing

4.1 Creating Innovative Marketing Teams 123

4.2 Innovation across the Marketing Value Chain 140

4.3 Implementing Marketing Innovation 149

Introduction

ii Innovation for Marketers

Section 3: The Marketing Champion

Chapter 5: The Role of Internal Marketing

5.1 The Role of Internal Marketing in Supporting Innovation 161

5.2 Internal Marketing, Leadership and Other Business Functions 181

5.3 The Internal Marketing Plan 187

5.4 New Ideas and Digital Media 191

Chapter 6: Marketing-led Organisational Change

6.1 Analysing the Context of Change in an Organisation 201

6.2 Planning and Executing a Change Programme 222

6.3 Engaging Stakeholders in Organisational Change 233

6.4 Measuring Success 237

Index 245

Introduction

Innovation for Marketers iii

About the Authors

Andrew Hatcher BSc MBA FCMC Chartered Marketer

Andrew initially studied as a Mechanical Engineer before joining Reuters, the information

company as a journalist. He then spent 15 years with the company around the world in a

variety of technology, sales and marketing roles ultimately working with the Greenhouse,

Reuters’ corporate venture capital arm, based in New York. He subsequently established an

internal incubator for Reuters in three centres around the world before setting up a new

electronic trading venture in Singapore.

After Reuters, Andrew moved to Cambridge in the UK and has been involved in setting up a

number of companies including Investing for Good which offers philanthropists a structured

way to invest in charities, The Working Knowledge Group which delivers enterprise activities

to students in Higher and Further education and, most recently, the Applied Knowledge

Network which develops training courses and software applications focused on strategic

planning.

Andrew has been involved in marketing training since 2003 and has since delivered

programmes for a wide variety of clients including Statoil the Norwegian State oil company,

British Telecom, Yell, Smith & Williamson, NTT DoCoMo and Eversheds among many others.

He is the co-author of Inventuring – Why big companies must think small, which is a

handbook for corporate venture capitalists; of The Cambridge Marketing College

Handbook: Services Marketing published by Cambridge Marketing Press; and of the Metrics

for Marketers Guide.

Andrew is a fellow of Cambridge Marketing College and has many years’ experience

teaching at both the CIM Diploma in Professional Marketing and Postgraduate Diploma

levels.

Kiran Kapur BA MPhil (Oxon) FCMC Chartered Marketer

Kiran has worked predominantly in Financial Services and has expertise in customer

relationship marketing and customer communications. As a consultant, she has worked as

project manager for companies including Liverpool Victoria, Barclays, London Life and

Cazenove.

She has taught a wide variety of courses at Cambridge Marketing College since 1999. She is

the Distance Learning & Overseas Course Director, with responsibility for the College’s

overseas expansion and a Fellow of the College. She has been a CIM examiner since 2004.

Her publications include the Assessing the Marketing Environment Study Guide published by

Pearson Education in 2009, and The Cambridge Marketing Handbook: Law for Marketers

published by Cambridge Marketing Press in 2015. She is also the author of the Guide: The

Customer.

She is a trustee of Jimmy’s Cambridge, a charity for homeless people.

Introduction

iv Innovation for Marketers

Charles W Nixon MBA FCIM FCAM FRSA Chartered Marketer

Charles began his career after studying History and Economics at Manchester University, a

degree that he says gives him a long term approach to strategy. He was first employed as

Government Relations Officer for Courtaulds (then the largest textile company in the UK)

where he liaised with civil servants and politicians on government policy. Whilst at Courtaulds

he was asked to explore the possibilities of the use of new mini computers in the field of

market research and intelligence. This led to his founding Courtaulds’ Office of Market

Intelligence for its Consumer Products Group and establishing one of the first computerised

marketing information systems in the UK.

After a short spell at the International Wool Secretariat as Senior Economic Analyst, Charles

went to Warwick Business School (WBS) to take one of its first MBAs. Whilst there he helped

write the Business Plan for the Warwick Science Park and so confirmed his interest in High

Technology. Following WBS he joined Arthur Andersen Management Consultants (now

Accenture) and spent time in Chicago and Geneva, before joining Mercury

Communications the then embryonic rival to BT. At Mercury, Charles was Head of Market

Research and Market Planning helping the new company segment its market, plan for

distribution, and research customer needs in order to introduce new products. In 1987 he

moved to the City of London and joined Extel Financial in time for the Big Bang and the city

revolution. These latter two posts gave Charles an insight in to the different ways UK

companies approach the market and marketing.

Following several years with Extel he was head hunted by Société Général to rebrand its

recently acquired UK Unit Trust Asset Management arm – Touché Remnant. However the lure

of WBS proved too strong and in 1992 he left the City to start Doctoral Research on the

Marketing of English Universities.

During this time Charles founded Cambridge Marketing College with Ian Brownlee in May of

1991. The College quickly established itself for its fresh and enthusiastic approach. Over the

next five years it steadily grew as a part time activity and in 1997 expanded with a second

college in Guildford and then a third in Manchester. In 1999, Charles became Chief

Executive of the College. Since then, the College has gone from strength to strength to

become the leading Professional Marketing College in Europe with 1,400 delegates at its

study centres around the UK and from over 100 countries worldwide.

Introduction

Innovation for Marketers v

How to Use this Guide

This Guide has been written specifically to assist marketers who are involved in both studying

the nature of and implementing innovation. It includes examples and activities to help

reinforce your learning, and recommended reading and website links for additional

information. We recommend that you work through the Guide from beginning to end

undertaking the exercises and supplementary reading included.

The Guide is part of a set, all written by professional marketers and tutors, designed to

provide clear and easy to read introductions to key marketing topics. The other Guides in this

set are: Strategy for Marketers, Digital Strategy and Metrics for Marketers.

Within the Guide you will find the following icons used:

This icon defines a key learning concept.

This icon identifies additional reading resources that can be used to gather extra

information or to reinforce learning about a particular concept.

This icon identifies tasks that are useful in widening your knowledge and applying

the concepts to your own organisation.

This icon identifies real-life examples that illustrate the key issues discussed.

This icon identifies websites with further information on the key issues discussed.

This icon identifies videos available online to reinforce your learning.

Introduction

vi Innovation for Marketers

Additional Study Resources

This Guide has been designed to provide you with all the core knowledge and skills you need

to understand the key concepts that support innovation in marketing environments.

However, marketing is a constantly changing discipline and in order to be a first class

marketer you must keep up-to-date with what is going on around you. Consequently we

strongly recommend that you read widely around the subject for this (and every) topic.

CMC Tutor Blog, Scoop.it! and YouTube Channel

Tutor Blog: www.marketingcollege.com/blog

Scoop.it!: http://www.scoop.it/u/charles-nixon

YouTube Channel: www.youtube.com/channel/UC0_uEMPBTxuUr8hH1Ikl70w

Magazines and Journals

We strongly recommend that you read around the subject from the daily and weekly press

and marketing journals and widen your studies by looking at key trade magazines that serve

the industry. These include:

Ad Age www.adage.com

Cambridge Marketing Review www.marketingcollege.com/blog/cambridge-

marketing-review/

Campaign www.campaignlive.co.uk

Marketing www.marketingmagazine.co.uk

Marketing Week www.marketingweek.co.uk

Media Week www.mediaweek.co.uk

Cambridge Marketing Handbooks

The Cambridge Marketing Handbooks: Digital Marketing, Distribution for Marketers, Law for

Marketers, Marketing Communications, Marketing Philosophy, Marketing Planning, Pricing for

Marketers, Product Marketing, Research for Marketers, Services Marketing, and Stakeholder

Marketing, 2015, Cambridge Marketing Press

Introduction

Innovation for Marketers vii

Recommended Books

Nijssen E J, (2014), Entrepreneurial Marketing: An Effectual Approach, Abingdon, Routledge

Tidd J and Bessant J, (2013), Managing Innovation, 5th edition, Chichester, John Wiley

Ahmed P and Shepherd C, (2010), Innovation Management: Context, Strategies, Systems

and Processes, Harlow, FT Prentice Hall

Bjerke B, (2007), Understanding Entrepreneurship, Cheltenham, Edward Elgar Publishing

Blundel R, and Lockett N, (2011), Exploring Entrepreneurship: Practices and Perspectives,

Oxford, OUP

Hayes J, (2014), The Theory and Practice of Change Management, 4th edition, Basingstoke,

Palgrave Macmillan

Hogg C, (2014), The Handbook of Entrepreneurial Marketing: How to Align Marketing and

Promotion to New Products and Services, London, Kogan Page

Moore G, (2014), Crossing the Chasm: Marketing and Selling Disruptive Products to

Mainstream Customers, 3rd edition, New York, HarperBusiness

Ries E, (2011), The Lean Startup: How Constant Innovation Creates Radically Successful

Businesses, London, Portfolio Penguin

Sethna Z, Jones R and Harrigan P, (2013), Entrepreneurial Marketing: Global Perspectives,

Bradford, Emerald

Introduction

viii Innovation for Marketers

Useful Websites

The Chartered Institute of Marketing

www.cim.co.uk CIM website with information and access to learning

support.

www.cim.co.uk/insight/tools-

and-templates/study-resources/

Direct access to information and support materials for all

levels of CIM qualification (available to CIM Members).

www.cim.co.uk/cuttingedge Weekly roundup of marketing news (available to CIM

members), awards and forthcoming marketing events.

www.cim.co.uk/insight/marketin

g-library-resources/

EBSCO, Emerald, iLibrary and more.

Publications on line

www.ft.com

Extensive research resources across all industry sectors,

with links to more specialist reports. (Charges may apply).

www.economist.com Useful links, and easily-searched archives of articles from

back issues of the magazine.

www.mad.co.uk Marketing Week magazine online.

www.brandrepublic.com Marketing magazine online.

Sources of useful information

www.esomar.org/

European Market Research Association.

www.asa.org.uk/asa/ Advertising Standards Association – useful for the Codes

of Practice.

www.marketresearch.org.uk The Market Research Society. Contains useful material on

the nature of research, choosing an agency, ethical

standards and codes of conduct for research practice.

www.statistics.gov.uk Detailed information on a variety of consumer

demographics from the Government Statistics Office.

www.data.gov.uk/publisher/ce

ntral-office-of-information

Government News.

www.quickmba.com/ Quick reference website for business models.

Wikipedia – A Note on its Use

Wikipedia is a good place to start any research on a new subject. Whilst content now goes

through some review to remove obvious errors of fact, the encyclopaedia is not definitive

and can be incorrect. Always check any information with a second source. Wikipedia is a

good source for other sources.

Innovation for Marketers

SECTION 1

ENTREPRENEURIAL MARKETING

Introduction

Innovation for Marketers 1

Introduction

A word of caution. The world is moving at a fast pace and marketers need to think quickly.

This Guide has been written for those with a quick mind and a willingness to read widely. All

the concepts and references included are not spelled out, but are easy to find through

Google. So please read your Guide and then research the topics you do not at first

understand or about which you want to know more. Doing this is one of the first steps in

being effective at driving innovation!

In the 20th Century there was the Marketing Department. However as the discipline of

Marketing has become more widely accepted and understood, the standard techniques

have passed into mainstream Business Development activities. In the 21st Century the most

relevant department is better described as Marketing and Innovation. Because of the

external-facing function of the discipline, it is to marketers that the task of identifying new

opportunities and devising plans to exploit them, falls. And, as basic marketing practices

become more widely used by non-marketers, it falls to professional marketers to innovate in

order to stand out from the crowd.

This Guide was written following 15 years of delivering our MHT (Marketing for High

Technology) Programme for companies in and around the hugely successful Cambridge

technology cluster in the UK. Based on that experience and on the wider world of marketing,

the Guide looks at a wide spectrum of change: from disruptive innovations to creative new

ideas, from implementing major change programmes to managing evolutionary, small-scale

improvements. It looks at Innovation in terms of marketing practice and business

development; the marketing of innovative products and their organisations and marketing-

led internal change management.

Graffiti on the A14 highway leaving Cambridge (Photo: CWN, 2014)

Section 1: Entrepreneurial Marketing

2 Innovation for Marketers

Chapter 1: Marketing and Entrepreneurship

Innovation for Marketers 3

Chapter 1: Marketing and Entrepreneurship

The expected learning outcomes for this chapter are that you will understand the

relationship between marketing and entrepreneurship including being able to:

Describe how the entrepreneurial process sits alongside core disciplines in marketing

Describe the different ways in which business ideas can be translated into

entrepreneurial opportunities

Assess the usefulness of both existing and new marketing approaches in a range of

entrepreneurial contexts

1.1 Integrating Marketing and Entrepreneurship

Many of us work for organisations that are well established, some for many decades or

centuries. As a result these companies have lost much of the original energy of their

founders. Instead they perpetuate the business through what is left behind of that original

entrepreneurial spirit.

For many established companies, it is the reinvigorating of the entrepreneurial zeal that is the

hardest task, as it is safer and (for staff) often easier to continue to gently evolve and please

the current customer than it is to find new ones with new offerings. (Throughout the Guide

‘offerings’ refers to consumer, B2B or not-for-profit products and services)

For others of us, we are privileged to be involved with the founding of a new business or

enterprise and we get to experience the joys and pains of corporate birth. In both situations

we are looking to gain and maintain a market lead or competitive advantage and as such

the customer is always at the heart of the successful enterprise.

There are times, however, when innovation is driven by necessity in order for organisations to

survive. In these periods (termed Creative Destruction by Schumpeter in 1942), marketing

plays a key role: not just understanding the traditional customer, but rather as the observer

and interpreter of macro trends; the identifier of opportunities and educator of consumers

and creator of markets (Schumpeter, 1942).

Creative Destruction

Creative destruction describes the continuous product and process innovation cycle

whereby outdated models and items are replaced by new ones. The process of creative

destruction is estimated to be the driving force behind productivity growth. Artificial

limitations to creative destruction can create significant negative short- and long-term

macroeconomic consequences

Section 1: Entrepreneurial Marketing

4 Innovation for Marketers

1.1.1 Creating Competitive Advantage

Organisations of all types in many contexts are faced with the challenge of gaining and

maintaining competitive advantage over their competitors. Developing that specific edge

can be critical in some cases, where it ensures survival, whereas for the majority it will provide

a way to stay ahead of the competition. In the last 10-15 years the focus on innovation as a

core competence has increased largely as the result of increased competition from

emerging economies, the ever faster cycle of new technologies, the rapid fall in the cost of

information and the increasing sophistication of the buyer.

Most analysts concur that any advantage from cutting costs and outsourcing have probably

already been exhausted and consequently in order to compete there are few options left

except to innovate a path to advantage. This has resulted in innovation moving from being

an interesting but expensive sideline to being adopted as a core competence and as a

result becoming sustainable.

A critical ingredient for creating and maintaining that advantage can often be the

presence, acceptance and effective implementation of innovative products, processes and

ideas. Being innovative in this environment means seeing things from new angles, having

broad perspectives, taking risks and being flexible. Developing the appropriate climate for

innovation in the workplace often involves not just changing the furniture but is more about

enabling employees to become idea observers, interpreters, identifiers, educators and

creators.

1.1.2 The role of marketing in driving innovation

Let’s look at each of these roles in turn:

1. Observer

2. Interpreter

3. Identifier

4. Educator

5. Creator

The role of marketing in driving innovation:

Observer

Interpreter

Identifier

Educator

Creator

Chapter 1: Marketing and Entrepreneurship

Innovation for Marketers 5

1. Observer

Joseph Schumpeter and Nicolai Kondratieff both hypothesised the existence of Long

Business Waves (Schumpeter, op.cit.), (Kondratieff, 1979). These waves, which Schumpeter

christened Creative Destruction, occur roughly every 50 years and dramatically change the

dominant technology – wiping out an existing competitive advantage; generating new

opportunities. Schumpeter and Kondratieff demonstrated how this had occurred when

steam power was applied to factories in the early 19th Century; to farms and agriculture in

the late 19th Century and when electricity was applied to factories in the 1920s. More

recently it can be seen in computerisation and automation via microprocessors.

The impact of these waves was/is to destroy the old paradigm of business and replace it with

a new way of working. The consequence was mass unemployment of the work force as

capital adjusted to the new technologies and labour took time to retrain. This paradigm shift

can then be seen in the impact of micro-processors (PCs), the internet (www) and now in

mobility and interconnectedness (The Internet of Things) (Witchalls, 2013).

The original theories posited that long business waves occurred every 50 years, as evidenced

in 1879, 1929 and 1979. However, the latest wave of Mass Mobile computing power has

come much earlier and has caught many commentators by surprise. The change is dramatic

though still fluid. So what will be the impact of mobile devices which are always on and

personal? What will be the impact of the interconnectedness of 50 billion devices via the

internet let alone the incredible increases in processing power coming from the ‘second half

of the chess board’?( Brynjolfsson and Mcafee, 2014).

Environmental Scanning

Marketers need to constantly watch or scan the environment (to spot the next trends

(wearable technology?) and the new opportunities that accompany them; and monitor

emerging uncertainties.

Figure 1.1 The Kondratieff Wave Source:

http://blog.nationmultimedia.com/home/blog_data/5/5/images/kondratiev5.jpg

Section 1: Entrepreneurial Marketing

6 Innovation for Marketers

How do we do this?

• Reading source journals – (these are the ones that journalists use to find stories. They

are the scientific publications, e.g. Nature, Scientific America; the economic press,

e.g. F.T, Economist; the technology press, e.g. New Scientific, etc.).

• Scanning peripheral sectors – keeping a watching brief on sectors that could be a

substitute (remember Porter?) for what you do, e.g. mobile phone companies

entering the banking sector!

• Debate – be part of the new thinking; speak at conferences; become a member of

technical standards committees; but above all talk to your target audiences.

The standard and most obvious model to use here is Porter’s 5 Forces model, though this is

limited in the areas it looks at so you need to think more widely and include extended PESTER

analysis as well (Porter, 2008).

Figure 1.2 PESTER analysis of the macro external environment

Find the prime source journal(s) for your sector.

Chapter 1: Marketing and Entrepreneurship

Innovation for Marketers 7

To give you some examples of the current level of change in technology, look at

www.gartner.com. Gartner is a leading Management Consultancy and specialises in looking

at the latest technology opportunities. However they recognise that not all ideas come to

fruition – new ideas generate increasing expectations but then some fade as they fail to

take-off, leaving others to change our lives forever. Consequently they created the Hype

Cycle to separate the hype from the real drivers of a technology's commercial promise

(Gartner, 2015).

The Gartner Hype Cycles provide a graphic representation of the maturity and adoption of

technologies and applications, and how they are potentially relevant to solving real business

problems and exploiting new opportunities. It provides a view of how a technology or

application will evolve over time, providing a source of insight to manage its deployment

within the context of specific business goals.

Figure 1.3 The Gartner hype cycle

Observing is only part of the task; it is knowing what you see that is key. “Looking where all

are looking, seeing what no-one sees” is often considered to be a definition of genius – but

we need to do this if we are to be innovative.

2. Interpreter

How do we understand what we see? In The Adventure of the Blue Carbuncle Conan Doyle

describes Sherlock Holmes inspecting a battered bowler hat and then handing it to Watson

to see what he makes of it. Read the passage below and consider what is seen by Watson

but not interpreted.

Section 1: Entrepreneurial Marketing

8 Innovation for Marketers

Extract from The Adventure of the Blue Carbuncle by Sir Arthur Conan Doyle

“I beg that you will look upon it not as a battered hat but as an intellectual problem. And,

first, as to how it came here. It arrived upon Christmas morning, in company with a good

fat goose, which is, I have no doubt, roasting at this moment in front of Peterson’s fire. The

facts are these: about four o’clock on Christmas morning, Peterson, who, as you know, is a

very honest fellow, was returning from some small jollification and was making his way

homeward down Tottenham Court Road. In front of him he saw, in the gaslight, a tallish

man, walking with a slight stagger, and carrying a white goose slung over his shoulder.

As he reached the corner of Goodge Street, a row broke out between this stranger and a

little knot of roughs. One of the latter knocked off the man’s hat, on which he raised his

stick to defend himself and, swinging it over his head, smashed the shop window behind

him. Peterson had rushed forward to protect the stranger from his assailants; but the man,

shocked at having broken the window, and seeing an official-looking person in uniform

rushing towards him, dropped his goose, took to his heels, and vanished amid the labyrinth

of small streets which lie at the back of Tottenham Court Road. The roughs had also fled at

the appearance of Peterson, so that he was left in possession of the field of battle, and

also of the spoils of victory in the shape of this battered hat and a most unimpeachable

Christmas goose.”

“Which surely he restored to their owner?”

“My dear fellow, there lies the problem. It is true that ‘For Mrs. Henry Baker’ was printed

upon a small card which was tied to the bird’s left leg, and it is also true that the initials ‘H.

B.’ are legible upon the lining of this hat, but as there are some thousands of Bakers, and

some hundreds of Henry Bakers in this city of ours, it is not easy to restore lost property to

any one of them.”

“What, then, did Peterson do?”

“He brought round both hat and goose to me on Christmas morning, knowing that even

the smallest problems are of interest to me. The goose we retained until this morning, when

there were signs that, in spite of the slight frost, it would be well that it should be eaten

without unnecessary delay. Its finder has carried it off, therefore, to fulfil the ultimate

destiny of a goose, while I continue to retain the hat of the unknown gentleman who lost

his Christmas dinner.”

“Did he not advertise?”

“No.”

“Then, what clue could you have as to his identity?”

“Only as much as we can deduce.”

“From his hat?”

“Precisely.”

“But you are joking. What can you gather from this old battered felt?”

Chapter 1: Marketing and Entrepreneurship

Innovation for Marketers 9

“Here is my lens. You know my methods. What can you gather yourself as to the

individuality of the man who has worn this article?”

I took the tattered object in my hands and turned it over rather ruefully. It was a very

ordinary black hat of the usual round shape, hard and much the worse for wear. The lining

had been of red silk, but was a good deal discoloured. There was no maker’s name; but,

as Holmes had remarked, the initials “H. B.” were scrawled upon one side.

It was pierced in the brim for a hat-securer, but the elastic was missing. For the rest, it was

cracked, exceedingly dusty, and spotted in several places, although there seemed to

have been some attempt to hide the discoloured patches by smearing them with ink.

“I can see nothing,” said I, handing it back to my friend.

“On the contrary, Watson, you can see everything. You fail, however, to reason from what

you see. You are too timid in drawing your inferences.”

“Then, pray tell me what it is that you can infer from this hat?”

He picked it up and gazed at it in the peculiar introspective fashion which was

characteristic of him. “It is perhaps less suggestive than it might have been,” he remarked,

“and yet there are a few inferences which are very distinct, and a few others which

represent at least a strong balance of probability. That the man was highly intellectual is of

course obvious upon the face of it, and also that he was fairly well-to-do within the last

three years, although he has now fallen upon evil days. He had foresight, but has less now

than formerly, pointing to a moral retrogression, which, when taken with the decline of his

fortunes, seems to indicate some evil influence, probably drink, at work upon him. This may

account also for the obvious fact that his wife has ceased to love him.”

“My dear Holmes!”

“He has, however, retained some degree of self-respect,” he continued, disregarding my

remonstrance. “He is a man who leads a sedentary life, goes out little, is out of training

entirely, is middle-aged, has grizzled hair which he has had cut within the last few days,

and which he anoints with lime-cream. These are the more patent facts which are to be

deduced from his hat. Also, by the way, that it is extremely improbable that he has gas

laid on in his house.”

“You are certainly joking, Holmes.”

“Not in the least. Is it possible that even now, when I give you these results, you are unable

to see how they are attained?”

“I have no doubt that I am very stupid, but I must confess that I am unable to follow you.

For example, how did you deduce that this man was intellectual?”

For answer Holmes clapped the hat upon his head. It came right over the forehead and

settled upon the bridge of his nose. “It is a question of cubic capacity,” said he; “a man

with so large a brain must have something in it.”

“The decline of his fortunes, then?”

Section 1: Entrepreneurial Marketing

10 Innovation for Marketers

“This hat is three years old. These flat brims curled at the edge came in then. It is a hat of

the very best quality. Look at the band of ribbed silk and the excellent lining. If this man

could afford to buy so expensive a hat three years ago, and has had no hat since, then he

has assuredly gone down in the world.”

“Well, that is clear enough, certainly. But how about the foresight and the moral

retrogression?”

Sherlock Holmes laughed. “Here is the foresight,” said he putting his finger upon the little

disc and loop of the hat-securer. “They are never sold upon hats. If this man ordered one,

it is a sign of a certain amount of foresight, since he went out of his way to take this

precaution against the wind. But since we see that he has broken the elastic and has not

troubled to replace it, it is obvious that he has less foresight now than formerly, which is a

distinct proof of a weakening nature. On the other hand, he has endeavoured to conceal

some of these stains upon the felt by daubing them with ink, which is a sign that he has not

entirely lost his self-respect.”

“Your reasoning is certainly plausible.”

“The further points, that he is middle-aged, that his hair is grizzled, that it has been recently

cut, and that he uses lime-cream, are all to be gathered from a close examination of the

lower part of the lining. The lens discloses a large number of hair-ends, clean cut by the

scissors of the barber. They all appear to be adhesive, and there is a distinct odour of lime-

cream. This dust, you will observe, is not the gritty, grey dust of the street but the fluffy

brown dust of the house, showing that it has been hung up indoors most of the time, while

the marks of moisture upon the inside are proof positive that the wearer perspired very

freely, and could therefore, hardly be in the best of training.”

“But his wife – you said that she had ceased to love him.”

“This hat has not been brushed for weeks. When I see you, my dear Watson, with a week’s

accumulation of dust upon your hat, and when your wife allows you to go out in such a

state, I shall fear that you also have been unfortunate enough to lose your wife’s

affection.”

“But he might be a bachelor.”

“Nay, he was bringing home the goose as a peace-offering to his wife. Remember the

card upon the bird’s leg.”

“You have an answer to everything. But how on earth do you deduce that the gas is not

laid on in his house?”

“One tallow stain, or even two, might come by chance; but when I see no less than five, I

think that there can be little doubt that the individual must be brought into frequent

contact with burning tallow—walks upstairs at night probably with his hat in one hand and

a guttering candle in the other. Anyhow, he never got tallow-stains from a gas-jet. Are you

satisfied?”

“Well, it is very ingenious,” said I, laughing;”

Source: (Conan Doyle, 2014)

Chapter 1: Marketing and Entrepreneurship

Innovation for Marketers 11

The key point here is to spot the indicators that lead to the bigger picture. In the Marketer’s

world we are looking for indicators of change that lead to scenarios of opportunity.

The first and obvious indicator is the pattern. There is evidence all around that people react

in different ways to PESTER events and forces. But when you can see a pattern forming in

these disparate acts then you can observe, predict and react e.g. seeing people using

fitness bands or reading blogs about a desire for a healthier diet allows the marketer to make

assumptions about the future.

The second indicator is the trend. With the pattern comes identification but we need to know

if this is an opportunity we can use. So we need to observe if and when the market is

nascent. We need to spot a trend. Here we need to collect indicative data of the growing

conformance to the pattern. standard market research and monitoring techniques should

be used.

3. Identifier

So how do we see new opportunities?

Through our observations we constantly have to reassemble our notions of satisfying needs

and we have to consider what new needs are created by the changes in the environment

as a result of the waves of creative destruction.

For example, if we extrapolate the increase in computing power from 8k to 32 gigabits on a

microchip, what do we do with this massive increase in processing power? What is more the

power is now portable; what can we do with it on the move to make life easier? Further still, if

we can embed it in clothing or a human body, what can we control with it? These are just

one set of questions from a couple of trends.

If we add to this the observable trend of an aging population, how can we combine the

two? And, finally, if we know we can sequence the DNA of any one person, what can we do

with the data?

Often the answers or new ideas seem to come from science fiction but in reality they are just

the application of desires for a better, broader life of experiences made possible by

imagination.

Discovery and creation theory

There are two contrasting (although some would argue complementary) theories of

entrepreneurship: Discovery Theory and Creation Theory. Whilst both assume that the aim of

entrepreneurs is to identify and exploit opportunities; they differ in their view about the origin

of opportunities and about the nature of entrepreneurs.

Discovery theory assumes that opportunities arise independently of any action taken by

entrepreneurs and are waiting to be discovered. Opportunities in a sector or market are

caused by exogenous shocks and are observable by anyone and therefore, in principle,

exploitable by anyone associated with that sector or market. The reason why some people

manage to successfully exploit a new opportunity and others do not is attributed to

differences between entrepreneurs and non-entrepreneurs, e.g. they may be more alert or

less risk averse.

Section 1: Entrepreneurial Marketing

12 Innovation for Marketers

Creation theory takes a different view. Opportunities are not created by exogenous shocks

but are created endogenously by the actions of entrepreneurs as they explore and develop

new offerings. They do not search; they act in order to create new market demand – and

observe how the market or customers react in turn. We will look at the role of Creator in more

detail later in this Section.

Discovery and Creation Theory

To find out more read Alavrez S A and Barney J B, (2007), Discovery and Creation:

Alternative Theories of Entrepreneurial Action, Organizações em contexto, Ano 3, 6,

December

One model to consider when trying to discover new opportunities comes from Murphy

(Murphy, 2011). Murphy recognised that theories about discovery are important to

entrepreneurism but that too many of them were based on the assumption that

opportunities were found by deliberate search or serendipitous discovery. He believed that

this oversimplified the nature of opportunities and developed a multi-dimensional model of

entrepreneurial discovery shown in Figure 1.4 below.

Figure 1.4 Murphy’s model of entrepreneurial discovery

Chapter 1: Marketing and Entrepreneurship

Innovation for Marketers 13

The model identifies 4 quadrants:

Eureka (high serendipity/high deliberation)

Deliberate Search (low serendipity/high deliberation)

Legacy (low serendipity/low deliberation)

Serendipitous Discovery (high serendipity/low deliberation)

and throws more light on the range of approaches taken to discovering opportunities.

Murphy’s full article is available online:

http://condor.depaul.edu/profpjm/pmurphy_files/Murphy%202x2%20(2011).pdf or use

google.

Having observed a pattern you then need to consider how to predict its trend. In this respect

Creation Theory is best summed up in that ‘no-one ever asked for a mobile phone’. You have

to create the market for it by educating people as to what is possible. Leaping from a basic

raw technical possibility to mass market service is unlikely unless the market can see the new

offering as analogous to a previous technology/offering. For example, the introduction of

the VCR cassette recorder for the home took nearly 30 years to reach 99% household

penetration. The DVD player took 10 -15 years to achieve the same penetration because it

was replacing an understood offering.

Mobile Communications

Originally mobile communication was developed for the military as mobile radio for

Command and Control. With the end of war and translation of the same technology into

civilian use it was applied to Emergency Services. However, it required a network and

considerable power to operate, so it stayed as a niche service for those sectors that saw

sufficient benefit to accept the cost of setting up a network and providing large expensive

battery packs.

As the value in speed of information became a pattern in other markets during the

nineteen seventies and eighties, especially in Financial Services and Sales Processing, the

technology was extended to small niche markets so networks could be set up in discrete

areas, such as the City of London, then the M25 belt or major arterial roads. However,

one-way mobile communications remained the norm for several years (known as

telepoint)!

However, with this nascent stage came the ability to gain economies of scale in

production and move down the learning curve. Thus more power, and smaller handsets

meant new general business users and with this came ubiquitous networks and then mass

social users.

At each of these stages in the evolution, different companies led the way or dominated.

Philips and Motorola in the early years, then when the Telepoint market arose it was

Hutchison with Rabbit; then Nokia rose with longer lasting battery life in their phones to

dominate the market, but then lost the trend by not seeing a new pattern of activity and

Apple took the lead with the iPhone.

Section 1: Entrepreneurial Marketing

14 Innovation for Marketers

Figure 1.5 below illustrates the shortening of the adoption curve for new technology in recent

years. Contrast the adoption of the telephone after 5 or 6 years (it had hardly got off the

ground) with the adoption of the cell phone (at over 25%).

Figure 1.5 Adoption of technology

4. Educator

Ask many entrepreneurs or high-tech start-ups what their customers want and they will tell

you that their customers don’t know: Because they do not understand the technology, they

are not scientists and do not understand what is possible.

Henry Ford’s response when asked what his customers would like if he asked them was “a

faster horse”.

This is where the ‘anticipating’ part of the definition of marketing comes in. It is through

experimentation and education of the customer that markets evolve or revolutionise. Those

on the inside of a company know what their technology is capable of delivering. They are in

advance of the market. The job of marketing here is to create the market, through

education and nurturing of understanding. This takes time and resources and it is often better

to be a close second to the first mover who spends most on market creation.

This is the difference between being market driven and market-driving. These approaches

come to market development from very different angles and the main characteristics of

each can be seen in Table 1.1.

Chapter 1: Marketing and Entrepreneurship

Innovation for Marketers 15

Market-driving Market-driven

Disruptive Reactive

Innovative Incremental

Creative Insignificant

Value Features

Agile Rigid

Competitive Tentative

Decisive Unsure

Clear Confused

Dynamic Static

Table 1.1 Characteristics of market driven vs. market driving

One of the most successful, recent books on Strategy has been Blue Ocean Strategy: How To

Create Uncontested Market Space And Make The Competition Irrelevant by W. Chan Kim

and Renee Mauborgne (Chan Kim & Mauborgne, 2005). The authors postulate that instead

of trying to find way to compete in crowded known markets (Red Ocean), we should look for

completely new markets that are apart from the crowd (Blue Ocean).

Section 1: Entrepreneurial Marketing

16 Innovation for Marketers

Blue Ocean vs. Red Ocean Strategic Thinking

Blue Ocean Strategy, suggested by W. Chan Kim and Renee Mauborgne, is a theory that

challenges traditional strategic thinking (Chan Kim & Mauborgne, 2005). It proposes that an

organisation will find the greatest success in markets where there is no competition, and

advocates that the greatest efforts should be spent in identifying such opportunities. Not

only is this theory new in its approach, the authors have been widely regarded as

disagreeing completely with conventional thinking such as Porter’s generic strategies.

The blue ocean is the metaphor for open space, tranquil and bountiful whereas the red

ocean is inhabited by competitive sharks which have bloodied the waters with repeated

attacks on rivals. It is colourful stuff, but there is substance beneath.

Firstly, the theory avoids any no-brainer tag by making it very clear that this is not about

diversification, i.e. new products or markets. Instead, organisations can retain their basic

core competences but reinvent the process of bringing themselves to market by looking at

the marginal gains that can be achieved by doing everything better, or differently, instead

of in a blind response to competition, in the heat of battle.

There are also consequences for how you do the external audit, since you may need to

gather information about markets that you had not previously considered. So in this way the

audit is at least partially driven by the anticipation of possible strategies (which you would

not have done last year!). This is an important example of how planning does not go in a

straight line. Just as audit information immediately feeds into strategic decisions, so the

anticipation of strategic options feeds into what is done in the audit.

In addition, the authors propose a model called the Four Actions Framework which breaks

the trade-off between differentiation and low cost. In doing so, the framework poses four

key questions:

Raise – what factors should be raised well above the industry's standard?

Eliminate – which factors that the industry has long competed on should be

eliminated?

Reduce – which factors should be reduced well below the industry's standard?

Create – which factors should be created that the industry has never offered?

You can find out more about Blue and Red Ocean thinking at:

http://www.blueoceanstrategy.com/

where you will also find a link to a webinar hosted by the Harvard Business Review

in which Rennée Mauborgne discusses Blue Ocean strategy and leadership.

Chapter 1: Marketing and Entrepreneurship

Innovation for Marketers 17

Observation and identification will get you into a rising market but it does not get you that

First Mover Advantage. There is much debate over the merits of being first to market but in

order to ‘own’ or lead a new market you have to be in very early on (if not to have created

it). To do this, you have to experiment and you have to be able to cope with uncertainties

and with failures.

Experimenting is a learning process otherwise known as ‘trial and error’; and many great

companies have stumbled on their way to the top: Apple with the Lisa computer and the

Newton Digital Assistant or Sony with its mini disk and DAT tape technology. Each time,

however, lessons are learnt by the company and the market is educated about what is

feasible. The downside, of course, is the impact on reputation and brand image.

Many companies do not see the opportunities of a new pattern until a product is launched

and the market created. Many great entrepreneurs who are market creators are

characterised by robustness, not to say ‘bloody-mindedness’ in their determination to drive

through new ideas to create new markets.

In discussing the early dilemmas of the SMART car I was concerned at the concept and its

positioning in the market. The concept was for a cheap, eco-friendly car for young, trendy

consumers. Yet it was being made by Mercedes (an expensive, old, industrial car brand) with

customer interchangeable side panels (environmentally wasteful) and boot space for “the

week’s shopping and a case of Perrier”. The founder, Nicolas Hayek, was convinced that the

market would understand the concept only once it had seen it and understood the

possibilities. The SMART Car has created a niche after 16 years but it still does not dominate

it.

This ‘build it and they will come’ approach was also tried spectacularly by The Sinclair

company when expanding beyond its successful home computer and calculator market.

The launch of the ‘revolutionary’ C5 car was carried out by a team convinced they had

found a need for a new emission-free car.

Figure 1.6 The Sinclair C5

It was a disaster.

Section 1: Entrepreneurial Marketing

18 Innovation for Marketers

For most innovative companies the approach is to build slowly at first and then more quickly

as the market responds. Often this is underpinned by seeding the primary source market of

users. By this we mean giving young staff, students or children access to the offering as they

are more likely to engage quickly, and then build relations with these users as they move into

the workplace and take up positions of influence.

5. Creator

On what basis do you set out to create a market? How do you manage the internal risks,

when you could be “betting the company on it ».?

For many, ‘gut’ instinct is what they go on. Jobs and Hayek did, but this is only possible if you

(co) own the company and can empathise with the customer. It is the latter aspect that is

critical in doing this successfully. Can you consume your own offering and be your own

customer? If so, then you have a good understanding of the market. However, if you are not

in the main target grouping you will need market research. After 10 years the creators of MTV

stopped making judgement calls on the business and started using market research when

they realised then were no longer in the target market.

In a traditional approach to creating a new market a separate division may be formed to

pioneer the creation and development, untrammelled by the structures and cultures of the

parent company. Such a strategy is famous in the development of the Personal Computer

(PC) by IBM. Here, the parent company was the leading mainframe supplier and saw

desktop computers as a threat to its dominance. Yet others within the firm saw the rise of

Apple, Atari and Commodore as a new dawn in productivity and recognised Moore’s Law

was not on IBM’s side. So they set up a ‘Skunk Works’ (originated by Lockheed Martin for

secret aircraft research), which was a secret team and development area to create a

working prototype. Once the product concept was proven, the company saw the

opportunity and launched the IBM PC. However, if this project had been proposed in parallel

with other computing ventures, IBM would not have allowed the development in the first

place and the world would be a different place.

For other organisations, the method is to externalise the development – either to a separate

company or offshore location in order to hide the activity until it is proven. A similar approach

can be taken with time. Here, companies (such as Xerox and Google) allow staff a certain

amount of time each week /month to devote to developing their own ideas and prototypes,

which they then present to the company for mainstream adoption. One very successful

result from one electronics company called Racal was Vodafone!

These are somewhat deliberate approaches to allowing new ideas to take shape. However,

in many companies, formal planning processes are weak and strategy – and hence

development – is ‘emergent’, evolving in response to what is happening in the market. This

emergent approach has its strengths in allowing constant evolution in response to change,

but may not allow the whole company to focus on the task, as would be the case with a

formal plan.

Chapter 1: Marketing and Entrepreneurship

Innovation for Marketers 19

Further Reading

1 D’Aveni R A, (1995), Coping with hypercompetition: Utilizing the New 7S Framework,

Academy of Management Executive, Vol 9(3), pp45-57. Available in EBSCO.

2 Charitou C D and Makrides C C, (2003), Responses to Disruptive Strategic Innovation,

MIT Sloan Management Review, Winter, pp.55-63. Available in EBSCO.

1.2 Converting Ideas into Opportunities

There are a number of different ways in which business ideas can be converted

into entrepreneurial opportunities:

Intuitive, ‘gut feel’, insights

Traditional business plans

Developing business models

Internal and external approaches

1.2.1 Intuitive vs. traditional approaches

With the considerable changes in the business environment over the last decade, there is

debate about the best way to exploit a given idea and convert it into a profitable

opportunity. Many of the standard practices of the past – local manufacturing, physical

distribution, off-line advertising - no longer easily apply. In addition traditional research and

planning processes may be too slow or, given the newness of the opportunity, there may not

be the data to populate the models. We need to add to this the rising role of crowdfunding

and peer-to-peer lending which reduces the requirement for traditional bank funding and

the detailed, formal business plans they required.

As countries now compete actively to generate businesses in order to grow their economies

it becomes easier for entrepreneurs to start up as evidenced by the “Ease of Doing Business”

surveys by The World Bank and The Economist that rate and rank the ease with which it is

possible to create a business indifferent countries. Companies are now able to exploit ‘gut –

feel’ or intuitive market insights without recourse to traditional funding and the constraints

that went with it. We will look at the merits of this approach in more detail in Section 1.3.1.

Section 1: Entrepreneurial Marketing

20 Innovation for Marketers

1.2.2 Developing innovative business models: the blank canvas approach

Several commentators over the last five years have developed new approaches to creating

innovative business models. Taking the ‘blank sheet’ approach they have created what they

are calling ‘canvases’ to guide entrepreneurs in developing new business market models.

The aim is to set the entrepreneurial spirit free and not to constrain it with linear planning

models. This resonates with several of the most successful US social media and internet

companies where instead of the usual business planning meetings that would occur in the

UK, they have multi-disciplinary ‘Growth Meetings’ to thrash out the next stage of

development.

Developing different business models requires insight and confidence. Resources are no

longer the main constraint. Access to resources can now be gained via the internet. The task

is knowing what resources are required and how to manage them.

Osterwalder and Pigneur see nine key building blocks for a successful model (Osterwalder

and Pigneur, 2010):

1. Customer insight

2. Value proposition

3. Channels

4. Customer relationships

5. Revenue streams

6. Key resources

7. Key activities

8. Key partnerships

9. Cost structures

Peter Fisk on the other hand sees the model developing from thinking differently (Fisk, 2014):

Power of imagination

Audacious – ideas with attitude

Foresight – seeing the future and working back

Ambition – what is your purpose

Rethink – seeing things differently

Questioning – redefining the problem

Creativity and connection

He also addresses the downside of what to do with too many ideas and the need to focus.

Both of these approaches facilitate the ability to see opportunities and build a variety of

business models.

Chapter 1: Marketing and Entrepreneurship

Innovation for Marketers 21

Business Model Generation: A Handbook for Visionaries, Game Changers, and

Challengers by Osterwalder and Pigneur, John Wiley & Sons, 2010.

Gamechangers: Creating Innovative Strategies for Business and Brand by Peter Fisk, John

Wiley & Sons, 2014.

Innovative Business Models

The Free or Freemium model

Whilst this concept was somewhat revolutionary when introduced, it is now widely accepted

that many services can be provided seemingly free. Business models have now developed

where the income stream is delivered through advertising or through the ‘bait and hook’

approach, where initial services are offered free and additional or enhanced services are

offered at a price. Examples here are obviously many of the Apps that are freely available

but require in-App purchases to gain the best of the software. Or the ‘Paywall’ model for

newspapers where headline information is available free, but in depth analysis is available at

a price. Examples here are Skype, Google and Newspapers such as The Times and Financial

Times.

The Long Tail model

This concept was developed when organisations began to consider the idea of deselecting

products in the book or music industry that were no longer mainstream. In the old physical

world these products took up a considerable amount of storage and stock which was costly.

In the new business model of the dematerialised product there is no cost in holding this

particular type of ‘long tail’ or limited appeal product. Examples here are the bookselling

sector which can still sell titles long after they are no longer bestsellers, by utilising either

ebook downloads or print on demand. It also applies in a variation to Lego which allows

users to generate their own kits from the brick styles available on the web.

The Unbundled Business

This is an intriguing concept whereby the operations of a company which may have been

seen as integrated if we use the old Value Chain model, can now be unbundled and

distributed to other companies, suppliers or indeed customers, and the company now

concentrates on the aspect where it can gain the greatest return. Examples here are Telcos

where they have outsourced the infrastructure to others and in-sourced new innovative

content services .

The Open Business model

This is the concept of externalisation of almost any aspect of the company. It is possible to

source new ideas from customers, to develop products with suppliers, to outsource delivery

to distributors and indeed even to create products with competitors. Examples here are

Proctor and Gamble crowdsourcing new products and the GSK Patent Pool, which allows

others to exploit the patent for third world drugs.

Section 1: Entrepreneurial Marketing

22 Innovation for Marketers

Unconstrained by the internality of old business approaches where everything had to be

internalised or under the company’s direct control, the 21st Century business externalises all

but the idea.

1.3 New and Traditional Marketing Approaches

There is a range of mainstream and new marketing approaches which are

appropriate in different entrepreneurial contexts:

Deliberate vs. emergent approaches

Exploiting gaps in dynamic markets

Market tests vs. market research

Market sizing and potential in incipient and latent markets

Competing and collaborating

Market entry via niches and highly segmented markets

Exploitation of market adjacencies

Short-term ploys (see Chapter 2), cannibalisation and hypercompetitive markets

Innovative use of social media and ICT

Modifying the marketing mix in entrepreneurial contexts (see Chapter 2)

There are many different ways in which business ideas are converted into entrepreneurial

opportunities. We have already touched on some of these – now let’s consider some

additional alternatives.

1.3.1 Deliberate versus emergent strategies

The standard theory of marketing would demand that we create a plan for what we are

about to execute. For all the reasons that we know and believe, the creation of a marketing

plan is the best way to focus an enterprise’s attention and resources on the opportunities

ahead.

Strengths of planning:

Focuses the effort of staff

Gains agreement and commitment

Provides clear leadership

Allows balanced assessment of risks and rewards

Sets out roadmap for the enterprise to follow

Chapter 1: Marketing and Entrepreneurship

Innovation for Marketers 23

When creating a marketing plan the first stage is to carry out an audit, then to assess the

strengths and weaknesses of the organisation versus the opportunities and threats. However,

this presupposes that we have not yet identified an opportunity and therefore need to take

a balanced approach to those opportunities that may exist in the environment. Using

techniques such as gap analysis and Ansoff’s famous matrix presupposes that the

opportunity in the marketplace is developmental from the current starting position. However,

for entrepreneurs the situation is usually reversed in that the opportunity has been spotted

and then the plan needs be constructed. For the entrepreneur there may be no original

starting position in terms of an existing company and therefore many of the standard

business planning models do not readily apply.

Finding and exploiting gaps in existing marketplaces is not that easy when those markets are

highly dynamic. Organisations that currently believe that they can gain significant market

share growth by being two times better than they are at the moment are outpaced now by

organisations that believe that they can be 10 times better than the incumbents in the

market (Fisk, op.cit.). Secondly, the analysis that goes into the audit takes time and carrying

out the research for such an audit process may well show the hand of the company to its

competitors.

The 21st-century world circumstances change quickly and as a result strategies and plans

need to be constantly updated. However the process of planning, which was created at

least 50 years ago, is not quick enough to respond to the changing environment.

Consequently entrepreneurs develop a more emergent strategy which reflects the pace of

the environment.

Strengths of Emergent Strategies:

Quick to respond

Easily adaptable

Easily shareable with modern social media

However this approach has its drawbacks.

Strengths Weakness

Gut feel Passion

Drive

Motivation

Speed

Limited explanation

Exists only in head of leader

Hard to disseminate

Business planning Dissemination

Co-ordination

Communication

Easy to compare for external

Time-consuming

Slower to respond

Dispassionate

Section 1: Entrepreneurial Marketing

24 Innovation for Marketers

funding

Table 1.2 ‘Gut feel’ vs. business planning

Constantly changing plans need to be constantly communicated. It may also be that, as

strategies change, not all of the consequences of the changing strategy are considered and

this can lead to waste of time, effort and resource, together with conflict.

The slower pace of a deliberate planning process does allow involvement of multiple groups

of people and fuller consideration of the consequences of any change. Emergent strategies

on the other hand whilst they can incorporate robust scenario planning tend to be applied

within organisations that are dynamic and changing on a frequent basis, and as such they

need to maintain rapid movement and to anticipate competitor moves without necessarily

looking at the consequences in terms of resources.

Emergent strategies can lead corporations up cul-de-sacs and leave them with requirements

to reverse out of the latest fancy technology or social media that seemed appropriate at the

time, but can soon be seen as the wrong move. In which case the organisation has wasted

its time and resources, and being small, these losses can be significant.

The dynamism of the marketplace is both an opportunity for entrepreneurs as well as a

threat. Spotting opportunities requires rapid reaction if they are to gain an advantage before

others move in. However there is the likelihood that the opportunities will cease as rapidly as

they began.

As we have already touched on, there are new business models arising which shun the

standard approach to profit maximisation. Firstly the model for many App based operations

is to gain as many users as possible through free pricing in order to sell advertising thereafter.

For others it is the opportunity to sell ‘in-App’ purchases that is the model. In essence size (of

the user base) matters.

A variant of this approach is to pay people to use the service! The model is again to gain as

big a user base as possible, though the attraction for the user is to earn money or discount.

Quidco and Groupon are classic examples here but also check out Qustodian which pays

users to review adverts and Apps (Roberts, 2012).

Qustodian

Read John Roberts, co-founder and MD UK of Qustodian, Qustodian Case Study in The

Cambridge Marketing Review, Issue 4, Autumn 2012.

You can find more on new business models in Section 3.1.7.

Chapter 1: Marketing and Entrepreneurship

Innovation for Marketers 25

1.2.2 Is the opportunity worth it?

This brings us to the thorny issue of market sizing. How do you estimate the scale of the

opportunity when the product has not yet been created? How can you assess the likelihood

of potential customers purchasing a product that is not yet a reality? This is a very real

problem faced by people such as Steve Jobs at Apple and Hayek at Smart. There are three

main responses:

concept testing

involvement of potential customers in the product development process

creation of working prototypes that can be demonstrated.

In the standard new product development (NPD) process we would find that the

involvement of customers at an early stage is now considered essential. The problem with this

approach in highly dynamic markets is that the consumer may not even understand the

concept at this stage. If the concept being discussed is not analogous to an existing method

or means of solving a problem then the consumer will have difficulty relating to the benefit

that is offered.

Consider the standard concept of a mobile phone earlier this century. A mobile phone was

used to make phone calls and had very little other functionality other than perhaps texting.

Consider therefore the concept testing of a single device that would allow you to surf the

internet, to take photographs, to play music, etc. The consumer would have a great deal of

difficulty in valuing such a proposition (except as discrete devices), or indeed being

convinced that such technology was possible. This is where the entrepreneur’s problem really

lies.

If the opportunity is significant and ground breaking how do you explain this to people who

do not understand the problem that would be solved or understand the technology that

could supply the solution?

The obvious answer here is to educate a group of customers to be in the forefront of, not

only market understanding, but the technological solution. These customers will then

become your advocates and your mavens who will tell the world about your offering. They

will then hopefully take you over the tipping point from fed to main stream. See Malcolm

Gladwell's book The Tipping Point: How Little Things Can Make a Big Difference for more on

this approach (Gladwell, 2002).

In other markets, where technology is not so costly, the prospect of doing market research

may well be super-ceded by actually producing the product itself to see customers’

reaction. One of the common considerations when doing market research is the cost versus

gain conundrum. Market research can be costly and especially so when it is defining in

words and pictures concepts which are better seen in reality. Consequently it can be

possible to produce the product (or Beta version) and get customer reaction to the real

offering at a lower cost than it would be to carry out market research on a theory in a

statistically significant way.

However there is also the issue of ‘showing your hand’ to the competition. By carrying out

market research or attempting to educate the marketplace in an open way (perhaps by

using social media), you are exposing your concept to your competitors and may therefore

be giving them an insight into your strategy.

Section 1: Entrepreneurial Marketing

26 Innovation for Marketers

Market Test vs. Research

In some circumstances it can be more effective (and cost effective) to produce trial batches

of a new product to test the market rather than carry out market research. Here the cost vs

benefit equation of market research is very important. It may be far more expensive to

produce the trial batches than undertake some market research, but the result from a ‘real’

market reaction to the product versus a simulated response in a questionnaire may provide

far more insight into the consumers’ engagement with the product. Market testing as

opposed to questions about a hypothetical new offering is likely to be far more effective with

a brand new idea or technology with which consumers are currently unfamiliar.

1.2.3 Collaborate or compete

The introduction into the discussion of competitors raises very real issues today. Do we

collaborate or compete? Indeed we now have the term ‘co-opetition’ where we do both.

For entrepreneurial companies the problem can often be that they see opportunities which

they are unable to fulfil. Their resources, manpower and funding may be insufficient or they

may be unable to access the full potential of the marketplace with their own resources in a

short timescale before their main competitors. This then leads to the idea of collaborating

with others who are in adjacent markets or who may offer a simple access route to the new

market.

1.2.4 We all have a book in us

For many, the idea of writing a book is a long cherished dream. For some, the prospect of

setting up a publishing company and revolutionising what is a traditional marketplace has

been a very attractive opportunity. However, the writing and publishing of a book is only part

of the job, and for many has proved to be the greatest joy then followed by the biggest

problem. How do you get the book to market? How do you make it discoverable so that

readers can buy it?

Few new publishing houses have been established in the last five years despite the massive

growth in the software to self-publish and the social media to distribute them. The solution for

successful organisations wishing to exploit self-publishing is to find a collaborator in distribution

and publicity. The creation of platforms such as Amazon's self-publishing programme has

been massively instrumental in revolutionising the sector. The point to note is that the

technology alone is not enough to change the market.

The obvious benefits of collaboration are that the entrepreneurial company gets assets that

it lacks and the collaborator gets products to fill its channel to market, and therefore makes

better capacity utilisation of its resources. Today the concept of ‘not created here’ is not

really applicable anymore. Companies do not have to do it all themselves and increasingly

the quickest way to exploit ways to new markets is to find partners.

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Innovation for Marketers 27

1.2.5 So how do we get to market?

For entrepreneurs the challenge is cost and speed. Having seen an opportunity, the

challenge is to secure as much of it as quickly as possible with limited resources before the

competition. The balance is in not creating a market opportunity that is too big and thereby

open to competition.

Figure 1.7 The technology life cycle

As we have already touched on there is something to be said for first mover advantage.

However, in most examples the first mover is not the most successful company in the long

term. It is the company that is able to exploit the full marketing mix including distribution and

marketing communications that is the winner in the longer term. First movers often create a

market and expose the new opportunity to others, but are unable to satisfy all customer

requirements, nor are they able to expand and offer new product variations to a hungry

market. In today’s environment they seek the exit strategy of being acquired by the ‘big

boys’.

The obvious solution is the creation of a niche market which is highly defensible and which

the entrepreneurial company can make its own. A key way to do this is to gain considerable

levels of loyalty from the customers in the niche and thereby defend itself against the appeal

of larger corporations who have limited track record in this area. The best method of doing

so is obviously through detailed segmentation and the gaining of a very clear understanding

of the users’ requirements and preferences in the sector. In addition the use of crowdfunding

ties customers in to being defensive of the sector against competitors.

For many organisations with an existing product range, movement into new areas is often

best achieved through what is termed market adjacencies. This is the move you would see in

an Ansoff matrix into new markets and potentially into diversified fields (Ansoff, 1957).

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28 Innovation for Marketers

Figure 1.8 Ansoff’s matrix

Ansoff proposed 4 strategies:

Firstly, market penetration i.e. the improved use of the existing marketing mix to gain

sales. This often forms the main element of a short term strategy, addressing those

obvious areas where the company is not following good marketing practice or

causing the organisation to be deliberately more savvy in winning incremental

business.

Thereafter there are the options of product development and market development.

Here the risks of the unknown need to be considered plus the considerable cost of

product or market development. These strategies tend to address gaps in the

product range and in overseas or alternative markets.

Finally there is the diversification option. This is the most risky and costly option.

However, bear in mind that the most substantial part of Ansoff's book was about

diversification and the gradual means by which it can be achieved, it was not about

the other three boxes and in this we have some very powerful tools.

Chapter 1: Marketing and Entrepreneurship

Innovation for Marketers 29

General Motors

As an example to illustrate the Ansoff matrix strategies:

1. Market penetration – GM produces and sells cars in the USA

2. Market development – GM sells and then produces and sells cars in Europe

3. Product development – GM provides finance to purchase new cars

4. Diversification – GM develops a manufacturing control system and its own telecoms

network. It now manufactures and sells around the world.

The essential aspect to consider in using Ansoff’s model for strategy making is the degree of

risk inherent in each strategy and the associated costs. You need to understand that the

degree of risk rises exponentially from market penetration to diversification. You need to be

clear where the risks lie in your proposed strategy.

You should also consider the expanded matrix (see Figure 1.9 below) that includes an

intermediate step between both existing and new markets and existing and new products,

which provides a slightly lower risk option in each case and may enable the company to

grow at a more manageable pace rather than immediately taking larger, riskier steps into

new product or new market development.

Figure 1.9 Expanded Ansoff’s matrix

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30 Innovation for Marketers

In the expanded matrix the first expansions are to find new customers in existing markets or

similar (new) markets for existing products. The next expansion is to invest in similar

technologies that can be used to develop extended products enabling the company to

move into similar (new) markets that are adjacent to the ones already being served. Within

this stage one of the options is for the company to become its own customer using its

products or components in other products e.g. from cars to tractors – the tractor division

consuming components or similar engines from the car division. The final expansions are to

move into new products (first for existing markets) and then for new markets.

Figure 1.10 An interesting idea! (Photo: CWN 2012)

Establishing a presence in adjacent markets can have a negative impact on traditional

product sales. This cannibalisation effect eats into the profitability of the traditional product

and can cause it to become loss making, so careful management of the introduction of new

adjacent products is needed to balance the decline of the PLC of the established product

as the new one rises.

A contemporary example is the balancing of fall and rise of the iPod and iPhone. As the

once hyper-popular MP3 player market is replaced by the same functionality on a

Smartphone then the sales of the former decline. The same was true of the decline of the

VHS cassette machine on one side with the rise of the DVD player on the other.

1.2.6 Hyper-competitive markets

A hyper-competitive market can occur at several stages in the technology lifecycle (when

company shake outs happen) but are particularly prevalent at the take-off stage (see Figure

1.7), when the number of firms entering the market is greatest. As the technology or product

concept is seen to work in the market and early adoption starts, companies pile into the

market place, each with a slightly different offering and all trying to gain dominance. At this

time ‘First Mover’ advantage is often lost as more marketing savvy companies steal a lead

over technology/product orientated companies. This is a wild time when there are few (if

any) standards by which the consumer can judge competing offers.

In addition, there is usually limited inter-operability between competing offerings so

consumers become embedded with one product. Classic examples have been VHS vs,

Betamax; the QWERTY keyboard; and audio cassettes vs. mini disks vs. DAT tapes. In nearly all

instances the best technology lost!

We will return to ‘First Movers’ in Section 3.1.8.

Chapter 1: Marketing and Entrepreneurship

Innovation for Marketers 31

1.2.7 New digital approaches

Finally in this section we need to consider the use of new digital approaches. The use of the

internet allows entrepreneurs to ‘punch above their weight’ and gain exposure and

interconnection with markets that would previously only have been possible for large

companies.

The following is a checklist of areas to consider:

New Product Development (NPD):

o Collaborative ideas generator

o Crowd sourcing via social media

o Fundraising via peer-to-peer lending/crowdfunding

o Researching of technologies and consumer behaviour with academia

o Researchgate

Product development via internet collaboration e.g. outsourcing of coding,

etc.

Launching – Raising awareness via targeted social media and journalist

networks

Distribution

Third party sales sites e.g. Amazon, eBay, Etsy, etc.

o App building

o Social media business sites, e.g. Facebook for business, company

pages on Google + and LinkedIn

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32 Innovation for Marketers

INNOVATION FOR MARKETERS

INDEX

Index

Innovation for Marketers 233

4Ps of entrepreneurship .............................. 34

—A—

Adoption of technology ......................... 7, 14

Aikido strategy ......................................... 38-39

Ansoff's matrix ................................... 22, 28-29

—B—

Belbin's team roles ................................... 64-65

Born-global organisations ................. 193, 203

Boundary spanner .............................. 105, 108

Business models ................... 20, 21, 25, 50-51,

83, 87, 148, 152

—C—

Change agent ............................................ 211

Change programme ................... 1, 163, 201,

222-223, 227-229, 238

Change team ..................... 68, 222, 228, 230,

232, 236

Co-creation ................. 86, 115, 122, 141-144,

191, 196

Collaboration ................................. 27, 92, 121

Collaborative structures ............................ 120

Competencies ............42, 48, 53, 65, 85, 102,

136, 188, 189, 208, 215, 217

Compliance ............... 224, 228, 237, 239-240

Conflict ................................................... 69, 133

Co-ordination ...................... 22, 161, 179, 180,

187, 188

Corporate strategy .... 46, 104, 171-173, 189

Cost model .................................................... 90

Creative climates ....................................... 106

Creation theory ....................................... 11-13

Creativity ......................... 73-75, 109, 110, 113

Cross-functional teams ..................... 129, 131

Crowdsourcing ... 42, 115, 121, 140, 142, 146

Cultural web ........................................ 229, 237

Customer orientation......... 108, 175-178, 182

—D—

Design ............................................ 33, 122, 222

Diffusion .............................. 73, 95-97, 136, 137

Discovery theory ........................................... 11

Diversity .................... 69-70, 110, 113, 193-195

—E—

Ecosystems ........................................... 117-118

Emergent strategy .................................. 22-24

Employees .................. 168, 181, 183, 191, 212

Empowerment ............................................ 171

Entrepreneurial teams ...................... 33, 62-63

Entrepreneurship ................................ 3, 11, 34

Evaluation .................... 44, 110, 113, 115, 157,

188, 219, 223

Experimentation ......................... 14, 72, 74-75

—F—

Fast follower ............................................. 92-94

First mover .................................... 17, 30, 92-94

Five factor theory ....................................... 232

Forecasting ...................... 47, 52, 59, 61-62, 92

—G—

Gen Y/digital natives ................................. 191

Globalisation .............................. 117, 201-203

Group development .............................. 68-69

Guerrilla marketing ................................ 33, 36

—H—

Herzberg's two-factor theory ................... 169

Human Resource Management (HRM) ........

182-183

Hype cycle .............................................. 7, 205

Hyper-competitive markets ....................... 30

—I—

Ideagoras ............................................ 121, 146

Innovation:

Advertising ............................................... 156

Closed ........................................................ 81

Disruptive ................................................... 76

Incremental ......................................... 83-84

Networks ................. 115, 117, 140, 147-148

Open .......................................................... 82

Paradigm .................................................. 80

Platform ............................................... 73, 79

Index

234 Innovation for Marketers

Position ....................................................... 80

Pricing ...................................................... 152

Process ....................................... 79, 153-154

Product .............................................. 79, 154

Radical .................................................. 84-85

Social media ........................................... 158

Supply chain ................................... 147, 155

Sustaining ............................................ 75, 77

Internal communication ....................... 38, 70

Internal marketing ............. 161-164, 181, 187,

190, 198

Internal marketing plan .................... 187-189

Invention ............................................ 73-75, 79

—J—

Judo strategy ................................................ 36

—K—

Knowledge management......... 40, 135-137,

161, 173

Kondratieff wave ............................................ 5

Kotter's 8 step framework ................. 230-231

—L—

Leadership ..................... 62, 98, 113, 131, 181,

185, 222-224, 226

Learning theory ........................... 222, 231-232

—M—

Macro external environment ............... 6, 202

Market orientation ....................... 98, 107-108

Market pull ................................................ 85-86

Marketing mix ................ 27, 28-33, 36, 38, 47,

49, 58, 162, 187, 190, 193

Maslow's hierarchy of needs ............ 166-167

McClelland's motivation needs theory ........

168-169

McKinsey 7S model ............................ 220-222

Measurement ............................. 109, 110, 113

Micro external environment ..................... 205

Motivation ................................... 164, 166, 170

—N—

Networking .................. 38, 148, 150, 158, 180,

191, 198, 205

New Product Development (NPD) .... 25, 31,

41, 46, 49, 64

—O—

Objectives ................................... 131, 187-189

Ocean strategy ....................................... 15-16

Online discussion ........................................ 144

Organisational structures ................. 100, 111,

119-120, 148, 197, 211, 220

—P—

Partnerships .................... 36, 39, 140, 161, 218

PESTER analysis ................................................ 6

Porter's 5 forces model .................................. 6

Porter's value chain ............... 52-53, 218, 222

Power..................................... 20, 201, 211, 230

Profit .................................................. 54-56, 186

—R—

Ratios ......................................................... 55-56

Recruitment .................. 98, 123-124, 129, 162,

182, 183, 186, 187, 194, 231

Research commons ........................... 120-121

Resistance to change ....... 212, 227, 233-234

Resource based view (RBV) ............. 218, 222

Resources ...................... 20, 33, 110, 112, 131,

201, 215, 240

Revenue model ...................................... 51, 88

Rewards .......................... 28, 82, 127-128, 167,

170-171, 185, 212, 230

Risk .................................. 70, 116, 145, 219, 240

Index

Innovation for Marketers 235

—S—

Satisfaction .... 40, 91, 128-129, 153, 163-166,

170, 175, 181, 183-185, 187, 238, 241

Schumpeter ................................................. 3, 5

Self-managing teams ........................ 131-132

Service-profit chain ............................ 184, 186

Stakeholders ......................................233, 2325

Strategic alliances .............................. 115-117

—T—

Teams........................... 62, 64, 68-71, 123, 194

Technology life cycle ............................ 30, 67

Technology push ..................................... 85-86

Transactional leadership ................... 100, 111

Transformational leadership ....... 99-100, 111

—U—

Unlearning behaviour ................................ 174

User trials ............................................... 140-141

—V—

Value chain innovation............................... 91

Value Grid ................................................. 53-54

Virtual teams ......................................... 62, 194

VRIN framework .................................. 218-219

Vroom's expectancy theory .................... 170

—W—

Wheel of creativity ............................. 109-110

—Y—

Yerkes-dodson curve ......................... 215-216

Index

236 Innovation for Marketers