Setting prices on new products and services is one of the most challenging roles in marketing. Pricing mistakes are costly, yet it's one of the most tempting tools to use when trying to generate revenues. Fortunately, methods like Value Based Pricing and frameworks like The Big Picture make the job easier.
What if you wanted to explore more innovative ways to set prices? Applying the SIT innovation patterns would create new insights and options. The SIT patterns help break fixedness - the tendency to limit the way we see things to what we know. These patterns are innate to all of us. We just need to "extract" them from within and deploy them in a systematic way.
For this month's LAB, we will apply SIT to pricing. While there are many methods and schools of thought around pricing, the SIT templates should apply to any of them. I would do the following.
Read this partial list of core competencies for a particular firm and try to guess what industry it is in:
1. Consumer insights: understanding what consumer want
2. Design: making things easy to use
3. Innovation: coming up with new ideas routinely
4. Systems integration: making things work together
5. Customer relationships: forming and maintaining customer loyalty
From this list alone, you could imagine this firm being part of virtually any industry. In fact, the firm with these core competencies would likely be the leader of that industry. Which company owns these skills?
In 2008, managers at Kodak cited these skills as their core competencies. Less than four years later, Kodak is on the verge of bankruptcy, ending the reign of a once proud and legenday 120 year old brand. It is now forced to sell its massive patent estate to raise operating cash.
What happened? Many will cite the familiar reasons: failure to innovate, slow to move into digital photography, poor execution of digital photography, and so on. Yet none of these reasons are correct. Kodak was a highly innovative firm. It invented digital photography long before it wiped out its paper film business. Kodak was a marketing powerhouse. It could execute marketing campaigns and brand building with the best of them.
How do you know if someone is truly innovative? I look for three things. First, does the person have a cognitive process for generating new ideas? Innovation is a skill, not a gift. It can trained and learned like any other skill. So I expect successful innovators to have such training and be able to deploy ideation methods - on demand.
Second, is the person motivated and hopeful about the future? Hope is defined as a positive motivational belief in one's future; the feeling that what is wanted can be had; that events will turn out for the best. Research shows that an employee's sense of hope explains their creative output at work. Hope predicts creativity.
Third, and perhaps most elusive: do they have the innovation senses to know how their efforts will succeed? I call these the Five Senses of Innovation.
Leaders need to make innovation personal. Creating a culture, from the top down, where innovation is encouraged appears to be a successful formula. Mike Clem reminds us again that there needs to be a bit of a designer in all of us, and this especially applies to management.
One way to develop your expertise in SIT techniques is with pattern spotting. A key premise of SIT is that for thousands of years, innovators have used patterns in their inventions, usually without even realizing it. Those patterns are now embedded into the products and services you see around you, almost like the DNA of a product. You want to develop your ability to see these patterns as a way to improve your use of them.
There's probably no better place to practice pattern spotting than at the Consumer Electronics Show (CES). In last week's CES in Las Vegas, "manufacturers demonstrated a range of previously mundane but now smart, web-connected products destined to become part of daily domestic existence, from kitchen appliances to baby monitors to sports equipment," as reported in The Independent.
The famous inventor, Thomas Edison, lived in a beautiful home. But something was unusual about the gate that led into his house. His visitors had to push the gate very hard to open it, and then again very hard to close it. It seemed odd that such a successful inventor like Thomas Edison wouldn’t fix his gate. Rumor has it that Thomas had attached a pump to his gate so that every time someone opened or closed it, they were pumping fresh water into the plumbing system of the house.
This is a great example of the innovation technique called Task Unification. Task Unification is defined as the assignment of additional tasks to an existing resource. That resource can be a component of a product or service. Or it can be something in the immediate vicinity of the product or service.
The economic outlook for 2015 is, by most accounts, "slightly better than 2014." That, of course, depends on what industry you're in. For some, that outlook could be a lot better with an injection of good, old fashioned innovation. Here is my short list of five industries most ripe of innovation in 2015.
"So my definition would be, in order for a certain idea to be creative, it must possess two major components. One, it has to be new, novel, something we haven't seen before," says Rom Schrift, a marketing professor at the Wharton School of the University of Pennsylvania.