In today’s competitive environment, innovation—in its many forms—is more important than ever. How have many small, under-resourced businesses come so far so quickly, and what can you learn from their strategies and tactics? Renowned experts in global branding and marketing explore innovation and the role it plays in a company’s success. Rajeev Batra, the S.S. Kresge Professor of Marketing at the U of M’s Ross School of Business, moderates. He leads Professor Srinivasaraghavan Sriram and other panelists in discussing how to innovate with your brand, how to bypass key bottlenecks when initiating innovation and how to use disruptive innovation to gain competitive advantage. Professor Batra will also share insights from his recently published (May 2012 McGraw Hill) book that outlines disruptive ‘compete from below’ strategies used by low resourced companies to gain competitive advantage.

1. Marketing Roundtable: How Smart
Marketing & Branding can Help
Innovative Entrepreneurs
October 9, 2012
© Ann Arbor SPARK

2. Branding through Innovation:
Learning from the new Global
Brands from Emerging Markets
Rajeev Batra
Ross School of Business
University of Michigan
Amitava Chattopadhyay
INSEAD, Singapore
Aysegul Ozsomer
Koc University, Turkey
© Rajeev Batra

3. Background and Motivation: “EMNCs”
© Rajeev Batra

4. Special Challenges: How Overcome?
• Smaller size, weaker financial resources
– Whirlpool $19b, Arcelik all $5b; VW $140b, Mahindra all $7b
– To build brand awareness and associations
– To gain distribution access
• More negative initial quality and trust associations
– ―Made in China,‖ ―Made in India‖
• Smaller global organizations than incumbent ―TMNCs‖
– Thinner global organizations
– Less customer insight and knowledge
• Learn about successful EMNC strategies + tactics; TMNC
responses; “Challenger, compete-from-below strategies”
© Rajeev Batra

5. Despite such Challenges, Look at Performance
Revenue (US$ Bn)
16
14
12
10
8
6
4
2
0
2005 2006 2007 2008 2009 2010 2011
(but 2012 problems!)
© Rajeev Batra

6. 39 Companies Interviewed
• India • China/Taiwan
– Asian Paints – Lenovo (2)
– Apollo Tyres – HTC
– Bajaj Automotive – Midea
– Dabur – Haeir (USA)
– Godrej – Chigo
– Infosys – Mitac
– Mahindra and Mahindra • S. Korea
Auto/Tractors – LG Electronics
– Marico • South and South East Asia
– Taj Hotels – Asia Pacific Breweries (Tiger Beer)
– Tata Tea – Jim Thompson (Clothing, Food)
– Tata Motors – Varafoods (Beverages)
– Titan Watches – Dilmah (S.L., tea)
– Wipro • Turkey
• Latin America – Arcelik
– Natura – Mavi
– Modelo – Eyvap
– Café Britt – Ulker
• Middle East – Vitra
– Aramex (Jordan, Courier) – TEMSA
– Savola (Saudi, Oil + Sugar) – Turkish Airlines
• Russia Phone & personal interviews
– MTS (Telecom)
with CEOs, COOs, CMOs, e
© Rajeev Batra

8. Four Types of Strategies
Go to Similar Go to Different
Markets Markets
Use Existing “KNOWLEDGE “COST
Competencies LEVERAGER” LEADER”
“NICHE “GLOBAL
Build New BRAND-BUILDER”
Competencies CUSTOMIZER”
In R&D, Innovation, -- THROUGH
“Insight” FOCUSED
LOW-COST
INNOVATION
-- THROUGH
BRAND
ACQUISITION/JV
(SOFT TOUCH)

9. Four Strategies: Niche Customizer
• Knowledge of/capability to understand segmented consumer needs
and identify groups ignored by TMNCs
• Low-cost ―frugal innovation‖ R&D abilities to create customized new
offerings
• Self-owned and flexible manufacturing facilities to produce a bigger
range of SKUs at a low cost—plays to the weakness of TMNCs
• Capable of dealing with emerging market and other environments
• Acquire capabilities and scale to jump to the next level…
© Rajeev Batra

10. Four Types of Strategies
Go to Similar Go to Different
Markets Markets
Use Existing “KNOWLEDGE “COST
Competencies LEVERAGER” LEADER”
“NICHE “GLOBAL
Build New BRAND-BUILDER”
Competencies CUSTOMIZER‖
In R&D, Innovation, -- THROUGH
“Insight” FOCUSED
LOW-COST
INNOVATION
-- THROUGH
BRAND
ACQUISITION/JV
(SOFT TOUCH)

11. Four Strategies: Global Brand Builder
• Natura: exploits advantage that 22% of world’s bio diversity is
in the Amazon: sustainable capability to identify and extract active
ingredients from Amazon flora used by indigenous people
• Expanded to France
– International headquarters created in New York city
• Amazing new product development capability, creating very fast cycle
times — a new product every 3 days and 65% of revenues
coming from products developed in last three years
• Most productive direct sales force--superior to Avon or Amway
• Spend 3-4% of sales on R&D, less than competitors; but have
lower cost R&D capability, leveraging university affiliations
– Like Apple (vs. Microsoft), even small R&D/Sales % can
have huge impact, bolstered by much lower cost of EM-
R&D
© Rajeev Batra

12. Lessons about
Tactics
© Rajeev Batra

13. Awareness-Building Tactics
1. Go for multiplier effects
2. Laser-focus for efficiencies
3. Lower-cost, variable-cost media…
4. Attention-getting messages (MPR)
5. Long-term Investment: Spend big money
6. Acquire/license brands with high awareness
© Rajeev Batra

14. © Rajeev Batra

15. Ways to Build Quality/Leadership Perceptions
(Crucial!!)
1. Real Quality Gains
2. Real + Communicated innovation,
leveraging MPR for credibility
3. Real niche-area leadership
incl. technology, VFM, Service
4. Q Signals: Co-branding, awards,
design, tests, ratings, reviews
5. Change perceived Country of Origin
6. Acquire high-perceived quality brands
© Rajeev Batra

16. Lessons for all Challenger Businesses
Don’t Over Reach Don’t Stay Still Take a Long View
Deepen and leverage Invest behind Develop a long-term
initial capabilities innovation mindset
Focus, focus, focus Execute on Achieve the “core
on customers, innovation cycles quality” of the offer
customer needs, visibly faster than the first
similar to those you category norm
know
Remain under the Innovate beyond Invest systematically
radar of TMNCs and products to create behind brand
avoid head-to-head novel customer building
competition experiences
Avoid over reaching Move carefully but Create, embed, and
in terms of customer systematically, using a transition to a central
acquisition (go test and learn strategy brand marketing team
wholesale)
© Rajeev Batra

17. Questions, Comments, Suggestions?
Rajeev Batra
rajeevba@umich.edu
www.EMNCStrategies.c
om
© Rajeev Batra

18. Two Myths About Innovations and Success
AA Spark Marketing Roundtable
October 9, 2012
Prof. S Sriram
Ross School of Business

19. Myth 1: A “Good” Innovation will Naturally Lead to Success
• Typically, a “good” innovation offers some combination of the following
~ A few innovative features
~ Better value for $ Does anyone really care
~ Better quality for these?
~ Convenience
• R.J. Reynolds (RJR Nabisco Inc., subsidiary) spent over $300 million to
market its Premier Smokeless Cigarettes, which were priced at a 25%
premium to other cigarettes
© 2012 S Sriram, All Rights Reserved

20. Why is a “Good” Innovation not Sufficient for Success?
When Kraft launched EasyMac, a line of microwaveable macaroni
and cheese, sales were disappointing
• The added convenience that even kids could prepare it without
compromising on taste should have made it an instant success
• What went wrong?
A
• Awareness
A
• Availability
T • Trial
R
• Repurchase
A good innovation is necessary but not sufficient for success
• The way it is taken to market is very important
© 2012 S Sriram, All Rights Reserved

21. Myth 2: An Inferior Product Cannot Displace a Superior One
• This is an example of what Clay Christensen labels as Disruptive Innovations
• Disruptive innovations start out as inferior to existing technology but eventually
catch up with what the market wants
• In contrast, Sustaining Innovations involve incumbents focusing on the most
profitable customers and producing innovations that overshoot the mass market
© 2012 S Sriram, All Rights Reserved

22. Other Examples
Disruptive innovations might never be as good as sustaining innovations, but
who cares?
Cell phone cameras can take
pictures of acceptable
quality such that they can
replace digital cameras
GE V Scan is a portable
ultrasound device. Like other
portable GE products, it was
developed for poorer countries
where there is limited access to
healthcare
© 2012 S Sriram, All Rights Reserved

23. To Summarize …
• A “good” innovation does not necessarily imply that it will automatically
succeed
~ It will succeed if the awareness, availability, and trial components are met
~ A good innovation is necessary but not sufficient for success
• An innovation that looks less attractive today compared to an incumbent
technology can displace it in the future
~ Disruption is more common than we can imagine
© 2012 S Sriram, All Rights Reserved

24. Thank You!
© 2012 S Sriram, All Rights Reserved

25. Next Marketing Roundtable:
SoLoMo: Social, Local, Mobile
November 13, 2012
© Ann Arbor SPARK