Making value explicit in innovation: Gillette razors last five weeks

If you spent 1 Billion $ in product development in a low-tech category like shaving razors with a powerful brand like Gillette,  the shaving experience should be enough.It was true till the economy slowed. And Gillette market share dropped 3% between 2010 and 2012. And now Gillette is apparently revealing a razor industry secret, i.e.  how long a shaving razor lasts according to Fortune. If you are wondering, its five weeks….

Is there really a need for a two blade,three blade and five blade razor or is this just a case of building a better mouse-trap? Challenging the premium pricing of big brands is DollarShaveClub.com that has founder Mike reminding folks in a hilarious video that Grandfather shaved with one blade….. It turns out though, that only 10% men change blades on a calendar and the rest do so by the rough feel of the shave. But Gillette has been able to grow the market hugely going by the number of national brands like Bic,Schick  and store brands that you see on shelves even for multi-blade razors. At the premium end of the shaving market is the Art of Shaving, that moves shaving to well – an art form.

Since multi blade razors don’t seem to have manufacturing constraints, Gillette has decided to make the 5 week value claim and hopes that the large mid-market will not mind the very expensive cartridge refills. If 90% of shavers do not change blades by calendar, it is unlikely that they’ll track a 5 cartridge Gillette blade refill pack to see if it really did last for 6 months going by the 5 week per blade logic.

So the question is whether Gillette should have clarified the long life of its blades at the time of the launch of the famous Billion $ new product development budget Mach 3 ? Had it done so in the last seventeen years then it could have perhaps retained its luxury position and pricing. Unlike Dyson vaccuum cleaners the customer tends to shave every day and it’s hard to not try a less well known brand that comes at about half the price. Changing blades whenever you like feels like an indulgence that you can afford. An interesting thought for the weekend.

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Understanding the Buying Center can help B2B Marketers and Supply Chain for innovation

B2B Buying Center StratoServe

Understanding and talking about the Buying Center can help B2B Marketers and Supply Chain Managers for innovation. The Buying Center is a 40 year old concept attributed to Webster and Wind and can be hugely useful to both B2B Marketers and Supply Chain /Procurement managers today. The Buying Center is a part of the informal organization and involve a bunch of people who have varying influence on the B2B buy decision. The individuals in the Buying Center can have one or more of the following roles:

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[ Note: Thank you dear readers for your overwhelming interest in this post originally published on June 7, 2012.The image is updated March 9, 2021.]

  • Initiator: This is ideally the person who will actually use the product or service and feels the need. So a machine operator might initiate the requirement for a particular tool or a salesperson might show interest in getting some leads from website visitors. Frequently however, the user may have no knowledge at all that a requirement has been initiated! The latter can happen when say a consultant suggests a purchase.
  • Decision maker: in the above examples would be the Production manager who must request Procurement/Supply Chain and Sales Manager who might ask the website team/IT and not even contact the Supply Chain folks.
  • Controller/Finance: Should be able to confirm that there is money in the budget for the purchase.
  • Purchasing Agent: This could be a Commodity Manager/Supply Manager in the Supply Chain function who for higher value items develops an RFP,seeks bids,negotiates,places orders. In other cases, where if the item or service is specialized the order is placed based on the decision maker’s inputs.
  • Influencers: are hard to identify even by the supply manager as they could be users, departments like fire and safety who may weigh in or the hard to believe example of the Chairman’s wife who likes a particular Ad pitch among several Ad agency pitches.
  • Gatekeepers: could be the secretary who does not transfer calls or an engineer who does well meaning edits to whatever suppliers propose. The edits can harm the proposal but the engineer is a trainee who is helping the Supply Manager co-ordinate and this fact is unknown to the bidders.

Since the buying center is a concept from the informal organization, it appears as an elephant in the room among groups of B2B marketers, groups of Supply Chain managers and even mixed groups of Buying/Selling managers. Everybody knows about the Buying Center but  there is really no document that lists the members (being informal) . Thus the discussion rarely achieves focus and output about what the Buying/Selling managers can do to address the mostly legitimate concerns  of the members of the Buying Center.

Given that Buying Centers are alive and well despite globalization,the Internet and the 21st Century it probably is a good time for B2B Marketers to ask and Supply Managers to tell about who the buying center members are. Also since stuff is mostly shared by email both the buying and selling organizations should encourage digital documentation that can be shared by the Buying Center members.

Innovation in the Buying organization can happen if the supplier get a chance to perform. By recognizing the Buying Center and its concerns both Supply Managers and B2B Marketers can help innovation.

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Innovation in video gaming to go mobile and social: the monetizing challenge

The E3 trade show for computer,video games and related products has got underway at Los Angeles. And there is excitement around developing mobile and social gaming applications amidst the monetizing challenge of these apps.  The buzz around mobile and social apps  tie in to the changing behavior of gamers who are moving out of controllers, stationary TV sets according to this WSJ report. In fact, video game discs,consoles and accessories sales declined in double digits  in the first quarter of 2012 compared to 2011, according to research by NPD Group.

The challenge of converting mobile game app users into paying customers is huge. Because in contrast to paying upto $60 for a disc the mobile game app user expects the app for almost free. The NPD group panel survey suggests that the Freemium model works if people start free and then upgrade for a better experience. However, those who do not convert to paying customers within a month, rarely do convert. So the revenue model has to be Ads within the App and that will take time to develop.Even here, the serious gamer may not really be interested in the sub-optimal experience that a mobile phone screen offers.

The game developers can use platforms like iTunes or Amazon but unlike the digitization of music video games is new territory for the consumer. People always listened to music and had time to move from various paying formats like vinyl,cassettes,CD and MP3 to free file Internet sharing to paid iTunes. In contrast video gaming is an individual sport and there are not many games you could play solo in the pre- computer age, except for perhaps Patience in cards.

Complicating things are the price points of the earlier game video disc. No one expects to get a video game disc for under $10 whereas everyone expects Internet based content whether on mobile or computer to be near free. But if people are going to play more on their iPhones and iPads that's where game developers need to be. The monetizing challenge for the industry will continue though, as the advertising revenue model gets clarified… Contact StratoServe.

Innovation: Product Innovation Charter (PIC) helps prevent scope creep in technology and market

A Product Innovation Charter (PIC) can help prevent scope creep for both the technology and market dimensions. The PIC is supposed to have guidance from top management to the innovation team about the market focus and the technology focus that the multi-disciplinary team should try to maintain. Here is how both these focus points are derived:

  • The Technology Focus in the PIC document comes from the Strength /Weaknesses  evaluation part of the SWOT analysis. Here the organizational leaders are taking a hard look at internal resources of intellectual property, known technology, supplier and partner knowledge alliances that might be possible to marshal. They also try to build up an “avoid” list of technologies/platforms for which they do not have the skills or think that the particular technology does not appear to have a great future.Merely articulating the Technology Focus is really helpful to the Innovation team that have folks from Production, Procurement and Supply Chain, Finance and of course Marketing and Sales. 
  • The Market Focus: The Marketing and Sales folks are ones who need to provide input to this one in the PIC and once formulated agree to be guided by it. Top management might identify Opportunities and Threats in the market ( the OT of the SWOT) and identify some great market segments to target. Issues like how easy it will be to cater to the market from a branding sense, a distribution sense and a competitor sense even with a winning product needs to be in-built into the focus of the market. For example, a new brand  building exercise might take millions which is fine if the PIC has a sense of what the organization can afford. On the other hand, a brand extension might come in much cheaper and merely articulating it in the PIC can help keep the later marketing, sales and later advertising on track.

The New Product Development (NPD) team should have the approved PIC document, including the Market and Technology Focus clearly posted at meetings, work place and documents. A periodic ” organizational reality” check against the PIC will be helpful in avoiding scope creep like let’s get that market too and let’s get that technology – we’ll learn it after we license it.. type of thinking. 

However, the above does not mean that the PIC is carved in stone. If the innovation project encounters serious constraints top management might be asked to modify some of the PIC guidelines. Just reviewing potential violations of the PIC will engage top management in the particular innovation project and if modified, the PIC will become stronger and more aligned to the mission of the organization. About StratoServe.

What CEOs’ can learn from the sixty years reign of Queen Elizabeth II

Sixty years of reign by Queen Elizabeth II with 12 Prime Ministers must make all CEO's wonder. Given that CEO's are  barely able to last 7 years at the helm of companies.  OK CEO's are not monarchs but you have to to wonder at the enduring success of the British monarchy in an ever-changing world.  How come QE-II continues to be relevant today? Particularly impressive because in the sixty years  many monarchies have become defunct or  irrelevant (Indian Maharajas, Nepal King , Middle Eastern monarchies to name a few). Here are some thoughts about what might have worked for the Queen.The CEO question is placed in italics after each point:

  1. Visit Hospitals and People: This one is from a BBC report. Apparently King George V the Queen's grandfather was the person who re-branded the monarchy from the German sounding Saxe-Coburg and Gotha to the title of Windsor given that the Brits of the time  were apprehensive about the German house name of the monarch after World War I. More than the monarchy  name King George V set up the routine of every Royal having to visit hospitals and the people on a routine basis. "Be seen" was his motto and that included visiting far-flung colonies like Australia, by sea. The aim was to be seen as enlightened upper middle-class rather than decadent royalty.  As a CEO do you visit with your divisions,branches and people on a routine basis? Do you call at the hospital if your direct report or key manager is sick?
  2. Prime Minister Weekly Meeting:  Queen Elizabeth II meets the Prime Minister every week and has been doing so since Winston Churchill. David Cameron, the current Prime Minister, says that there are no other people in the meeting,no minutes but it forces the Prime Minister to think about where her/his Government is going and what are the top issues of the week. Do Board Chairpersons/CEO's meet every week or at least talk on the phone ? As a CEO do you meet your direct CxO's every week, on a routine?
  3. Change with the times: The Queen has softened her stand on numerous family and marriage issues that seemed so non-negotiable just a few decades ago. Remember that the same monarchy required Edward VIII to abdicate the throne for marrying a divorcee. At a more banal level the Queen has a Facebook page and seems very comfortable with her grandsons from Gen Y. As a CEO do you accept the changes in Gen Y/Millenials? Do you have a Facebook page ?

To summarize, Queen Elizabeth II should get a lot of credit for maintaining the loyalty of her subjects and more importantly keeping public interest in the monarchy alive even in former colonies like the US ! Truly an insipiration for the multinational CEO of the 21st Century. Contact StratoServe.

May Jobs Report: What can college students do?

The May jobs report is devastating. It's estimated that over half the graduating class of 2012 will not have jobs. Yes the economy is slow, it's slowing in emerging markets as well besides Europe that seems very bad. However, those US  students who are entering college in the fall need to consider the following things:

  • Stay with a Science/Engineering Major: Unless you totally hate science and math in high school stay with science and engineering in college. You can always do a double major/minor  in subjects that you love but those that do not have jobs.  Science/Engineering have the highest paying jobs and a shortage.
  • Even Business needs Math and Science: This blog is biased towards innovation but the point is that emerging opportunities in fields like marketing no longer depend only on "social skills" and "creativity." Data analysis with big data is an emerging field with huge opportunities for fields within business including supply chain,finance and accounting.
  • Get Internships from freshman year: Internships are  a no-brainer in today's job market. Yet parents are surprised when they learn that a majority of college students start preparing a resume in their senior year. Even high demand majors need students to have experience in the field. It's better that your experience is part of a structured company internship program.
  • Large companies are looking for interns : Most large companies are looking for interns. It makes economic sense for them and also decreases hiring costs if there is a mutual fit. For the intern, its a win anyway because an internship on a resume makes all the difference in your job hunt. A good reference from your internship supervisor can be great in landing your job after graduation.
  • Engage with College Career Events: All colleges, faculty and administrators understand the urgency of the economic situation. They organize career events, activities and the majority of students do not show up. Unless you are in it- you cannot win it whether- it is an internship or a job offer.
  • Engage with professional clubs: Among professional associations less than 20% members show up for events – even when they are free, include dinner and have a great speaker. College professional clubs tend to be thinly attended as well. This is a lost opportunity to take leadership and engage with the Professional Association who are happy to come and speak, offer internships or at least tips and advise.

Facebook and LinkedIn should supplement the college student's networking efforts and not replace the "on ground" opportunities that colleges, the community and professional associations keep trying to provide.

In summary, with globalization the graduating class of 2016 will face an equally turbulent job market and the time to start preparing is from the Fall of Freshman year in 2012. Contact StratoServe.

Concept Testing in New Product Innovation : worth the cost

Concept testing in new product innovation is worth the cost. In B2B there are normally fewer customers and concept testing is easier and less expensive. But if you are in   B2C with millions of potential customers  for your new product, concept testing costs  do work out.

[Note: This post was originally published on May 30, 2012. Thanks to reader interest we have done minor updates to the post on March 9, 2021.]

For prices starting at under 100,000 $ from  leading concept testing  agencies,  you can get to know what your potential customers think about your new product  concept. For consumer food products, let’s say you get one bit of feedback: some folks are wondering about the high sodium level. You can come up with a low-sodium variant and grab large sections of the older population that’s trying to watch its sodium and salt intake for blood pressure. Think of the millions of new customers that the product would have missed without a timely  concept test !

So how does a concept test work? If you have developed a concept, i.e. a fairly well articulated idea of the product,preferably a prototype that customers can see, you ask the following question:

  • How likely are you to buy this product ?

The key point is that you ask a sample of your target market. The target market could be defined by age,income,education,location or behavior but the closer you can get to asking your target market the better is your handle about what might actually happen when you get to launching your product.

The answers to the “How likely are you likely to buy… ” need to be classified into a five point Likert scale like

  1. Very likey to buy….. score 5
  2. Likely to buy…… score 4
  3. May or may not buy…..score 3
  4. Unlikely to buy ….score 2
  5. Very unlikely to buy… score 1

When you add up the scores of the first two items, you get an overall idea of  how well the idea is going to fly with your target market. At this stage customers responding are not actually spending money at the retail store so the percentage folks who politely say Very likely buy/likely buy might actually turn out to be less than half  eventually .  Thus in the sample say 70% fall into the very likely/likely category – after product launch the numbers might be under 35% who actually buy. Here past data is helpful for caliberating customer responses in similar categories. For example, earlier BASES ( Booz Allen Sales Estimates System) now a part of the Nielsen group, has been gathering data since 1986. BASES is able to quickly compare with past purchase intention data to give a good sense of how the purchase intention estimates might work out in consumer product categories.

More importantly, the innovator can get some important feedback and change product characteristics early in the development process to increase chances of later market success. 

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Innovation : tyranny of the Buy Class Relationships in B2B Marketing

The tyranny of buy-class relationships hinders innovation. Buy-classes are a part of the Buy Grid that also considers Buy Phases. The Buy-Grid is an old model of looking at buying decisions in the supply chain. Robinson, Faris and Wind in 1967 (here is a nice summary) came up with the buy-grid to say that organizations have different processes depending on whether the B2B buy was a straight rebuy, modified rebuy or a new buy.

  • A straight rebuy is stuff that is bought as components for an existing product line. Imagine that there is a particular model of an appliance that has a lot of product life-cycle left and components are needed for this product line. Would you take a chance with a new supplier ? Probably no, going by the risk aversion of supply chain folks particularly for big volume items. A straight rebuy, almost by definition, does not involve radical innovation.
  • A modified rebuy is when you modify  existing supplies. For example, a component from one to another capacity. Think of a camera memory card that goes from 8 GB memory to 16GB memory for the same slot. Would you look for a new supplier? Not really, because you will deal with the same suppliers who were already supplying the earlier memory card. A modified rebuy can improve the bought item and involves incremental innovation in many cases.
  • A new-buy is something that has never been bought before. Like an App for your product to be put out on an iPhone or Android phone. Would you try a new supplier? Probably yes because no production line is at risk and this is fairly a stand-alone buy. A new buy has potential for innovation that can be both incremental and radical.

At the time the above model was developed, buyer-seller relationship thinking was still twenty years away. And this is how the buy-class model and B2B relationships get locked into a tyranny against innovation:

Buy Class

B2B Relationships

Innovation  type

Straight Re-buy

Existing Suppliers

Incremental

Modified Re-buy

Mostly Existing Suppliers

Incremental

New Buy

Ask Existing Suppliers first /Try New Suppliers?

Incremental/Radical

Organizations are comfortable with existing suppliers including managing their problems which are familiar ground for the supply chain folks and more importantly, the businesses that are at the user end. But all of this hinders innovation, that organizational leaders crave for.

Acknowledgement: This post is inspired in part by some great comments at a GNEMSDC meeting (2012) by several Directors of GNEMSDC including incoming Chair Lawrence Wooten, Director Bill Boodry,MBEIC Chair Gary Stiffler and GNEMSDC President Dr. Fred McKinney.

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Why is execution so difficult and strategy so easy?

Why is execution so difficult and strategy formulation so easy? This is one of those perennial management and leadership questions. A question that legendary managers like Jack Welch emphasizes and thought leaders like Ram Charan have been writing about. Somehow execution is equated with “tactics” and numerous budding managers and leaders are constantly told about being more strategic- as if great strategy alone will get things done. Here are some thoughts on bridging the strategy to execution challenge:

[ Note this post was written on May 23, 2012 and minor updates were made on January 30, 2021 due to reader interest. The ideas in this post continue to be relevant as we see the execution struggles with the COVID vaccines. It was easier to invent and manage vaccine production. It’s harder to get vaccines into arms!].

  • Company leaders must emphasize execution: While the firing of 27,000 workers today (May 23, 2012) by HP is a hard blow to jobs, CEO Meg Whitman mentions better execution in her rationale for the HP re-structuring. More CEO’s should put execution on center stage before the organization gets into trouble in not realizing the value of great strategy through poor implementation.
  • Spell out the steps: Spelling out the steps of implementation in a “FAQ” sense right from the CEO is a great help. Invariably, execution is delegated to VP’s who delegate it to Managers and who in turn delegate to front-line employees without clearly spelling out what the end outcome should look like for each level. For example, you want to improve customer retention from 70% to 80% detailed data must be gathered as to reasons of attrition. After this the top causes need to be identified and addressed. Sounds simple but articulating steps like who will gather the data? Who will analyze the data? Who will implement the remedial action? And how will the review happen? is not spelt out or followed up because each step individually seems so mundane,tactical or operational that it seems like below the dignity of the manager,thinking of higher strategic things.
  • Team Relationships: Within team relationships are the only way that each of the steps above can happen. Thus, the data gathering team must be on the same pages as to methods,time-lines and sources of data. Team members who are friends that have coffee together helps!
  • Between team silos: Silos get a lot of attention in MBA training and again tend to get elevated to a philosophical discussion. Operational details of how teams would co-ordinate with each other without mindless long drawn meetings are not spelt out. For example, a video/audio conference between global team members on a routine basis can help.
  • Routine: Finally setting up a routine to follow through on strategy implementation is the key to success. The routine should not be daunting like a full day meeting every Tuesday with several long presentations that took a whole lot of time to prepare. Instead, if the relationship pieces are in place within team and across team communications can be effective and easy. 

To summarize, CEO focus on execution, spelling out steps,strong team relationships and a routine  can help organizations deal with the intractable execution of strategy problem.

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B2B Innovation market success needs credibility,opportunity and competitive advantage says Alcatel-Lucent

Alcatel Lucent is about to make the Internet 5 times faster with its new core router 7950 XRS. According to CNN that is 16 Terabits of data per second or 2.5 Million HD videos streamed per second! But Alcatel had tried to break into the CISCO-Juniper stronghold of this market that consists of all manner of wired and wireless Internet providers. The earlier attempt by Alcatel, to enter this market ten years ago, failed. This was before Alcatel acquired Lucent and in the meanwhile CISCO has been setting the technical standard so how does Alcatel-Lucent believe that it can break in to the market now?  According to Lindsay Newell the Marketing VP of Alcatel-Lucent's IP business for this B2B market you need credibility,opportunity and competitive advantage. Kinds of things that are really needed to succeed in marketing to the upstream supply chain,particularly in high-tech fields. Here is how Alcatel-Lucent hopes to break into the market:

  • Credibility Alcatel-Lucent had entered the edge router business in 2003. Think of the edge router  as similar to providing the ramp to the information highway. Staying with the highway analogy,the edge router takes individual requests from the main street and puts them onto the highway. This market is now worth 2B$ to Alcatel-Lucent and it is no. 2 with 24% share having edged out Juniper networks from the second spot after CISCO. And gained great credibility in the process.
  • Opportunity: This blog had discussed the band-width crunch in wireless in the wireless space where AT&T has been buying bandwdth or building more highways and getting ahead of Verizon. What if you could drive five times faster on the highways you own? When B2C demand is zooming for video,gaming and cloud computing ? Besides this market is estimated at 4B$ and growing at 10%.
  • Competitive Advantage: The competitive advantage is in the capacity and quality of the 7950XRS, that took three and a half years to develop. It is claimed to be 5 times faster than the 2010 offering of CISCO the CRS-3. And through the edge router market entry Alcatel-Lucent has a 450 customers base many of whom are already using their edge routers. A bit like having the ramp installed and just putting in the highway!. Potential customers like Verizon are are excited about the possibilities just as B2C customers complain about caps in usage.

As CISCO and Juniper ramp up their offerings, Internet users should feel some relief coming their way while upstream B2B marketers get some cues from the Alcatel-Lucent strategy of introducing high cost innovations in B2B markets.Contact StratoServe.