Culture and Consumer Choices

The article "Cultural research tour reveals who likes what" in the Financial Times discusses the disparities in consumer behavior when it comes to jewelery here.  For the astute, this also provides insights in luxury and aspirational consumer goods and services as well.  In emerging markets of China and South Asia (India, Pakistan, Bangladesh), jewelery provides the deepest insights as it represents social standing as well as continuation to brand loyalty as it can be a significant both monetarily and as an emotive purchase.

"In the US today, the average price of a piece of diamond jewellery is $199, while in China it is $1,000 - David Rudlin, Japan-based global marketing director for De Beers’ Forevermark"

The article did not highlight though whether the jewelery industry is a follower or a predecessor to overall consumer markets trend?  Or does it stay constant?  That would be valuable information.

Few more interesting trends, for example, the difference in American and Japanese consumers overall are highlighted simply:

"In the US, 80 per cent of diamonds sold are for the bridal market. The American market is more ready than the Japanese to sacrifice quality for size... “The Japanese reject anything with even invisible flaws,” says Mr Rudlin."

"The biggest jewellery chain in the world, Chow Tai Fook, has 1,000 stores in China and will have 2000 by 2020. In China, 70 per cent of the market is made up of solitaire wedding rings, which are relatively easy to design and manufacture."

"“India, with its jewellery culture inspired by maharajas, is unlike anywhere else in the world,” says Mr Rudlin. “The demand is skewed to elaborate multi-stone pieces, with a focus on necklaces, earrings, bracelets and bindis and hair jewels.”"

Innovation in Emerging Market: New Business Models

In Economist's recent report on innovation in emerging markets here, the article "Here be dragons" talks about three specific business models that - "are not only important innovations in their own right but have serious implications for the way that Western companies run their affairs".

The three business models discussed and shared below are designed for the culture and society that is under pressure of growth and has a deep desire to fulfill its aspirational goals. The West cannot copy and paste these. It can only succeed if the society is willing and driving its own transformation. Will it? In another article from the report, "The power to disrupt":

"Anand Mahindra, vice-chairman of the eponymous family firm, says that these days when Indians go to bed at night their dreams about their country’s future “are not just colourful but steroidal”. His compatriots are at last beginning to believe that “the sandcastles we build in our minds are not going to be simply washed away by the morning tide.” The same is true across the emerging world, whose “sandcastles” are now being built on the solid foundations of business innovation. They will endure, changing not just emerging markets but the rest of the world as well."

Business Models -

The first business model is "scaling out, which means involving a wider range of people in the process of production and distribution, something that has been made much easier by mobile phones and the internet. The most successful examples of this are clinics on wheels, but there are plenty of others. Nutriset, a French manufacturer of fortified food for malnourished children, has outsourced production to local franchises in Africa. The company maintains quality control and the franchises are close enough to the children to make distribution quick and easy." This is in comparison to "scaling up".

The second business model is "“pull” model ..., designed to help companies mobilise resources when the need arises. Hong Kong’s Li & Fung or China’s Chingquing Lifan Group can use their huge supply chains to produce fashion items or motorcycles in response to demand. Taiwan’s Quanta and Compel can produce cheap computers and digital cameras for a fashion-conscious digital marketplace." this is in comparison to the "push" model.

The third business model is "the application of mass-production techniques to sophisticated services. This started with India’s outsourcing firms, which demonstrated that economies of scale and scope could be reaped from services that used to be highly fragmented and geographically rooted. These outsourcers are still expanding and moving upmarket. Indian consultancies are now challenging Western ones in complex services, not just dealing with customer complaints."

And it is the third model that is creating impact beyond the traditional information technology driven growth: "[Indian entrepreneurs] see a huge market for legal services requiring a high level of expertise. Dr Shetty is only one of many Indians who are applying Henry Ford’s principles to health care. LifeSpring has reduced the cost of giving birth in a private hospital to $40 by looking after many more mothers. Aravind, the world’s biggest eye-hospital chain, performs some 200,000 eye operations a year. It takes the assembly-line principle literally: four operating tables are laid side by side and two doctors operate on adjacent tables. When the first operation is done, the second patient is already in place."

Innovation in Emerging Market: Universal and Apsirational Brands

From the Economist's recent report on innovation in emerging markets here, the article "Easier said than done" showcases pyramid-straddling - the concept where a brand is able to win across all socio-economic market segments.

"... the masters of pyramid-straddling are mobile-handset makers. Nokia produces phones for every market, from rural models designed to cope with monsoons to fashion accessories that will look cool in a Shanghai nightclub. The cheap phones are sold through a vast network of local outlets, such as mom-and-pop stores and rural markets, and the upmarket models through shops in fashionable city centres. The aim is to create a brand that is at once universal and aspirational."

Innovation in Emerging Market: Dilemma Managent vs. Problem Solving

In Economist's recent report on innovation in emerging markets here, the article "Easier said than done" talks about differentiated and unique approaches to putting economically profitable business ideas into practice. An exceptional example is from Kenya:

"East African Breweries, a division of Diageo, launched a cut-price beer, Senator Keg, to help reduce demand for illicit alcohol, which is cheap but is frequently contaminated with methanol, fertilisers and battery acid. The company reduced the cost of the beer by negotiating a tax waiver with the government and by distributing it in kegs rather than bottles. The company made use of the shadow economy to get the beer delivered to the outlets. It also trained bar staff to understand the importance of rotating kegs to make sure the beer was fresh, and of washing glasses. Senator Keg is now ubiquitous in Kenya, sold in every makeshift roadside bar, and is affectionately known as “Obama”."

This is 21st Century Dilemma management vs. 20th Century Problem Solving. Thinking beyond maximizing the shareholder value on a quarterly basis yields the above innovative solution.

Innovation in Emerging Market: Data Points

"The engineering gap" in the January Economist states:

"According to the [Aspiring Minds, India], only 4.2% of India’s engineers are fit to work in a software product firm, and just 17.8% are employable by an IT services company, even with up to six months’ training. A larger share could cope in business-process outsourcing (call centres and the like). These findings are even gloomier than the 25% figure for employability that has been bandied about since 2005, when McKinsey released the results of a survey of international companies."

Download the complete report here.

The article "Grow, grow, grow", in Economist's recent report on innovation in emerging markets here, states: "McKinsey reckons that only 25% of India’s engineering graduates, 15% of its finance and accounting professionals and 10% of those with degrees of any kind are qualified to work for a multinational company."

The emerging market growth is fantastic, yet reviewing the thorough report from the Aspiring Minds raises or should raise questions for the multinationals. Also, curious if this level of employability applies to the Indian scientists as well?

In the report on innovation in emerging markets, the following statistics provide food for thought:

"The number of companies from Brazil, India, China or Russia on the Financial Times 500 list more than quadrupled in 2006-08, from 15 to 62. Brazilian top 20 multinationals more than doubled their foreign assets in a single year, 2006...

Multinationals expect about 70% of the world’s growth over the next few years to come from emerging markets, with 40% coming from just two countries, China and India...

Fortune 500 [companies] have 98 R&D facilities in China and 63 in India. ... General Electric’s health-care arm has spent more than $50m in the past few years to build a vast R&D centre in India’s Bangalore... Cisco is splashing out more than $1 billion on a second global headquarters—Cisco East—in Bangalore... Microsoft’s R&D centre in Beijing is its largest outside its American headquarters in Redmond... a quarter of Accenture’s workforce is in India."

Shoppers Reality at the Shelf

Having been the Architecture Leader at Procter & Gamble on the shopper and consumer virtualization platforms, I am thrilled to see that the statistics still hold true when you and I stand in front of the shelf to make the buy or not to buy decision.  My work was covered in AG Lafley's book "Game Changer" blogged here by friend and colleague Franz Dill.  Franz was instrumental in setting up the P&G Innovation Centers, now enabling P&G to be the leader in shopper and consumer insights to impact product development at the concept stage:

"In the Bases research, the biggest driver of new-product awareness in store was simply seeing the product on the shelf -- accounting for product awareness in 71% of cases where people cited the store. All the other tools marketers and retailers use to drive in-store awareness -- including off-shelf displays, retailer circulars, product demos, in-store media and samples, accounted for awareness in only 2% to 18% of those cases. In-store media and product demos both scored in the low single digits. That helps drive home the importance of packaging and signage, Mr. Twitty said."

States the article "This Upfront, P&G May Want to Boost Spend on Piggly Wiggly" here. 

Though AdAge's graph here from Nielsen showcases the impact of shopper based design, shopper driven marketing communication, shopper based package design, etc. see below a video from the Economist on the impact of TV on the shopper and the consumer.

Frugal and Bandit Innovation

I have believed that one of the key ways disruptions in products and services get developed is when the environment creates pressures and the creative thinkers deliver game changing and apropos to the need innovation.  I have been argued against that places like Silicon Valley are not being pushed yet continue to lead... and always an interesting debate ensues!

Here is an excellent video on how the developing and frontier markets are innovating on top of what is considered breakthrough for the developed countries.  I like having the Economist on my side in this debate.

Ad Age Disappoints - iPhone OS 4 Multi-tasks

Ad Age writes in Apple Brings Multitasking, Skype Support to iPhone Update here, "The new software answers many developers' and consumers' requests, especially with features like some multitasking support, a unified e-mail inbox, better VoIP calling, and a social-gaming network. It's cool that you'll be able to listen to Pandora radio and make Skype calls while reading e-mail and surfing the Web."

The statement in the article "These are fine features, but nothing revolutionary" shows that Ad Age has to go a ways to comprehend technology.  Multi-tasking implies that emergency messaging can get through, automated email updates, superior use of bandwidth when available, continuous consumer engagement solutions, continuous monitoring solutions in healthcare, etc. etc.

I'm disappointed in Ad Age!

Best Buy Going for Mobile Technology HFS!

"Brian Dunn, chief executive, told the Financial Times that the retailer expects eventually to have "a number somewhere between here and 1000" of Best Buy Mobile stores in shopping malls across the US, on top of the 77 it has already opened."

Read a related article at The Street here, see current Best Buy Mobile across the NE USA here.

Such stores will end up being similar to gas stations as the iPad driven convergence of internet communication, wireless telecom, content creation and management escalates.  Hence my reason to call them what they really ought to be - High Frequency Stores.  Something to invest in now?

India's National Institute of Design

I am always inspired by some excellent work at the Young Designers website of National Institute of Design in India, see various examples related to communication, interdisciplinary, industrial, textile and IT here.

Congratulations to the faculty, administration and the students on bringing the institute through to its 50 years this year.  I hope to visit in person one day!

See the NID's website here.

User Centric Design is Dead

Found at Design Sojourn "User Centered Design Innovation is Dead", details here.  Reminds me of a Steve Jobs quote - "You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new."

In-Context Consumer Innovation

Prith Banerjee, Director of HP Labs talks about the importance of innovation in-context of the consumer's environment, from the McKinsey:

"Today, HP Labs is in seven different locations around the world. We are in India, China, Russia, Israel, and all over the place. And the reason we moved to those locations has nothing to do with cheap labor. By moving a researcher from Palo Alto to India—and maybe the cost is half that in India—it has nothing to do with cheap labor.

It has to do with the researchers in India trying to tap into the talent in India. And the researchers in India are actually working on projects that are relevant to that context. So HP Labs India, its mission is innovation for the next billion customers.

I strongly believe that it is not very easy for researchers sitting in Palo Alto to imagine the problems for the billion people in India, the vegetable vendors in India. What kind of cell phones, what kind of PDA devices would they need to solve their day-to-day problems?

Sitting here in Palo Alto, you imagine that the whole world is developed, and it’s not. So the researchers in India are actually working on precisely those problems. They are looking at rich, intuitive interfaces; they are looking at devices, sort of a smart phone for the Indian market. There are a billion people in India. More than 70 percent of the people have cell phones, but only 5 percent of people have PCs, computers, in their homes. So what we are trying to do is to see how we can enable the remaining 95 percent of people in India to embrace computing.

The challenge isn’t that they can’t afford a computer. It’s true, a computer is $1,000. But they are affording televisions. They’re affording cars. They’re affording scooters. So clearly it is not the price, it is the value. Can we bring value to those people in India? And that’s an example of a project that is going on—it’s a project called a value device, a sort of cloud service and a platform environment that they are working on in India. Completely innovative. And those kinds of projects would not have happened from the researchers in Palo Alto."

Media Shows Its Ignorance on Innovation

Good friend Franz Dill shares thoughts on a ABC article on innovation here.

Alcatel-Lucent Seeks Wireless Innovation

Sarfraz Haroon passes along Alcatel-Lucent's foray into the global invention network - "As part of a program called TechQuest, Alcatel-Lucent is seeking applications from wireless / mobile technology experts for applications in the areas of public safety, entertainment, eHealthcare and eLearning".  See details here.  Just don't call it Open Innovation!

Will Design Thinking Deliver to the Consumer?

A new mantra among the corporations of the world is emerging for the teen years of the 21st century - Design Thinking.  Just like the concept of Innovation rose in the early 2000s, Design Thinking as an idea is finally on the rise.

The leaders in this space have existed for a while, couple of examples being IDEO and Procter & Gamble (with its Innovation Centers).  The level of understanding, misunderstanding or not understanding this space are clear from the Business Week article "Inside the Design Thinking Process", here.  The author, Helen Walters, discusses the Aspen Design Summit where multiple design driven sessions were conducted to solve hard problems.

I give credit to Ms. Walters on stating about the Design Thinking process as implemented at the Aspen Design Summit, "... the strongest takeaway was that those looking for a prescribed way to implement design thinking are destined to be disappointed. It's a messy, opaque process that depends as much on group dynamics as intellect or insight."

Preparation of such sessions requires experience and insights into human behavior.  Someone I personally know to be exceptionally talented at this is the Marketing Consulting Services of Copenhagen, see information here.

Yet, the one reason I suggest giving this article serious consideration is because the author highlights the key to the success of all Design Thinking processes, having the end user or consumer of the product or service engaged, which apparently was missing from all the sessions conducted at the Aspen Design Summit.  The author termed the results being developed out of the sessions to "seem like entirely inappropriate bunk" for the end user or consumer.

Perhaps all this is becoming news due to Roger Martin causing an uproar with his open challenge to the research driven, heavily analytical product and service development organizations and management consultancies, see my blog "Roger Martin - On Designing the Future", here.

I believe that exciting times are ahead as the left and right brained individuals realize that to truly deliver a breakthrough to their consumer, they must work collaboratively, break down the silo and unburden themselves from the past to really "create".

Breakthrough Innovation in 30 Hours?

Mr. Aaron Turcott, one of the top graduate students at Georgia Institute of Technology I had the opportunity to instruct sends a link to CapGemini's Accelerated Solutions Environment, here.  Interesting... 

I would direct anyone interested in the above to give serious consideration to my previous business partner Ms. Frederikke Kroon's breakthrough method of innovation conducted in 30 hours or less, see details and media on Frederikke's work and company Marketing Consulting Services in Copenhagen here.  Though the method requires intense preparation ranging anywhere from four to ten weeks, yet the execution occurs in 30 hours, creating tangible value that engages the client, carefully mixes in adjacencies, from anthropology to theology, scientists to artists, etc.  The results Frederikke's organization produced for multinational clients such as Arla, Vovlo and Carlsberg speak for themselves!

Roger Martin - On Designing the Future

My astute friend from McKinsey, Samvit Kanoria forwards "What's Thwarting American Innovation? Too Much Science, Says Roger Martin", in Fast Company, see here.  The article highlights Mr. Martin's focus on creativity in innovation being a combination of science and design aspects of product or service development working together.

For the scientist, he states - "The future has no legitimacy for analytical thinkers."

Mr. Martin thrashes the large management consulting companies and lays the blame of innovation bottle neck on a corporate structure mired in research and analysis of the past - "But what they analyze is the past.  And if the future is not exactly like the past, or there are things happening that are hard to measure scientifically, they get ignored."

Mr. Martin is asked - "Are you saying that the regression analysis jockeys and Six Sigma black belts have got it all wrong?" and he states - "Well, yes."

Interestingly, my tenure at P&G was during the time Roger Martin was advising A.G. Lafley and I was a part of the substantial changes brought within P&G's approach to business.  See information on some my work related to Virtual Shopper here on my friend Franz Dill's blog, who also was one of the founders of the P&G Innovation Centers.

Though Mr. Martin speaks candidly, yet the change he suggests carries pain to the corporate as a whole and the machinery of suppliers supporting it.  Corporate innovation remains more perception than reality, with incremental results seen in their markets from licensing, buyouts, etc.  Breakthrough innovation remains the domain of the entrepreneur, one who can imagine a future unburdened by the past!

Service Innovation in Airlines - AirAsia

Tony Fernandes believes that the key to his Air Asia airlines breakthrough success is people (committed to the customer), leadership and ability to brand and market - perhaps the pillars of service innovation.  See interview below.

Google's Holiday Gift to the US Air Travelers

Airline consumer will be heads down on their smartphones and laptops at airports this holiday season, thanks to Google, which is offering free WiFi at 47 participating airports around the USA, details here.  Though you will not find Atlanta, New York or Chicago on the list!

Brand Manager vs. Brand Advocate?

Forrester has finally caught up with the leading marketing companies of today!  Forrester published a report recommending the shift from the designation "Brand Manager" to "Brand Advocate" in their report - "Adaptive Brand Marketing: Rethinking Your Approach To Brands In The Digital Age", here.

I was activitly engaged in creating this new pathway seven years ago at PG-Tremor, details here.  The Advertising Age magazine states as much in their article, "Why its time to do away with the brand manager", here:

"Executives of big marketers Procter & Gamble and Unilever note that they're already doing much of what Forrester recommends.  The global brand strategist/local brand advocate breakdown, for instance, resembles how they and other big household and personal-care marketers already organize."

I remember one of the big moments was when the brand managers discovered they had minimal to no insights on the digital social networks driven communities of choice forming around the "choice" i.e. the brand that fulfilled a need.  The AdAge articles states this to be a necessity today:

"[Rex Briggs] believes marketers in the digital age need to be more "numerate", with more training in research and analytics..."

Interestingly, I remember listening to Paul Poleman current CEO of Unilever when he was at P&G about the importance of information technology in reaching the consumer.  He is quoted in the article stating:

"Web-enabled consumer intelligence may be one of the biggest benefits of social media for marketers."

The astute will note that Mr. Poleman used the words "intelligence" not analytics!