IHS Chemical Week

CHEM IDEAS

The Integration of Innovation and Marketing Best Practices for Business Excellence

2:01 PM MST | March 4, 2009 | By GUEST AUTHOR

This is the first article in a series on marketing and innovation in B2B industries, such as chemicals, by Phil Allen of GEMS Europe and Kevin Weir of ISiB. You can learn more about marketing and innovation by participating in CW's webcast on the subject on April 7. The webcast will feature Kevin and Phil.

During the economic downturn, with shrinking markets and lower pricing, surveys have shown that marketing and particularly funds for innovation and growth are amongst those hardest hit. As new, profitable innovations are owned by marketing, whilst their financing comes from the ability for the current business to generate profits, there is an intimate link between marketing and innovation.
Considering current business and innovation as distinct silos, managed in different ways by separate functions, may mean that the organization is missing a significant opportunity to maximize the skills, knowledge, resources and networks of the organization.
In this first of a series of articles Innovation Expert, Kevin Weir and Marketing Excellence Practitioner, Phil Allen explore how companies can keep their marketing and innovation machines turning even in tough times by taking a more integrated approach.

Marketing and Innovation in the downturn

In their October 2008 published benchmarking study of Strategic Marketing in chemicals, plastics and other B2B markets Phil Allen’s GEMS Europe GmbH discovered – amongst other things – that Strategic Marketing and Innovation are strongly and closely linked in those companies where excellence in these disciplines is practiced.
Strategic Marketing was identified as bringing five key elements to managing business in B2B markets, of which three were Innovation-related

Strategic Marketing, as it applies to a B2B industry

a)    Brings a clear market-focus to the development of strategy;
b)    Takes a strong future orientation, and ensures that someone adopts the longer-term perspective,
c)    Ensures that innovation is nurtured and driven by a deep understanding of what will create value in the market and fulfil customer value drivers;
d)    Makes decisions about innovation and participation in products, technologies and markets,
e)    Drives sustainable, profitable growth.

Where the term Strategic Marketing is in use it is always associated with future direction and innovation, with varying degrees of emphasis and orientation:
30% of respondents’ companies refer to a group of people whose focus is longer term business development and innovation.
26% of respondents’ companies use Strategic Marketing to describe planning activities and processes which support the future direction and innovation.
23% of respondents’ companies have Strategic Marketing as a function that provides leadership and guidance to the businesses.
13% of respondents’ companies define Strategic Marketing as a set of responsibilities with future direction and innovation at their heart; part of a larger job e.g. Business Director.

Marketing and Innovation in the downturn

Innovation does not stop during a downturn – it changes. It changes because the very drivers of innovation are more finely tuned to the stronger desire for value, lower cost, basic utility and system simplicity. Innovations are more likely to cope with consumers having less to spend (or the fear to spend what they have!).  

The low cost airlines in Europe were a product of the downturn of the early 90’s, whilst the successes of Google, TripAdvisor and the growth in online banking, can be linked to the effects of the last economic down turn in 2001-2002.

Marketers are faced with both market forces and the need to implement company strategy. Market forces include the proliferation of new products, faster technology introduction and shorter product life-cycles, global competition and an educated consumer with instant access to product information and price comparison via the internet. On the reverse side, companies want to grow current business and create differentiated, valuable new products quickly and efficiently with minimum resources and they want to sustain that differentiation for as long as possible to reap the additional rewards from the higher profit margins that it allows them to achieve. Innovation is one of the strategic tools and processes that marketers can leverage to deliver the results organizations desire.
 
Take the opportunity to tune your business

A further finding from the GEMS Europe GmbH Strategic Marketing Benchmark Study was a correlation between companies using the Market Value Chain and PESTLE Analysis tools and the achievement of above average profit margins.
In these difficult times, it is vital that companies continue to pay special attention to the market value chain and adopt methods that extract maximum value from existing product portfolios. At the same time, companies should examine new innovation management systems and processes that can accelerate the development of breakthrough, value adding new products and services.              
With regards to maximizing existing business value, the quieter market conditions allow time to review product portfolios, validate customer and need segmentations, analyze applications and value chains and fine tune company offers. These Value Management techniques ensure that customer segments receive exactly what they are looking for, at a price they are willing to pay and at a specific level of product and service. In tougher economic climates, your customer’s business may be quieter, the sales intensity lower, and because the customer may be under increasing pressure to cut costs, they are probably more willing to spend time with you to let you understand more about the job they do and what they are trying to achieve. This is a perfect opportunity to discover value opportunities.
Marketers can map out the customers’ processes, listen to their needs and desires, and use the information to assess how even more customer value can be delivered. If done well, the efforts made now will create new opportunities that lead to significant product and service improvements, build loyalty, and bring strong returns during the next economic upturn .
When innovating in an economic downturn is added to the value equation, the same ideals hold true. More time mapping customers and the value chain can develop deeper insights, identify trends and opportunities and determine satisfaction gaps.  Wherever there is an intersection of trends, drivers, needs, satisfaction gaps, competencies and technology, there is a good chance of discovering sources for incremental and radical innovation or disruptive innovation in over served markets.

Part II in the series will appear on Chem Ideas in mid-March. 

















 
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