After giving it a lot of thought I am going to rank this as the second most asinine thing ever said by a business leader: "Marketing and innovation produce results; all the rest are costs." That was reportedly said by Peter Drucker. It was a really, really dumb thing to say, but I don't think it rises to the top of the stupidity chart. That place still belongs to Thomas Murphy, the GM President who said, "General Motors is not in the business of making cars. General Motors is in the business of making money."
What makes these statements particularly inane is how unsupported they are by the obvious and common sense. What does make a lot of sense is the current ad campaign for Shredded Wheat, in which they claim to "put the 'No' in innovation", boasting that their product has remained unchanged for some 70 years. The reason this strategy makes sense is because cereal is not an innovation driven business. The number one selling product is Cheerio's, largely unchanged since its inception in 1941. Number 2? Frosted Flakes, which has been around since 1952. In spite of all of the noise, this market is almost entirely driven by value. A cereal company that builds its business around Drucker's "Marketing and innovation" adage will fail. Marketing and innovation in this, and many other industries is not the key to the future – it is the road to failure taken by management that does not know how to create value for their customers. And value is created back in those areas Drucker dismissed as merely costs.
Of course innovative technology is critical to the consumer electronics industry. But the fact that Steve Jobs propelled Apple to the stratosphere in that industry does not mean that focus on inventing the cereal equivalent of the iPod is a particularly smart strategy. In fact, it is folly in most businesses.
The article citing the Drucker quote concerned GM and the marketing industry indignation that a product guy like Bob Lutz would be put in charge of the strategic centerpiece of marketing. The Drucker quote is intended to support the theory that the auto industry is just like the MP3 business – that innovation and marketing are the universal strategy for success. Like the cereal business, however, all you have to do is look at the industry leaders to spot the fallacy of this notion. Toyota, Honda, increasingly Hyundai Kia … hardly synonymous with marketing and innovation. They, like the cereal companies, succeed on the strength of providing superior value for their customers.
The 'marketing and innovation is everything crowd' is a lot like this guy – the father of the bride in My Big Fat Greek Wedding who believed that Windex was the universal solution to all of life's problems. It defies common sense. More relevant to most businesses is the old Will Rogers quote, "If advertisers spent the same amount of money on improving their products as they do on advertising then they wouldn't have to advertise them." Value optimization is more the Windex of manufacturing than innovation and marketing will ever be.
My old friends at Wahl Clipper are another example. In the rather spartan lobby of their headquarters they have an exhibit showing their hair clipper models going all the way back to 1920 or so. The most noticeable aspect is that the inner workings of the original models are not that much different from the ones they sell today. Their success is not a story of innovation and marketing. It is one of relentless focus on value. Their advertising budget is a fraction of the budget at their major competitor, Spectrum Brands – the makers of Remington products. Spectrum Brands, by the way, filed for bankruptcy earlier this year, while Wahl continues to grow sales, profits and market share.
The ability of the marketing and innovation proponents to delude themselves cannot be underestimated. The same article with the Drucker quote ascribes the success of Harley-Davidson to the creativeness of their HOG image campaign. In fact, the business literature if crammed with stories of their amazing quality and cost turnaround – the value they began to build into the product. An innovative gimmick, advertising and marketing will lure me into buying a product once – value is what determines whether I buy it again. That, too, is simply a matter of common sense.
Common sense should trump buzz words and management fad every time. Look around your house; look at what you spent your money on last week; walk the aisles at Walmart. Little of it is driven by innovation- clothes, basic foods, furniture, housewares, pet products, auto parts and supplies, and on and on. It is overwhelmingly value driven – not innovation driven.
"Marketing and innovation produce results; all the rest are costs" ??? Not hardly. How you manage those 'costs' determines value for the customer, and how well you do that produces results. Marketing and innovation have little to do with it in the long haul unless you are in a very narrow group of innovation driven businesses, and it doesn't take a genius to figure that out.