Triumph of a better ideology

Market innovation has long been dominated by the world view of engineers and economists – build a better mousetrap and the world will take notice. But Douglas Holt and Douglas Cameron argue the merits of cultural innovation instead

This functional point of view certainly has merit. But, because it is the only way that we approach innovation, the ‘better mousetraps’ approach has had the effect of eclipsing a very different innovation world view – champion a better ideology and the world will take notice as well.

This phenomenon is found everywhere in consumer markets. For example, farmer-cookbook-author-television host Hugh Fearnley-Whittingstall, author Michael Pollan, the international Slow-Food movement, and the American grocery retailer Whole Foods Market, among others, have transformed food consumption for the middle and uppermiddle class. These cultural innovators have championed an alternative approach to agriculture and food as an ideological challenge to the dominant scientificindustrial food ideology.

They have brought to life the value, even necessity, of winding the clock back to some sort of pre-industrial food culture in such a way that it is irresistible for the upper middle class in the United States, the United Kingdom, and other countries. Relying upon what we term myth and cultural codes, these cultural innovators have massively transformed food preferences.

We call this phenomenon cultural innovation. Cultural innovation has been ignored by management strategists, despite its pivotal role in launching and reinvigorating any number of billion-dollar businesses. The Body Shop, Ben & Jerry’s, Marlboro, Method, Whole Foods, Dove, Red Bull, Harley-Davidson, the Mini, Starbucks, Coca-Cola, Levi’s, and Snapple, to name a few, have all profited from cultural innovations. When these enterprises advanced a more compelling ideology – leapfrogging the staid cultural orthodoxies of their categories – consumers beat a path to their doors.

The search for better mousetraps Launching ‘the next big thing’ – the innovative idea that resonates powerfully with consumers and takes off to establish a profitable new business – is the holy grail of managers and entrepreneurs alike. Strategy experts have been offering advice on how to identify and exploit such opportunities for decades.

Fifteen years ago, Gary Hamel and CK Prahalad offered a pioneering call to arms. To ‘create the markets of tomorrow’ they urged managers to focus on industry foresight and strategic intent. To avoid getting bogged down in an established market’s internecine tactical battles, they encouraged managers to stake out new market space – what they famously termed white space – in order to create and dominate emerging opportunities.

More than a decade later, W Chan Kim and Renée Mauborgne introduced a new metaphor – blue ocean – to dramatise a very similar idea.

Existing markets are characterised by dog-eat-dog fights to outdo competitors on a conventional set of benefits. Incumbents rely on incremental changes in product and tactical marketing to fight over thin margins. This, according to Kim and Mauborgne, is a red ocean. In order to develop future-leading businesses, companies must reject the conventions of the category to craft ‘value innovations’ that have no direct competition – blue oceans.

These marching orders have inspired many managers and entrepreneurs. But what kinds of future opportunities should we be looking for? And how does one actually go about spotting these opportunities and designing new concepts that will take advantage of the blue oceans? Innovation experts have offered us two paths.

Technological Innovation For most innovation experts, future opportunities mean one thing – the commercialisation of new technologies. Technology-driven innovations are the stars of business. From historic innovations such as the light bulb, the telephone, the television, the Model T, and the personal computer to recent stars like the iPod, Amazon.com, BlackBerry, Viagra, and Facebook, the commercialisation of breakthrough technologies has clearly had a huge impact on business and society.

In The Innovator’s Dilemma and subsequent books, Clayton Christensen argues that new technologies allow companies to design ‘disruptive innovations’ that transform their categories. Disruptive innovations are products and services that trump the value delivered by existing category offerings because they are cheaper, more useful, more reliable, or more convenient.

Mix-and-Match Innovation In recent years, a ‘mix-and-match’ approach to innovation has become influential. According to Kim and Mauborgne, in order for companies to offer customers a significantly better value proposition, they must methodically break the rules of their existing category: subtracting and enhancing conventional benefits, as well as importing new ones from other categories.

For instance, in Blue Ocean Strategy’s lead example, the authors describe how Cirque du Soleil created a blue ocean by borrowing from theatre and Broadway musicals to reinvent the circus.

These better-mousetraps innovation models are based on the world view of the economist and the engineer – a world in which it is only the material properties of what we buy that are important.

Consumers see innovation differently Consumers – the ultimate arbiters of market innovation efforts – often find offerings to be innovative even though they seem quite pedestrian from a product-design standpoint. It turns out that blockbuster new businesses do not necessarily require radically new features that fundamentally alter the value proposition.

Consider beer. From a bettermousetraps perspective, the American beer market has long been a mature category – a notoriously red ocean that resists innovation. Many product innovation efforts have been tried, and the vast majority have failed despite their seeming combinatorial creativity.

Brewers have tried to follow blue-ocean strategy for many years. Combining concepts across categories, they have launched beer+energy drinks (Sparks, Be), beer+tequila (Tequiza), beer+soft drinks (Zima), and so on. All these supposed innovations were failures in the mass market.

Now let us look at the beer category from an ideological viewpoint. While the product – the beer itself – has seen only minor changes over the past 30 years, the category has been very dynamic in terms of the cultural expressions that consumers value. Incumbents have been pushed aside by new entrants with a better ideology.

In the popular-price tier, Budweiser took off in the 1980s with branding that showcased men working cheerfully and industriously in artisanal trades, men whom Budweiser beer saluted with a baritone-voiced announcer proclaiming: ‘This Bud’s for you!’ The results were startling. The beer brand quickly became the go-to choice for working-class American men. By the middle of the decade, Budweiser was unchallenged as the most desirable beer in the country.

By the early 1990s, Bud’s ideology had lost resonance and the business sank, to be replaced by its stable mate. Bud Light took off in the 1990s to become by far the dominant American beer brand, speeding past the brand that had pioneered light beer as a product innovation, Miller Lite. Bud Light tastes little different from Miller Lite. Rather what was different was a decade’s worth of silly Peter Pan stories of men who engage in all sorts of juvenile high jinks, which conjured up a new kind of rebellious masculinity for adult men.

Consider soft drinks – a category that would seem to be one of the most masochistic red oceans around. The two leading soft-drinks marketers in the world, PepsiCo and The Coca-Cola Company, have invested hundreds of millions of dollars to innovate their way out of this mature category.

Both companies have aggressively pursued mix-and-match concepts to create new value propositions. For example, The Coca-Cola Company has made big bets on Coke Blak (coca-cola+coffee) and Enviga (a ‘calorie-burning’ green tea). Both of these ambitious efforts – supposedly targeting distinctive consumer ‘need states’ – failed to break through.

Enter the cultural entrepreneurs While the food scientists were struggling to make odd-ball mix-and-match drinks combinations, cultural entrepreneurs were playing an entirely different game. They pursued radical innovations in culture, not product.

The most familiar example of this in the United Kingdom is Innocent Drinks. The market for alternative natural fruit smoothies had long been established in the US, pioneered by Odwalla (est. 1980) and Fresh Samantha (est. 1992). The big UK grocers such as Marks & Spencer, Sainsbury’s, and Tesco imported the concept and developed their own versions.

Innocent easily won over consumers who were worried about health issues by making a cultural assertion – championing the pre-industrial purity of ‘only fruit’ against drinks full of preservatives and synthetic ingredients.

"While food scientists were struggling to make odd-ball mix-and-match drinks combinations, cultural entrepreneurs were playing a different game. They pursued radical innovations in culture, not product"

The Coca-Cola Company, which had paid $180m to buy out the ideologically innovative Odwalla in 2001, followed suit by paying $50m for about 15% of Innocent in 2009 – a $333m valuation.

Failing at its better-mousetraps innovation strategy, Coca-Cola has had no choice but to acquire ideologically innovative brands at very steep prices.

These businesses have been every bit as innovative as the technological and mix-and-match businesses celebrated by innovation experts. But what was radical about them was what the product stands for – its ideology, which, when staged through myth and cultural codes, becomes a distinctive cultural expression.

Furthermore, many technological innovations can benefit from innovative ideology as well. Cultural innovations have turbocharged many better mousetraps including Apple, Google, Mini, Red Bull, JetBlue, and Wikipedia.

the traps in ‘mindshare’ marketing We might expect that the discipline of marketing would play a leading role in the development of strategy for cultural innovation. Yet, conventional marketing – what we term mindshare marketing because it is couched in psychology – emphasises the day-to-day stewardship of existing businesses and, in so doing, slights cultural innovation.

Depending on the company and category, today’s mindshare strategies focus either on ‘functional benefits’ (sometimes termed ‘rational benefits’), or on ‘emotional benefits’, or on both.

the functional benEfits trap Mindshare marketing relies on an easy and intuitively appealing metaphor: brands succeed when they colonise valued ‘cognitive territory’ in consumer minds. The model directs managers to determine the cognitive ‘gap’: which functional benefit in a given category is most valued by consumers and least dominated by other brands? Targeting the gap, the marketing goal is to stake out a claim to the cognitive association in consumers’ minds, then hammer home the connection between the trademark and the benefit claim as simply and consistently and frequently as possible.

Over time, according to the theory, consumers would unconsciously associate the brand with the benefit, and as a result the brand would come to ‘own’ (in a cognitive sense) the benefit.

The functional benefits model is most useful when a product really does command a novel functionality that gives the brand a substantial and durable advantage over competitors. In such instances, the mindshare model simply reinforces what economists have been preaching about reputation effects for decades. Such advantages, however, are hard to come by, and, when a new technology with a truly improved performance is introduced, it is summarily copied by competitors.

The Commodity Emotions Trap Unfortunately, the new style of mindshare marketing has proven to be more problematic. To avoid the functional benefits trap, many marketers now focus on identifying what they term ‘emotional benefits’, which are the softer values, thoughts, and feelings that consumers associate with the product, brand, or category. Although the intentions may seem noble and sophisticated, ‘laddering up’ to the consumer’s ‘higher order values’, or ‘probing deeper’ to unveil the consumer’s ‘fundamental need-states’ and the ‘brand truth’ is anything but that.

In practice, the result is simply to push for vague abstractions that hold a negligible value for consumers. At least functional benefits forced marketers to remain grounded in the product’s material performance. There are no constraints at all for emotional benefits: all emotions are fair game. We are witnessing an emotions ‘arms race’ in which companies vie to own one of the shortlists of top emotion words.

This process encourages companies to pursue generic ‘emotional territories’ that any brand in any category can claim. Coca-Cola becomes the champion of ‘happiness’, Pepsi becomes the champion of ‘joy’, Fanta becomes the champion of ‘play’, Snapple becomes the champion of ‘fun’. The marketers at Oscar Mayer, the lunch-meats and bacon brand, have launched a $50m advertising campaign consisting entirely of slice-of-life vignettes featuring people being happy while eating Oscar Meyer and the tagline ‘It Doesn’t Get Better Than This’. The company expects that these ads will ‘recapture the joy and exuberance’ of the brand.

These emotion words blur into a fuzzy sameness. Levi’s becomes the champion of ‘confidence’ and ‘freedom’. But so do Lee Jeans and Guess Jeans. For that matter, so do Oxford Health Insurance, Volvo Station Wagons, and Verizon Mobile telephone plans.

Only through such a process could Procter & Gamble house a pregnancy test, a washing powder, an oral hygiene brand, a feminine hygiene brand, a line of cosmetics, and an antiperspirant, all of which offer ‘confidence’ or ‘confidence in results’.

While the pursuit of emotional benefits has helped many a brand manager avoid the functional benefits trap, the unintentional consequence is to land in an even more strategically bereft space – what we term the commodity emotions trap. Emotional benefits render the brand even less distinctive, from a consumer’s perspective.

As with the functional approach, emotional branding drives brands to mimic the cultural orthodoxy of the category. Mindshare marketing not only limits innovation, it creates red oceans.

Psychology to blame Ultimately, both the functional and emotional benefits tangents of mindshare marketing are severely limited as innovation tools because they are rooted in psychology. Both approaches imply that marketing is about embedding associations between brand and valued benefits in consumers’ minds. As a property of mind, the brand and its benefits are both assumed to be durable and contextless.

Mindshare marketers’ favoured terms for a brand’s key benefits – brand essence and brand DNA – reflect this assumption. Because the strategic core of the brand has no connection to society or history, mindshare marketers push the job of making their brands resonate with consumers onto their creative partners. They are charged with injecting some ‘trends’ or ‘fame’ or ‘cool’ into the brand in an effort to make it relevant.

Conceiving of brands as a phenomenon of the mind – rather than of society, culture, and politics – means that opportunities for innovation created by historical changes in society are totally ignored.

Brands are rooted in culture People always want better functionality. Ideological opportunities, in contrast, are produced by major historical changes that shake up cultural conventions of the category, what we call a social disruption. These shifts unmoor consumers from incumbent brands, and prod them to seek new alternatives. It is an emergent kind of opportunity that is specific to a historical moment and a particular group of people. Likewise, the cultural innovations that respond to these opportunities are fundamentally different from better mousetraps. They are composed of specific cultural expressions, which are conveyed by the brand across consumer touchpoints.

"As with the functional approach, emotional branding drives brands to mimic the cultural orthodoxy of the category. Mindshare marketing not only limits innovation, it creates red oceans"

Powerful cultural expressions can be dramatised via product design (Ben & Jerry’s, Starbucks, Vitaminwater), print ads (Jack Daniel’s), guerrilla stunts (Ben & Jerry’s, Fuse), corporate business policies (Ben & Jerry’s, Fat Tire, Freelancers Union), retail design (Starbucks), packaging (Starbucks, Vitaminwater), the service encounter (Starbucks), naming (Vitaminwater), outdoor media (Freelancers Union), and television ads (Nike, Marlboro, Clearblue, Fat Tire, Levi’s, ESPN). All touchpoints are fair game for cultural innovation.

Can cultural innovation become a systematic pursuit? We have learned that it can. For the past decade we have engaged in a ‘cultural innovation laboratory’ of sorts: we conducted academic research on dozens of these successes while also consulting to a wide variety of companies to develop cultural innovations for them.

The result is what we call cultural strategy: a six-step cultural innovation framework supported by a systematic toolkit of cultural research methods. We have successfully applied our cultural innovation model to blue-chip brands such as Coca-Cola, Mini, Ben & Jerry’s and Converse, as well as to smaller entrepreneurial brands such as Fuse music television, Svedka vodka, Freelancers Union health insurance, and Fat Tire beer.

Ideological opportunities provide one of the most fertile grounds for market innovation. Yet, these opportunities have gone unrecognised because of the extraordinary influence of economics, engineering, and psychology on management thinking. These disciplines, as different as they are, share a common assumption – in order to simplify the world, they purposely ignore cultural context and historical change. These theories remove all the messy bits of human life in order to present a tidy theory that is easy for big companies to work with. We argue that it is in these untidy hard-to-measure parts of social life that some of the greatest innovation opportunities lie.

These better-mousetraps innovation models are based on the world view of the economist and the engineer, but there is more to the world of innovation than new product design alone

Douglas Holt is president of the Cultural Strategy Group, a cultural innovation consultancy.

[email protected]

Douglas Cameron founder and chief strategy officer of Amalgamated.

[email protected]

This article is excerpted from Cultural Strategy: Using Innovative Ideologies to Build Breakthrough Brands (Oxford

University Press, 2010). You can learn more about cultural strategy at culturalstrategygroup.com