|  In order to be innovative, you need to break out of the functioning silo, which means destroying borders between departments like sales, marketing, R&D. In the future, more successful marketers will be those who will act as the customers’ representatives in an organization.
– Patrick, what form of innovation is relevant at the moment?
– Innovation is driven by the culture and values. There are two aspects: the first one is market sensing, and that is being especially well-tuned to customers; and the most challenging aspect is to uncover what we call the latent customer needs. But also you have to be aware of what your competitors are doing. Sometimes people who are not working in the same market may develop a new technology which you can bring to your market. There is an external-focusing aspect of innovation which is giving you new customer insights. But there is no direct link from customer insights to business performance, because a valid normal insight in itself changes nothing unless it’s implemented. In your market sensing you don’t have to be the first, you have to be a pretty fast follower, then to invest enough, to execute really well, and to be a little lucky. So, Simply Better is about innovation, but mostly about incremental innovation, which means continuous improvement. The company which is very good at executing and is sufficiently paranoid and humble, is also very well prepared for more radical change. Because when something more radical, like the Internet, appears, they have a good understanding of customer needs and respond quickly.
– Which part in this concept do brands play?
– There’s much confusion in this area. First of all, the semantics. The word “brand” can be used in three valid senses which are categorically different from each other.
The everyday use of the worf “brand” is a named product or service. If I ask you what laptop you bought, you say, “An IBM”, for example. Usually, when consumers use this word they mean the product they bought.
The second meaning is a trademark – that is, the IBM logo and name, intellectual property that belongs to the IBM Corporation. The so-called brand architecture is about managing trademarks.
The third and the most important meaning of this word is brand equity. It is a slightly fuzzier concept; it is similar to reputation, it exists in the minds of customers and potential customers. In order to have that brand equity, the first thing is the customer must be aware of the brand and have a positive attitude to products and services which have that trademark. When you raise the question of brand value, this is really the value that comes from the brand equity. So the reason why a brand has value is because it has a reputation.
Brand equity is a funny asset because it has enormous economic value, but you cannot sell it! Because your reputation does not belong to you. So, when I say brand, what I mostly mean is brand equity. People have an exaggerated idea that the consumer is irrational, that functional things are not so important, that you can’t differentiate them. I think in business it’s a very dangerous idea, especially for Russia today. Brand equity is important, but it is mostly created with customer experience of using products with this brand, reinforced by brand communications.
Maybe it is connected with the sizes of advertising budgets?
– It is partly that, especially on television, but it’s also because a lot of marketing ideas were first developed on the base of these products. I think in the 21st century we have to turn this the other way round.
– Is it possible to change it the other way round? FMCG are about the only group of brands that addresses customers directly. In BtoB it is easier to be “simply better”, because a businessman buys a function and pays for it according to his idea of what is going to bring him profit. The customer, however, makes her choice according to different criteria…
– The difference is not as big as that. I am sure that if we take a long 50-100 years’ period, marketing thinking will evolve in the direction we described here in this book, simply because this is the way economy is going, and the marketing managers who think it is only about advertising and promotion are becoming less important. And in 10-20-30 years’ time more successful marketing people will be those who’ll have got to the very top of big organizations, and what they will have done to achieve that will be a combination of what I would call functional marketing, which is very interesting but is getting more difficult because of the digital media fragmentation. But the really big challenge in marketing is for them to break out of the functional silo, which means destroying the borders between the various functions within a company. At present we have a situation where the dominant function is usually finance. Of course it is important, but it has limitations, so I am quite sure that the meaning of marketing will evolve in the direction we are talking about in our book.
– What is your attitude to the changes that have been taking place in Russia?
– I focus on the practical side, and I am very empirical, and I am not an expert on Russia. When you have a country which is very big and has enormous natural resources like oil and gas, many things are happening at once, and not all of them are good. Some of the transition has not been well-managed, but moving to capitalism was enormously important for Russia. Capitalism is a system of markets operating under the law. The speed of introduction of new markets before putting in a strong institutional legal frame, has cost Russia an enormous lot. Nevertheless, you are where you are. The structure of the society and its policy are important, but whichever way the policy goes, companies have to solve problems of their inner development. Historically, quality of products and services is not so crucial. Those companies which are “simply better” have the greatest potential. The most important ideas are simple but hard to implement, this is why we are not talking about techniques. We are talking about people, culture, relationships. |
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