Imperial College Business School Imperial College London

Taking a Bite from the Open-Innovation Cake

How can product manufacturers and marketing agencies form a better relationship and grow their innovations abilities?

By Tal Tzvi Oron

A report submitted in partial fulfilment of the requirements for the MBA degree and the Diploma of Imperial College September 2010

Synopsis
In the past two decades, the Internet has penetrated most of the Western worlds life and has broken all sorts of existing boundaries between people. By using the Internet, the populaces knowledge in fields such as education, banking, communication and commerce has grown dramatically. Consumers can now research and compare offerings from various knowledge sources and vendors. Moreover, social media has enabled any persons opinion on any subject or product to be widely dispersed, practically abolishing product or service offers that are overpromised and/or under delivered. This idea is at the centre of this work. How can firms introduce perfectly aligned products with the market actual need, in order to introduce commercially successful products and services, that enjoy the benefits rather than suffer the repercussions of the new digital era wildly disperse platforms and tools. In addition, since product launches and promotions were dominant by advertising/marketing service providers (agencies), these agencies, are highly motivated in helping these firms achieve their goal. This paper covers the meeting point between the challenges and opportunities that both clients (product and service manufacturers) and marketing agencies face, which has been changed dramatically by digital platforms, and will try to establish a foundation between the challenges and opportunities from which these two entities can strengthen their current relationship in order to introduce innovations to the market.

Acknowledgements
This has been a long, hard and fulfilling process. I would like to thank the following people for their part in this project: My academic supervisor, Professor Nick Leon, for his initial thoughts, his support and his help in forming this idea and work. His guidance throughout was invaluable. To my friend Asi Sharabi for his dedication, sense of direction, guidance and brilliance that have made this process worthwhile. I have learned a lot, not just in the field of marketing but also in the areas of friendship, humility and style. I am grateful for that. To the brilliant, busy, giving people who were willing to invest their valuable time and energy without any apparent personal benefits: Nick Farnhill, Tom Himpe, Faris Yakub, Bob Gilbreath, Neil Perkin, Anjali Ramachandran, Solon Sasson, Darren Herman, Ana Andjelic, Adrian Ho and Hillik Nissani. You guys are a true inspiration to me. To my family, Ima Shosh, Aba Ilan, Amnon and Anna, Niv and Offira, who have made this whole journey possible for me. To my friends Gadi, Chris, Niv, Ronen, Kipodi and Idit who gave me structure, confidence and support through this process. Last but not least, to the people who take an active part in building and shaping the digital era that we live in. Twitter fellas, you rock.

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Table of Contents
1 INTRODUCTION ......................................................................................................1 2 CLIENT CHALLENGE ...........................................................................................4 2.1 INNOVATION MOTIVATION .........................................................................................4 2.2 INNOVATION VS. INVENTION ......................................................................................4 2.3 ILL COMMUNICATIONS ..............................................................................................6 2.3.1 RESOURCES .........................................................................................................7 2.3.2 STRATEGY ............................................................................................................7 2.3.3 PROCESS .............................................................................................................8 2.4 DIGITAL ERA ............................................................................................................9 3 MARKETING AGENCY CHALLENGE ...............................................................11 3.1 HISTORY ................................................................................................................11 3.2 ERODING MODEL ....................................................................................................12 3.2.1 CLUTTER ............................................................................................................12 3.2.2 MARKETING METRICS ..........................................................................................14 3.2.3 ECONOMIES OF SCALE ........................................................................................15 3.2.4 BUSINESS MODEL ................................................................................................16 4 HYPOTHESIS .........................................................................................................17 4.1 AIDA RESHUFFLE AND THE NEW MEETING POINT ....................................................17 5 METHODOLOGY ...................................................................................................19 5.1 CLIENT ..................................................................................................................19 5.2 AGENCY ................................................................................................................19 5.3 INTERVIEWS ...........................................................................................................20 5.4 LIMITATIONS ..........................................................................................................22 6 CLIENT OPPORTUNITY ........................................................................................24 6.1 OPEN INNOVATION .................................................................................................24 6.2 CO-CREATION ........................................................................................................29 7 AGENCY OPPORTUNITY ...................................................................................31 7.1 TRANSCENDING THE NOISE AMPLIFYING CONVERSATION ......................................31 7.2 ENGAGEMENT MARKETING .....................................................................................32 III

 7.2.1 SEO TRACK WHAT CLIENTS ARE LOOKING FOR ..................................................33 7.2.2 BRANDED CONTENT ............................................................................................34 7.2.3 BI-DIRECTIONAL COMMUNICATION ........................................................................36 7.2.4 BRANDED UTILITY ................................................................................................37 7.3 PEST SKILL SET .................................................................................................39 8 MUTUAL FOUNDATION FROM CHALLENGES TO OPPORTUNITY ...............41 8.1 INTERVIEW FINDINGS ..............................................................................................43 8.1.1 SKILLS ................................................................................................................44 8.1.2 MOTIVATION .......................................................................................................44 8.1.3 POSITIONING.......................................................................................................45 8.1.4 BARRIERS ...........................................................................................................45 8.1.5 OWN LIMITATIONS ...............................................................................................46 8.2 CASE STUDIES .......................................................................................................47 8.2.1 FMCG CATEGORY - WALKERS DO US A FLAVOUR ...........................................47 8.2.2 PRODUCT INNOVATION NIKE + ..........................................................................49 8.2.3 RETAIL INNOVATION BEST BUYS TWELPFORCE .................................................49 8.3 SPECTRUM OF INNOVATION ....................................................................................51 8.3.1 LIMITATIONS OF THE SCOPE .................................................................................52 9 CONCLUSIONS .....................................................................................................53 9.1 SUMMARY THE CHALLENGES AND OPPORTUNITIES ...............................................53 9.1.1 CLIENTS CHALLENGES ........................................................................................53 9.1.2 AGENCYS CHALLENGES ......................................................................................54 9.1.3 CLIENTS OPPORTUNITIES ....................................................................................54 9.1.4 AGENCYS OPPORTUNITIES ..................................................................................55 9.2 PROPOSED MODEL .................................................................................................55 9.2.1 THE NPD TASKFORCE TEAM ................................................................................56 9.2.2 LIMITATIONS OF THE SUGGESTED MODEL .............................................................57 10 REFERENCES .....................................................................................................59

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 APPENDIX 1 SCREEN SHOTS ................................................................................I 1.1 P&D CONNECT & DEVELOP: ..................................................................................... I 1.2 MY STARBUCKS IDEAS.............................................................................................. I 1.3 DELL IDEASTORM: ................................................................................................... II 1.4 SHARMIN POTTYPALOOZA: ...................................................................................... II 1.5 UNIQLO LUCKYCOUNTER: ....................................................................................... III 1.5 FORDS WHERE ARE THE JONESES? ..................................................................... III 1.6 OKCUPID: .............................................................................................................. IV 1.7 P&G OLD SPICE: ................................................................................................... IV 1.8 BACARDI MOJITO: ...................................................................................................V 1.9 ORANGE GLASTONNAV: ..........................................................................................V 1.10 FIAT ECO:DRIVE: ................................................................................................... VI 1.11 WALKERS DO US A FLAVOUR: ............................................................................... VI 1.12 NIKE - NIKE+ ....................................................................................................... VII 1.13 BESTBUY TWELPFORCE: ................................................................................... VIII APPENDIX 2 SPECTRUM OF INNOVATION DATA TABLE ................................ IX

1 Introduction
Since the dawn of advertising, advertising agencies role has been to be the strategic consultants and executioners of any form of awareness enhancing activity of firms value proposition, whether a product or a service, or in simpler words, to persuade customers they need to buy products made by the agencies clients. However, advertising has grown so much in the past decades that the average consumer these days is hit by about 5000 different messages a day (Story 2007). Because of that, marketing experts believe that in the future, getting attention from consumers will get even harder and be less effective. (Gilbreath 2010) In addition, the Internet has penetrated most of the Western worlds life and has broken all sorts of existing boundaries between people. By using the Internet, the populaces knowledge in fields such as education, banking, communication and commerce has grown dramatically. By clicking a few buttons and within seconds, consumers can now research and compare offerings from various knowledge sources and vendors. No longer is it possible for an advertising campaign to promote a product or a service through a sound bite or a celebrity endorsement that does not fit what the market wants or needs. Moreover, social media has enabled any persons opinion on any subject or product to be widely dispersed, practically abolishing product or service offers that are overpromised and/or under delivered. Advertising agencies, or marketing agencies as they are more holistically named, with their hand on the pulse of the consumer, understand that better than everyone. This paper provides evidence for the declining effectiveness of their work, declining participation levels by consumers and even growing resistance in the population to any traditional marketing associated actions (Greenspan 2004). This is why those agencies are facing a great challenge to their business model, as they are struggling to provide measurable, ROI-positive results to their clients. On the other hand, product and service manufacturers are faced with the other side of the same coin. As consumers become more knowledgeable and sophisticated, research- and development-oriented companies need to innovate and supply a product perfectly aligned with the needs of the market. They can no longer create and build products based on their own development strengths with the hopes of using a marketing campaign to build a need in the consumers minds, but rather they need to build what the consumers expect to get for their invested money. 1

 Traditionally, this was not the case; for most companies, innovation is a proprietary activity conducted largely inside the organisation (Cokepekin 2010). However, over the last decade, more and more consumer products, fashion, and technology businesses have been opening up the product development process and involving more stakeholders within the company, in many cases using ideas and processes hatched outside their wallsfrom suppliers, independent inventors, university labs and even customers themselves (Bughin, Chui and Johnson 2008) to be able to deliver an aligned product-to-market innovation. This paper covers the meeting point between the challenges and opportunities that both clients (product and service manufacturers) and marketing agencies face, which has been changed dramatically by digital platforms, and will try to establish a foundation between the challenges and opportunities from which these two entities can strengthen their current relationship in order to introduce innovations to the market. The synopsis of this work will hence enumerate the challenges and opportunities of both sides in the face of the changes that digital media has introduced, as well as introduce a suggested model for combining these opportunities in order to solve those challenges.

 The paper will conclude that in order to introduce successful innovations, which will be considered inventions aligned with the market, to the market, firms need to breakup the development departments within their organisations. By doing so, each division within the company will be better able to contribute their expertise to create such innovation. Since marketing divisions will be brought into the process earlier, marketing agencies, which are the suppliers of the marketing division, will enjoy a great opportunity to grab a piece of the innovation cake.

2 Client Challenge
2.1 Innovation motivation
Throughout time, companies have been introducing new and attractive products to serve the market more competitively than rivals in a strategy to maximise their profits. According to Clark and Wheelwright (Wheelwright and Clark 1992), a classic study of product innovation, the potential benefits for a company to be innovative and bring new products to the market are threefold: 1. Enhanced market position: Superior products and services are a means to a lead on competitors, build on existing advantage by creating stronger competitive barriers, establish a leadership image that translates into market dominance, leverage existing product and service offerings and increase market share. 2. Better resource utilisation: Introducing additional products and services building an already established network will improve the returns on existing assets such as sales force, factories and field service networks. Moreover, it will allow application of the new technologies for both products and manufacturing processes, while overcoming past challenges that prevented other products or processes from reaching their full potential. 3. Facilitation of enthusiasm: Images of growth associated with product and process development efforts capture the commitment, inspiration, aspiration and creativity of the entire organisation. This success, in turn, enhances the firms ability to recruit the best people, improve their integration and accelerate the pace of change. Indeed, the paper The profitability of innovating firms (Machin, et al.) reveals that innovators market shares were nearly six times larger than those of non-innovative firms. The following section will better explain the term innovation.

2.2 Innovation vs. Invention

Loveb and Ropera argue that an innovation event, such as the introduction of a new product, process or service, represents the end of a series of knowledge sourcing and translation activities by a firm (Ropera, Dub and Loveb 2008). 4

 Wikipedia defines innovation as a change in the thought process for doing something, or the useful application of new inventions or discoveries. (McKeown 2008) It refers to an incremental or radical change in thinking, products, processes or organisations. In the scope of this paper, when a manufacturing firm would like to gain the benefits of innovation, it tends to use a process known as new product development (NPD). This process is the source of the innovation and, if successful, should result in the benefits of introducing a commercially successful product or service as described in Section 2.1. However, it is important to understand the difference between innovation and invention. Schumpeter (Horn 2005) identifies invention as an idea made manifest and innovation as ideas applied successfully in practice. The terms differ more than just linguistically; innovation isnt just about invention, its about driving new ways of doing things, realising new ideas and bringing them into the market. While inventions are in abundance, not all of them achieve this end goal. In fact, many inventions end up sitting on a shelf, proof positive that a company doesnt drive innovation simply by increasing its R&D budget. The question thus is how to add value to an invention and establish it as an innovation. Paul Horn, an IBM executive, shows the difference between the terms, stating At IBM, we take pride in the fact that we have had more US patents awarded than any other company for 12 years running. One measure of their impact on our business is the profit of over $1 billion IBM realises yearly from licensing of intellectual property. Yet IBM spends nearly $6 billion a year for R&D, so a $1.2 billion return in the form of licensing would not appear by itself to justify the investment. That is why IBM invests in R&D primarily to generate innovative products and services in the marketplace. Yet this requires more than inventing and patenting new technologies; it requires applying those technologies to critical customer problems and then bringing them to market in a form that our customers can easily use. (Horn 2005) This correlates with Brown and Eisenhardts (Brown and Eisenhardt 1997) model that shows it is important to distinguish between process performance (how efficient the firm is at developing new products and services) and product effectiveness (whether the firm producing the right product and services). The NPD (new product development) process or endeavour that is mentioned above is the process by which companies concept and realise new products or services in an effort to make them commercially successful. As was hinted above, such processes are not always successful, and companies face the challenge of 5

 increasing the ratio of success vs. failure. Failure to convert an invention to innovation is simply defined as failure to introduce a perfectly aligned product to the markets expectations and needs. Unfortunately, in the past decades, rapidly developing technologies have lowered the bar of the development of new products and the market has become highly competitive, for both established firms and newcomers (H. Chesborough 2003). In addition, the growth of a mobilised skilled workforce and knowledge around the world have made these skills disperse. For these reasons, firms that compete to meet the demand of the market for new products are faced with significantly increased costs for new product development (NPD) and research (H. Chesborough 2003), as well as risk of failure and thus financial loss (Fleming 2007). The reality of todays marketplace demands that the translation from invention to innovation will need to happen at a faster and faster pace to meet shorter time-tomarket windows. This is because production technology has reached such an astonishing efficiency, competition among inventing companies is so fierce and vertical integration is less needed that the window of opportunity to turn inventions into innovation has shrunk dramatically. (Horn 2005)

2.3 Ill communications

There are many ways to drive innovation: create a culture of innovation within the organisation, provide forums for nurturing new ideas, celebrate risk taking, etc. But one of the keys for successful innovation is to ensure that people are working in tune with the marketplace, not just the technology, because the innovation will be happening at the intersection of the two. (Horn 2005) Regardless of the nature of innovation required, the process in which companies creates innovation has become one of the most critical activities for a company to undertake, and as shown in the previous sections, the need for such endeavours is stronger than ever if firms want to reap the benefits of innovations. Cooper argues that the three cornerstones for the success of an NPD are process, strategy and resources. While resources and strategy are important factors in raising the success vs. failure ratio of innovation, this paper will focus on the process side of achieving a successful NPD process, which is believe to be typically flawed but which can be rectified through new ideas that will be presented in this work.

 2.3.1 Resources As mentioned above, while this work recognises the need for properly available resources for an innovation process, I will not touch on the subject, but will refer to the following list from The Management of Technological Innovation (Gann, Dodgson and Salter 2008), which summarises these needs: 1. Financial resources and appetite for and tolerance of risk 2. Human resources and their capacities for innovation 3. Technological resources, both physical (parts and equipment) and intellectual (knowledge, patents, trademarks) 4. Marketing resources (ownership and market penetration of brands, access to lead customers, knowledge of markets) 5. Organisational resources (the routines, procedures, practises, and policies with the firm, which, when combined, craft processes) 6. Networking resources (partners, suppliers, customers, communities within which the firm operates, and the level of adhesion and trust within them) 2.3.2 Strategy There is a growing literature in the field of corporate strategy on the topic of dynamic capabilities, defined as the capacity of an organisation to purposefully create, extend and modify its resources base. (Helfat, et al. 2007) As with resources, these will only mentioned briefly through a summarised list as mentioned in The Management of Technological Innovation (Gann, Dodgson and Salter 2008): Types of innovation strategy: 1. Taking big bets investing heavily in a single new area or development with the prospect of major returns 2. Hedging bets investing in a number of different options where there are expected to be reasonable returns 3. Wait and see adopting a wait-and-see attitude to keep options open or maintain a position in a market whilst others bear greater risks by taking a lead in developments of uncertain new technologies

 2.3.3 Process Cooper and Kleinschmidt (Cooper and Kleinschmidt 1986) found that the new product process in its basic form has to be multifunctional: it requires the inputs and active participation of players from many different functions in the organisation. The multifunctional nature of innovation, coupled with the desire for parallel processing, means that a cross-functional team approach is mandatory. (Cooper 1996) However, Cooper (Cooper and Kleinschmidt 1986) found, in an extensive survey and detailed study of 123 firms and 252 actual new product case histories on new product items (not marginal extensions or minor modifications), that market orientation and customer focus were noticeably lacking in many firms new product projects, which may suggest that the power between the teams involved in a project is imbalanced. In this survey, he also found that the marketing actions were among the weakest executed in the process. According to both the projects study and the benchmarking study, a market orientation and customer focus were noticeably lacking in many firms new product projects with respect to two activities test market or trial sell (done only in 22.5% of the cases) and a detailed market study or marketing research (done in only 25.4% of the projects), both of which were mostly omitted. Other weak activities undertaken in less than half of the projects studied were pre-commercialisation business analysis and trial production. Surprisingly, the launch stage of some of the projects was not even formally recognised as a distinct and identifiable stage or activity in the NPD process. It worth noting that most of the activities that were lacking were related to the marketing part of the process, which sits well with socio-political theories in NPD that suggest that organisational contexts that strengthen or hinder the role of specific functions also affect influence (Philips 1997). For example, a technology-oriented culture tends to strengthen R&Ds influence at the expense of marketings (Workman 1993). Of course, this is not a healthy situation; in fact, the article argues that marketings and R&Ds influence should have positive effects on a new product projects performance, as both functions require information and other resources from each other to enhance their collective effort in NPD. Marketings influence should enable the NPD team to take account of market opportunities and threats and to enhance its understanding of the new products commercialisation strategy. (Moenaert and Souder 1990) (Ruekert and Walker 1987) Likewise, R&Ds influence should provide signals about environmental and technological changes that ensure an effective NPD process (Moenaert and Souder 1990).

 In spite of that, it seems that marketing and R&D undervalue each others importance and roles in the NPD process (Gupta and Wilemon 1988) (Sounder 1988) (Workman 1993). R&Ds dissatisfaction with marketing is sourced to the lack of credibility, lack of technical knowledge and lack of buy-in to R&D ideas for commercial success (Gupta and Wilemon 1988). Similarly, marketers believe that R&D is generally out of touch with customers and market needs and is often too technology oriented. These different evaluations of each others contributions to the NPD project reflect the political nature of the process (Frost and Egri 1991). Two other remarks regarding Cooper and Kleinschmidts (Cooper and Kleinschmidt 1986) research results: 1. Typically, the new product process was initiated by a product idea that was market derived from a customer, salesperson or competitor and there was less tendency for ideas to be initiated proactively either by an in-house lab or technical group or by a supplier. 2. The quality of execution of key tasks stands out as the major driver of NPD success. However, quality of execution was found to be mediocre on average. Establishing a well-organised, cross-functional NPD process is a huge challenge for companies, especially considering the hyper feedback mechanism that the digital era has introduced to the market.

2.4 Digital era

The introduction of blogs and social media platforms such as Blogger, Wordpress, Tumblr, Facebook and Twitter has shifted much of the conversation power from firms to consumers. Up until the last decade, companies were using paid advertising to persuade consumers of the benefits gained by using their product or service, sometimes promising results based on less-than-hard facts. In addition to those paid campaigns, firms hired PR companies to keep the firms image intact. This was possible only because the number of knowledge channels such as newspapers, magazines and TV channels was limited. By trading on scoops with the media channels, a PR company could easily make sure that positive reviews would be published. This allowed great power by companies over consumers. With social media sites such as those mentioned above, any piece of content has been given the capability of being an open conversation between people, and people are invited to comment on practically any blog post, picture or video. 9

 While in the past most of the factual data was published by a firm through advertising and PR companies were able influence negative opinions of reporters, it is virtually impossible today. Customers are gaining greater control over how brand values are communicated. Traditional interrupt and repeat advertising models such as broadcast ads continue to fade as brand-defining tools. Instead, consumers, empowered by the Internet and social media, are speaking their minds more freely about what they buy and use. They are driving the brand conversation, and marketers need to understand they must join the conversation instead of shouting over it. (The New Rules of Engagement - CMOs rethink their marketing mix) The traditional role, therefore, of maintaining a brands name has become practically irrelevant. That is why many believe today a good product is now the best way to market a company (or a brand). This notion strengthens the need for companies to provide better products which are perfectly aligned with the market expectations in order to receive positive support in the digital space. John Hegarty, the creative director and founder of global advertising giant BBH, which has been responsible for some of the most successful campaigns of the past 25 years, recently said, I can only guarantee the first sale; from the second on, its up to the quality of your product. A good example from recent events is Apples Antenna-gate. On 24 June 2010, Apple released the fourth version of its iPhone. On the same day, many popular blogs such as Gizmodo.com (5M unique users a day) (Site Meter 2010) and MacRumers.com posted videos of a network connectivity error that is influenced by hand gripping the device in a certain way. Even though Apple claimed media exaggeration, within 3 weeks, a time frame that was also criticised by many, it had committed to a $175M free-case program for all devices sold (Seeking Alpha 2010). More importantly, however, its sales have surely suffered due to consumers uncertainty of the products quality. Brand loyalty will be earned over time through consistent positive experiences and engagements with a product, service or company (Isakson). What the Internet has created and social media accelerated is the inability of firms to over promise and under deliver.

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3 Marketing Agency Challenge

3.1 History
Advertising is all about influencing, and marketers, of course, cannot truly control consumers minds, but rather try to create desire or influence their choice (Syrett 2004). The idea of an advertising agency, or the more holistic name of marketing agency, is not new and was first introduced to the world in 1812. In principle, these types of agencies have been the strategic consultants and executioners of any form of awareness enhancing activity of firms value proposition, whether a product or a service. These agencies are usually an idea & project management house, or a specific-skill production house, responsible for the act of branding using marketing to influence peoples attitudes towards and perception of what people say, feel and think about a product, service or company. Both models are independent from the client (firm). The current business model of most of these agencies is risk-free charge for time, meaning that they only charge for the amount of time professionals work on a clients project, whether for project management or actual hands-on production. Today, there are many different types of marketing agencies. Each offers a variety of marketing-related services, some focusing on a specific offering and some provide one-stop-shop service for all a firms marketing needs. The types of services these agencies offer can range from planning a campaign; managing the creative process of a campaign; media-buying through the various available channels, such as TV spots, magazines, newspaper space, Internet banners and billboards; direct communication with consumers through telephone or e-mail offerings; other services such as graphics and brand identity packages (logos and stationary). During the last decade, a new kind of marketing agency has emerged: the digital agency. These types of agencies, which grew out of early Internet adaptors, usually offer a mix of web design and development of corporate and e-commerce websites, Internet advertising and search engine marketing. These newcomers see themselves as pioneers of the Internet space (naming the space new media), have started to offer strategic and creative planning to these new types of campaigns, differentiating themselves from traditional agencies through the use of digital media, and offering one-stop-shop service, from idea inception to production (either in-house or outsourced). 11

 Today, and as opposed to what the name suggests, a digital marketing agency does not necessarily mean that it only provides solutions for the Internet space, but rather digital now refers to the digital age in which we live. Rob Master, the Media Director of North America Unilever said, in March 2008, [Digital] is the centrepiece of a broader campaign. I think thats become a real integral part of how we use the web, moving beyond just promoting web addresses in TV spots or print ads to really making them a critical part of the storytelling for the brands. (Advertising Age) From this point on, I will use the following definitions of these terms: Client: Firm that manufactures a product or offers a service to consumers. NPD: New product development process the process that occurs within a company that potentially should result in innovation. CMO: Chief Marketing Officer, usually a position in a client company. The CMO is responsible for any marketing activity of a firm. Agency: Service provider, usually a project management firm that is overseeing the creation of marketing campaign. Production house: A specific-skill service provider, usually in the range of web development, graphic design, content creation, etc.

3.2 Eroding model

3.2.1 Clutter In the past decade, there have been many indications of diminishing returns on traditional advertising expenses for clients. Many believe that the decreased attention span given to available marketing messages is attributed to the abundance of the messages that the average person is exposed to each day. Yankelovich, a market research firm, estimates that a person living in a city 30 years ago saw up to 2,000 ad messages a day, compared with up to 5,000 today. About half the 4,110 people surveyed in 2007 by Yankelovich said they thought marketing and advertising today was out of control. (Story 2007) This paper by no means claims that traditional advertising is irrelevant; if a client has a large advertising budget, it is possible to overcome the overload of marketing messages by acquiring a large number of advertising spots. 12

 A recent such example is the Apple iPad launch campaign, in which massive numbers of bus stations signs were bought throughout major cities that also had Apple stores, making it virtually impossible to disregard them. This problem exists for any firm that is incapable or uninterested in spending large amounts on buying such real estate. On the TV front, in todays world, the American consumer has access to an average of 91 TV channels, compared to 6 during the 60s (McPhillips and Merlo). Forrester and the Association of National Advertisers (ANA) surveyed 104 US advertisers representing nearly $14 billion in measured media budgets. More than half of them 62% indicated that TV advertising is less effective than it used to be (Cooperstein 2010). The Forrester report also notes that advertisers want more accurate measurement and the option for more targeted and clutter-free ad inventory. Moreover, the feeling of ubiquity is also enhanced by the abundance of direct mail and e-mail messages (also known as spam), promotional telephone calls and the increasing use of product placement of name-brand items in TV shows and movies. On the mobile devices market, the growing sales of smart-phones, which have a large colour display that is suited for advertising, reached 325.6 million units in the second quarter of 2010, up 13.8% from the same period a year ago and accounting for 19% of worldwide mobile device sales, up 50.5% from 41.0 million a year earlier (Worldwide mobile devices sales 2010Q2 2010). In the future, more and more mobile devices capable of showing colour ads will dominate the market completely. In addition to the effects of the excessive clutter that exist in todays advertising space, according to research done by Yankelovich Partners, Inc. (Greenspan 2004) in 2004, it seems that more and more consumers are growing resistant to and developing negative feelings towards advertising. The firms study indicates that 65% feel constantly bombarded with too many marketing messages, 61% feel the advertising volume is out of control, 60% have a much more negative opinion of marketing and advertising than they did a few years ago and 69% are interested in mechanisms that skip or block advertising completely.

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 When Yankelovich compared the results to a similar 1964 study conducted by the American Association of Advertising Agencies, the firm noted a worsening attitude toward marketing. Advertising/Marketing Opinions Then and Now 1964 AAAA Study View of Advertising Favourable Unfavourable Mixed 41% 14% 34% 2004 Yankelovich Study Views of Marketing Wholly positive Wholly negative Neutral/mixed 28% 36% 36%

Furthermore, more than 60% of the respondents felt that marketers and advertisers dont treat customers with respect, 59% felt that the messages they were exposed to had little relevance to them and 65% felt that regulations on marketing and advertising should be put in place. Bill Bean, the director of trade insight at Miller Brewing Company, says in an interview with him, No one wants to annoy the consumer. However, there are many annoying ads that sell products, and its very difficult to tell what annoys one consumer and what pleases another. 3.2.2 Marketing metrics On the client side, in an era of recession, measuring metrics for the success of campaigns has become more and more important for CMOs in order to justify their spending. These metrics are hard to achieve in traditional advertising channels, and clients would usually refer to bottom-line rise in sales for measuring such success. With the introduction of Internet ad networks, the ability to measure ads exposure through eyeballs (number of people viewing the ad) and click-through rates (number of people who viewed the ad and followed it) made such measurements more possible and accurate. Unfortunately, this has brought even more challenges to these agencies; with better measurements such as click-through rates, a client can monitor the exact impact on consumers that each campaign actually delivers. The problem is that click-through rates are declining, as the Interactive Advertising Bureau statistical report shows: In 1997, the average click-through rate for online ads was 2.1%. In 2001, it was 0.5%. In 2008, it was 0.1% (Lavrakas 2010), and for the reasons shown above.

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 These findings correlate with the business realities; newspapers and magazine publishers are struggling to sustain their businesses, announcing the closure of publications practically on a daily basis. TV channels are downsizing as well, having to cut fees for commercial spots because major advertisers are sceptical of their effectiveness. This year, Pepsi Co., one of the major advertisers in America, had decided not to invest its marketing money in the holy grail of the commercials spot, the American Super Bowl 30-second spot. Instead, it used a fraction of the amount to create an online competition for a business idea in the field of innovation in media (Owyang 2010). 3.2.3 Economies of scale As noted in the Yankelovich Partners, Inc. report (Greenspan 2004), 59% of the people surveyed felt that the messages they were exposed to had little relevance to them. This is no surprise; the abundance of TV channels, Internet sites and new product manufacturing procedures (such as print on demand by Amazon), has allowed people to access specific content they have never had access to, and through that content, they have developed a specific individual taste, but more importantly, they have become more informed and more educated. In his book The Long-Tail, Chris Anderson (Anderson 2006) finds that technology is turning mass markets into millions of niches; a later academic study (Brynjofesson, Hu and Simester 2007) validated Andersons theory by measuring and comparing mainstream hit products sales and niche products sales. Both studies result in evidence of a cultural change towards individualism and personalised taste, which is sourced to consumers being more knowledgeable. For example, as the number of TV stations grows or advertising is distributed through other digital channels, the key demographic individuals are split into ever-smaller groups. The legacy Pareto principle, known as the 20/80 rule, that claims that 20% of the products result in 80% of the revenues, has been flipped on its head now 80% of the products result in more than 50% of the revenues (Anderson 2006). As the targeted groups become smaller niches, and the quantity of channels becomes less of an opportunity cost, previously ignored groups become profitable demographics in the long tail (Anderson 2006).

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 These truths are making traditional, one-size-fits-all campaigns out-dated and irrelevant. Historically, marketing had no ability to target specific subsets of market segments, which resulted in creating campaigns that were directed to relatively broad segments in order to appeal to as many people as possible through the available mainstream channels. Today, as the balance has shifted towards sophisticated individualism, it is almost impossible to pinpoint and track the millions of niche markets, and more importantly, the cost of tailoring a message to so many specific groups does not enjoy the economies of scale marketers once enjoyed. 3.2.4 Business model The above-mentioned changes have eroded the traditional marketing/advertising agencies business model. Their model of conducting a business was based on a margin of a project that included all media buying contracts to other suppliers. For example, a $100m nationwide billboard campaign with the typical 15% margin fee would mean $15m for the agency. Due to these large margins, the agencies were accustomed to not billing the client for any strategy consultancy or production costs and would see the end-result, the media campaign, as their single point to make a profit. With the decreasing impact of advertising medium, decreasing media real-estate purchasing l and shrinking advertising budgets, bloated rich agencies have less and less to offer their clients. In addition, if the agencies would like to start charging for production costs and consultancies services, which the client are not used to paying, they risk departure of the client. These new terms put the agencies business model in jeopardy. More important than the agencies business model problem, however, with traditional advertising suffering from a decline in effectiveness, is how the marketing agencies can create awareness for their clients products and brand.

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4 Hypothesis
The challenges mentioned above, on both the firms side and the agency side is actually sourced from the same points, what companies are facing are huge challenges. Firms need to align and communicate products and services with consumer needs in a much more tight relationship then they have needed to do in the past. Only useful products that would be converted from invention to innovation will be able to overcome the clutter and abundance of products in the market, whether they are positioned to benefit the mass market or the multiple niche market. In addition the quality of the products, needs to be so satisfactory to consumers, that positive opinionated conversations would arise on the Internet space, having more promoters, advocators and evangelists recommending the purchase of such products. On the agency side, effectively of marketing campaigns are lowering, mostly because consumers are less sceptical to advertising messages that in the past decades have over promised and little delivered. Consumers had become much more informed and knowledgeable, and most consumers now research any message, product and service before committing to purchase. Agencies understand that the window of opportunity for them to promote a product or service had shrunk dramatically and unless they are able to promise a satisfactory product experience, they will not succeed to build enough consumer support to promote these products. The risk of not aligning consumers expectations and product benefits could result in a back clash to both the manufacturing firm and the agency building the campaign. These mutual challenges create a new meeting point between manufacturing firms and marketing communication agencies. If in the past product s had been manufactured almost solely for the reason of a company to expand and agencies were employed to create the awareness to, interest in, desire for products following by an call for action to purchase them, each of the role of both the agency and the product manufacturer is changing.

4.1 AIDA reshuffle and the new meeting point

The attention, interest, desire, action (AIDA) concept, first proposed by E. K. Strong in the 1930s, explains the process that individuals go through when making a purchase decision. Attention, the first step, refers to marketers efforts to make consumers aware that a firms products and services exist. Consumers will not purchase goods or services they do not know about. 17

 Thus, the first goal of marketers is to gain attention. The second step, interest, focuses on appealing to the needs and desires of consumers and addresses why they should care about the product or service. The third step, desire, convinces consumers of the products ability to satisfy their needs. Finally, sales presentations, advertisements and promotions attempt to produce action, hopefully resulting in a sale or at least providing additional opportunities for the marketer to continue a dialogue with the potential consumer. For the past 80 years, marketers on both the client and the agency side when designing marketing strategies used the AIDA model. The model suggests educating consumers for their needs (interest) and creating desire for products that would solve those needs (desire). However, as consumers became more knowledgeable, Interest had shifted to be created on the consumer side having desire for a solution provider to come and solve such Interest or need. Being aware of consumer interests, thus, has shifted to the domain of the product manufacturer or service provider, which had previously no role in the model. The domain of the agency has now shrunk to providing awareness, while creating action has shifted to advocating that consumers create trends (Ho 2010).

While the model still seems to be relevant, it is the new meeting point between product manufacturers, agencies and consumers that turns products into successful ones, where each of the players has an active role in its success. The research questions are, hence: 1. How can the AIDA model be rebuilt for and reused in the digital age? 2. What kind of skills should be developed on both the client and agency side to adhere to this new model? 3. How can we integrate these new skills to successfully introduce innovation to the market?

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5 Methodology
I have started from a conceptual place that I identified as part of my journey to understand where my professional skills best fit. I was fortunate enough to find an emerging niche in the marketing industry that involves both innovation and technological aspects. This niche, I suspected, had leaders and evangelists that have seen the future, and now advocate for the change that is needed.

5.1 Client
To understand the challenges on the client side I have used mostly desktop research. This enabled me to tap into much broader range of processes and firms that were previously research and understood. The desktop research was focused on understanding the NPD processes among leading companies, their challenges and potential opportunities. The topic of innovation and the correlation between innovation and creativity were also researched as a means to find the motives for innovation and what was proven to establish its grounds. Opportunities on the client side were established based on two methods, academic and business papers and literature, and ethnographic research through Internet blogs and one-on-one interviews.

5.2 Agency
Due to the small amount of academic research papers on the marketing agency, I resulted in using ethnographic research as my main research method for this part. Since the marketing industry is loud at its core, identifying the main challenge of the marketing industry was a fairly easy task. However, the number of opinions, well though reasoning and news coverage are endless in this field. In order to gain an indepth understanding of the people, the organisation, and the broader context within which they work, I have immersed myself with research material, covering major and minor newspaper publications, academic papers and uncountable practitioners blog posts. The journey allowed me to understand the underlying challenges and opportunities of the marketing agency and the marketing industry in general. This method had also allow me to establish the jargon and the nuances that would later result in much knowledge driven interviews question formation and freedom of action in those interviews. Moreover it the knowledge I have gained provided me with vital information to challenge our assumptions along the way.

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5.3 Interviews
In total 12 interviews were conducted. They included one-to-one interviews and were conducted face to face, by video chat or by telephone. The following table brings the names and current positions held by interviewees and my motivation for having them contribute for this work: Name Asi Sharabi Motivation Founder of Bench & Friends, a digital & social media creative strategy consultancy and previously the head of Hyper Social, Asi is one of the most important knowledge sources for understanding the digital space, with a focus on social media and its repercussions on the living world. Faris Yakub A self-named digital ninja, Faris is perceived by many to be the voice of a generation of the marketing industry. With a past in management consultancy, Faris, who now holds the position of Chief Innovation Officer at MDC Partners, had a major part in revealing the motivations and selflimitations of the marketing industrys future roles. Nick Farnhill Founding partner at one of the most interesting digital agencies in London, with 9 years of face-toface experience in delivering projects to major worldwide known brands, Nick was the compass of this work. Through his vast knowledge, experience and understanding, the marketing agencies challenges were devised. UK NYC, US Location UK

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Tom Himpe

Tom is a futurologist in all 248 of his bones. As the head of Communication planning at Anomaly he was one of the most viable source for understanding the limits of communications and more importantly to chart the map of opportunities in the field.

UK

Bob Gilbreath

Bobs book was The next evolution of marketing one of the first inspirations for this paper, he has coined the term Marketing with meaning that is widely used as a pillar for this work. He was a source of understanding the new skill set of the marketing industry.

OH, US

Anjali Ramachandran

A Strategist at Made by Many, one of the leading London digital production houses, was a source to understand co-creation methodologies. Her on-line list of Branded Utility was used as a base to devise a Spectrum of Innovation model that this paper introduces.

UK

Darren Herman

Chief Digital Media Officer at MDC Partner's media agency and Founder of Varick Media Management, Darrens expertise in media buying allowed him to understand CMOs and media buying agencies challenges and accountability.

NYC, US

Neil Perkins

A freelance consultant in digital commercial strategy, digital content strategy and social technologies, Neil is one of the great thinkers of the industry. His blog Only Dead Fish was the first to discuss many of the aspects that this work followed. His blog is a major online source of information on marketing innovation.

UK

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Adrian Ho

For the last four years, Adrian, founding partner at Zeus Jones, had built one of the model marketing agencies for cross-functional problem solving. The companys innovative approach and business model have resulted in diverse range of innovation for its clients.

MN, US

Solon Sasson

Head of Intelligence at Spotspot creative + engineering, Solon was the co-designer of an innovation service agency repositioning effort. With 7 years in management consultancy, Solon brought valuable information on innovation formation.

UK

Ana Andjelic

With experience as a social media consultant for Bloomberg, a guest columnist at Advertising Age and a strategist at The Barbarian Group, Anas blog I [love] marketing] focuses on understanding the future offerings of marketing agencies.

NYC, US

Hillik Nissani

Through an extensive experience in media buying and SEO methodologies as ex-VP Americas at 888.com, Hillik articulated the first methodologies the new SEO marketing had to offer.

Israel

5.4 Limitations
For the interviews, a semi-structured interviewing approach was used involving a common set of open-ended questions, relevant to the interviewees function. However, this method has a number of potential sources of error. First, interviewees may try the please the interviewer or to prevent him/her from learning too much about a subject in order to preserve ownership on the matter. Second, errors can arise related to the nature the method of the questionnaire administration or the sequence or wording of the questions. Third, errors can arise due to how the interview is conducted. In order to overcome such errors, I have triangulated between interviewees, and between interviewee and other data sources. I have validated my question by an independent practitioner in the field that was not part of the interviewees group prior to having those interviews, and I provided the 22

 interviewees with post interviews transcripts of their interviews to confirm the content and ensure their input was satisfactorily recorded and transcribed. In all cases, the interview transcripts were sent to interviewees for validation. As for my ethnographic journey, there are some disadvantages of ethnographic research, as some would claim that it does not have much breadth (Myers). Unlike a survey, an ethnographer usually studies just one organisation or in my case one culture. In fact, this limitation is a common criticism of ethnographic research: that it leads to in-depth knowledge only of particular contexts and situations. Despite that, I have invested great time on other means of research, interviews and writing; through those, I have continuously re-evaluated my position.

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6 Client Opportunity
The shorting time to market, companies need to produce better products that would satisfy consumer needs and expectations and the eroding influence of traditional marketing have resulted in many challenges as described in Section 2. Firms need to be able to produce better-aligned products with the market to sustain consumers positive opinions in the digital sphere and hence, forgo competitors alternatives and disregard the rising noise level in the market. However, the discrepancies between the need for collaborative process and the poor results shown in Coopers research entails that the current faults of the NPD process must be eliminated and the management of an NPD organisation needs to change in the face of this new world. One way of constantly delivering innovation is hire the best, most skilled workers that can deliver such results, however this ability is sustainably questionable due to the finite number of brilliant employees a company can attract. It is thus that innovation seeking companies will still need to continue hire the best, but more important than ever before, they will be the need to embrace collaboration partnerships within and beyond companies walls such as with universities, suppliers, other companies, and, more than ever before, with customers (H. Chesborough 2003).

6.1 Open Innovation

The term open innovation, which was coined by Chesbrough in his 2003 book Open Innovation, Researching a New Paradigm dated in 2003, indicates how companies combine externally and internally developed technologies in a flexible way to develop new businesses. Taking into account that this theory is relatively new to the academic community, there has been an increased awareness and interest of both practitioners and researchers into the concept of open innovation (e.g. Laursen and Salter, 2005; Chesbrough et al., 2006; R&D Management, special issue, 2005). While closed innovation is a view that says successful innovation requires control in which companies have to generate their own ideas and then develop them, market them, distribute them, service them, finance them and support them on their own (H. Chesborough 2003), open innovation differentiates itself by assuming that knowledge is widely distributed, and that even the most capable firm must identify, connect to and leverage external knowledge sources as a core process in innovation, not only by big organisations, but also by individual inventors, high tech start-ups and academic institutions. (Chesborough, Vanhaverbeke and West, Open Innovation Reearching a new paradigm 2006) 24

 The closed paradigm for managing industrial R&D:

The open paradigm for managing industrial R&D:

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 So open innovation is a paradigm that assumes that firms can and should use internal knowledge as well as external knowledge, and an internal and external path to market, as the firms look to advance their hold in the market. Open innovation combines internal and external ideas into architecture and systems whose requirements are defined by a business model (H. Chesborough 2003). The business model utilises these ideas to create value, while the firm claims some of the portion of that value. Open innovation also assumes that ideas created within the firm can be taken to market through external channels outside the current businesses of the firm, through tools such as licensing deals, in order to generate value that the firm cannot currently generate on its own. Chesbrough (H. W. Chesborough 2007) argues that the shortening product life cycles make it harder for companies to justify innovation investments. Using open business models, a company can reduce the cost side and focus on their core business competencies. Moreover, in the man of genius (Chesborough, Vanhaverbeke and West 2006) mode of the closed innovation paradigm, the focus was on securing the best and brightest, and then trusting that world-class research talent, when sufficiently funded, would come up with valuable new innovations that will somehow find a path to market. In open innovation, companies acknowledge the fact that they need to actively seek people of genius from inside and outside the firm in order to provide fuel for the business model. Chesbrough brings as example Proctor & Gamble, which in 1999, decided to change its approach to innovation. The firm extended its internal R&D to the outside world through an initiative called Connect & Develop. This initiative emphasised the need for P&G to reach out to external parties for innovative ideas. P&G created a position entitled Director of External Innovation and set an internal goal of sourcing 50% of its innovation from outside the company in five years, up from an estimated 10% in 2002. The companys rationale is simple: inside P&G are more than 8,600 scientists advancing the industrial knowledge that enables new P&G offerings, outside are 1.5 million such scientists. (H. Chesborough 2003)

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 There many reasons for establishing a more open relationship with external sources of knowledge and service providers, some of them are listed below: o o o o o o o o o Increase cost efficiency Focus on core business Solve business process issue Access technology Optimise application investment Reduce headcount Achieve cost variability Reduce assets Access expertise

Indeed, we see more and more evidence in the market for such a shift in paradigm, as evidenced by McKinsey Quarterly: Executives in a number of companies are now considering the next step in this trend toward the more open innovation (Bughin, Chui and Johnson 2008). However, it is important to note that relying on external partners offers both opportunities and threats in NPD processes. The opportunities are related to the value of knowledge contributing to NPD success, and also to the accelerated speed and quality of product development when knowledge comes from external knowledge sources. The threats are related to motivational problems, problems with communication, co-ordination and co-operation and especially challenges from utilisation of knowledge received from an external partner (Knudsen 2007).

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 McKinseys data and the open innovation movement reflect an understanding in firms of the challenges described in Section 2. Firms adopting the open innovation methodology are putting forth efforts to adapt their NPD processes and their companies culture to decrease internal political forces, break the culture barriers and convert the linear NPD processes that start from R&D and go to the marketing division for establishing a route to market, into a parallel, cross-functional NPD process, as shown below:

The opportunity, hence, relies in the involvement of the marketing division in the NPD process, but also in involving and utilising suppliers of each department as a mean to source for ideas and talent from a much larger circle of contributors. This idea is not necessarily new; management, R&D and marketing departments are each accustomed to using consultancy and production house firms for sourcing knowledge and expertise they do not own. However, with the open innovation movement, corporate culture recognises the benefits opening up the product cycle not just for production or specific duties, but rather as equal contributors every step of the way.

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6.2 Co-creation
As mentioned above briefly, since the challenge of todays firms is to produce a product perfectly aligned with its market, a recent trend towards co-creation or crowdsourcing seems to have made headlines in past few years. Co-creation is a form of market or business strategy that emphasises the generation and ongoing realisation of mutual firm-customer value. It views markets as forums for firms and active customers to share, combine and renew each other's resources and capabilities to create value through new forms of interaction, service and learning mechanisms. It differs from the traditional active firm - passive consumer market construct of the past (Co-Creation). Co-creation advocates that in order to satisfy consumers expectations, companies need to involve future consumers in development and even source new ideas from them. There are several examples of firms that have built platforms for co-creation hoping to achieve such synergy with their customers. P&G has built P&G Connect & DevelopTM, Starbucks has built MyStarbucksIdeas and Dell has built IdeaStorm (see Appendix 1 section 1.1,1.2,1.3). 29

 However, while co-creation does seem promising, it isnt entirely clear what capabilities companies will need (or how they will organise those capabilities) to make the most of it. Many of the answers will become clear as companies gain greater experience with various open innovation approaches, including co-creation. But a few challenges are already apparent, among them governing and compensation mechanisms that will hinder successful and sustainable processes. If we use the example above, MyStarbucksIdea.com has so far generated more than 80,000 ideas, of which over 50 have been implemented (Official Starbucks Blog 2009). However, this action by Starbucks has not only sweetened the bottom line of the company; in addition to having 80,000 new ideas that have been contributed by consumers for free and could have cost the company a fortune to nurture within the company, the company had gained massive amount of publicity and customer loyalty just by doing something different. The companys invested effort in building a platform that will help strengthen the relationship with their clients has revitalised and repositioned the brand as an open, more friendly brand and one that is respectful toward its clients, who believe they are equal partners in providing a better service from the company. So what is MyStarbucksIdeas? Is it an innovation? Yes. Is it part of the core product? No. Is it a marketing campaign? No. Is it a PR stunt? Not necessarily. What experts have been calling it is a marketing activity, which is realised through a complementary service to the core product, in this case a co-creation platform. This marketing activity projects the values of the brand to its consumers and potential consumers and results in a better relationship between the company and its consumers.

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7 Agency opportunity
As established in Section 3, marketing agencies and their clients, product and services manufacturers, are facing eroding abilities to market their products in traditional ways due to the growing resistance and negative feelings that consumers have been developing towards advertising. As consumers become more knowledgeable through digital and social media, which has been adopted by the mainstream population, marketing can no longer drive sustainable sales of mediocre products. Instead, marketing agencies role has turned into an amplification role, finding new and innovative ways to overcome the existing noise level that the average consumers face, transcend it and float relevant information to them. If the product is well made and fits consumers expectations, the product should, in theory, through a well-executed campaign, gain momentum in the market, by amplifying the positive reactions of consumers. If the product fails to satisfy consumers, amplification will result in a backlash, amplifying negative feelings as well.

7.1 Transcending the noise amplifying conversation

In 2010, it is safe to say that blogging has entered the mainstream consciousness as a legitimate source of media. According to Technocratis (State of the Blogosphere 2009) report, there are more than 133 million active blogs on the Internet, with an impressive continuing growth rate. Moreover, the report finds that even though the vast majority of blogs are still likely to be personal, professional bloggers are blogging more than ever, while hobbyists are blogging less. In 2007, the US House of Representatives voted in favour of a bill that would extend traditional media shield protections offered to journalists to bloggers. For many, that was a clear message that blogging as a medium had become a vital part of the news media landscape. If in the past, the job of a PR agency (a part of marketing) was to strike-up relationships with journalists, which were built over years and

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 years of consistent work in order to win coverage in the minimal media spaces available, these agencies now face an abundance of new blogger-journalists and uncountable media channels, many more that they can directly handle. In addition, many micro blogging sites such as Facebook and Twitter, have much like blogging, even decreased even further the bar of being able to post, and more importantly, to consume, new information online. These platforms, which in their early years were considered to be used mostly for personal usage, are undergoing transformation, with a growing number of their users spending much of their time collating links and pointing their followers to relevant, timely, topic-based information. The result of such is that in order to get the publicity needed to introduce new products or services, manufacturing firms cannot rely on old, traditional PR agencies, but rather have to tap into the broad range of consumers and appeal to their interest.

7.2 Engagement marketing

Over the years, and as explained above, while the use of digital channels has been growing, marketing agencies had to come up with new and innovative ways to get consumers attention and to interest them enough that they would click on their ads. On the digital space, agencies were able to incorporate video, animation and dedicated websites solely devoted to overcoming consumers fatigue of billboard, TV, print and direct mail advertisement. Eventually, these new innovations in marketing have resulted in marketing agencies that have expanded their toolbox and acquired new skill-sets. These new skill-sets are the pillars of what I perceive will allow marketing agencies to create a closer relationship with product and services manufacturers and, through that relationship, to innovation in general. One of the key marketing innovations was the new understanding that there is no point to throwing money at expensive campaigns that have little relevance to many consumers, but rather to act smarter and target consumers that are interested in what you have to offer. This cultural change in marketing ways was the move from push marketing to pull marketing. The terms pull/push are encoded in computer language and refers to the ways of manipulating data storage (and hence the connection with marketing and the need to have consumers store the messages of the brand). Push refers to the act of inserting information, and pull is referred to pulling that information back. In analogy to the marketing industry, push would mean to try and insert a message to the potential consumers with them being an apathetic or inactive participant in the 32

 process and pull refers to a message that was produced, but will only appear when a consumer takes a proactive action to find such a message. Damian Blackden, president of digital media of Omnicom Media Group EMEA, agrees: For me, creating value by enhancing peoples digital life through brand behaviour is a very exciting marcoms strategy being refreshing, rather than just saying refreshing. It's a lot easier to do now because you can communicate and transact using the Internet, as well as inform and entertain as you can through other media. (Nutley 2010) And again, Benjamin Palmer puts it as The big change that needs to happen is that we need, as an industry, to be innovators in making ourselves useful. A good example for such activity is the Sharmin Pottypalooza in Times Square, NYC. The US toilet paper producer, a sub-brand of P&G, in the fall of 2006, inaugurated the first fully-staffed deluxe bathrooms in New Yorks Times Square. Housed in a rented building, the 20 Charmin-sponsored bathrooms offered family-friendly facilities to more than 330,000 visitors during the busy holiday season. The campaign enjoyed the benefits of media impressions through TV & Internet news channels, newspaper articles, blog posts and promotional and user-generated videos posted online, as well as traffic and interaction with consumers who were able to have first-hand experience with the product on location. The campaign resulted in a 14% sales increase and won multiple marketing awards. Due to its massive recognition and success, the campaign has been running for over three consecutive years. Please see appendix 1.4 for pictures. In the following three sections, I will elaborate on the new methods of marketing that had direct influence on the new skill sets developed over the years by the marketing agencies. The skills will be then linked to the agencies capacity to be included in an NPD process, a capacity that had never existed beforehand. 7.2.1 SEO track what clients are looking for Google AdWords was, in my opinion, one of the first major changes that allowed marketing agencies a closer look at what people are looking for, rather then establishing their agenda through traditional advertising. In October 2000, Google introduced its AdWords product. The product allowed advertisers, for the first time, to create text ads for placement on the Google search engine. The mechanism allowed bidding on words that people were proactively searching for, and Google would provide sponsored relevant results to the search query. 33

 This would define a generation of marketing, turning an industry on its head. No longer would advertisers need to push generic messages in hopes to bait a fish in an ocean, but rather have consumers be the initiator of such data retrieval. The beauty of this new and innovative approach was that consumers were presented with these contextual ads just at the moment they actually showed interest in a subject; advertisers, on the other hand, were able to monitor trending searches, down to the last user. In fact, the scheme was so successful that Google introduced a new, more confident charging mechanism: pay per click, which meant that the advertiser only paid if the ad was working. Since the introduction of Googles Adwords, a new marketing field was established SEO, or Search Engine Optimisation and with it, many production houses have opened their doors. These production houses are offering their clients their expertise in understanding the trends of users searches and helping those firms promote their businesses in search engine results and contextual advertising results. 7.2.2 Branded content Branded marketing usually refers to a piece of original content, whether its a video, a text or an image that produces an increase in brand awareness or achieves other marketing objectives (such as increase in sales). The idea is to establish awareness to the brand or product message when a consumer is receptive to such a message. Such content could be associative, such as in sponsoring the appearance of a product in a TV show or a movie, which is known as product placementaccording to Nielsen Product Placement Service, in the US, there were an astonishing 204,919 instances of product placement on cable and broadcast networks between January and June 2009 (Dailymail); entertaining such a funny website or video clip that people find more amusing than useful; or informative, such as a health portal or message board created by a pharmaceutical company to gather information from patients and doctors on relevant issues. There are two targets for creating branded content. First, it needs to create association to the brand and its values in consumers minds. Second, as with Google AdWords, in needs to enable its delivery to consumers when they are mostly interested in the topic or just in a certain receptive mood. [The agencys job is to create] content so valuable and useful that [consumers] wouldn't want to live without it. (Hicks 2006)

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 By harnessing technologies such as e-mail and social networks, and because one type of advertising content became less believable, creators of such branded messages hope that the consumers who find the message (or information) useful will forward, recommend and promote the content to other people in their social circle. If successful, the brand values and message would be spread through indirect advertising channels, which is both cost effective and bypasses the lack of peoples trust in advertising. This idea is known as viral marketing and refers to a selfreplicating spreading of processes. It is important to mention that such viral branded content effectiveness has since been brought into question due to the abundance of such campaigns, since in many times, it has failed to establish a strong link to a brand or product. Because of the diverse range of such messages, different service providers can be involved in such a creation process. In order to create such interactive messages and platforms, marketing agencies have developed skills that are similar to product development skills, such as gathering requirements, characterisation of an offered solution and advanced development techniques. Examples of such campaigns are in abundance, but some of the more known ones would be: 1. Uniqlo Lucky Counter: In September 2010, for the re-launch of its new site, Uniqlo created a web application that engaged consumers in determining the price of some of the newly sold items on its coming website. The mechanism worked with two incentive layers for users. The first, when users sent out, using their Twitter account, a link referring to the web application, affected the items price and lowered it when the new web store opened. The second layer was a drawing among the users who participated and promoted the campaign; every sixth twit received a special promotional code for the newly open site. See appendix 1.5 for screen shots. 2. Fords Where are the Jones? As a brand, Ford was losing relevance for its target audience young, creative and digitally savvy consumers who were less engaged with traditional media, tuning out messages that were inconsequential to their lives. They decided to approach this market segment through engaging them in their language and on their terms, through existing platforms such as YouTube, Facebook, MySpace, blogging, etc. where viewers could actively participate in the creation of the ongoing storyline through wikis and provide commentary via blogs. This viral model (with Ford as a low-key commissioner) built a fan base that spread across many online media channels. 35

 Where are the Joneses?, an innovative, world-first, interactive comedy was created, generating an online community of just under half a million people, with an average visit time of 3 minutes and a fan base spread across many online media channels. The campaign reach is estimated to be over 3 million. This was an initiative that energised Ford to move beyond the traditional to a more connected approach. See appendix 1.5 for screen shots) (Ford asks "Where are the joneses?" 2009) 7.2.3 Bi-directional communication As mentioned in Section 7.1, digital media has impacted how PR is done in the digital era. As practically any person can publish his/her thoughts on a product and campaign, the traditional role of the PR agency to get product exposure through the limited channels has been expanded (because the old channels still exist) to include manufacturing of conversation in the digital space. Manufacturing conversation can be done via communicating internal news about a company, a product or a service or coming up with ideas that would grow conversation through the vast communication channels. To be able to create conversation among its consumers or potential consumers, the marketing agency now has to be able to target the mass numbers of end consumers rather than the media publishers and news writers. They need to understand better what the readers want to learn about the field of their client company. This has led many agencies to employ much more skilled, research-driven workers within their organisation and have them investigate and report on the matters that relate to the clients business and industry. In its effort to drive conversation, the job of the marketing agency has grown to also initiate newsworthy innovative occasions such as special events, competitions, research reports, new product teasers, etc. This requires the marketing agency to be included much earlier in the NPD process, as the value of news has grown tremendously, but also because it takes longer for conversation to grow when there is not a centralised source of such news information as before. Two interesting examples for news manufacturing that have happened recently are mentioned below: 1. OKCupid dating site statistical data: In 2010, OKCupid, a matchmaking dating site, started graphically posting statistical information that is gathered on their site in order to give tips to users on how to successfully get more dates through Internet dating service sites. 36

 The information is produced to benefit and entertain users across the Internet in hopes of building brand awareness for the OKCupid site. This statistical information data is so well made that they are making headlines throughout the Internet space, fuelling conversations and finding many users that are referring to this information. See appendix 1.6 for screen shots. 2. P&G OldSpice Man: With a super bowl ad in February 2010, P&G relaunched its OldSpice brand by introducing The OldSpice Man. With a shirtless man with great physique and sense of humour, the OldSpice Man promised women that he is The man your man could smell like. During three days, in July, the OldSpice Man was available in near realtime, answering questions from people who were logged on to Twitter.com and Facebook.com questions. Wieden & Kennedy, the agency responsible for the idea and execution of the campaign, posted 186 new videos of the Old Spice Man during those days. The results of this campaign effort made the all-time number one branded channel on YouTube, with the total viewed videos during the first week of 35.7M. The total uploaded videos views (including UGC) reached 133M, with production costs that are estimated circa $300k. (Old Spice Man, Wieden & Kennedy self produced case study 2010) In comparison, the annual American Super Bowl attracted 106.5 million viewers in its 2010 broadcasting, charging companies $2.52.8 million per 30-second ad spot. This number is lower than the $3 million that was charged in 2009 for the same spot (Super Bowl ad prices dip, bu still pricy 2010). See appendix 1.7 for screen shots. 7.2.4 Branded utility Since marketing is about creating association to a brand or a product, the latest thought in marketing, which acts as one of the pillars of this work, is an incremental innovation in the field of marketing, which is built on top of the push/pull theories of marketing, and proactive approaches to earned media and news manufacturing. There are several names for the school of thought such as branded utility, marketing with meaning and marketing as a service. These names all refer to the claims that the new way of doing marketing is to add real value to or benefit peoples lives and, through that, create a positive association to either the brand or a product.

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 Many of the people Ive interviewed for the research into these marketing jobs have been talking religiously about this approach, which is still in its infancy. [Branded utility] is where the brand creates a commitment to a relationship. Its where the brand creates something useful to you, something thats a utility in your life. The consumer will feel more confident with the relationship if the brand will continue to be part of your life. (Benjamin 2006) This approach, in contradiction to that most people think, is not new; in 1900, Michelin, the rubber tyres company, started an annual tradition, publishing a restaurant guide for the use of drivers that they could visit when travelling. In 1933, Shell did the same with lesser success, as it lacked originality of the idea. In 1997, Johnson & Johnson created Babycenter.com (a form of branded content), an informational website for parents that supplied them with parenthood advice and also information about the companys products. The site is still the biggest parenthood site on the web, has been visited by over 100 million parents and has won a slew of awards. In the US, it reaches over 78% of new and expectant mothers. (Nutley 2010) Newer examples of successful implementations of this approach are: Bacardi Mojito party calculator: In 2008, Bacardi made the decision to adapt their marketing in step with both consumers digital media and off-premise consumption habits. Bacardi Mojito Party Facebook app helped guide users in mixing the perfect Bacardi Mojito when planning at-home parties. The Facebook web utility included a Cocktail Jag Calculator and a feature that let users invite friends via Facebook or Evite. The application was installed 100,000 times in its first week and ultimately helped Bacardi Limited produce its highest sales in history for the fiscal year ending in March 2008. The success of the project has resulted in Bacardi producing a mobile version of the calculator for the iPhone and iPod Touch. See appendix 1.8 for screen shots. Orange GlastoNav: In 2010, Orange released an mobile application for the UK Glastonbury festivalgoers. The festival attracts some 100,000 people each year. The application was given for free and included an interactive map of the event, full stage listings in co-operation with the Guardian Guide, a complete bar guide, an easy way to pinpoint your tent for easily locating it and recommendations posted by a major artist for each day of the festival. See appendix 1.9 for screen shots. 38

 Fiat eco:Drive, a site that teaches Fiat car owners how to drive more efficiently, and by that help them save on petrol expenses and lower their CO2 emission: eco:Drive uses a USB stick that fits in certain Fiat model dashboards and records information on how youre driving. This information is then fed into your computer, which looks at areas where you could have made a greener driving choice. On its website, Fiat also offer free access to eco:Village, an online community where users help each other drive better and help Fiat improve the system. In its first three months of operation, according to Fiat, drivers using eco:Drive have saved 163,000kg of CO 2 in their efforts to clean up their lead feet. The campaign has won multiple awards across fields from marketing, technology and green organisations. In 2010, the company extended its free service to include business fleet eco management. See appendix 1.10 for screen shots. Palmer is co-founder and president of the interactive hybrid agency / production company / think tank The Barbarian Group. I believe the next stage of brand advertising is going to be in the realm of branded utility. What branded utility represents is the agencies developed abilities closest to product development than ever before. Even though these utilities are at this point used as peripheral to the core product of a company, they cannot be developed solely on the agency side, as just a mean for communication marketing, but rather in collaboration between the sides. Some of these solutions, such in the example of Fiat eco:Drive, need direct contact with the R&D departments on the client side and build the peripheral solution into the core product.

7.3 PEST skill set

These varieties of innovation in marketing encompass a whole new toolbox and skillset for the marketing agency. It spans a wide spectrum of activities, from business development, consumer research, product characterisation to marketing communication, requirements writing and implementation skills. Activities have also grown and span offline events, interactive communication, corporate websites and mobile phones. (Nutley 2010)

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 It would be interesting to examine these skills in the form of PEST analysis: o Political: Agencies are opening up and understand the universe in where they have to operate; they are more open to trends outside their microcosms of advertising. o Economical: Understanding models such as freemium (a model for free trial base marketing) and pricing give an agency better perspective closer to business development rather than just communication. o o Social: Agencies understand their clients better. They are more involved in the feedback mechanism from clients. Technological: Agencies are able to write product requirement, they need to understand whats possible and what not. They need to understand the implications on production costs and be up-to-date with technologies available on the market. The results of these new methods of marketing make a huge transformation in marketing, where innovation in marketing is leading the way to having marketing agencies, being able to offer firms services that are broader than marketing communication. They are essentially becoming more similar to a product design agency, with the additional value of storytelling and launch experts. Obviously, the old style campaigns will continue to be made for a long while as the huge advertising and marketing industry slowly changes. However, forward thinking individuals, agencies and clients have started to understand that the change has started.

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8 Mutual Foundation from Challenges to Opportunity

In Sections 2 and 3, evidence was provided of the challenges that product and services manufacturing firms on one side and the marketing agencies on the other side have been facing. These challenges seem to be sourced in consumers strengthening power, as social media is empowering consumers. In the words of one of my interviewees, shitty brands and shitty products are unable to be disguised by clever marketing anymore because social media has closed the gap between product and marketing. Your product is your marketing, your service is your marketing and your brand is your marketing (Sharabi 2010). It is important to understand that the motivations of both sides are still the same; both sides are driven by the aspiration of selling more goods. Selling more goods affects bottom-line revenues for clients and, in time, grows marketing budgets that return to marketing agencies.

It is clear that in any case possible, marketing agencies have incentives to market better products, which makes marketing activities earn back consumer trust and enable them to promote products for their client in the digital sphere. For clients, any success in promoting their products will effect bottom-line revenues and gain brand appreciation for future offerings. The joint purpose creates a strong mutual foundation between agencies and clients, a mutual incentive to create better products that are aligned perfectly to the market expectations and needs. The question of how to introduce innovations remember the difference between innovation and invention is still open. 41

 Yusufs (Yusuf 2009) basic model for innovation states that innovation stems from the creative application of knowledge.

(Cokepekin 2010) Yusufs work follows that creativity and a stock of knowledge are the two key ingredients for innovation, which again comes to life through the NPD process. This notion is also supported by McKeowns: Innovation stems from knowledge and creativity (Yusuf 2009); as well as Chesbroughs: knowledge and knowledge-driven capabilities are raw materials, while creativity is the ingredient which leads to innovation (Cokepekin 2010). Most organisations, which have their own research divisions, would probably have the most knowledge about their product. In that sense, they are the most qualified to create inventions (which result from the process of research and development), but do they have enough creativity within their team to transform most inventions into innovations? In his book How Breakthroughs Happen, Andrew Hargadon (Hargadon 2003) learns from Fords innovation process: Fords willingness to give almost carte blanche to a group of engineers with little to no experience in the automobile industry suggest that experience, specialised training and advanced degrees in a single field may not be the best way to pursue innovation. Large-scale investments in research and development, building on a model of the internal development of scientific advances that break from everything that has come before, have sent a great many creative geniuses into their laboratories with implicit instructions to ignore the most fruitful source of innovations what has already been done. Hiring the best and the brightest and then asking them to think outside of the boxes in which theyve been raised may simply be unrealistic if the goal is creating breakthrough innovation. In his papers findings, Breakthroughs and The Long Tail of Innovation, Lee Fleming recognises that multi-disciplinary collaboration increases the variance of the outcome, such that failures as well as breakthroughs are more likely to happen.

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 The opportunities described in Sections 6 and 7 allow a glance at shifts that are occurring in clients organisations and marketing agencies. Client organisations are re-evaluating the long-time use of NPD process and understand better that unless a more open process that will equally include more stakeholders within the company throughout the NPD process, innovations will be hard to create. Opening their doors to partnerships outsides the companys walls allows them to use expertise and knowledge and economies of scale that they do not own. Agencies, on the other side, have gained new skills in the past decade that allow them better understand their clients business needs and have taught them how to produce products (tangible or software) and introduce them to the market. In addition, as marketing agencies needed to govern many of the social web and social aspects of companies, they have gained knowledge of the wants and needs of consumers. Following Yusufs model for innovation, it is fair to say that creativity is the most defining skill of marketing agencies. Their ever-growing need to surprise consumers in never-beforedone marketing communication messages was a key need in order to be successful in the field. Even in terms of organisation structure, all agencies are employing exceptionally creative employees for positions such as Creative Director, Chief Creative Officer, Creative Technologist, etc.

8.1 Interview findings

After using ethnographic research and desktop research to understand the challenges and opportunities for the manufacturing firms and marketing agencies, and devising a mutual foundation between them, I conducted personal interviews with 12 leaders within the marketing and innovation agencies. The interviews were used to re-check the assumptions and results of the conducted research and, more importantly, to understand the motivations and barriers of tightening their relationship with their clients, with the aim of creating better innovations that could be better introduced to the market. The following sections synthesise the different perspectives obtained via semi-structured interviews. All 12 interviewees agreed the marketing industry is in a shift that is re-shaping the agencys working model and were willing to share their experience and knowledge in order to decipher the opportunities and limitations their agencies are facing. The research aims to find commonalities and themes rather than individual opinions, and therefore, findings are presented in a generalised way.

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 8.1.1 Skills Interviewees across the range have conveyed the difference between idea agencies with production abilities and production houses with creative and planning personnel. While idea agencies can have a vast creative input, their solution toolbox is limited, and hence, their solution offering range might be limited as well. All interviewees see their job as interruptive and advocate the need to think outside the box in order to overcome the current high-bar of marketing noise. Many of them have testified of personnel change within their staff that include less vertical knowledge and a more horizontal one, one that can be useful for more than one type of job and have a say on more than one professional subject. However, some vertical knowledge professionals are still being recruited, such professionals are usually developers and user experience experts, which historically were out of the scope of the companies personnel. Many believe this is due to the blurring between a product and a communication campaign, and recognise that in order to provide better service for their clients, they need to posses these capabilities in-house. The reasons for that were: 1. Campaigns are becoming richer, and new experiences need to be provided for their clients. 2. All believe that a broader range of professionals benefit the idea creation process. 3. Time to market: how fast were they able to provide a mock-up of their solutions and have impact on their client decision process. 4. Margin driver: as all believe digital media is here to stay, they see an opportunity to utilise staff on multiple projects and enjoy economies of scale. 8.1.2 Motivation The reasons suggested for the change in their interest for self re-positioning are usually derived from their understanding that pure communication effectiveness is declining and hence so are their revenue sources. Moreover, it seems that competition in the market is fierce, while marketing agencies suffer from declining revenues and commoditisation of their offering, other consultancy service providers, such as management consultancy and product design consultancies are enjoying an existing relationship with R&D departments and management, and are also moving to offer innovation services and marketing solutions. 44

 In addition to those, some have been questioning whether the briefs received from clients are lacking understanding of the new market. These briefs have been found to limit the creative output of the marketing agencies. It seems that some of the interviewees have been driving by self-actualisation needs and would like to see their solutions benefiting the mass population in a quest for successful project productions that will deem success for the client. Due to these views, most have offered their opinion that they need to be more involved in the process earlier in the stage rather than later, to provide those successes. 8.1.3 Positioning Interviewees all agreed that, historically speaking, advertising has aligned itself to storytelling, to narrative, to symbolism and to the creation of intangible assets for their clients. And service and product creation had been the domain of the client. However, with the emergence of digital production companies and digital agencies that can build technology, client perception of their range of offerings has changed to include broader solutions. These broader solutions still very much reside on the communication side, but as more and more marketing campaigns include branded utilities, they consider themselves as service and product designers. In addition, many of them consider themselves to be very much involved or capable to be involved in the business side of a process, this is usually is the result of much more measurable expectations and advances in the field of marketing matrixes. One of the interviewees, Faris Yakub, raised an example of agencies like JWT that invented products with their clients; famously, Mr Kipling cakes were supposedly invented by the agency. He said that that kind of invention role hasnt been part of the agency structure for a long time, though he thinks brand utility is a way to get back into that kind of role. 8.1.4 Barriers Despite the fact that all interviewees have shown high motivation to participate in the process of product and service design and, more importantly, in the innovation creation, some raised fears of inability on the client side to facilitate such involvement. The limiting factors of such an idea were: 1. Open-innovation is still in its infancy phase, and many firms still work in an old NPD model where the marketing department brings the insights but are not involved in the R&D process. The result of that is organisational departments which are hard to penetrate, even for the clients internally. 45

 Moreover, the Profit and Loss, the financial validity figures, of these divisions are separated, and hence, there is uncertainty as to where such an expense would be attributed. 2. Many of times, a client would already approach an agency after making most of the decisions for the product and would come only with communication requests to the agency. This is usually attributed to insufficient understanding of what digital agencies can now bring to the table. An alternative reason would be fear that the marketing division might be afraid to be perceived as redundant in the organisation. 3. The glass ceiling was also raised as an important issue. Historically, the level of personnel that were in contact with marketing agencies were producers rather than strategic influencers. Because of that, a glass ceiling might occur, with lack of power and lack of understanding by the firms personnel contacts to the agency. 4. A language barrier may also occur due to the different cultural figures in such interaction. While agencies would like to be more involved in the R&D and strategic thinking, they might find it hard communicating their vision to bottom-line managerial figures in a firm, whereas management consultancies would probably find more commonalities. 8.1.5 Own limitations There are, however, some internally recognised limitations that were raised by the interviewees; these limitations may also provide a glimpse of the reason such a shift does not happen more rapidly on the firms side and prevents them from acting more aggressively. 1. Few people in the marketing side have worked in any other business, which means they really dont know enough about business; they just know about advertising. This is, of course, is one of the key factors with respect to the language barriers that a client may recognise. 2. The business model is yet to be defined; historically, agencies have charged their client for time invested in a project rather than the effects of it. This is sourced to the immeasurable metrics of their efforts toward the bottom line of their clients. Usually, as Ive shown before, the ideation process and strategy is included in the promise of work and the solution implementation bill, and 46

 more intense effort would be needed to change the business model of those agencies. There are some agencies that are trying a different business model such as flat fee by Zeus Jones and revenue share by Anomaly and Poke, but it has yet to prove itself as sustainable model. More important would be that such a revenue model change would have to be learned and recognised by clients, which are, today, used to getting many of these services for free. 3. Every idea that agency creates while on a clients time is by definition owned by the client in terms of IP and copyright. If an agency creates an idea on its time, then the probability is it will have to invest in it. So either they are doing product R&D, in which case they would have to sell that R&D later to clients directly, or they have an idea which is not owned by them and their ability to bill on it differently would not be possible. These are two different opposing models.

8.2 Case studies

To strengthen my hypothesis of a relationship at early stages of the NPD, and with the help of the interviewees, I have researched a further 3 cases that have realised the shared effort between marketing agency and product manufacturing needed in order to create innovation. These innovations were aligned with the market expectations and needs and have therefore gained traction in the digital sphere that allowed these products to rise above the advertising noise. 8.2.1 FMCG Category - Walkers Do us a flavour Walkers crisps, one of Britains biggest brands, which is owned by Pepsi Co., during 2008, faced a problem brand regard was falling and category competition was rising. The company tried to expand their product range by launching Sensations, a premium range brand, with little success. In order to overcome past failures, the brand decided to differentiate themselves from their competitors with the choice of introducing new flavours to their main product range. However, as opposed to previous product development offers, this time, a well co-ordinated R&D and marketing effort was tried. Whereas previously a chef would be brought to the process and creative effort would centre R&D and then be tested by the marketing department through focus groups to decide which flavours appealed to a small group of consumers, and that flavour would be then move to launch phase, Walker chose to do something else and use both new innovation in marketing and open-innovation and co-creation tactics to get better NPD results. In 47

 July 2008, Walkers launched their biggest, boldest and most innovative multimedia campaign to that date under the name Do us a Flavour. The idea was to give power back to the consumers and capture the heart of the nation, inviting the public to create the next great flavour of Walkers Crisps (Annunziata 2009). The campaign was structured in 3 phases: 1. Suggest Flavours Through a process of co-creation, users were invited to simply send some text and a photo of the flavour of crisps they would like to be developed by the company. In addition, each suggestion submitter received a link to his suggestion in order for him to invite his friends to vote and support his/her suggestion. 2. In addition to the most voted flavour on the site, 5 celebrity judges were brought to cast their votes on the short-listed ideas and choose 6 flavours that the company would then turn over to their R&D for production and market testing. 3. Among the 6 flavours that were produced, a second phase campaign invited the nation to choose the best flavour that Walkers would continue to produce as part of its standard range of crisps. Idea submitters were competing on national recognition but also were incentivised by financial benefits. All 6 finalists were to receive 10,000 prize money each, and the winner would get a 50,000 cash prize and 1% from sales profit. At the launch of the campaign, Walkers was expecting a maximum of 250,000 entries to the competition. As of October 2008, the website had received an astonishing 1.4 million ideas, 1.2 million consumer votes, 160,000 mobile game downloads, 825,000 consumers opt-ins, and then Walkers.co.uk saw a 2,200% surge in unique users in comparison to its normal website traffic (JigSaw official statistics 2010). Through the help of JigSaw digital agency development of the idea, the production house skive and a well-co-ordinated cross-functional team including R&D, marketing, business development and finance within Walkers, the NPD process assured success by allowing inventions aligned with the market to become a wellrecognised innovation. Along with the commercial success of the product, the campaign received multiple awards and generated 4.7 million worth of free news impressions across the UK. See appendix 1.11 for screen shots. 48

 8.2.2 Product Innovation Nike + By 2005, Nike Inc. , achieving profits of $1.2 billion, faced fierce competition from its arch-nemesis Adidas, who purchased Reebok, creating a number two challenger in the sporting good category. At that time, many believed that Nike would retaliate through an expensive traditional ad campaign, and possibly even return to the Super Bowl, from which it had been absent since 1998. Instead, in 2006, Nike launched Nike+. In a symbiotic partnership with Apple, Nike launched a system that combined a clip-on sensor that communicated with iPods to enhance the experience of serious runners. Every mile, a voice spoke over the iPod, played music and provided updates on pace and miles run, and offered words of encouragement. The product was complemented with an additional service layer. By placing the iPod in its cradle, the runners data was automatically uploaded into the nikeplus.com website, allowing runners to compare runs, track their progress against goals and note improvements over time. But the real advantage of the Nike+ system went even further by helping runners connect between them, establishing the worlds largest running club. The service connects runners, allowing friends, groups and even entire nations to share running courses and challenge one another. The marketing agency that was hired to build the system was R/GA. The marketing agency, hired by Nikes marketing division, had been deeply involved in the NPD process of the product, tying hardware and software technology with the social aspect that are the core competencies of the digital agency. As Nick Law, Chief Creative Officer of R/GA noted: [Nike+] is not an advertising idea, it's a technology idea. We are delivering a product, an application. (MediaPost) After only six months of sales, Nike CEO Mark Parker reported to analysts, Nike+ is turning out to be huge. Clearly, our confidence in the concept is proving to be accurate. (Parker 2006) He credited the companys 8.1% rise in second quarter profit to this line of running shoes. See appendix 1.12 for screen shots 8.2.3 Retail innovation Best Buys Twelpforce Twelpforce (a concatenation of Twitter and Help) is the Twitter customer service channel for Best Buy, as well as a place where Twelpforce team members can share relevant information with customers. Twelpforce was conceived by Crispin Porter & Bogusky (CP+B) creative agency out of the insight that Best Buy customer service on location is well known for its expertise, though it is not reachable outside of Best Buy stores (CP+B Official case study 2010). By harnessing over 2,600 Best Buy employees and motivating them to use their free time in-store to help customers over 49

 the web, Best Buy was able to create better customer service, which has answered over 33,500 questions in its first year of operation, with an average answer time of 12 minutes or less (Ogneva 2010). The action had rewarded CP+B and Best Buy with the Cannes Titanium Lion Grand Prix award 2010, which oddly is an International Advertising Award. This is no mistake, and it is just another example of the relationship between a product and its marketing. CCO (Chief Creative Officer) of AKQA said, about awarding an advertising prize for what seems to many as a pure business innovation, The phrase that came up with this piece was that it was a business-changing idea. Not only is it game-changing, but it changes the business of the client. And added: One of the things I think about a lot when we do our work is that it should be useful, usable and delightful. This piece hit all those points, especially the last it put delight back into customer service. The campaigns best achievement is that it helped lower customer complaints by over 20%, utilising the current assets of the company, innovating the service division and marketing division through using marketing division knowledge and external sources. See appendix 1.13 for screen shots.

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8.3 Spectrum of innovation

It would be interesting to look for patterns in order to try and analyse whether we can see the strong motivations that were articulated in the interviews and the opportunities described in this paper, on both sides, translate to reality. By plotting this papers researched case studies on a matrix, we can start evaluating the shift in the agencies and clients relationship for the purpose of creating innovation. The Y-axis represents whether the innovation is more related to the core product or whether it an innovation that results in peripheral products. The X-axis represents the leader of that innovation. Interestingly enough, over the past recent years, we can notice a shift right, which represents a tightening relationship between the client and the agency in creating innovations. This would seem to correlate with clients willingness and agencies abilities to produce such innovations.

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 On a broader lever, if we look for opportunities in the market, we can plot a larger sample of recent projects. The sample presented below consists of 40 random marketing activities (see appendix 2 for complete list of samples and scores). As we can observe, many of the current innovations are led by marketing agencies and result in peripheral products to the main product. While client-driven innovations, while fewer, result mostly in core product innovation. We can also observe that agencies have started being involved in innovations that resulted in core product innovation.

8.3.1 Limitations of the scope The scope of innovation plot is limited by availability of inceptor information. Due to limitation of time, each of the samples was researched through desktop research only and not directly tracked to the sources of their creators. In some cases, quoted testimonies by their creators implied a disagreement on the involvement ratio between actors in the projects; this has happened on both the clients side and the agencies side. Thus, the X-axis scoring was devised by estimation based on either knowledge of capabilities or understanding of previous works done by each of the sides. The Y-axis was scored based on the current gap between the offering and the core business of the manufacturing firms, though future changes of the firms products or services focus can potentially change the scoring.

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9 Conclusions
9.1 Summary the challenges and opportunities
This paper has looked into the challenges that both manufacturing firms and their marketing agency counterparts have been struggling with ever since the Internet democratised knowledge sources among consumers. Through access to information, consumers have gained much more power over manufacturing firms and marketing agencies, and they now enjoy the ability to research more thoroughly any subject before believing a message and buying a product. In addition, as consumers become more knowledgeable, we see decreasing belief of marketing messages. As a replacement for corporate marketing messages, consumers started looking for opinions from other consumers that have actually used a product on offer, whether is a book, a banking service, a consumer electronics product, etc. This new market condition impacts manufacturing firms and marketing agencies. Manufacturing firms have to produce much better products than ever before that will be, as much as possible, aligned with its target audiences expectations and needs; otherwise, no matter how they try to promote it, within days, negative opinions will be posted online and potential users might avoid buying into the product or service. As for the marketing agency, no matter how brilliant and engaging a campaign is, these same negative opinions about the product will probably have stronger impact on consumers purchasing decision. This new reality proposes the following challenges for the two sides: 9.1.1 Clients challenges 1. The old model of NPD barriers limits the companies ability to get a proper buy-in and involvement from different available resources within the company. As the process is fragmented to different departments, from R&D, marketing, business development, etc., there is an accountability boundary that results in serious organisational politics and post-launch cross-functional blame. This results in, in the long run, little mutual respect between marketing and R&D divisions. 2. Execution is key, and many times suffers from average results, usually due to lack of accountability from each of the departments.

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 3. As the success of a product relies on how prominent its introduction to the market, how both marketing and product aspects of the product are executed is key for success. 9.1.2 Agencys challenges 1. The average consumer is hit by an abundance of marketing message daily, all claiming to improve or change his/her life for the better. 2. These messages usually over promise, and the products usually under deliver. 3. Consumers, who are used to these over promises, do not believe those messages and would rather see actions than words. 4. With consumers using other ways of finding out the facts of products, traditional advertising is somewhat redundant. 5. Without aligned-to-market products to promote, agencies know it wont take long for social media to be inundated with negative opinions. These agencies feel that in order to succeed in promoting a product, firms need to produce products perfectly aligned to market. Fortunately, opportunities on both sides may be used to overcome the major challenge of producing the necessary innovations, or as stated before, products that are aligned with the market. 9.1.3 Clients opportunities 1. The open-innovation movement is gaining momentum; this movement establishes that companies need to open up their long archaic development departments, involving more stakeholders in the NPD process. As the success of a product relies on how prominent its introduction to the market, having more and diverse skilled workers contributing equally to the innovation process would allow better success rates of product launches. 2. The open-innovation movement also determines that sourcing outside of the firms wall bears great benefits to firms, as skilled, well-experienced workers are spread throughout various organisations. Having more partners from different school of thoughts would bring more brilliance to the NPD process. 3. Sourcing outside of organisations will also allow a firm to enjoy their partners economies of scale for cost reduction. 54

 4. Co-creation, or the process of involving consumers throughout the design phase of any product development, is a secondary layer that will help firms align their products with their consumers needs and expectations. When used right, this could lead to broader range of advocates for any initiative of a firm. 5. Finally, high existence of understanding the need and motivation to create out-of-the-box thinking innovation seems to erect on clients side as a mean to dominate markets, and surprise consumers. 9.1.4 Agencys opportunities 1. With lower success rates of providing successful traditional campaigns, agencies have started innovating their own services, acquiring new skill sets and expertise in various fields. 2. The digital era has introduced the agency to software product design and development. 3. Measurable marketing metrics tools have exposed agencies managements to additional business layers such as ROI metrics, bottom-line performance etc., which they have never had to deal with before. 4. Understanding their limitation of turning bad products into successful campaigns is driving agencies motivation to help firms improve their products prior to launch phase. 5. Finally, strong opinion leaders evangelise the need for better products, driving already existing high agencies motivation and creativity of their employees, to take pro-active action.

9.2 Proposed model

In summarising the challenges of clients, it is obvious that the two problems that currently affect most innovation journeys are accountability and diversity. In order to realise the opportunities on both sides, these two factors must be taken into account. The following suggested model should, in theory, allow these two issues to be handled and open a way for marketing agencies to contribute to the innovation process in its early stages. It was developed over the duration of this work and throughout my extensive interviews that Ive met. This suggested model by no means comes out of the blue and is rather a formalised process of an ad-hoc behavioural process that Ive inferred. 55

 However, these behavioural process are currently used in a more haphazard way rather than a wide spread phenomenon as I perceive it should be. From my research, the current ad-hoc behavioural process for marketing agencies to be included in the innovation process from an early stage, or contribute on more levels than communication, occurs based on an existing personal relationship between two figures one each on the marketing agency side and on the clients side when one of the actors suggests such a process or a subset of this process. For example, when Poke created the Manchester City Football Club website, it had also participated in working out the site commerce experience and video services, which are peripheral services (or products) given by the clients firm. This, in time and without any formalised process, may incur results for both the specific agency and the specific client that have achieved such relationship, as each is experimenting with such a process. The client, then, might include such a modus operandi throughout its projects, The agency will be able to build a track record of innovation, which it can then continue to market to its other clients. However, as the process is not formalised, it is exposed to failures which will be obstacles to taking the necessary leap of faith towards embracing new methods for constantly creating innovation. Moreover, I expect its adoption to take more time than with a formalised process. The following formalised process, hence, is offered as an ideal procedure for a smoother operation on both sides. 9.2.1 The NPD taskforce team 1. Management of manufacturing firms should create taskforces that will each work together from idea inception to product launch. These taskforces will not just include top managers from each department, but will also appoint a representative from each division as a full equal partner in the NPD process. The taskforce should include any major stakeholder division from any relevant existing division of the firm. This structure will act autonomously in order to bring the innovation to market. This structure will allow division managers (from marketing, finance, R&D, etc.) to hold accountable their division representative, on a personal level, for the success or failure of a product. This taskforce structure will break the barriers that exist between departments in order to integrate thinking, as well as allow managers of each department to hold responsible the member of team representing their division for utilising internal and external sources for the success of a project.

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 2. The taskforce will be assigned a PNL, which will include all resources spent by the team, including the salaries of each team member. This structure will allow metrics to be created. 3. As taskforces are constructed, each member of the team will be able to use his/her divisions resources to facilitate his function in the taskforce. For example, a taskforce team member from the marketing division will be able to approach his marketing team manager and utilise the firm relationship with inhouse resources or external vendors in order to make sure the innovation is successful. Since a PNL is established for the taskforce, abuse of division budget is less likely. 4. By creating these taskforces, expert companies will be invited to participate in the process from an early stage, each based on its own expertise (i.e. product design for product look and feel, marketing for storytelling and planned launch and management consultant for finance and supply chain optimisation). Such a move will allow internal and external talent to join forces together and, again, be accountable together. The idea here would be that no blame on internal malpractices can be placed, as each team stakeholder will start the process almost simultaneously. 5. The model will create a lean organisation form that can focus on using its best skills for execution purposes. This model realises the opportunity on both sides agencies will be able to contribute their creativity and communication skills from day one, and clients can suppress politics within the organisation. Moreover, the NPD team will have diverse knowledge and creativity using internal and external assets that are necessary to deliver innovations. 9.2.2 Limitations of the suggested model 1. In case a team member, whether external or internal, must leave the taskforce or fails to fulfil his role in the taskforce, a replacement should be brought in. This will create accountability issues with the newly brought-in partner due to previous decisions in which he/she did not take part. 2. Since taskforce stakeholders should be invited at early stages, a former relationship with the partner or a track record should be built upon. This might make it harder for newcomers to enter a taskforce, and an incumbent culture might be created.

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 3. Due to time and report length constraints, the suggested model does not include a business model validity of the concept. One of the big questions left untouched is how the marketing agency would turn the opportunity into a revenue stream.

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Appendix 1 Screen Shots

1.1 P&D Connect & Develop:

1.2 My Starbucks Ideas

1.3 Dell IdeaStorm:

1.4 Sharmin Pottypalooza:

ii

1.5 Uniqlo LuckyCounter:

1.5 Fords Where are the joneses?

iii

1.6 OKCupid:

1.7 P&G Old Spice:

iv

1.8 Bacardi Mojito:

1.9 Orange GlastonNav:

1.10 Fiat eco:drive:

1.11 Walkers Do us a flavour:

vi

1.12 Nike - Nike+

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1.13 BestBuy Twelpforce:

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Appendix 2 Spectrum of Innovation Data Table

B ra nd Utility T ype Mobile Mobile Mobile P hys ic al O nline O nline O nline O nline O nline O nline O nline/P hys ic al O nline/P hys ic al O nline P hys ic al O nline/P hys ic al P hys ic al P hys ic al P hys ic al P hys ic al P hys ic al O nline O nline O nline Mobile Mobile Mobile Mobile Mobile Mobile Mobile Mobile Mobile Mobile Mobile Mobile Mobile C ore vs Ag e nc y Vs. P e rife ra l C lie nt

Orange Guinness Charmin Charmin Las V egas Tourism Johnson & Johnson Uniqlo Bugaboo Plum Bank of America Nike Adidas Halifax Howies Michelin Clear Channel AdShel Ikea Ikea Starbucks Fiat British Airways American Express Fiat Sonos CLIFBar Surfline Target Lucky Magazine Nike Nike Women Chanel VW Polo Zippo Pedigree Dog Food Coca-Cola MINI

GlastoNav Moments of Greatness Sit or Squat NYC Restrooms My V egas Babycenter Uniqlock Bugaboo Daytrips Plum V ision Keep The Change Nike Plus MiCoach Share Price Alert Tap i n Carnaby Street store, London Driving Guides Citybikes SXSWi Lounge BoKlok Music Kiosks Road Safety f or Children Metrotwin Open Forum EcoDrive Sonos Controller i Phone app Save our Snow i Phone app Surf Report i Phone app Christmas Gift Finder i Phone app Lucky At Your Service i Phone app Nike Goal i Phone app Nike Training Club i Phone app Chanel i Phone app VW Polo i Phone app Zippo Lighter i Phone app Shake & Bark i Phone app Magic Coke Bottle i Phone app Road Assist i Phone app

3 2 4 7 6 3 0 3 1 7 7 5 4 1 2 9 5 8 6 3 1 3 7 8 2 8 7 6 2 5 5 3 2 2 0 2

8 9 7 5 9 6 9 7 8 4 2 2 3 3 7 1 9 2 5 5 10 7 6 2 8 3 8 5 8 6 8 8 6 8 10 8

Source: Anjali Ramachandran

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