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Drucker Perspective

Marketing Is Innovation

MMN
Contributor: Management Matters
Posted: 09/24/2017

Innovation means the creation of new value and new satisfaction for the customer. Successful innovating organizations, noted Peter F. Drucker, measure innovations "not by their scientific or technological importance but by what they contribute [in terms of value] to market and customer." 

Innovation in a business enterprise must be always market-focused. 

Converting unfulfilled customer needs into new products and services that people want, need, value and expect -- and are willing to pay for -- is what strategic (as opposed to tactical) marketing is all about. 

Strategic Marketing And Economic Growth 

Celebrated marketing guru Philip Kotler said: "Marketing's job has always been to get the ball rolling on spending…And it's not about spending for spending sake, or building idle pyramids…

“…We are talking about spending and investing to meet the vast unsatisfied needs of billions of people on the planet… We have not yet come to a 'no need' society…" 

In other words, marketing in its purest form, is what stimulates an economy to grow (e.g., Apple's iPad/iPhone) and creates high-paying jobs. 

Make no mistake: it's the job of government policymakers to create the necessary conditions that stimulate business innovation and willingness to take more risks. Simply put, if businesses create more products, services and experiences at the lowest possible prices, economic growth would skyrocket. 

To do these things, businesses must innovate. Let’s explore the relationship between marketing and innovation: 

Marketing Versus Selling

The uninformed still believe marketing is the devious art of separating the unwary consumer from his loose change. In this respect, they equate marketing with aggressive selling. 

While marketing encompasses the art and science of selling, marketing is concerned with the all-important subjects of pricing, segmentation, competitive strategies for defending existing markets… and gaining market position from dominant competitors, positioning, communication and public relations, advertising, innovation, and more. 

To repeat: selling is just one component of marketing. 

Strategic marketers start out with finding out what the customer needs (and is willing to pay for) and then design their products and services to fulfill those needs. 

In the process of attempting to fulfill unfulfilled needs, major scientific, and technological innovations are often required; but not always. 

Invention Versus Innovation 

Any viewer of Shark Tank is continually exposed to the major difference between "invention" and "innovation." 

Many of those seeking new venture funding tend to be "inventors" who are very proud of the technological marvels they have created. 

But the panel of seasoned investors always ask the right questions with respect to what customers consider value, distributive channels, pricing strategies, competition and the like. 

In short, many of so-called "innovators" are really inventors disguised as innovators. Without a market focus, the only result will be a triumph of technology over common sense, which only leads to disappointing results. 

Still another example is the invention of film and the movie projector. The true innovators were those that created the film industry. Of course, innovation would be impossible without the invention of film and the movie projector. But the pioneers of the film industry created "value" in terms of producing movies that hundreds of millions customers needed, wanted, and were willing to pay for. 

Let's look at this in the opposite direction. If someone had thought through that the world needed movies and movie theaters, perhaps they would've gone to work on developing film and projectors to make possible their vision. 

The innovative idea usually comes first. Then, it is necessary to go to work on creating the necessary scientific breakthroughs. 

The point is: innovation is value. And it is not dependent on breakthroughs from science and engineering. 

A Powerful Drucker Definition Of Innovation

Peter F. Drucker once defined innovation as: 

"The design and development of something new, as yet unknown and not in existence, which will establish a new economic configuration out of the old, known, existing elements. It will give these elements and entirely new economic dimension. It is the missing link between having a number of disconnected elements, each marginally effective, and an integrated system of great power." 

A Concrete Example to Bring These Lessons to Life 

In the 1970s, the publishers of Industry Week magazine co-founded a company called Penton Learning Systems (Disclosure: PLS is the owner of this website and IQPC). 

PLS's mission and purpose was to "supply the missing link between a number of disconnected colleges and universities, each marginally effective in designing and developing short courses for managerial, technical and professional workers, and an integrated system of great power."

The Concept Was Simple 

Let's say Michigan State University (MSU) offered the best short course on Developing the Annual Marketing Plan, and California Institute of Technology (CIT) offered the best short course on Conserving Energy in Buildings and Plants

MSU could "import" CIT's Energy Management course and "export" its marketing planning seminar to CIT. 

If 100 schools entered the consortium, and each provided just one outstanding two or three day seminar and faculty member, then every institution would have access to 100 outstanding seminars and faculty members. 

The concept proved valid: 105 colleges and universities joined the consortium. 

Schools, such as Southern Methodist University, University of California-Berkeley, University of Cincinnati, California Institute of Technology, Northwestern University, Michigan State University, University of Minnesota and the like became active "importers and exporters" of timely seminars that could be offered to their local markets. 

For 15 years, Penton Learning Systems managed this consortium with great success. 

It assisted in the design and development of over 30,000 short courses/seminars in the fields of quality management, project management, finance and accounting, marketing management, strategic planning, energy management, and the like. 

Schools could not by themselves continuously define and staff salable short courses that met a wide variety of training needs of institutions in their market area. 

In reality, universities and colleges know how to produce degree-granting programs. 

But most know very little—or have the appropriate marketing intimacy knowledge—to design and develop a continuing series of timely short courses that solve very specific problems target audiences in their local markets require or are seeking solutions. 

PLS's innovation was to supply the missing link between a vast number of disconnected colleges and universities and combine them into an integrated system capable of the meeting the training needs of the markets they served. 

All the elements were there. What was lacking was the simple element of a dedicated entity designed to organize a disorganized industry. 

Other value-added services were required: the disciplined selection of a faculty that could face an adult audience; the design of the right programs; direct marketing expertise; negotiation with faculty to keep their fees realistic and sensible; and a logistical support system to facilitate the exporting/importing of quality faculty/quality programs. 

Tremendous economies of scale were achieved. New economic capacity was created for each and every school in the network. 

The point? All the assets were already in place. No new inventions, scientific discoveries, or new knowledge was required. 

Entrepreneurship And Innovation 

Said Drucker: "Innovation is a change in the wealth-producing capacity of resources through new ways of doing things…Innovation is the impact on economic capacity, the capacity to produce and utilize resources with which 'innovation' is concerned…” 

“…The entrepreneur is somebody who endows resources with new wealth-producing capacity…" According to Drucker, many well-established organizations must continuously look to endowing  "already in existence resources" with new “wealth producing capacity."

The All-Important Mission Statement: A Guideline To Producing And Managing Innovation 

Said Drucker: "the outstanding innovators among the world's pharmaceutical companies define their goal as 'new drugs that will make a significant difference the medical practice and to patient health'… 

… They do not define innovation in terms of research, but in terms of the practice of medicine… 

… Not surprisingly, however, it is... the most market-focused innovator who has come up with some of the most important technical and scientific advances…" 

… To start out with the customer's need for significant change is often the best way to define new science, new knowledge, and new technology, and to organize purposeful systematic work on fundamental discovery…" 

To repeat: Innovation must always be market-focused. Innovation that is product focused, will produce "miracles of technology" but disappointing results. 

Selling is only the tip of the marketing iceberg. Drucker put it this way: 

"There will always, one can assume, the need for some selling…But the aim of marketing is to make selling superfluous… 

…The aim of marketing is to know and understand the customer so well that the product or service fits him/her and sells itself… Ideally, marketing should result in a customer who is ready to buy… 

All that should be needed then is to make the product or service available {and communicate to the target audience product or services available}…" 

Take-home message: If you have what potential customers really need and are willing to pay for, selling is easy. 

A Clear, Concluding Example 

A new (innovative) drug that cures a specific disease needs little selling. The appropriate target audience will instantly respond when informed about potential benefits and risks.

Selling, advertising and public relations act as the communication vehicles to inform customers. 

Marketing is, therefore, more than delivering the message.

Marketing, at its very core, is about finding out what customers need, thoughtfully designing products and services to fill that need, and making sure what is promised is delivered via the appropriate organizational structure. 

Innovation must be customer driven. Marketing is the art and science of finding, keeping, and growing profitable customers. It's impossible to separate true strategic marketing from innovation.

MMN
Contributor: Management Matters
Posted: 09/24/2017