Before You Innovate:
An Interview with Sergio Zyman
Zyman is the founder and Chairman of Zyman
Group, an international management consulting firm based in
Atlanta. Zyman Group has worked with such companies as Microsoft,
Miller Brewing Company, and McDonalds.
starting Zyman Group, Sergio put the fizz back in Cola Cola's
fortunes. During his tenure as CMO of the soda company, he boosted
sales volume from 9 to 15 billion cases, a growth record for the
definition of marketing success is to "sell more stuff, to
more people, more often, for more money, more efficiently."
His latest book is Renovate
Before You Innovate: Why Doing the New Thing Might Not Be the
Right Thing. He is the namesake for the Zyman Institute
of Brand Science at Emory's Goizueta School of Business - and
this very site.
of all, what's wrong with innovation? Are corporate pied-pipers
like Gary Hamel and Tom Peters really leading executives astray
by asking them to innovate, innovate, innovate?
Zyman: There's nothing wrong with innovation. But most companies
that think innovation usually end up making one or several mistakes.
They get hung up on core competencies instead of their
core essence (I'll explain what this means in a minute), or
they pursue creativity at all cost, treating all new ideas as
potentially equal; or they limit their innovation to new products,
forgetting that innovation is about creating new value; or they
chase horizontal instead of vertical growth; or, and this is a
plague, they try to innovate through acquisitions, instead of
sounds silly, but its really rather simple. You'd be amazed at
how many companies confuse what they know how to do, their
core competence, with what consumers will buy from them, what
I call their core essence. For example, Coke once got into
the shrimp farming business- we had core competencies covering
purchasing, distribution, sales, logistics, and global operational
capabilities. Where it all fell apart was that we never thought
about why customers would buy shrimp from us in the first place.
Shrimp farming was not a core essence. Consumers simply couldn't
make a connection between shrimp and Coke.
that was an example of barking up the wrong tree. Innovative,
perhaps, but a business failure, nonetheless. It's easy to buy
or develop new competencies, but it's much harder, if not impossible
to develop a new core essence.
doing the new thing, as you say, might not be the right thing...
Zyman: Do you remember when Porsche came out with an automatic
transmission? That's not their essence. It's, ...
Sergio Zyman: I
was going to say dumb.
reminds me of innovations like Pepsi Blue, or Nestea's yellow
tea drink called "Tea Whiz," or Kimberley Clarke and
Proctor & Gamble's "wet toilet paper," or Las Vegas'
"family friendly" campaign. The list goes on and on.
Innovations that fail.
says "start with what you can make and see if you can sell it."
Conversely, "renovation" says "start with what you can
sell and see if you can make it."
is also much more expensive and risky than renovation because
it often requires you to build new assets/infrastructures and
competencies and to source new customers and consumers. Remember,
securing a new customer often costs six times more than retaining
a current one.
Brand: Sergio Zyman
take it you're not exactly a fan of ads for ads sake?
Zyman: A while back I used to tell everyone who would listen-
"The problem in marketing today is that we spend 95% of our
time and money on advertising and 5% on the rest of the stuff.
What I propose to you today is to flip it around: Spend 5% of
your time and money on advertising and 95% on everything else.
If you do that, you'll sell a lot more to your customers."
That's even more true today.
I want to say this clearly- I'm not against creativity or innovation.
But you don't have to abandon everything you know in order to
achieve breakthroughs that lead to topline growth. Innovation
utilizes existing assets to develop high-risk propositions before
you see whether you can develop ways of activating better your
that's why you think companies should renovate? What is renovation?
Zyman: The bottom line is that renovation is a means to drive
organic growth. The philosophy of renovation is this: "Let's
find out what we can sell and see whether we can make it."
Renovation is grounded in a company's core essence and is a rigorous,
research-driven approach to understanding what a company stands
for in the minds of consumers and how to best meet consumers'
needs and maximize their experience. Instead of selling consumers
what a company can make (innovation), Renovation seeks to define
what consumers will buy and then provides it for them. Renovation
provides context for growth by asking and answering questions
such as, "What does the market expect and demand that we do? What
does the market give permission for us to do? What will the market
forgive? What will the market reject?"
starts with a company (re)validating its core essence and is followed
by a strategic effort to leverage its core competencies and existing
assets/infrastructures to renew and reinvigorate the overall business.
I spell out the "Six Key Components to Renovate Your Business:"
Renovate Your Thinking
You have to think and act like the insurgent rather than the
incumbent. You must treat marketing like a science and not an
art. You must recognize that marketing is all about selling.
Too many companies achieve a little success and then get fat
and lazy. Think like an aggressor and a renovator in all aspects
of your business.
Failure to think like an aggressor and a renovator helps explain
phones weren't introduced by AT&T
mapping wasn't introduced by Rand McNally
package delivery wasn't introduced by the U.S. Postal Service
and caffeine-free soft drinks weren't introduced by Coke
Renovate Your Business Destination
This requires defining your current state and identifying your
desired end state. From here, you can create an effective plan
to bridge the gap between the two.
3. Renovate Your Competitive Frame
You must understand the entire set of viable alternatives to
your product that compete for your customers' time and money.
Look outside of your traditional competitors and even your current
category as your customers define it. Your company could be
in big trouble if you only consider your obvious competitors.
The big three U.S. automakers were blindsided by Japanese import
cars; steel mills by mini-mills. In Russia, Coke's main competitor
was not another beverage, but the bus system. Redefine your
competitive space to create preference for your brand and a
reason to spend money on your offering.
4. Renovate Your Segmentation
In order to allocate resources to the higher-profit opportunities,
you need to understand the values, attitudes and behaviors that
shape demand as well as the attributes and benefits that drive
preference among your customers and consumers.
5. Renovate Your Brand Positioning
It's the overall image of your brand that you create in your
constituents' minds; and every program, initiative and activity
you undertake must be consistent with and measured against the
positioning. If you don't take control of the dialogue between
you and your customers, your competition will, and they'll position
you as irrelevant. Communicate with your customers to position
your company right where you want to be. The Concorde is a classic
example of terrible positioning. Instead of positioning itself
as an elite form of air travel for the rich and famous (and
getting labeled as an extravagant corporate expenditure), it
should have been positioned as an economical and efficient way
to do business in Paris and London.
6. Renovate Your Customers' Brand Experience
on the basis of experience vs. product attributes alone expands
your competitive frame and gives you more opportunities to deliver
value and differentiate yourself. Create a meaningful customer
experience before, during, and after purchase in order to influence
repurchase. Think of Ritz Carlton and its constant attention
to guests' preferences, which resulted in a premiere service
called luggageless travel (frequent guests leave personal items
and clothing at the hotel between visits).
talk about "Renovate Your Thinking." Can you explain
that component for our readers?
Zyman: One, thinking renovation means thinking like a challenger
rather than the champion. Train yourself to see opportunities
(within your core essence, of course) and act on them early. Two,
measure the result of every dollar you spend on marketing. Three,
don't even think about lowering prices. There are tons of ways
to generate organic growth- cutting your prices isn't one of them.
about "Renovate Your Business Destination"?
Zyman: A destination statement articulates where you want
to nd up as a business. But you don't just throw this together
during your lunch break. It's serious work. The
best destination statements answer several questions. For example:
How do we define our business? What business do we want to be
in on a long-term basis?
2. Who are our target customers? Who should we sell to, directlyor
indirectly, now or in the future?
3. What do we want them to think? What explicit, tangible attributes
and benefits will customers ascribe to our brand?
4. What do we want them to feel?
5. How do we want them to act?
6. What do we want as a result?
I give detailed examples of how companies are doing this. Again,
I can't stress this enough, your destination must be consistent
with your core essence.
can you give us an example of how not to renovate?
Zyman: Let's take a look at Diner's Club. Here's a company
that literally invented the credit card and created a whole new
industry, but failed miserably on all six components of renovation.
begin, it failed to develop a renovation mentality, holding firm
to being "the highest quality travel and entertainment card"
when people were using their cards to charge a lot more than travel
and fun. That's the wrong business destination.
they raised their annual membership fee from $80 to $95 when most
other cards were free or a lot cheaper.
Club also competed in the wrong space. They assumed they were
competing with American Express, only to find that AmEx, Visa
and Mastercard are fighting each other for turf, and all three
left Diners Club behind. Diner's Club failed on the three A's
- availability, acceptability, and affordability.
their expensive Diner's Club cards aren't accepted at very many
place, and when the Diner's Club no longer carries any prestige,
customers forget about the fun chat they had with the customer
service person, and cut up their card instead.
the one idea you want people to take away?
Zyman: Simple -- the purpose of marketing is to drive sales,
and every dollar you spend on marketing should generate measurable
Sarkar is the managing editor of the ZIBS.com site.
He is the founder and CEO of Double Loop Marketing LLC,
an online company specializing in demand generation and thought-leadership