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Jack Myers

Jack Myers

Posted: October 27, 2010 10:47 AM

As unlikely as it may seem, a controversy seems to be brewing about the need for - and role of - innovation in the media and advertising business. Not only is innovation overwhelming executives and their teams, but it is causing too many companies to take their eyes - and budgets - off the basic fundamentals required for day-to-day business management and client services.

Attend almost any industry event, conference, convention or corporate meeting and a common theme is innovation and the organizational changes required to embrace innovation. Yet companies continue to struggle with integrating innovation into their day-to-day business realities.

The Online Business Dictionary definition of innovation may explain this paradox. Innovation in business is the "Process by which an idea or invention is translated into a good or service for which people will pay. To be called an innovation, an idea must be replicable at an economical cost and must satisfy a specific need. In business, innovation results often from the application of a technical idea to decrease the gap between the needs or expectations of the customers and the performance of a firm's products."

Are you having the same "a ha" moment I had when I read this? In most of our leading media and advertising companies, not to mention the marketers they serve, innovation is perceived as a cost rather than a revenue opportunity. Innovative tools and services are often not replicable on a meaningful scale without synchronous sapping of resources from traditional businesses, and innovative business opportunities are rarely more economical to implement than existing businesses. Innovation in advertising and media can also all-too-often be ideas in search of a need.

Hundreds of millions - probably billions - have been invested by institutional and venture investors in technology-based innovation with the belief and expectation that advertiser dollars would easily cover the investment and deliver 10 to 20 time multiples. But to a significant extent, media advances over the past decade have added huge amounts of advertising inventory enabling advertisers to reach audiences with increased cost efficiency without delivering measurable and sustainable business enhancements. Agencies, marketers and media sellers must invest heavily in resources and infrastructure to evaluate and consider the thousands of tech-based new entrants in the media business, without meaningully and measurably "decreasing the gap between the needs or expectations of the customers and the performance of a firm's products."

Based on research I've conducted among agency, media and marketer executives, the average company in our industry invests 65% to 85% of its spending in basic business maintenance and organizational overhead, including general administrative costs, sales, marketing and communications, Fifteen to 25% of spending is typically invested in competitive positioning focused on market share growth, including new business development, incentives, advertising, research and product enhancement. The average company spends less than 5% on business expansion models that require the introduction of new ideas, goods, services, practices and personnel - the traditional definition of innovation. No established well developed company can afford to spend much more than that. Yet ask the majority of senior managers in our business what their primary focus is for servicing existing clients, developing new business and for assuring their company's future, and the answer invariably will include innovation. The actual financial commitment may be less that 5% but the investment in strategic intent, business development presentation content, public relations messaging and meeting time is far more.

The goal of innovation is positive change. Innovation leading to increased productivity is the fundamental source of increasing wealth in an economy. A backlash against innovation should not be misconstrued as a reversion to the tried and true gospel of traditional media. Rather it is an appropriate demand that innovation be backed by solid economic models that validate the need for the products and services being developed, define the revenue model and profitability, prove the scalability, and demonstrates how the clients' economic best interests are being served.

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