Personal computer. Smartphone. Medical imaging scanner. They are all but a few radical innovations which have revolutionized our life.
Contributor: Dr. KYRIAKOS KYRIAKOPOULOS
Academic Dean of Academic Programs Enrollment, Academic Director of Executive MBA, Academic Director of ALBA- EUROBANK MBA in Financial Services
Professor of Strategy and Marketing
Outlet: BUSINESS PARTNERS
Radical innovations employ different technologies and deliver dramatically stronger customer benefits. As a result, they have the potential to catapult innovators to industry leadership but also lead big companies to stumble or even demise. A case in point, Polaroid and Kodak missed the boat of digital imaging (ironically, invented at Kodak’s R&D labs) while newcomers exploited this technology to become leaders of the industry.
Marketing has been partly blamed for the notorious inability of big firms to innovate. As Akio Morita, the legendary CEO of Sony once encapsulated the disdain of technology companies for marketing’s empathy with customers: “Our plan is to lead the public rather than ask what kind of products they want… So, instead of doing a lot of market research, we refine our thinking on a product and its use and try to create a market for it by educating and communicating with the public.”
Research has echoed this norm in the context of overwhelming evidence that large, successful firms are prone to bureaucracy: as they grow big, they build layers of power, processes, and rules to safeguard their ‘recipe’ for market success. They also suffer from escalated commitment to their investments in market-related assets such as distribution channels and brands that screen out new products that threaten the value of existing assets. Falling prey to hubris, big, successful firms end up with incremental, me-too innovations that please current customers but they miss the boat of radical change.
And, yet, our recent work points to a glimpse of hope against this plot of doom. We studied more than 110 high-tech firms and included innovations such as LED technologies, ADSL VOIP router modem, ground proximity warning systems for aircrafts, introduction of tetra radios and accessories, robots for space exploration, energy efficiency monitoring systems, sigma method for designing and building ships, and drug coated stents1.
Our work reveals a more complex role of marketing (positive, negative and neutral) depending on the marketing asset we examine. On the one hand, marketing’s traditional focus on understanding current products and current customer needs, indeed, generates marketing knowledge that lead to incrementalism, improving existing product attributes and existing customer benefits. Likewise, corporate reputation and strong brand names (corporate & brand equity) make companies risk averse as the high odds of failing products can tarnish the hard-won reputation.
On the other hand, our research illuminates an overlooked benefit of marketing’s investments in customer and distribution relations (customer equity): they emerge as wellsprings of insights for new customer needs and emerging distribution technologies, thereby increasing the odds of radical innovation. Finally, our research underscores the beneficial role of marketing in the launch phase. Radical innovators coupled with powerful brands and strong customer equity accelerate customer acceptance and therefore profit more from their innovations than radical innovators without these two valuable marketing assets.
More generally, research shows that large, incumbent firms are not doomed to fall prey to the trap of success, bureaucracy or hubris as long as their corporate culture features willingness to cannibalize their current technologies and products, risk and failure tolerance, and relentless focus on new customers and overlooked needs2. Companies like Intel and Microsoft are a case in point for their insatiable need to “eat their own lunch” before others do it by introducing regularly new technologies and migrating rhythmically customers to new products.
1 Kyriakopoulos, K., et al., (2016), The Role of Marketing Resources in Radical Innovation Activity: Antecedents and Payoffs. Journal of Product Innovation Management, 33 (4), 398 – 417.
2 Tellis, G. J., et al., (2009), Radical Innovation Across Nations: The Preeminence of Corporate Culture. Journal of Marketing 73(1), 3-23.