Article -> Marketing Takes the Lead in the Innovation Process
Date Added: July 2006
Thirty years ago, well-known business strategist, Peter Drucker wrote, “Because its purpose is to create a customer, the business enterprise has two – and only these two – basic functions: marketing and innovation. Marketing and innovation alone produce results; all the rest are costs.”
A recent survey of senior executives found that increasing top-line revenues through innovation has become an essential key to success. However, more than half of the executives were dissatisfied with the financial returns on their investments in innovation. After all, more than 90% of new products launched each year fail.1
Another study of the top 1,000 global research and development (R&D) corporations found that superior results seem to be a function of the quality of an organization’s innovation process. However, 40% of companies either have no formal process for improving performance, or describe their efforts as ad hoc.1 A company’s overall approach to innovation, rather than the amount of time and money it spends on process improvements, correlates with the results obtained.
Former GE leader Jack Welch, known for cost cutting, efficiency and continual improvements; left the company in the hands of Jeffrey Immelt. One of Immelt’s major goals was to raise GE’s average organic growth from 5% to 8%. Immelt needed to change the corporate structure to spur creativity. He appointed Beth Comstock to the new position of chief marketing officer, responsible for generating innovation and creativity.
One of the first things that Comstock did was to bring in an external firm to audit GE’s culture. The audit praised GE’s work ethic, but noted that employees wanted more “wow.” They were looking for more discoveries from the company founded by Thomas Edison.1
The company responded by bringing its business closer to customers by holding “dreaming sessions” in which senior executives and customers debate future market trends. This is similar to a Voice of the Customer process which includes personalized qualitative and quantitative data analysis to help organizations proactively identify customers' needs. Both the dreaming sessions and Voice of the Customer allow for new forms of innovation based on an intimate understanding of customers.
One of the reasons why customer-centric innovation is not applied everywhere is the existence of institutional barriers in many firms. Product developers and marketing departments do not work together often enough, so there is little cross-pollination between the two disciplines. Hewlett-Packard, a positive example, requires product developers and marketing employees that are assigned to a project to visit prospective customers and hear directly what they have to say.
The goal for marketing should be to utilize customer input and insight to guide R&D, instead of waiting for new products to be developed and then determine how to sell them. Marketing can no longer focus exclusively on promotion and public relations. It must accept new responsibilities for the organization and put the customer front and center.
1 Crosby, Lawrence and Sheree Johnson. “Customer-Centric Innovation.” Marketing Management. March/April 2006: 12-13.