6 Innovation Exercises for Brand Leadership

The world’s leading brands continually innovate. While we often think of Google and Apple as innovation juggernauts (and they are), there is innovation afoot at older brands such as Pepsi, McDonald’s, and Mercedes. In the case of Pepsi and McDonald’s who have a portfolio of products caught in the obesity storm, they’ve had to evolve from their historical platforms to avoid extinction. Pepsi has developed a social responsibility platform. McDonald’s is now the #1 buyer of apples in the US. In the case of Mercedes, a new line of lower price tag cars is their response to the dangers of their aging wealthy consumer base. In some cases, the innovations are purchased. For example, Microsoft is known for its investment and acquisition of new products and technologies.

Whether created organically or purchased, whether incremental improvements or transformational, innovation is vital in today’s rapidly evolving, competitive global economy. At Sparxoo, our team of brand & innovation strategists has led many brand innovation workshops and expert worksessions with Fortune 500 companies. Our formula: start with creativity to spark new ideas and add in strategy to structure and focus ideas across identified goals. Great ideas can come from anywhere, so tap into your leaders, your Gen Y talent, your customers, and industry experts. Connect the ideas together and draw out an innovation roadmap for the medium-term and long-term. Below, we share 6 innovation exercises to help energize your thinking.

MARKET INNOVATION

  1. Subway Train. This exercise is a big picture competitive mapping to help you visualize the interactions among market players. Stretch your thinking about how far-reaching your platforms are, and the relationships between industry players.Pretend you are a civil engineer designing the future map for your industry with a focus on mapping out the current and potential future competitors. Like the NY Subway, create a series of 4 to 6 subway lines. Name each subway line and create specific stops on the line. Each stop represents a brand in your industry or potentially in an adjacent industry. On the map, note subway hubs where several lines intersect. Which is your brand’s location on the subway map? Where is the ideal location for your brand tomorrow?
  2. Royal Kingdom. This exercise helps you identify partners and competitors, and anticipate the moves of key market players. Get prepared for the battles that lie ahead.You are the king of a village and are expanding your kingdom. Draw a map of your surrounding terrain, noting all nearby villages. For each village, note whether the occupants are friendly (i.e. potential partners / acquisition targets) or foes (major competitors). Note the key assets contained by each village. What are the benefits and barriers to occupying each space? What are potential battles that lie ahead and how will you align your troops for success? Consider that you only have a few key moves in the next 3 to 5 years. Which villages should you focus your attention on, and Why?

PRODUCT INNOVATION

 

  1. Causal Connection. This exercise helps connect product benefits with customer needs. This one-to-one mapping can help to make sure your innovation is on-target from the user perspective.Create 2 columns: 1) in the first column, create a list of product features and 2) in the second column, note the action you hope to accomplish for the customer. Now, prioritize the actions that you want your user to take and aggregate product ideas together that will help satisfy the customer need.
  2. Shop-Along. This exercise gets you out of the office to where your customers are: in the store. The way your customers shop in reality may be very different than the way you drew it up. Visit the stores where your consumer shops. Shop along with the consumer, tracking their movements and the types of products they’re shopping for. When they evaluate products, what are the cues they are looking for? What is the suite of products associated with selected products (i.e. when they buy a Hershey’s bar, they might also buy marshmallows and graham crackers). As an added bonus, you can use special glasses that record eye movement to see what’s grabbing the customer’s attention, what’s in their considerations set, and what they end up purchasing. Take the learnings to your product development team to consider product features and attributes.

BRAND INNOVATION

 

  1. Music Mojo. This exercise helps you think through the personality of your industry, your competitors, and your organization.When you think about your industry, what mood comes to mind? Choose 5 to 8 songs from across genres and listen to them. What does each convey? What would you think about an organization / brand that reflected the song? Now map the songs to your competitors and to your brand today. Which song is inspirational for your brand tomorrow?
  2. Magazine Cover Story. This exercise helps your organization imagine what you want to become famous for. The goal is to truly stand out, so make it happen.Select the magazine for which you’d like your brand featured on the cover. Determine the topic of the cover story, then create a headline and a visual. Discuss the impact of this cover story and the steps to achieving the magazine cover.

 

Contact Sparxoo today to learn more about innovating your brand.

How Amazon is Trying to Be the Center of the E-Commerce Universe

When Jeff Bezos founded Amazon.com in 1994, could he have imagined how the company’s gravitational pull would make it the center of the e-commerce universe? The company conquered the online sales of goods from CDs to groceries, is partnering with social media giant, Facebook, essentially created the e-book market and most recently has its sights on the video rental space — the next chapter in its quest to be the center of the online retail space.

Amazon envisions the future of the e-commerce world to be in the cloud based on product launches in the past five years. In 2001, Amazon enabled its users to buy and sell used and new products and four years later began selling private label goods (under the name, Pinzon). Amazon has focused less on physical goods and more on the cloud in the second half of the decade.

In 2006, Amazon began selling data storage, called Amazon Simple Storage Service, and a year later launched its digital music service. In that same year, Amazon launched its ground-breaking e-reader the Kindle. And in July 2010, e-book sales overshadowed Amazon’s hardcover books. In fact, Amazon claims it sold 143 e-books for every 100 hardcover books. The success of the Kindle (which can only be rumored to be successful as Amazon has never released sales figures of the device) has arguably led to the current war of the tablets — with competitors like Apple, Google, Dell, HP and others.

With its e-book sales increasing (a resource with tips for eBook authors), Amazon is poised to tackle the emerging online video rental market. Online video is certainly a rising trend amongst internet users. In the month of December 2009, 178 million people watched 33.2 billion videos, with the average viewer watching 187 videos per month in the U.S, according to comScore. To capture this growing audience, Amazon recently announced it would soon begin $.99 online video rentals and launched video streaming, similar to Netflix. But Amazon isn’t the only company picking up on the trend.

Steve Jobs recently released the new iTV video rental device, Google has beta tested its YouTube rentals and the rapid growth of Netflix over the last couple of years is going to be challenging for Amazon to compete against. Netflix had 15 million subscribers as of June 30, an increase from 10.5 million a year ago, with 61 percent of them having watched a movie or television show via the internet on computers and web-connected TVs. And Netflix’s CEO admitted over the next decade he anticipates the company to focus primarily on internet streaming, reports the LA Times.

“Amazon.com has used aggressive price discounts to carve out a dominant position in print and electronic books,” writes the Wall Street Journal. But the company is faced with formidable competitors in the online video space. Beyond the industry leader, Netflix, Amazon is challenged by Apple — which aims to replicate its $.99 music downloads in the video rental market with its new iTV. Amazon’s goal is to match the $.99 rentals, but if Apple’s iTV takes off, Amazon could lose grasp of the market.

Will Amazon tackle the online video rental market as it did with e-books? If Amazon can parallel its e-book success in the online video space, the online retailer will be that much closer to achieving its goal of becoming the center of the e-commerce universe.

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Financial Projections Modeling

Developing financial projections can seem like a monumental challenge, especially for emerging businesses that have little track record.  After all, if you are operating at a loss with $0 revenue, how can you project a future state in which you have millions in revenue and are operating profitably?  While financial modeling can be an inexact science, it can be incredibly helpful in pushing you to think about the future state of your business.  Entrepreneur typically build a financial model in conjunction with their business plan.  We suggest revisiting and updating your financial model as you reach milestones and plan for future growth.  Assumptions are the key to any financial projections model.  Before developing an overly complicated Excel model, give some thought to the key levers for your business.

Revenue Assumptions
Identify your revenue streams first (i.e. advertising, product sales, subscriptions) and the key elements for each.  This can be as straightforward as price times quantity sold equals revenue.  In a subscription business think about price points of your products and your target number of customers.  If you have an advertising based business, consider metrics such as number of advertisers, impressions, and CPM. To help inform your assumptions so that they are more than just guesses, you should look at the overall market and comparable businesses.  How long did it take your competitor to reach $1 million in sales?  What price are they charging?  Even better yet, do a beta test of your product to see sales response on a limited basis.  If you have little confidence in your assumptions, create assumptions for multiple scenarios by developing your best guess, an optimistic case and a pessimistic case.

Expense Assumptions
Expense assumptions are often much more straightforward than revenue assumptions.  Start with cost-of-goods sold, then consider sales, marketing & distribution expense.  It’s important to think about how your expenses relate to your revenue.  For example, if you are going to ramp up your sales, do you need a significant marketing budget?  Then factor in your technology, people, office, and other expenses.  Expenses tend to go up over time, so factor in annual raises and adjustments for inflation of 3 to 5% annually.   Be sure to be comprehensive and include expenses such as payroll taxes, healthcare expenses, and a small miscellaneous cushion.

The Actual Model
Setting up the model is the complicated part, unless you are an Excel whiz.  The key output of your financial modeling is income statement projections for the next 3 to 5 years.  Try to link up as much as possible through formulas that reference your assumptions (ideally assumptions can be on a separate worksheet in the same Excel file).  Generally, you can use simple formulas such as multiplying price and quantity.  Occassionally, you’ll need to use more advanced functions such as the IF function and others.  I color code my entries such that all hard-entered inputs are in blue, and all formulas are in black. Then I know never to update any numbers in black because they are just calculations that adjust in real-time.  Beyond an assumptions worksheet and income statement worksheet, you might also consider separate worksheets for listing out your headcount, cash flow, balance sheet, and a depreciation schedule.

Making Sense of the Output
The fun part is to see revenue growth, operating income, and required investment based on the final model.  Be sure to troubleshoot and make sure that your results make sense.  Assuming that your formulas are all linking up properly, consider how your business looks to an investor.  How much do they need to invest and what is the expected return?  Are you able to surpass revenue milestones of $1 million and/or $10 million?  Do you show a healthy revenue growth of 15+ %?  Do your operating margins make sense in years 3 – 5 (i.e. are they reaching the 20 to 30% range)?  Are you able to reach profitability by the 2nd or 3rd year of projections?  How much investment is required to fund your business for the next 18 months?  Be sure that your expectations are reasonable.  I’ve seen some projections that are unrealistically optimistic and show margins twice those of Google.  You might need to find additional market data to inform your assumptions and make adjustments so that your financial projections model is both reasonable and compelling to prospective investors.

View A Financial Model Presentation for Startups

Financial Models for Startups

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