The Role of Brand Strategy in Innovation

Transcript

David Lemley: Okay everyone, welcome. Thank you for joining us today, we’re really grateful for your time. We want to make it very interesting and valuable for you. My name’s David Lemley, I’m the president and head of strategy at Retail Voodoo.

Diana Fryc: I’m Diana Fryc, I am David’s business partner here. I’m responsible for client development and also strategy validation. Today we’re going to talk about strategy’s role in innovation but before we talk about the topic too quickly hear just a little bit of housekeeping. We’re going to spend about 20 minutes talking about our topic. We have some slides we’re going to go through with you and show you how process influences innovation and how to gauge whether innovation is right for your brand.

And then we’ll have about ten minutes set aside for questions and answers. If during the time we’re talking you have any questions that you feel like you want to ask but don’t want to remember, you’ll see in the GoToWebinar panel (down below there is a questions section), feel free to type those in anytime you think about them. If we haven’t addressed them by the end of our webinar we’ll take a look at them during that Q&A time.

So, let’s talk about our topic here. What’s the inspiration? Why are we talking about this today?

David: Great, okay so we thought that it would be an important thing to talk about because we know that all business leaders believe that innovation is vital to the growth of their business. However, nobody seems to agree on what it means and how to do it. So, defining its importance, innovation has become an overused industry buzzword that is empty and meaningless. If you use Google for example, you just type it in and search for it, you get in two seconds 300,000 hits with thousands and thousands of definitions. Google’s own definition within brand is even less helpful. They say it’s “the action or the process of innovating,” and we wanted to clean that up.

So, in the process of that in trying to find the perfect definition of how we talk about it, we came to the conclusion that it’s not as important to define innovation for you, as to understand its purpose within business. And so innovation’s purpose is to create ways to drive growth for your brand.

Diana: Yeah so before we talk about innovation and how brand influences it, I do want to make a distinction here about what innovation is not, because this is one my personal pet peeves. Often times, opportunistic line extension shows up within a company’s vernacular as innovation. So, let’s talk about an example.

David: Two words: pumpkin spice. So, pumpkin spice is not an innovation. It was when Starbucks invented it way back in the day because it was a way to reach new audiences with their coffee rituals.

Diana: Yeah, it was bringing flavor into coffee, it was really the first time and it also did another thing: it introduced a season. Now, when you think of pumpkin spice and it shows up in September, you know it’s time to start shopping for Christmas.

David: So we put some examples on the screen here for you and this top row is really big CPG and what we want to say is this isn’t wrong for them to do, but they’re being opportunistic, not strategic. They’re trying to get a bump for the month of October and November. They are the kind of business and the kind of marketing system where a zero point zero-zero-two bump on that particular skew is gonna rock.

For the rest of them (where it’s getting to kind of middle tier), like these guys down here, they are definitely expressing a little bit of confusion. Pumpkin spice flavored bagels, or butter, or hummus, or salsa, or spaghetti sauce, or goat cheese – that gets a little weird but it’s still within the system. It feels a little confused, no offense Sprouts. But down here, we feel like this is where it’s pretty much the bus ticket to hell.

Diana: You’re going off the rails.

David: You’re down here making raw pork pumpkin spice sausage, breaded fish filets, dog treats, cat litter, hand sanitizer, and my personal favorite, fish bait.

Diana: Yeah, the fish bait! The cat litter is the one that really is confusing to me.

David: Yeah, so let’s move off of this now and we’re going to talk about innovation. We’re going to talk about six different types today. Innovation by its very nature should be balanced and limitless, but so for the purposes today we’re going to focus on six.

Diana: Yeah.

David: So the first one that we want to talk about is form or form factor innovation and the reason it’s so important is because it can have a really huge influence on a large scale of customers and it can really be revolutionary for your brand in terms of growing it and if you’re doing a really great job it can really revolutionize the industry. So, do you have any examples you want to talk about?

Diana: Well, I’ll talk about my favorite example, which is Califia Farms. This is no surprise everybody will identify Califia Farms as kind of breaking that barrier from those square, or rectangular tetra packs (a boring product sitting on a shelf) to something that people wanted to purchase because it was beautiful. It took the form of the old glass milk containers, cross-referenced it with a typical juice container, and mixed it together to create something new, but very specific to the brand and really changed that category in general.

David: Yeah, they brought queues from traditional dairy and the heritage of the American family and brought that to non-dairy, which was really pretty disruptive. My favorite example actually within form factor is Underwood Winery. I think they are a really great example. They’re a premium winery, great blends, great varietals, and they are the ones who first put high-end wine in aluminum cans just like Budweiser. I think it shifted people’s perception and it made wine more portable, more on-the-go. It also loosened the screws on the whole category, so you know you find a lot of people who are moving beyond the concept of boxed wine.

Diana: Yeah, gone are the days of the taboo box wine, we’re now in cans.

David: So, the second type of innovation we’re going to talk about today is product innovation and this seems like an obvious one and you think it would be so obvious that we don’t need to talk about it, but it’s very hard to do well. So, I think the first step in getting product innovation to work, is I would encourage all leadership out there to develop the following: learn to make mistakes quickly.

Diana: Yes, well let’s talk about one of the brands that we’ve worked with within the past couple of years in regard to an example case of product innovation. Hilary’s Eat Well is a meatless burger patty brand that we brought onboard I want to say almost three years ago now. When they came to us they had a really great product and they had a really great story, but they weren’t really pointed in any particular direction – which is why they came to us and asked to help us with our brand strategy. As went through the process of brand strategy, we determined that their space that they could play in was in the free-from space (allergens) but then the fact that they had culinary background that came from their founder/owner, Hilary Brown, we took that and mashed it together. Now we’ve got a brand that is free-from, meatless with a culinary background.

What that did was it allowed them to start talking about, oh what kind of flavors now make sense for a brand? So rather than kind of guessing and shooting in the dark of whatever Bob in operations thinks is a good idea, we now have a filter through which these go through – not only the flavors in the line extension, but then we started talking about what’s next.

David: Yeah, awesome. What I loved about it is they gained tons of confidence and clarity and figured out how to move into different parts of the store.

So, the next type of innovation I want to talk about is channel innovation. Simply put, it’s really just about finding new places to sell your stuff or to present your brand. And it can be as simple as a food/drug mass strategy versus a club strategy or it can get a lot more nuanced.

Diana: Okay so like DRY Sparkling.

David: Yeah exactly, DRY is a great example for this. Research had showed us that there were unmet needs in the hospitality channel. We were able to come up with innovations that addressed that really well. DRY was so excited about it that they shared this innovation strategy for hospitality as part of their sales presentation to a large retailer who had previously discontinued them. That retailer not only bought into the entire idea, but made DRY their category captain.

Diana: And asked them to help them build that category for them at retail.

David: So that move helped them grow to a factor of 20x.

Diana: Yeah, so you take this one channel driven innovation and you impacted the organization as a whole.

David: Okay, so the next type of innovation we want to talk about is operational. So, operational innovation is really not about improving your existing methods, it’s about finding new methods. So that can include process, people, product, everything about it, customer service, anything that your business or brand does, any function that your company performs, finding a new better way to make it more meaningful, or faster.

Diana: Yeah, basically the readers’ digest version is: we’re basically saying operational innovation is systemic, so anything that you’re going to do is not going to just impact one part of your business, but likely it’s going to have an impact on all of the business. Changes will need to be made across the company.

David: Yeah and my example for that, that I really like a lot is BMW’s ReachNow program. You take a company that has distinct equity and you find a new channel like on-demand transportation and you bring in that luxury, high-end quality to it. You create a whole new way of reaching customers.

Diana: Yeah and how that works is (because that sounds a little bit more like channel strategy) that allowed them to test and innovate new products a little bit more frequently, it allowed them to talk about marketing in a different way, so this one innovation concept operationally changed the way the company did business and brought new products and tested them in marketplace.

David: Great. Okay so then the next type of innovation is marketing innovation.

Diana: So, that means implementing or bringing in a new marketing methodology or new strategies.

David: Right. This involves big change in something like product design, or your pricing strategy, or your sales and promotion strategy, and of course packaging and that sort of thing.

Diana: Yeah, Netflix is a really great example of a company that used marketing innovations. Within a short period of time, the way they were going to market (using their marketing strategy) they disrupted a traditional way of getting entertainment into the household.

David: Yeah, I think they’re a really great case study because first they disrupted Blockbuster using good old-fashioned U.S. mail and then they morphed from just a video streaming company to be one of the most influential companies in Hollywood. They actually named their process “reverse engineering Hollywood,” which looks a lot like collecting a ton of data, stockpiling it, analyzing trends and then figuring out how to satisfy unmet customer needs.

Diana: Yeah.

David: So the last innovation thing we’re going to talk about today before we get into the model that we’re gonna share with you about brand strategy’s role in innovation, is cultural innovation.

Diana: Okay, so what’s cultural innovation? That sounds woo-ey.

David: It is a little woo-ey. So cultural innovation actually means making internal changes that impact existing things within the organization inside your company. It could be redefining your values, it could be helping your people achieve better or training them differently and it’s of course about process. So when and how and what do we make? Can we do it better? Faster? Do we need different people? Do we need different expertise in-house?

Diana: Part of Retail Voodoo is we work with brands that already have that nugget of ability to have a cultural impact on society within the organization. Why don’t we talk about one of your favorite brands?

David: Yes, I’m deeply passionate about this brand. One of my favorite examples of cultural innovation is Teton Waters Ranch and you probably have yet to hear of them but Teton Waters Ranch is one of our clients and we work with them. They are grass-fed beef ranch that was so successful in the short term that they worked themselves out of cattle and out of a brand and out of a culture. Their supply could not meet the demand that they created. And they were still intent on saving the planet, which is how they got into the business in the first place. So we worked with them and what came out of it was something called Ranch 3.0, which is a global set of standards on how to produce grass-fed beef at the highest quality.

So, let me explain this so you can kind of get it. So, Ranch 1.0 would be home on the range, how cattle were raised for 1,000 years – they lay in the grass and they chomp on the grass and you take care of them. It’s good for the planet, good for the people, and good for the animals right up until the end.

Diana: Then came the industrial age.

David: So the industrial age brought big ag. Picture the 1940’s/1950’s, where it was all about volume, volume, volume.

Diana: Efficiency.

David: No longer concerned about the quality of the product or what it does to the environment and no longer concerned about the life of the cattle. So that produced an entire backlash that generated things like heart disease, or increased heart disease because it took what was good about the beef out. And so, Ranch 3.0 is all about making sure that the animal welfare and the sustainability of the environmental standards are in play. And then how things are done – so product, quality, and integrity are throughout.

Diana: Yeah.

David: And so what’s really cool about it, is Ranch 3.0 is now a global network of family owned, multi-generation, grass-fed ranches that have committed to the Teton Waters Ranch sustainability standards and it’s amazing.

Diana: Yeah.

David: You can tell I love it. So, but I digress a little bit. Now we’re going to get into our model, so I’m going turn on screen over here so you can see what we’re doing. So, these are the innovations that we talked about.

Diana: Mm-hmm, we’re gonna talk about how Retailer Voodoo uses brand strategy in order to drive innovation. So you’re going to have to understand how we approach brand strategies, so bear with us for just a minute while we talk about that and then how that then tees you up for successful innovation filter.

David: Yes, okay, so I’m going to pop these on the screen so you can see them. But really what we do is there are five key areas that we work in that are all about the who, what, why, and how of innovation within your brand’s position. And so cultural assessment, which is first, is really about your values and your people. Then competitive audit is really about finding those advantages and those distinctions within the marketplace. Then category motivation is really about what is the marketing opportunity and what are people looking for – what unmet needs are out there? And then consumer insight will help you get to that, which is really simply about human truths. What do the humans need that we can actually do for them?

Diana: And being able to distinguish what they think they need versus what they really need.

David: Yes, because we can get into that, but that’s another topic. Okay, and so then the last thing in this set is, your capability, what is your organization able to do or make?

Diana: Yeah.

David: So if we look at that as our baseline over here, we then come into this, where we start with your mission, your only-ness, your brand pledge (which we consider your guiding principles) and your insights. So we take all of those things that come through based on the cultural assessment and the competitive audit. We’re really trying to build a brand strategy ecosystem, intent on asking who we are, why we exist, and why does it matter. And so, trend analysis is really the important part. Once we have all those other pieces in place, we push all of that through trends and you can see how the network is working, where these are continuously back and forth type questions, so it’s very important that they play off one another.

So, what we want to do is be able to take what you already know about your brand, along with the new learnings, and then peer out into the Zeitgeist (which is really the world of opportunity), what’s happening out there and find out where logically your brand can extend you to and what kind of innovation makes sense. So, you see how we connected the branded ecosystem to innovation, this is where it gets really cool. Now we’re going to build and innovate innovation filter for you, because that’s really what you should be able to get out of this, at the end of the day.

With the brand strategy in place, you can build this innovation filter. So, it comes down to essentially three kinds of questions. Now that you have all your brand strategy ecosystem in place, you can go out and say, “do we have permission to do this?”

Diana: This is the first layer of the process.

David: We’re gonna show you. We’ll build the filter – it’ll all make sense momentarily. But the first gate in the filter are these three questions: Do we have permission from the marketplace? Do we have any distinct equities we can push out into these innovations that will give us traction and third? Do we have trust, internally and in our business channels and in the marketplace to do this? And so, if you can answer those questions then yay, you go to gate two. So, gate two is really about, you’re wanting to answer the questions no here and the questions are really: Will this innovation change our values in any way? Will this innovation pull us off mission in any way shape or form? And if you get two no’s, then you move to the next question, which is, does it make business sense? Can it really make us money? Will it grow our brand? Can we provide it?

Diana: Mm-hmm (affirmative), is there enough opportunity for it?

David: Yes, is there enough opportunity. So, the next gate is, can we bring immense value? Which means, can we do something that is not a me too? Can we create something within our brand towards this audience to meet a need in a way that no one else is? And if you can answer that question yes, then make it so.

Diana: It’s really important (and most of you out there know this), but we run into clients all the time that aren’t necessarily in tune with this: product development takes about 12 to 24 months for any set of concepts and flavors. We really recommend that a company has at least five years’ worth of innovation. So, if you’re a smaller company, that might be two or three different line extensions so that you’re at some phase of product development through the process. We don’t ever want you to do one innovation at a time because you do lose blocks of time.

David: Yes, so we were actually with a client yesterday working with this exact model and we were able to build out an 18-month horizon, a 5-year horizon, and then 10 years, which is into the dream state and the woo-woo part of running a practice. But what’s really great is they now know what’s going on for the next 18 months and those things are going to be on the shelf, available to purchase in 18 months.

Diana: Yeah, the next set.

David: The next set. Okay, and so I think from here, here’s our map, and I’m sure you will have questions about it, but if you could take only one thing away from us today (from this time you’ve been willing to invest with us for this webinar), innovation should be part of your business strategy and brand strategy is the most successful way to drive innovation meaningfully.

Diana: That is our 20 minutes and I can’t believe that we’re literally on the minute so we’re going to open it up to any questions, does anybody have any questions or clarity or anything specific to their brands that they’d like to ask at this time?

Got a couple popping up, let’s just give it another minute or two and see if any others pop up.

Okay, let’s talk about sales. So the question is: When do you bring sales into the process, or do you?

David: Yeah, excellent question, I think it’s critical, there are three key chains that are necessary to have any meaningful innovation be disruptive and successful. Those are your sales team, your marketing team, and your operation team. Leadership should oversee this and buy into it, but think of it like a three-legged stool. You need all of them in there and they need to be singing kumbaya the whole way through. They have to think about it at different points in the process. There will be innovation that will be driven by operations, and there will be innovation that will be driven by sales and driven by marketing, but all three of those people need to be at the table and have implicit trust across the silos so that you can shepherd this thing and make sure that it shows up in the marketplace.

Diana: As a sales person I like to add to this. This is how I see it as well: your sales team really has a pulse on what’s going on in a marketplace, so they’re usually the ones that are coming to you, saying we’ve got to do this X, Y, and Z. I really feel that sales is not only important with ideation because they’re going be so important and of course the sale of the product, you’re going to want them to be participating through the testing and having them participate in that.

But when you have a brand strategy in place it will become really easy because often times salespeople tend to be opportunistic, they’re 90% of the reason why pumpkin spice is in every product in the marketplace. So, having that filter in place will allow you to take their feedback, kind of throw it in the pool and send it through the filter process. And then the last thing that I’ll say is, because we have seen this happen with several clients away, is the sales team gets very excited about product development and oftentimes spill the beans or get too excited before product has been thoroughly vetted through the product testing cycle. So having them be part of the team, letting them know they’re important to the process (but also making sure they’ve got the brakes full on until your company is very clear about what your go-to-market strategy is gonna be about any innovation) is going to be super critical.

David: Yes, well said. So, short version of that answer, I’d say, when do you involve sales and marketing? Obviously, marketing would start here, but I’d have the salespeople sit in this conversation. From phase zero, all the way through this and keep them part of the entire conversation and that way you will not end up with pumpkin spice as an innovation.

Diana: Well, unless it’s right for your brand.

David: Who has another question?

Diana: Okay, so there’s a couple of other questions here. I’ll let you choose this one.

David: So the next one is, how to brands fail at doing this and where is the biggest place they go wrong? And I think Diana, you just kind of touched on that, and I think it’s not singing kumbaya.

Not having the whole organization in or thinking that operations is the place to innovate without leadership’s buy-in, without a clear plan, without sales and marketing being at the table for everything and everybody being in unison. You’re going do what every organization does when they get operational significance, you’re going to go into functional silos and those ultimately turn into fiefdoms. So it’s where they fail the most is when they operate within functional silos and don’t trust each other.

Diana: Okay, great. Functional silos.

David: It’s nutty.

Diana: I know. Let’s just do one more question here.

So, what’s this going to cost me? That’s probably an offline conversation, but where do you get your money from for innovation? That’s a really good question, we’ve seen companies pull for not just brand strategy, but for innovation from different parts because product innovation is the lifeblood of your brand, it’s really important not to find it as an overhead expense in operations or strictly a marketing spend. I would say CAPEX, which seems like a good place for most organizations is where we would recommend, if you don’t already have the money allocated somewhere else.

David: Yeah, I think that’s an interesting question. I saw this one here that I think is kind of interesting, what is the biggest challenge a brand faces when beginning the innovation process? And I think that again, the reason that we built this map and the reason we’re having this conversation in the first place is, they start here, without doing any of this work. So, if you try to start here, you end up arguing, you end up the loudest voice in the room, the strongest personality or the people with the power to let other people go in the room, end up having the best ideas and that’s not always so.

Diana: Well you don’t want your innovation to drive your brand, you want your brand to drive your innovation and I think that’s really what you’re saying here.

David: Yeah, well said.

Diana: Are we doing a couple other ones?

David: Well I’m looking at the time and we have time so, what’s the next step, I have a big idea that passes the filter, where do I go next? Okay, so I think that Diana touched on this a little bit too but I think it’s really about building that pipeline and making sure that you have time to get it right and that you have the ability. So you come and you’re doing your innovation and your product can be built, you know that you can make money on it or you can impact the world in the right way on it. Then you want to be able to figure out how you’re going to market it, how you’re to sell it in, and then how you’re going to keep the promises. So that involves sales, marketing, innovation, so it’s an operational sandwich. You need leadership to bless it, you need operations to prove it can be done, marketing, sales, operations.

So, I think that’s what happens next and that process again, the development process, some companies are really fast, can develop something in a matter of weeks, but they need to be able to take time to operationalize it and make sure marketing sales are dialed in and then you have to figure out how you fit into the seasons or how you fit into the sales cycle. So again, 12 to 18 months is realistic on that.

Diana: Did we catch all of them? Any other ones pop up? I don’t think so.

David: I think we’re good, sorry I was just reading ’em all.

Diana: And making sure we got all the questions answered.

David: Okay, well thank you so much for joining us today.

Diana: Yeah and hopefully you got a little something out of it, so if you have any questions about any of the content, let me know or let David know through email, we’ll be taking this presentation here and providing it to you in email format and it will then be available online in transcript and video here in about a week, so if you’re wanting to share this or just kind of recapture, revisit some of the topic’s talking points, that will be available to you soon.

David: Okay, again thanks for your time, take care, bye-bye.