Marketing Innovation

Wisdom from the Ages Predicted Apple's Success

"No organization can achieve greatness without a vigorous leader who is driven onward by his own pulsating will to succeed. He has to have a vision of grandeur, a vision that can produce eager followers in vast numbers. In business, the followers are the customers. To produce these customers, the entire corporation must be viewed as a customer-creating and customer-satisfying organism.

"Management must think of itself not as producing products but as providing customer-creating value satisfactions. It must push this idea (and everything it means and requires) into every nook and cranny of the organization. It has to do this continuously and with the kind of flair that excites and stimulates the people in it. Otherwise, the company will be merely a series of pigeonholed parts, with no consolidating sense of purpose or direction."

Source:  "Marketing Myopia", by Theodore Levitt, Harvard Business Review, July-August 1960

And to think that Steve Jobs was only five years old when this was published! He obviously learned this lesson brilliantly.

 

Accidental innovation - Corn Flakes!

Sometimes, you just can't improve on reality.

From http://yhoo.it/l1UDs8

Corn Flakes

As a Seventh Day Adventist, Dr. John Harvey Kellogg adhered to his faith's vegetarian diet as well as the teachings of the cultish, nutritional hardliner Sylvester Graham, the inventor of graham crackers.

In 1894, while employed by the Battle Creek Sanitarium in Michigan, he began experimenting with ways to make that restrictive diet more palatable and an inexpensive way to feed his charges.

Leaving some boiled wheat unattended, it went stale. Attempting to salvage it by rolling it into dough, Kellogg (aided by his brother Will) found that it tore into pieces and refused to hold a shape. Undaunted, they toasted the flakes and were pleasantly surprised by the result.

After a bit of trial and error, the brothers decided to use corn, instead of wheat, as the main ingredient. The result was deemed tasty enough by patients that Will founded a company bearing the Kellogg's (NYSE: K - News) name to sell their corn flakes.

Dr. John, however, opted out of the venture, angered that his brother tampered with the healthful nature of the recipe by adding sugar to the mix. It should be noted that the elder Kellogg wasn't so much worried about obesity or bad teeth; as a staunch practitioner of sexual abstinence, he theorized that his corn flakes would suppress physical urges. Sugar, an aphrodisiac in his opinion, would undo that.

Further revolutionizing how the world eats breakfast, a patient at Kellogg's sanitarium, C.W. Post, used his own variation of the cereal to create his own company and a competing product, Post Toasties.

Does Innovation Pay?

To answer that, I look at three companies:  Apple, HP, and Dell.  Apple is rated the most innovative company in the world by both BusinessWeek and FastCompany; HP is #42 in the BW poll and doesn't make the FastCompany 50; Dell makes neither list.

Let's look at five year stock price:

• Apple went from $63.55 to $346.66
• HP went from $32.13 to $40.81
• Dell went from $25.96 to $16.01

Let's look at the most recently reported full year revenue:

• Apple:  $87.5B
• HP:  $127.2B
• Dell:  $61.5B

Profit margin:

• Apple's is 22.36%
• HP's is 7.17%
• Dell's is 4.29%

And finally, guess which companies match these market capitalizations:

• $320.6B
• $88.3B
• $30B

Yep, Apple, HP, and Dell in that order.

Seems to me the answer to the title is pretty clear -- innovation pays big.

 

Lessons from the Nissan Leaf: EVs Are Practical, Efficient, and Perhaps Strategically Important

The Tesla Roadster made me aware of what electric vehicles are capable of; the Nissan Leaf made me realize that they are practical.

I test drove a Leaf recently when the "Drive Electric Tour" stopped in Raleigh. Based on the Nissan Versa, the Leaf is a fairly conventional looking car, with plenty of room inside. It is pretty zippy off the line, and very easy to drive. Like the Tesla, there is only one gear and it is virtually silent. That is about where the similarities end, though.

The Leaf takes two and a half times longer to get to 60 miles per hour (about 10 seconds), has less than half the range (about 100 miles), a top speed less than 75% the upper limit (about 90 mph, so I hear), two and a half times MORE seating capacity (five full sized adults), and an infinite amount more cargo capacity (in other words, it has some). It also has a roof as standard equipment.

My group (about 20 people) listened to the Leaf story from some of the people conducting the tour. There were some cutaway views of the battery, which a sign said that its capacity was 24 kWh (kilowatt-hours). Even though I've got an electrical engineering degree, I didn't know what that translated to. So I looked it up when I got home.

A gallon of gas contains about 36 kWh of energy. OK, so what? Well, this means that the Leaf can go 100 miles on the energy equivalent of two-thirds of a gallon of gas. While running the heat or air conditioning. That's pretty impressive. Oh, and it costs about $2.50 to fully charge the battery. The only fluid to worry about is windshield washer fluid. There is virtually no routine maintenance. Unlike a hybrid electric vehicle (which has 30% more components than a conventional car), plug-in electric vehicles (PIEV), like the Tesla and the Leaf, have 85% fewer parts.

I asked our postal carrier (she drives one of those little jeep-like vehicles) how far she drove each day. She said, "about 30 miles." And the type of driving she does (a LOT of stop-and-start) is ideal for an electric vehicle, because when an EV's brakes are on, the battery charges (this is called "regenerative braking"). Even without this, the USPS vehicles are ideal for conversion to electric. Since the USPS has the largest vehicle fleet in the country, converting it would be a significant impact.

The biggest worry about these PIEVs is how far they can go on a single charge. This psychological affliction even has a name:  "Range Anxiety". This is natural. As I wrote in an earlier piece on the Chevy Volt, a 40 mile range isn't inspiring.

However, a 100 mile range is OK. It is true that you can't drive coast-to-coast in a PIEV, but you can get around town very well. Nissan says that 95% of the population drives less than 100 miles a day -- I certainly fit in that. A PIEV would be a great second or commuter car. 

Another consideration is that the energy acquisition process is fundamentally different between conventional (gasoline-power internal combustion engine) cars, and PIEVs. Gas stations are all over the place, and you use the car until the energy supply is low, and fill it up on demand.

With a PIEV, you fill it up at home. It is like having a gas pump in your garage that fills you up with five to ten gallons of gas every night. If you had something like that, how often would you need to stop at a gas station? Very rarely.

An alternative model can be found in the Blue Rhino gas grill LP cylinder business model. What if there were a little trailer that held a 25 - 50 kWh battery that plugged into the car to supply the juice for 100 - 200 miles. When it was discharged, you pull into a service station and swap it out for a fully charged one, and hit the road again. The service station simply recharges it, and swaps it for an empty one for another traveller. Voila! Range Anxiety cured!

I am even more of a convert to the EV cause than I was after the Tesla experience. If 10% or 20% of the cars on the road became electric, it is reasonable to think that the value and strategic importance of foreign sources of oil would diminish. We could generate the electricity needed to charge these vehicles domestically -- perhaps even at our homes or businesses with sources like the distributed generation Energy Server from BloomEnergy.