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India Inc’s Innovators Are Setting The Stage For The Ecosystem

Steve Jobs, the late co-founder of Apple Inc and one of the greatest innovator from the tech world, believed that innovation was the only way to win, and by no means did he just see innovation in making things more complex. An advocate of simplicity, he also reiterated, “Simple can be harder than complex; you have to work hard to get your thinking clean to make it simple.” That’s why we, at GHV, believe “Innovation is not just doing something new. Sometimes it means pushing the existing more powerfully and elegantly.”

Innovation or doing things differently is something that has set the momentum of the “startup scene” in India. It is because of thinking differently, the “old wine in a new bottle” syndrome that has revamped and fuelled the success of top startups in the country today. Innovation is all about bringing something new and exciting to the customer. Given the cutthroat competition in the market today, innovative products and ideas are the key to differentiating yourself from others in the race.

Successful businesses often anticipate future trends and develop an idea, product or service that allows them to meet this future demand rapidly and effectively. It is not just about fulfilling the pain points of the consumers, but also being able to preempt the future needs of the consumers before they even feel them. In essence, predicting and fulfilling a future void and working on its solution in the present, staying ahead of the curve. Innovation can help you stay ahead of your competition as markets, technologies or trends shift, thereby giving you a definite edge.

This year, India has slipped 10 places in the Global Innovation Index to a disappointing 76th position. Imagine what we can accomplish as a nation if more people were to focus on innovation. We can easily transition to become a nation of job creators than job seekers.

Renowned global brands like 3M, GE, Lego, Nestlé, Pepsi and Starbucks are all from different industries, but have been constantly innovating their products. These companies have successfully created and supported an internal innovation capability that drives new products into the marketplace year after year with remarkable success. In fact, the very reason behind their success is that they made innovation a critical capability within their organisations. These companies recognised innovation as a key driver for success by enhancing the value that the business was delivering to customers.

With Indians like Nikesh Arora and Sundar Pichai, leading the heavy weight ‘innovating’ companies like SoftBank and Google, we are looking at a complete change in the way India and Indians are perceived globally; whether it is Indra Nooyi, Satya Nadella, Ajay Banga or Shantanu Narayen.

Innovation helps large companies survive challenges. According to Clayton Christensen, disruptive innovation is the key to future success in business. For companies to become market leaders and retain that position, they have no choice but to innovate and disrupt an existing technology or market by recognising opportunities.

For example, Patym had revolutionised mobile commerce in India. Earlier, people were wary of storing their debit or credit card information online. The company created a secure digital wallet where a user can put in a small amount without threat of online and credit card fraud. The payment solutions provider uses an RBI approved semi-closed wallet that is being used everywhere, right from Domino’s Pizza to Zivame to Uber. The company now has over 80 Mn mobile wallets and more than 15 million orders per month.

Innovation is that one thing that all successful businesses worldwide have in common. Innovation is a part of their culture… it’s in their DNA.

To foster a spirit of innovation in today’s youth, iSPIRT is hosting InnoFest, a daylong event focused on kick starting the next wave of innovation in the country. The event to be held at Indian Institute of Science, Bangalore on 22ndAugust 2015, will offer young innovators a platform to present their ideas and interact with like-minded people from across the country. The daylong fest is meant to celebrate innovation and bring forward ideas that can become game changers for the nation.

Guest Post by Vikram Upadhyaya

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When Should Push and Pull Marketing be Used?

Have you put a lot of time and effort into making your website rank higher, or invested in advertising on search engines, but seen no increase in the number of leads? If you are a startup and you have, it might be time to revisit your broader marketing strategy.

Two Strategies in Marketing

There are two broad strategies in digital marketing – push and pull (also called outbound and inbound).

Pull Marketing

Pull or inbound marketing is analogous to opening a store on a street corner. People walk past the store, and if they have a need for what is being sold in it, they walk in and make a purchase.

When it comes to digital marketing, of course, the store is any online presence. All pull marketing methods are therefore intended to help increase the number of visitors to digital properties.

SEO (Search Engine Optimization), SEM (Search Engine Marketing) and Content Marketing are examples of inbound methods.

Push Marketing

Push or outbound marketing, on the other hand, is analogous to carting products around town to wherever buyers may be found, in an attempt to initiate one-on-one interactions with them that could lead to sales.

There are two variations in push marketing: one that invites one-on-one interaction from a buyer, and one that forces one-on-one interactionon a buyer.

The former approach is analogous to an ice-cream cart ringing a bell to advertise its presence. The sound of the ringing bell is welcome to those interested in an ice-cream. And it is easy and effortless to ignore for those who are not interested in it. This approach is used in many social media marketing tools.

The latter approach is analogous to doing door-to-door sales; the salesman knocks on doors and pitches the product to anyone who answers the door. This approach is usually very annoying to those subjected to it since it distracts them from more pressing tasks and it takes effort to decline the interaction. An example of the latter approach is unsolicited email marketing.

Now that we have understood push and pull marketing, let us take a look at where pull strategies may not work and push strategies need to be used. There are four broad competitive positions that a firm typically maneuvers itself into, and the choice of marketing strategy depends to a large extent on the competitive position that a firm finds itself in.

Four Kinds Of Market Players

In their book “Marketing Warfare”, Al Ries and Jack Trout proposed the concept of a strategic square in terms of competitive positioning.

The four corners of the square consist of four types of players in a market: 1) market leaders 2) the followers 3) small players and 4) local and regional players.

Market Leaders

The market leader is the firm with the biggest share of a market and a clear lead. Taking the U.S. automobile industry as an example, the Ries and Trout say that General Motors with a 59% market share is the market leader (all the other firms in the fray don’t add up to its share of the market).

Followers

The follower is the No. 2 firm in the market. For example, Ries and Trout consider Ford to be a strong No. 2 in the U.S. automobile market with a 26% share.

Small Players

The small players are firms with a much smaller share of the market than the top two players, but with sufficient resources to challenge the big players in sizeable segments of the market that the main players may not ignore. Ries and Trout considered Chrysler with a 13% share of the market to be the small player.

Local or Regional Players

These firms are very small firms that do not have the resources to challenge the big players in any market segment large enough to interest them. American Motors with a 2% share of the market (they manufacture the Jeep, a category of vehicle that has too small a market to interest the bigger players) is a good example of a local or regional player.

Marketing Strategies and Competitive Positioning

Now, we can take a look at the marketing strategies that firms in each of these competitive positions should use.

1. Marketing Strategies for Market Leaders

A firm that is creating a market needs to use content marketing. Content creation is essential because of the need to educate people about the new product or service.

The goal of pull strategies is being found. When a market is created, people who benefit from the ecosystem being created will be likely to link to content from the firm creating the market, if such content is available.

The back links to their content will make the content rank higher in searches, which in turn will help make the market originator and leader the firm most likely to be found by prospective customers when they search for solutions to their problems.

So, content marketing becomes a great defensive strategy for market originators and leaders, helping them maintain their lead.

Once a market matures and people no longer search as much for information on a product category, but more for vendors and comparison shopping, because the benefits and manner of use of the product are now common knowledge, then it becomes important to rank ahead of competitors in search results.

This can be accomplished through the use of SEO (search engine optimization) and SEM (search engine marketing) for the main keywords associated with the products being sold by the market leader.

Push strategies are not needed by the market leader since pull strategies are sufficiently effective in helping them maintain their lead.

2. Marketing Strategies for Followers

Followers have a far lower failure rate than market creators (because most of the risk associated with market size and discovery of solutions to address the key pain points have now been eliminated).

So, it pays to attack the market originator. However, if a follower merely puts out content to attempt to attack the position of the market leader, they are likely to run into the “findability” barrier. The follower’s content will almost never be organically found because the market leader’s content ranks higher on account of the in-links that it has already accrued.

So, the follower will have to focus on finding ways to distribute their content. One method to distribute content is SEM (search engine marketing). This involves taking out paid ads on search engines. Another strategy is SMM (social media marketing) which can involve taking out ads on social media platforms.

Since the follower’s advertisement will be ranked on top for a small percentage of searches, this would give the follower a chance to be noticed ahead of the market leader by a certain percentage of customers.

Followers can also use push strategies to distribute content and get noticed by prospects at times when they are not actively searching.

Over time, as followers get noticed by the ecosystem that has developed around the new market, especially by parts of the ecosystem that would like to have or offer an alternative to the main vendor, more people in the ecosystem will consume and link to the follower’s content.

As a result, the follower’s content will rise in rankings and eventually with sufficient investment of effort and money can lead to the follower becoming more findable than the leader with all the attendant benefits.

Once the follower’s content ranks high enough, it will be sufficient for the follower to fall back to using pull strategies just like the leader. However, as long as there is not sufficient awareness about their alternative and its benefits, followers will have to utilize push marketing in its various avatars.

3. Marketing Strategies for Small, Local and Regional Players

Ries and Trout recommended that small players do something innovative to create new market segments, so that they become the first to enter that new market segment. Clayton Christensen also spoke of this category in his book “The Innovator’s Dilemma” where he called them firms that bring about “disruptive innovation”. Most startups fall in this category (it is not every day that startups get to create and own a new market).

Unfortunately, disruptors will not be able to use pull strategies alone. This is because they, like the followers, have neither the audience nor the volume of high-ranking content required to be noticed by people searching for keywords belonging to their product category.

Moreover, being very small, they do not have the funds to pay for effective SEM at very high volumes. Just as SEO favours market leaders, SEM favours bigger firms because they have the funds to pay for a higher ranking for their ads on search engines than smaller firms do.

For small and local firms, push marketing is often the only way to create awareness about their existence and about their innovations, and ought to be used until a critical mass of audience members for their content is built. Once there are enough social media followers, email newsletter subscribers and partners, it might become possible to switch to pull marketing strategies.

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Disruptive Innovation Revisited

Disruption and disruptive innovation have been in the spotlight of late. The guru of disruptive innovation, Clayton Christensen, and his famous theory were put under the scanner in a highly critical if somewhat flippant recent piece by Jill Lepore in the New Yorker. Just a few weeks earlier, the New York Times carried a provocative article titled “Business School, Disrupted,” that examined the potential of MOOCs to change management education and chronicled the troubled efforts of arguably the world’s strongest business school brand, Harvard Business School, to embrace MOOCs.

Is the problem with disruptive innovation or innovation itself?

Though Lepore’s article is ostensibly targeted at disruptive innovation, her grouse seems to be with innovation itself. She chronicles how “progress” used to be the ideal, till the notion of “progress” got discredited because of the many negatives that came along with it (atom bombs, for instance). Today, innovation has become the holy grail even though innovation can result in several unanticipated negative consequences.

As someone who has beaten the innovation drum for close to 2 decades now, I have to admit that some of this criticism is justified. The word innovation is used quite indiscriminately these days because it’s the “in thing.” I remember grimacing when I once read a report on the Indian BPO industry that gushingly identified picking up and dropping employees at home as the most important innovation of the industry! But, many people are sensitized to this debate – whenever I try to define innovation in my class these days, we end up having a lively discussion about the difference between improvement and innovation. I must admit that in keeping with the times, and reflecting the importance of small changes in most business contexts, my own definition of innovation has become much broader over time (see below)!

Innovation can be criticized on several counts including a propensity to create needs that are not fundamental, being wasteful of resources, and, at times, acting as a smokescreen for other less desirable activities. The best example of this last one is the success of the pharmaceutical industry in justifying high prices for drugs in the name of innovation, when some studies have shown that what really pushes up the price of drugs is the marketing activities undertaken by these companies (that these marketing practices are often far from kosher is another dimension of this story!).

Lepore’s criticism

But Lepore’s main target is disruptive innovation. Much of her criticism is targeted at the process of Christensen’s theory-building. She cites examples from Christensen’s own work to try to establish that disruptive innovation is not based on strong empirical evidence. She faults it for not being predictive, pointing out that Clayton Christensen predicted that the iPhone would not be successful! She accuses Christensen of picking and choosing data to suit his theory, and suggests that the cases he cites don’t take alternative explanations into account.

Some of this criticism may be unjustified. As far as I can make out, there is no “theory” of disruptive innovation. It’s an interesting concept, particularly when it is contrasted with “sustaining” innovation (for a review of disruptive innovation, see my earlier post. Incidentally, this is the post on my blog that has the highest number of hits!). Christensen advanced the concept of disruptive innovation as an explanation for why several successful companies failed.

In fact, disruptive innovation can be subject to legitimate criticism, but not along the lines of many of Lepore’s arguments. Christensen sees disruptive innovation as a new way of doing things that is often inferior to the existing way, but one which advances rapidly thereafter, so much so that it can overtake the sustaining innovation trajectory at some point. One of the difficulties I have always found is identifying which (potentially) disruptive innovation will actually succeed and which will fizzle out.

Which disruption will succeed?

MOOCs is a good example. Plain vanilla online learning has been around for some time, and the demise of education as we know it has been predicted for the last 15 years. But, the first phase of online learning proved to be a complement to conventional education rather than a substitute. It’s only in the last few years that the improvement in streaming technologies and the huge increase in the availability of low-cost internet bandwidth have resulted in the take-off of MOOCs. Interestingly, MOOCs are still dependent on the teacher, only you now see her in video streamed from the MOOCs site.

However, even today, the jury is out as to whether MOOCs will replace classroom education. MOOCs seem to work well for self-motivated adult learners but there are many aspects of education that can’t be achieved through MOOCs such as socialization, working in groups, and values.

Lepore is critical of the way people tend to see disruption lurking everywhere. But, there are two reasons why disruption has become a part of our everyday lexicon. The first is that the internet has been a trigger for disruption in different industries and product categories. Particularly where the product itself is digitisable (books, movies, photos, music, etc.), the internet has clearly acted as a force for disruption. The second is related to cost and reach. The focus on reaching out to price-sensitive “unserved” or “under-served” markets (the so-called “bottom of the pyramid”) has led to people trying to discover ways of delivering products and services shorn of frills, and at the lowest cost possible. This has inevitably led to attempts to “disrupt” markets in the way that Christensen suggests. But, though this sounds easy, it’s not so in practice as several efforts have shown (see, for example, my earlier post on chotukool).

Tailpiece: What can we learn from this episode?

There may be a lesson for would-be management gurus from the Christensen experience. He has become an easy target because he appears to be a “one-trick pony,” known for disruptive innovation and nothing else. Contrast this with Michael Porter (5-forces framework, generic competitive strategies, competitive advantage of nations, clusters, CSR and shared value) and CK Prahalad (strategic intent, core competence, bottom of the pyramid) and you realize the difference. Both Prahalad and Porter moved on to other ideas, and such portfolio diversification made their reputations less vulnerable to sniper fire!