Wednesday, April 26, 2006

Innovation - The P&G way

It is mind-boggling to see the variations in color, design, texture forms in edible products these days. Now rather than asking for salt or sweet, you should't be surprised if you are asked whether you want emborsed wafers or oil painted wafers. And mind you, everything confirms to the laws of Food Industry. And why just food products, look around and you will see Markets are full of consumer products that are so unconventional, and yet best sellers.

Have you ever thought how this is achieved? Have you ever thought how Pringle gets that fine images in each of their chips? And can you imagine the amount of investment in cost and time is involved. And most importantly how does one create and manage such Innovation? In this article, I will discuss how P&G manages innovation. Read ahead....

P&G practices and has achieved considerable success by a strategy they call "CONNECT & DEVELOP" (C&D).

The stratgy is to innovate by going to external connections rather than entirely relying on internal R&d experts with a goal to acquire 50% of innovation outside the company.

The most interesting part is how they have implemented this through different programs, some of which are worth studying and pursuing. A brief summary of their programs is as below-

Proprietary Network
1. Technology Entrepreneurs - these are senior P&G people who are located around 9 C&D hubs across the globe sniffing through stores, exhibitions, literature etc to come up with ideas.
2. Suppliers - Created IT platforms to share technology briefs with suppliers and co-created new products. (P&G realized that within their suppliers they had 50000 researchers)

Open Network
3. NineSigma - A network to connect companies in need of technological innovations with universities, labs, government agencies, companies that have solutions. So, send technology brief across the network and get proposal of solution confidentially. The network has 700000 users who are highly specialized and gain mutually.

4. InnoCentive - A community of contract scientists, who crack the problem and provide an easy solution. So, if a process gets done in 5 steps, and has to be done in 3, the question is put in the network.

5. YourEncore - Connects retired Scientists and helps bring deep experience to solve problems on case basis. So a retired boeing aircraft engineer can be used to do the prototype for their next skin care box.

6. - This is a market place for Intellectual Property Exchange. This was built by a group of fortune 100 companies.

The best i like is firstly, they have 6 different approaches to solve the same problem - each connecting to a different resource segment AND secondly, they had a clear goal - get 50% of innovation from community. However, when you are P&G building a community is not as difficult as it is for some small starters. But, if the goal is set and agenda is clear, then you will build a community around people who would want to be a part of it.

To achieve a sustained and steady top-line growth, innovation is required.

Well..... "How to" is the key !

[Inspired by an HBR published article.]

Monday, April 17, 2006

Engineers or Entrepreneurs?

Or Engipreneurs?

What happens when a professional expert turns into an Entrepreneur? When a Doctor starts her own hospital or an attorney his law firm, what are the challenges, symptoms of caution and mistakes that characterize this transformation? Do they get overwhelmed by business functions or they never loose their domain focus? This article is inspired by these questions and the most common inhabitants of Silicon Valley, the ‘Engipreneurs’.

Silicon Valley is full of Engineers and Entrepreneurs. By engineers and for the purpose of this article, I mean Software Engineers. There is a third category of inhabitants seen largely here and I like to call them as ‘Engipreneurs’. As the name suggests, these are Engineers who have turned into Entrepreneurs’.

The word "engineer" derives from the Latin word ingenium - innate character, talent, or ability. “Entrepreneur” has its roots in the French word entreprendre which means to undertake or take action. An engineer applies mathematics, science, and systems-integrative approaches to conceive, design, build, and operate useful objects or processes; whereas an entrepreneur assumes the tasks of organization and management as well as the risks of new-project creation or new-venture startup.

The definitions above bring in a key point of consideration; engineers create objects and entrepreneurs create businesses around these objects.

So what happens when the two meet – when Engineers become Entrepreneurs? By definition this seems to be the most ideal thing to happen. Now, an engineer not only creates the object of worth but also builds a business around it, brings intended users close to the object. But many a time, this is not the case. And more often than not, an over-enthusiast engineer may not bring in the best business value from his entrepreneurial venture. The reason is simple – ‘not letting go’! I have tried to analyze some of the most common syndromes, practices that characterize these ‘engipreneurs’ (who do not let go). Take a look and eliminate as many as possible in case you are preparing to become one successful entrepreneur.

‘The Best Technology Syndrome’ – If you have ever worked or lived closely with engineers you will know, that they attach a lot of importance to the best technology. Their judgment of a worthy proposition is one that ensures or demonstrates ‘The best Technology’. This syndrome keeps them continuously focused on the ‘best’ as seen from ‘their’ eyes. If you can create a wireless communication mechanism between Earth and Mars, yeah that is a ‘wow’ technology. But who will be there to take your call in Mars? This is the work of scientists, not entrepreneurs. So the key here is ‘it is not the best technology that is all important but the potential market for the technology that drives businesses. And isn’t there always something ‘better’ than the ‘best’?

‘Good vs Perfect’

I have known several engineers who are always in the attempt of making the ‘perfect’ software. I say, a ‘good’ software is much better than a perfect one, if it reaches the market on time. Entrepreneurs have to deliver what they have promised and they have to do so in time. If they loose out on time, there is someone already waiting to occupy the space. This does not mean the software product should be buggy but it should not be perfected so much as to delay the entire business cycle. And by the way, who has seen a ‘perfect’ software till now? The first version of ‘Windows’ would still be incubating, if one waited to perfect it.

‘Innovative product or innovative use’

Many engineers who turn to become entrepreneurs often think that they have to come up with an innovative product. This is not untrue. An innovative product always attracts attention not just of users but also of venture capitalists. Having said this, how many innovative software products have we seen in last few years? If you try to analyze the trend, what will glaringly become clear is that it is not innovative product but innovative use that makes a big difference. So, engineers have to also look into the side box marked as ‘innovative uses’. It makes them no less engineers if they have used somebody else’s technology. Businesses would have stopped creating web-based emails, once HotMail got popularity or they would not have invested millions in search technology, if they thought that Google has done it all. These and numerous other examples suggest that not only thinking innovative product, but also thinking innovative use, makes it big in business.

‘The Right Time’

This is a very overly stated and underly estimated phrase. The cliché ‘there is always’ a right time’ is always right. There is no need for your product if you are not fast enough to meet the demand or fulfill the generated demand of your product. You can create a wow effect, but unless you are delivering to that ‘wow’, it soon will frizzle out. So however good your product is, always bear in mind, it has to be presented at the right time. Sometimes, this right time is to fasten and launch your product, sometimes it entails waiting to launch it later. Why do you think, Microsoft is not launching its long promised and awaited ‘Vista’? Think about it.

‘Risk-taking is not gambling’

Yes! When entrepreneurs take risks, they take it in measured way. They calculate and base their risk on certain parameters. But they are known to take risks. Engineers however are not trained to take risks. By definition, they base their judgments on proven and predictable methods and formulae. There is no such formula for success. However, you plan and predict the market variables it is your gut that dictates majority of your decisions. Well after all, ‘the riskiest thing to do in business is NOT to take any risks’.

‘Painting hands red, green and blue’

There are other languages in the world than ‘Programming’! I am yet to see an Engineer who thinks of a problem as faced by users. In most cases, the discussion around a problem is so concentrated to the underlying programming language, database and other software artifacts that the actual essence of the problem is lost. This and the fact that an engineer will very seldom leave his focus away from the code that runs the software, doesn’t let an engineer think beyond the software point of view. What is an added advantage to an entrepreneur becomes an obsession and soon turns out to be an obstacle. This I call painting hands red, green and blue because, engineers cannot keep their hands away from code.

‘Network vs Network’
One of the characteristic that amuses me of Engineers is the way they sneer at the mention of group party or group activity. They talk a lot, but only if the discussion is around some ‘cool’ technology. To them rest all meetings, discussions are mundane. Networking to them is when two or more computers talk to each other. Networking to entrepreneurs is ‘socializing’. This is an important transition from ‘machine’ to ‘human’ interface that engineers have to acknowledge in order to become successful entrepreneurs.

‘Passion vs Ego’
Lastly, I would like to close this list of characteristics with a very important distinction, pointed out by my husband, couple of days back. When we say, we are passionate about something; we are actually more egoistic than passionate. Passion soon becomes an ego issue, when it is pursued to prove a point. When an engineer turns into an entrepreneur, very subtly the passion becomes his ego. Now, more than making a good business proposition, he becomes obsessive to prove a point. Not all entrepreneur ventures are meant to be highly acceptable and very successful. To follow your passion means to give in your best but also accepting failure and success with equal weights. Like one of my friends always says “You don’t succeed unless you fail”.

To summarize it all, entrepreneurial or engineering characteristics are very much a matter of mindset. When you are an engineer and want to become an entrepreneur, it is like accepting the fact that you will be sharing the house with your two wives. How happy you want yourself to be depends on how you keep a balance between the two wives. My advice “do not love one over the other”.

What are Marketing Analytics? - Part I Introduction

In keeping with the spirit of the blog, I make a feeble attempt at talking about marketing analytics - a subject that gave me nightmares at XLRI. I write under the umbrella of correction and criticism is solicited. This is a three part story where we try to learn about marketing analytics. This part is just an introduction. The next part will try to delve into the finer points of X-Sell, Retention and Up-Sell; What is the kind of data looked for.

Imagine this. You are the marketing veep of a stationary company. You have a gut feeling that the new white board marker you make is going to be a hit. but your colleague veep finance, the CEO and MD tell you not sell your dreams to them. "Get me numbers" growls the Chairman. Now what the hell are you going to do?? you twiddle your thumbs, bite finger nails to the very roots. so you go to your manager and growl "I want numbers." Now the manager who is a wise guy and an alley cat. He knows all about numbers. But problem is he needs somebody to program the whole damn thing. Now about the products and how they are selling, he has a disks full of raw data. he has to cull useful information from that. For example he has to find which distributor is selling the most. Drill down further from there and find which areas of the distributor reports most sales. Drill down further to the retailer. That is one customer. Then there is the bulk-order customer like corporates who strut around with presentations . The output might look something like this or it can be more graphical. What in effect the manager is trying to do is find out the best probability of making maximum through put and which wholeseller/distributor/retailer is most likely and least likely to meet this requirement.
The next aspect that most marketers worry about is X-Sell (pronounced cross sell). Would a customer move from a one product towards another offering from the same company. Ex. will a credit card user avail of this new "low interest loan" that we have. For this they have the demographics and other parameters. So can the numbers churn out information useful for this. Again the most likely candidates and least likely candidates are found.
The next one is the bane and ruin of many a marketing golden boy. Retention is a worrisome word. How likely is a customer move away from me? The marketer has to come up with solutions to problems like this. Most of you must have changed your car's service center at least once. Now the reasons are aplenty, but the service center (if it wants to) can retain customers if and only if it has some data with it which can be converted to information. You might be surprised, but a simple fact is that customers of a car service center are retained when they are directly in touch with the actual mechanic working on their car and not the handsome face of the suited front office exec. Retention strategies always keep marketers on their feet and make them sleep one eye closed.
The last major aspect is Up-Sell. Make a customer move from his drab master card to a gold card. Will a customer be able to. Remember the form you filled out when applying for a card. All that data is not just thrown away. That form is a wealth of information. Say you applied for a card 3 years ago, the bank calls you and talks about add on cards, life time free gold card and other goodies. Not every one gets such a call. Only Most likely customers are targeted.

Now marketing analytics is about getting that kind of numbers offering drill-down capabilities to get down as far as possible; nay as far down as wanted. It is about culling meaningful information from volumes of data, might be dating as far from a decade or so. Marketing analytics are to a marketer what taste buds are to a wine taster.

Yours Truly
Manikantan a.k.a Mani/Naren