driving profitable growth through major strategic innovations by jeff goldstein of ingenuity...
DESCRIPTION
In recent years it has become evident that strategic innovation is critical to corporate success and even survival. Achieving success with new brands, flankers, business units, new ways to-go-to market and change the game licenses and partnerships requires deeper and more objective assessment of the consumer, the category and the competition. Jeff will discuss how profitably managing ROI on innovation is really about managing the risks of learning, fully understanding the costs of acquiring and retaining new users, and most of all, executing the core innovation elements with excellence. Mr. Goldstein’s presentation will provide an overview of key concepts for success in major new businesses, licensing/partnerships and acquisitions and will reveal common mistakes made by innovation managers and entrepreneurs. He will also discuss 5 models for licensing/partnerships, overlooked components of volume and thinking like direct marketers.TRANSCRIPT
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Jeff Goldstein, President
AcuPOLL Precision Research, Inc.
October 18, 2012
Profitable Growth Through Strategic Innovations: New Businesses, Partnerships, and Acquisitions
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Confession: I do not meet the #1 criterion for a highly acclaimed speaker
• I’m not from out of town
• However, I do have diverse experience:
– Discovered, invented, patented, trademarked,
developed, funded, launched,
searched, bid, acquired, licensed,
grown, and profited from innovation
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Focus Today on ROI
• Not sexy … but powerfully important
• Strong idea and a great product often are not enough
• Tough economy, and competitive maturing markets, require a more strategic approach
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Understand Your Audience
Raise Your Hand If You Have…
• Analyzed a market to identify a big new business opportunity
• Developed a written concept for an innovation
Stand If You Have…
• Conducted quantitative market research on your concept, product, or package
IF YOU ARE SITTING, PLEASE WRITE THIS DOWN.
(800) ACU-POLL … we’d be happy to help!
Raise Your Hand If You Have…
• Been involved with a volume forecast
• Worked on a direct response or infomercial campaign
• Interest in raising money to invest in a new business or innovation
• Interest in tips on acquisitions
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1. Attractive Markets #1 Decision for finding profits and managing risk
2. Strong Concepts Dramatic & desirable differences
3. Strong Volumetrics Lessons from Snuggies
4. Trial Generation Costs Think like a direct marketer
If there’s time and interest …
1. Funding innovation How much does $1 of funding cost?
2. Growth acquisitions Tips for acquisition search
4 Strategies for High ROI Innovation
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CLIFF NOTES ONLY
1. Attractive Markets #1 Decision for finding profits and managing risk
2. Strong Concepts Dramatic & desirable differences
3. Strong Volumetrics Lessons from Snuggies
4. Trial Generation Costs Think like a direct marketer
If there’s time and interest …
1. Funding innovation How much does $1 of funding cost?
2. Growth acquisitions Tips for acquisition search
4 Strategies for High ROI Innovation
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1. Market Selection Sets the Stage for Success
Often the single most important decision you’ll make
• Play where you can win
• Defines risk and return
Over 100 million sold since 1994 Est. $200 million paid to George
George Foreman Grill
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Why selling products to beauty salons was a great opportunity…
• Unlikely millionaires
• Weak competition
• Fragmented distributors
• Great margins
…until marketplace changes ruined it!
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Strategic Analysis to Pinpoint Great Markets
• Understand fundamentals – The 5 Cs • Consumers, customers, competition, company, and economic characteristics
• Understand trends Wayne Gretzky: “skate where the puck is going, not where it’s been”
Aging Beauty Look Younger
Healthy Living Nutrition Fitness Self-Treatment Germ-Free
Natural Organic Green Chemical-Free
Specialization Ethnic
Multi-Benefit Devices Licensing Celebrity/Music/Sports Endorsement
Convenience Design Value Premiumization
Pets as People … and other category-specific themes
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Strategic Analysis to Pinpoint Great Markets
Translate platforms to products … the devil’s in the details of the proposition!
The Corporation in the Clouds story
• 12 Platforms … 200 ideas … “but I don’t see a product I can launch!”
• Demographics
• Competition
• Company Competencies
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Consider How Opportunities Fit Your Portfolio
“Managing Your Innovation Portfolio,” Bansi Nagji and Geoff Tuff, Harvard Business Review, May 2012
2 4
1 3
Existing Products
New Products
Existing Markets/ Channels
New Markets/ Channels
“Innovation Ambition Matrix”
4
Greater Risk
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Successful Company Example: Investment vs. Return*
*Results vary by industry
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2. The Power of Dramatic & Desirable Differences
Get the concept right!
• Febreze failed twice before national success Trial
• Odor Elimination test market Low
• Fabric Refreshing / Freshness test market Med
• Cleans Away Odor national launch High
More recently, “a breath of fresh air” grew global share 1.5 pts. last quarter!
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What’s in a Concept?
The unique & appealing proposition defining why target customers should buy your product or service instead of competitors’
1. Customer Insight – The existing customer belief that illustrates the problem or unmet need your product addresses. It can reflect strengths, competitor weaknesses, habits, emotional concerns or wants, etc.
2. Benefit (#1 in importance) – The functional or emotional promise you make that addresses the insight and motivates purchase
3. Reason-to-Believe supports or explains why customers should believe this promise
Scope Example
Insight: The worst bad breath is in the a.m. and results in 80% of consumption
Benefit: Scope fights morning mouth, the worst breath of the day
RTB: Scope has two powerful ingredients that kill 99% of bad breath germs
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Knowledge Drives Odds of Success
Expertise & Research Increase Potential … and Big Companies Invest in Both!
• Fundamentals: demographics, psychographics, needs, language, psychology, etc.
• Focus groups and ethnographic research
• Image, habits, practices, usage, attitudes, segmentation surveys
• Applications: insights, concepts, advertising, product performance, packaging, promotions
• In-market testing
Amount of Customer Research Interaction
Odds
of
Success
With Expertise
Without Expertise
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Knowledge Drives Odds of Success
Expertise & Research Increase Potential … and Big Companies Invest in Both!
• Fundamentals: demographics, psychographics, needs, language, psychology, etc.
• Focus groups and ethnographic research
• Image, habits, practices, usage, attitudes, segmentation surveys
• Applications: insights, concepts, advertising, product performance, packaging, promotions
• In-market testing
Amount of Customer Research Interaction
Odds
of
Success
With Expertise
Without Expertise
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Febreze/Swiffer reached $1B in categories without competition…
where they could most easily create a dramatic and desirable difference!
– Febreze reinvented home fragrance for fabrics
• Only then expanded into plug-ins, air sprays, candles, and cars
– Swiffer reinvented cleaning for the convenience world, eliminating mops
Don’t Be Afraid of a Niche Or to Zig When Others Zag Businesses often don’t end up where they start:
Special K Aveeno Neutrogena Strivectin Pantene Arm & Hammer
Can you own a niche and unique benefit, and earn while you learn?
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3. Understand Components of Volume
# Target HHs
% ACV Distribution Difference between accessible and available
% Awareness Marketed or inherited (foot traffic, ease to find, ease to notice)
% Convert to Trial Driven by dramatic/desirable difference!
# and price per first purchase
# Triers & Trial $ Revenue
% Repeat Rate Critical for growth over time
# and price per repeat purchase
Purchase frequency Can be more important than % Trial*
# Repeaters & Repeat $ Revenue *Febreze example
Fourt-Woodlock Model Example:
Snuggies vs. Pedegg
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4. Trial Generation Costs
Direct marketers are hawks on infomercial ROI!
They make sure they can cover trial generation costs
They creatively extend their revenue models
• Regimens & add-ons/upsells
• Recurring purchases
• Retail halo / As Seen on TV
You MUST have a visible path to ROI on trial generation!
Think Like a Direct Marketer! Revenue $x COGS/Other -$y Ad cost -$z Profits $P
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Never Believe …
“This is a big idea because all we need is 1% of a kabillion dollar market”
The Seafood De-Sheller Story
Trial Generation Question: What does it cost to
reach, interest, and close a sale on this 1%?!!!
Caution
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5 Ways to Reduce Trial Generation Costs
Is there someone whose customers may want or be required to use your products or services? – Dunnhumby and Kroger, Macy’s, Home Depot – Your Encore and P&G, Eli Lilly, etc.
1. Sales- Funneling
Partnerships
2. Co- Promotion
3. Joint Ventures
Does someone in a related category deliver or reach your prospective customers? – Tide samples in Maytag washers – LifeLock at Office Depot; America Online discs everywhere – Prenatal vitamin recommendation in pregnancy test kit instructions – Intel Inside – Digital affinity and lead gen programs
Could a partnership bring together complementary capabilities? – P&G + Clorox Glad brand joint venture – Catalina Nielsen joint venture
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5 Ways to Reduce Trial Generation Costs
Does someone have a trademark or source of credibility that would make your product more successful? – License: Tide Laundry Essentials, Febreze air filters, Mr. Clean
Car Wash, SpongeBob Cheese Nips, Larosa’s Garlic Bread – Co-Brand: Crest + Scope, Tide + Downy, Kraft Bagelfuls with
Philadelphia Cream Cheese – Endorsement: ADA Seal, celebrity endorsement
4. Trademark or Other Brand
License or Endorsement
5. Co-Location
Does someone have a location that would make your product or service more successful? – Fast Food: Taco Bell + KFC, Starbucks in Target, McDonald’s in
Walmart, Subway in gas stations – Sephora in JC Penny, Sunglass Hut in Macy’s – ATMs in hotels and casinos – Great Water Capital and Dinsmore & Shohl – Nail salons in airports
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1. Attractive Markets #1 Decision for finding profits and managing risk
2. Strong Concepts Dramatic & desirable differences
3. Strong Volumetrics Lessons from Snuggies
4. Trial Generation Costs Think like a direct marketer and collaborate!
If there’s time and interest …
1. Funding innovation How much does $1 of funding cost?
2. Growth acquisitions Tips for acquisition search
4 Strategies for High ROI Innovation
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Cost of Funds Affects ROI and is Highly Variable
• What does $1 cost?
– Consumer Loans:
• Payday lender, credit card, home equity, margin, pledged asset loan
• Rate % depends on the source, pitch quality, and amount you shop
– Sources: friends/family, un/sophisticated angel, venture firm, mezzanine, etc.
– Pitch quality: management team, evidence of opportunity, proven and
scalable revenue model, market size, margin on acquired users, etc.
– Amount you shop: Chicken Soup for the Soul met with >100 publishers!
• ROI objectives vary with the cost of funds, from a few % to 25-35%
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A Little About Acquisitions
Some Advantages
• Often a proven business model
• Visibility of current returns
– Much less risk than a new business of investing and achieving $0
• May provide brands, scale, competencies or other benefits
• Buying a “sellable” asset
Some Disadvantages
• Feasibility and timing are unpredictable (i.e. moon and stars must align)
• Seller expectations & competition set the price
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Acquisitions Can Be Appealing Relative to New Brand/Business Odds of Success
• Startup and new brand success rates are extremely low
• P&G is the gold standard for new brands in CPG but has many failures
– Developed 32 in ’80s: 16 launched (50%), 8 national (25%), 5 profitable early ‘90s (16%)
– Many failures in ’90s/’00s: HomeCafe, Fit, Torengos, Dryel, Thermacare*, Kandoo*, Culinary del Sol, Juvian, etc.
*Never reached expectations, subsequently sold
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Tips for Acquisition Search 1. Clearly define and align on objectives/criteria
• Includes why acquire (sales, brand, technology, etc.)
2. Focus on attractive markets
3. Focus on opportunities that are dramatically and
desirably different
4. Understand how company competencies fit
5. Formulate new vision before assessing opportunity
6. Determine what it’s worth … and when to walk
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Future Interest Areas
• Innovation Success Models
• Schemas, Conceptual Blends, and Frames of Reference
• Any reason to call us at (800) ACU-POLL • The 3 Gs: Grow, be Grateful, and Give back
Questions?
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