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As part of the 24 hours of Innovation I was asked to give my half time pep talk for 2009 as it relates to Innovation. Innovation being a long time passion of mine, it was hard for me to distill my thoughts in two or three key points. All that being said, here we go – please let me know your thoughts.

1. Innovation and social media

Social media can provide unbelievable benefits when it comes down to innovation, and I believe that we will see an increasing number of companies who will achieve breakthrough innovations because of the advent of social media. Those who will be most successful will be those who realize that social media is not a new channel through which you source ideas, but rather a platform that allows the social that makes us humans to scale. They are the ones who will manage to tap into the human reciprocity reflex which drives us to help one another.

At the same time that I am enthusiastic about the potential of increased innovation in this social media age, I am also worried that some companies will put too much faith in this amplified voice of the customer. Doing so could result into marginal innovations and loss of competitiveness, as for some product categories, customers just do not care enough about the product to give you meaningful feedback and suggestions.

2. Successful innovators will tap the power of all their employees

Ok, so this may not be categorized as clairvoyant, but in reality there are very few companies that have been able to move beyond the virtualized suggestion box for new ideas.

I think we will see two types of internal innovation mechanisms – communities and marketplaces. Best Buy, whose CMO Barry Judge I interviewed as part of my regular CMO 2.0 conversations, is an example of a company that took a community approach through their well documented Blue Shirt Nation community of employees. GE, whose Global CMO Beth Comstock I also interviewed as part of that same series, took more of a venture based marketplace approach.

Obviously both approaches can yield results and in some cases, as with the Cisco iPrize example, which started out as a venture-based process and ended up in a community, it is hard to distinguish the two. All that being said it will be interesting to see if one is better than the other for certain types of innovation.

3. We need different thinking in order to avoid 80% new product failures

Many companies are doing the exact same thing as they used to do before the internet and social media – except that they are now doing them online. They run focus groups, they do online market research based on individual characteristics of random individuals or their champions, and they think they do persona based and ethnography based product design.

And they still get 80% failure rates.

What they don’t realize is that they now can observe the impact of group behavior in the buying process, not just individual behavior. They forget that they can now involve their detractors in the new product innovation process without having them become the tyranny of the minority. And they overlook the fact that they now can use their communities, internal and external, to kill dogs in their new product innovation pipeline faster – thus freeing up resources for the more promising innovations which would otherwise go under-resourced.

That’s it for me. I want to thank the organizers of the 24 hours of innovations to allow me to be part of this exinting, especially fellow Belgian Philippe De Ridder, and I look forward to your comments.

For my first CMO 2.0 Influencer Conversation, I spoke with Rob Kozinets, a professor of marketing from York University in Toronto, about communities, consumer tribes and word of mouth marketing – not surprising considering that Rob was the editor of Consumer Tribes, a collection of research papers on consumer tribes, recently finished a book on word of mouth, and is one of the few researchers looking at the practice of business through the eyes of an anthropologist/ethnographer (among other things).

We started the conversation by talking about the disconnect between the world of academics and the world of business, especially as it relates to marketing. It is an unfortunate fact that many mistakes could be avoided if marketers were making informed decisions based in part on some of the recent findings in the fields of behavioral economics, anthropology, complexity theory, sociology, and psychology.

One of Rob’s main themes is that consumer learning, opinions and transmission of influence happens in smaller groups – hence the idea of tribes. Today’s tribes have looser affiliations and are more hedonistic in nature than ancient tribes. They are nomadic by interest, rather than geography, and centered around expertise and commercial culture. Consumer Tribes are also not typically focused on a single brand but rather on a whole group, a whole culture or lifestyle, or a set of activities. Another challenge for marketers, according to Kozinets, is that consumer tribes don’t typically develop long-lasting relationships. Even some of the stronger tribes, like the Star Trek groups that were so popular in the 90’s, aren’t as active anymore – people move on as they get more options. It would actually be interesting to see if the Harley community is still as strong as it used to be. People move in and out of consumer tribes, and the tribes seem to have a natural life and death cycle – including a revival stage sometimes.

Of course, most marketers don’t think of their customers as tribes yet, or don’t realize the enormous impact that successful customer communities can have, so for many of them this is an non-existent problem.

According to Rob, one of the big problems with communities is that companies are setting them us expecting fixed ROI. In reality the measurement of the the impact of communities is very hard. They are hard to set up, take time to take off, and are challenging to maintain. And, as Rob points out, a lot of the successful community marketers have had their communities formed for them by their customers – much like Harley.

We also talked about the proliferation of special interest communities sponsored by various companies – e.g., small business focused communities, of which there are dozens. Obviously members will not want to belong to multiple small business communities, so what then? Consolidation, with most members gravitating towards the most successful small business community, or further fragmentation, with more user-driven communities aggregating around micro objectives? It’s hard to predict where we will see consolidation vs. fragmentation of communities as we do not quite understand how people move in and out of those spaces.

An interesting concept which Rob brought up was “share of community time,” which, in a way, is a measurement related to John Hagel’s Return on Attention (John has also agreed to conduct a CMO 2.0 Influencer conversation with me – stay tuned for a date). The problem with calculating share of community time is that there is a huge spread in the estimated number of people who participate in communities – between 100M and 1b.

Other things we talked about include:

• The role of payments and incentives in communities
• Whether online focus groups are stretching the possibilities of online community environments
• How to engage with your detractors as well as your champions
• How, if you are going to open things up, you should have a strategy to deal with criticism that will come
• The pros and cons of having a neat classification system for communities based on the different needs that they are trying to solve
• How community organizers need to think about members first and brand second

We also touched on word of mouth and how most marketers expect word of mouth to amplify their message, when in reality most word of mouth will transform your message.

As usual, you can listen to the podcast on the CMO 2.0 site, and we will be releasing transcripts soon.

(Cross-posted from the CMO 2.0 Conversation site)

Today’s CMO 2.0 Conversation with GE’s CMO Beth Comstock was packed with interesting insights. On a personal note it was certainly neat to get a one hour personal marketing tutorial from the CMO of one the largest companies in the world. By working in a real marketer’s laboratory, Beth must be one of the luckiest marketers around.

We touched on three main topics: the role of a corporate marketing group in a large diversified company with strong operating companies, how to foster innovation at GE, and general changes in marketing.

As a central corporate marketing group, Beth’s team is responsible for sales growth, innovation, and the GE brand platform. Even though the company has very diverse operating companies, her team has also been able to find opportunities for developing a customer platform (i.e., cross-sell accross business units), as well as product platforms (i.e., ecoimagination, the GE green platform, and a cross-operating-business battery project).

On the innovation side of things we touched on the importance of having a robust pipeline of innovations and on the need to have the right resources deployed across the right portfolio of innovations. We also discussed the need to kill ideas faster and the opportunity to create an innovation marketplace for ideas that may not be a good fit for the company. Beth described GE’s robust innovation process, and how they have both a formal process that very much resembles an in-house venture process as well as an online imagination network that relies much more on the wisdom of the crowd – in this case their employees. Other innovation related topics we covered include:

• how they use outside coaches and customer discovery sessions to bring outside insights into their innovation process
• the importance of including detractors in the innovation process
• how innovation is not just about technology innovation, but also about commercial innovations – and how they are constantly looking for new ideas around product, space, and business model
• the cultural changes required for fast-paced innovations and the creative tensions between being a process-driven organization and the inherent messiness and chaotic nature of innovation
• how in some cases you need to step away from traditional metrics to measure progress and success of ideas that are being incubated

We also talked about the changes afoot in marketing and how the new marketing challenge is in fact a knowledge management challenge – knowing enough about your customers so you can feed them data that will make them smarter.

On the need for new marketing skills Beth listed what she is looking for in marketers – people with new world skills, people who can simplify things and engage in customer communities, and people who can curate an experience for the customer. She also described how they set up a team of “rogue marketers” within the company, whose job it is to come up with rogue marketing techniques. It would be really interesting if at some point they would publish their findings in rogue marketing innovations.

You can listen to the podcast over at the CMO 2.0 Conversation site, in the near future we will also post the transcript from the interview.

You would think that with the ability to measure everything when you do online marketing, many companies would do so.

Not so say McKinsey consultants – while 91% of the marketing executives who participated in the McKinsey digital-advertising survey (06/08) reported that their companies were advertising online, 80% said that their companies allocate their media budgets by using subjective judgments or by repeating whatever they did the year before.

Heck, only 50% were using click-through rates to measure effectiveness of their online direct response ads. And only 30% considered the offline impact of online marketing.

Surprisingly (not), those who were measuring the impact of online marketing were more satisfied with digital marketing than those who did not, and 55% of them (compared to 43%) were cutting their spending in traditional media in order to increase their spending online.

It is amazing how many marketing departments are still not accountable for results…sigh…

Well – there you have it. It will probably not come as a great surprise that I think so, but after ruminating on it for a long time as part of a team of 12 great marketers which Valeria Maltoni assembled to provide some direction for social media marketing in 2009, that is how I decided I would characterize the state of Social Media in 2009.

Download the ebook in which 12 of us shared some great insights on the future direction of Social Media – it’s free!

From Valeria’s blog post, here are some bite-sized previews of what some of the other autors had to say – many of whom I consider real sharp thinkers when it come to marketing and some of whom I am fortunate enough to be friends with:

• “Basic metrics you can initially use to match up before, during and after sales deltas are frequency, reach, and yield” – Olivier Blanchard, The Brand Builder, @thebrandbuilder

• “There are three imperatives for execution programs in 2009 – start with measurement, create content for the open Web and for mobility” – Matt Dickman, Techno||Marketer, @MattDickman

• “The foundation and core of what social media is, consists of the five C’s. Conversation, community, commenting, collaboration and contribution” – Mike Fruchter, My Thoughts on Social Media, @Fruchter
  

• “With social media as a platform for participation, people can behave the way they were hardwired to behave in the first place – humanly, tribally” – Francois Gossieaux, Emergence Marketing, @fgossieaux

• “Social media enhances marketing efforts as an additional indirect communication channel” – Beth Harte, The Harte of Marketing, @BethHarte

• “Companies with greater social intelligence have stronger bonds with employees and customers, and that translates into revenue” – Lois Kelly, Beeline Labs, @LoisKelly

• “Change ensures our own livelihoods – new opportunities and trends to capitalize upon, unique products and profit centers that merit development, robust innovation to leverage”- Christina Kerley, CK Epiphany, @ckepiphany

• “Social media interaction allows us to have… well, interaction with our customers. It lets us see them as people instead of statistics and it lets us hear their voices” – Jennifer Laycock, Search Engine Guide, @JenniferLaycock

• “Goals absolutely must be built on business objectives” – Amber Naslund, Altitude Branding, @AmberCadabra

• “A proper social media education is more than just learning new tools. The most important lesson we can impart is the necessity to think ‘humans’”- Connie Reece, Every Dot Connects, @ConnieReece

• “Social media isn’t causing problems, but it is revealing them. And the problems aren’t new; they’ve been around for a while” – Mike Wagner, Own Your Brand!, @bigwags

• “The secret of success in social media is a product or a service that people actually like and use” – Alan Wolk, The Toad Stool, @awolk

And whatever you do in 2009, remember the words of wisdom from our fearless leader for this project – Valeria:

Don’t fear mistakes, welcome them. They will help you become more resilient and fl exible – in some cases even kinder. Nothing like the fresh breeze of reality to energize our purpose. Adapt your plan to circumstances and keep going.

I hope you enjoy and look forward to your feedback! More predictions coming up soon…

Virgin Atlantic is celebrating it’s 25th anniversary, and while the 25th anniversary ads are funny, I just loved this one (via AdFreak)…

(RSS readers who cannot see the movie, click here )

One interesting observation from the ongoing “2008 Tribalization of Business Study” is that while the state of communities has progressed by leaps and bounds since the last community 2.0 conference, the market is still very young with many people confused about what to do and what to expect.

One way of gauging this is by looking at what people found to be unexpected as part of their community efforts:

• Reach of Word of Mouth for free
• Knowledge about customers
• That our market really will tell us what they want — if we just ask
• Greater visibility
• Lots of active users
• Ideas generated by communities
• How happy customers are with the outreach

It is sort of funny that most people will setup communities to get to know more about their users, get ideas from the outside inside the company faster and increase word of mouth, just to name a few, and then get surprised when this actually happens.

Another unexpected consequence, this one potentially dangerous is “Advertising Revenue.” If the purpose of your community was not advertising, and so far no companies in the study have indicated that as a goal, then discovering advertising revenue as a by-product may potentially lead to spamming your community and eventual failure.

Starting with the premise that advertising is always designed to increase consumer awareness and to persuade users that the brand is superior, a new research study by a team of researchers from by Stanford University tested the impact of advertising on both awareness and perceived quality. What they found is that “advertising has consistently a significant positive effect on brand awareness but no significant effect on perceived quality.”

An interesting side finding from the study is that share-of-voice does not impact brand awareness – in fact, if you outperform your competitors with advertisement it will have a slightly negative impact on your brand awareness.

The research paper also mentions empirical studies that show that advertising lowers price sensitivity – again confirming that pricing may be controlled more by the supply side rather than the demand side.

All that being said, the study confirms that advertising has little effect on sales.

(via Strategy+Business)

Another great experiment by MIT behavioral economist Dan Ariely as described in his book “Predictably Irrational” shows that it is not the product that counts but the information about the product.

In one experiment, they sold SoBe drinks to two groups of students who were about to exercise. The first group paid full price, while the second group got a 30% discount. After exercising they asked the students whether they felt more or less fatigued than usual – and all reported that they were indeed less tired. Except that the group which paid full price was less fatigued than the group which paid less. The 50c aspirin does work better than the 5c aspirin…

They then did an experiment where they sold students SoBe, which claims to provide “energy for the mind,” before administering a 15-word puzzle. Again, one group paid full price and another paid less. They also baselined the experiment with a group that did not take SoBe. The group that paid full price solved as many word puzzles as the group that did not get the drink, while the group which got the discount solved about 30% less word puzzles.

WOW…we are doomed.

But wait! It gets better. They then performed the same experiment except that this time they printed the following message on the cover of the quiz booklet “Drinks such as SoBe have been shown to improve mental functioning, resulting in improved performance on tasks such as solving puzzles.” They also stated that the SoBe web site referred to 50 scientific studies to support these claims – information which was totally fictional. The results? The ones that paid full price solved 33% more puzzles than the ones who did not get the drink, and the ones that got the discount solved 7% more word puzzles.

And who said that messaging was dead? The things you say about your product may indeed be more important that the product itself…

The Online Publisher Association announced that it added Community as a category to its Internet Activity Index (IAI). So they will now measure how much time consumers spend online with Content, Communications, Commerce, Search and Community.

The OPA defines community as:

“Web sites and applications that combine user-generated content with communications in order to foster relationships between individual members and groups of members. Many Community sites are content driven, and they were previously accounted for in the Content category. However Community’s content is largely user-generated, and when merged with communication, creates a specific category of online activity.”

The IAI numbers for January show that consumers spent 42.7% of their online time interacting with content, 28.7% with communications, 16.1% with commerce, 7.5% with community and 5.0% with search.

AdAge picked up on the story, declaring “When It Comes to Time Spent Online, Content Trumps Community.”

But wait a minute here, adding community as a category at the same level as content, communications, search and commerce, is like comparing apples and oranges. Or better yet, comparing apples and oranges with air or water. Communities are combinations of content, commerce, communications and search. And communities affect the usage pattern of all the above categories and vice versa. So if I am spending time on Amazon.com, am I spending time with commerce, content, search or community? Obviously the end result is commerce if I buy something, but it could also be searching without buying or interacting with content (both user generated reviews and published content) without commerce. The fact that Amazon is a community which leverages my personal profile very well (another component of communities) is determining my interactions and time consumption on that site. The same can be said for many other sites that combine content with community. If I am spending time on the WSJ Health blog, I am spending time with content or community? If as a car buff I spend time on Carspace.com, I am spending time with commerce, content or community? Would I spend as much time conducting commerce, searching for stuff or interacting with the content on those sites if there were no community component to them?

Probably not…

Besides the fact something does not sit right with the categories, many conclusions drawn from the new numbers by AdAge and the IPA are equally flawed. Jim Nail at the Cymphony’s Influence 2.0 blog captures those flaws in detail in his post today (well worth the read). A couple of highlights include:

• The fact that page views per person in content dropped 225 pages suggests that a number of content sites were just moved to community.
• Content sites show 480 pages per month per user vs. 380 pages for community sites. So from an ad perspective, the reach may be just the same.
• Another factor not reflected in the new numbers is influence. If a third of people below 30 don’t make buying decisions before checking with their social networks, the impact of communities on the commerce is obviously not reflected in those numbers.

We should of course remember the agendas that both organizations are representing – those of advertisers and publishers.