How Do Innovators Create New Markets?

How do innovators transform new machines, molecules, and even melodies into multi-billion dollar value innovations - and break the rules of standard marketing in the process?

In March 2014, I gave an interview in Palo Alto that sheds some light on these questions through the lens of my own research on market creation and customer experience design.

Can you let us into the evolution of your thoughts and how they are different from standard marketing?

In a nutshell, the common sense in marketing has revolved around this idea of creating and communicating value. The gist of this model is that consumers have these unmet needs and what you want to do is figure out what they are and then create an offering that fills the gap. Aside from product management, the two major challenges are the identifying the need part and then the getting your message out effectively part. That’s the tale of marketing that I grew up with. This idea of satisfying consumers or, in short, consumering.

What’s the problem with consumering?

There is definitely something to be said about this model. It’s easy to teach. The problem that I have with consumering is about practice. Clearly, companies that are really important to society and also the ones that I’ve been working with, that’s just not how they go about value. Of course they create and communicate value to consumers but that’s almost like the surface level to an entirely different set of skills and strategic practices. Also reflecting on my own industry background in selling music, it’s obviously very different. Before you can serve the market, you must assemble the market. And the latter process could be much better documented in the marketing lexicon.

How did you come to that conclusion?

For me, the process started in the early 2000s. The war on music downloading had just broken out, everything was up in the air, my business was seriously affected. And so I turned to marketing for answers. I bought Philip Kotler’s Marketing Management Millennium Edition. The book was great of course but of relatively little help in my personal situation because the proposed strategies more or less relied upon a sandbox which was precisely crumbling in front of everyone’s eyes. The very sociological conditions necessary to do the consumering, you know, a durable music market with clearly defined consumer needs and behaviors, more or less coagulated price-value relationships, supporting institutional frameworks, and so on, all of that was falling apart. So Prentice Hall [Kotler’s publisher] had this book website link on the back of the book which in turn led me to Phil’s faculty profile at the Kellogg School of Management. And so I sent him an email and described my situation. I had of course no idea who I was talking to and he was surprised but also open-minded and generous enough to get me in touch with some of his colleagues and to invite me to Kellogg to dig deeper.

And that’s when you developed your own approach?

First of all, Kellogg was a fascinating place. Number one marketing department in the world at the time, great diversity of orientations. On the flip side, there was also a remarkable fixation on the consumer in this micro sort of way. The differences existed more on the methodological level between, say, grounded theory versus experiments. But the active category around which the departmental identity formed was the consumer.

For an incoming practitioner, this was strange. I always thought that marketing was first and foremost about making markets. At a time when downloading was unmaking the music market and the question was how to make it back into a market, all kinds of players would have to be rearranged, not just the consumer. But imagine being in one place with some of the world’s most highly decorated arborists and everyone is looking at the trees, to the exclusion of the proverbial forest. That was the spirit at the time.

My great colleague and friend Gary Gebhardt, also with a long career in marketing practice, and I were the only two students around working on system-level ideas. Gary spent a lot of his days at the management and organizations department to develop his firm-centric process model of market orientation. I, in turn, ran back and forth between Kellogg and the sociology department across the street to get my head around a market-level rather than consumer-centric model of marketing. And so one thing led to another, other cases were added, and this market systems approach gradually crystallized.

How does the market systems approach work?

Let’s fast-forward to the year 2002 or 2003, where we can see the idea of reassembling a disintegrating music market in action. Consider Apple’s iTunes Music Store. From a market-level rather than consumer-centric point of view, marketing is the process of making people and things act as a market. What Jobs understood is that you don’t ask about what the consumer needs or wants. Clearly, people want lots of music and ideally for free. So he rather asked what are the capacities of people and things required for people to need our store so that they could become consumers again? So think about the need here not as pre-existing sentiment in a consumer’s mind but as relational entity or a network that you must set up to function in your interest. So understanding how people get to say 99 cents per song...I need that, that is not so much a matter of market research and then communication strategy, it’s a matter of network building. Apple embraced a particular network building strategy, a strategy that would make people and stuff in the industry and larger society to perform on Apple’s rather than on Limewire’s or whomever else’s behalf.

So the product needs the consumer more than the consumer needs the product?

The consumer, the product, and the relationships that support them including the problem, what is the problem that is being addressed here, and so on. These elements do not exist independently of each other, they are co-constistuted. Consider another company down the road. Consider Genentech. The people at Genentech say that they make medicines that matter, which is reminiscent of consumering’s emphasis on serving. However, when you actually follow them around, you realize that they are violating virtually every textbook principle of standard marketing because what they are really doing is making molecules matter as medicines. First, they design molecules and test their durability in the lab. So that’s the molecule part. Next, comes the “matter as medicine” part, when that new molecule’s capacity has been established, and they redefine the capacities and interests of the medical community and the patients around it. Genentech’s medicine doesn’t come out of the lab. In order for it to become a commercial success, Genentech’s lab must actually extend well into society. Only at the end of the story, when the durability of all actors and elements is firmly established, it looks like Genentech is actually making medicines that matter.

Do you get pushback from people who defend the existence of consumer needs? I remember that this was a big deal in my marketing courses.

In a way, this ritualistic fashion with which this is insisted upon in the MBA classroom is proving my point about how the manager in training must in some sense be made to fit the standard theory. There may also be a concern of having to defend marketing against ethical questions such as do marketers create needs? In the moment you adopt a sociological perspective, this ethical dimension becomes much less black and white. And that’s because there are not just producers and consumers. There are many other groups such as scientific experts, regulators, spiritual leaders, activists, journalists, your competitors, all trying to recruit the other players to their particular causes. In view of all of these and other players wrestling over what has value and what doesn’t, our traditional understandings of what is true or false are significantly challenged. On the practical level, the simple question I have is what works and what doesn’t for the situation that I’m in. And if it doesn’t work, is this because I just didn’t understand my consumer well enough or because, like Genentech or the exact opposite, say, an activist organisation lobbying against genetic medicine, would I first have to intervene into society on behalf of my cause to establish one?

What role does music play for you?

Music is really the most important part in my life. It’s also a great way to understand emotions. What you learn early on as a musician is that emotions are always a fundamentally systemic concern. The room, the temperature, the light, the instruments, the voices, the audience and so on. Happiness is truly an assemblage. And so is pride. Consider, in this context, how George Frideric Handel deviated from the standard marketing protocol in creating a society of British men and women to whom his music would be of existential significance. So Handel assembled a Britain, a sense of being British, to which his aesthetic offerings were indispensable. I mean even today, it’s such a naturally British thing for BBC storytellers to pick Handel as the musical background for British stories. Why not Elgar or Holst? The Big Ben chime is said to be based on a variation of four notes from Handel’s Messiah. It is also remarkable in this context that the soundtrack to one the most sacred British rituals, the coronation anthem, was written by a de-facto German. Although my British friends always insist that he was a British citizen at the time, which of course serves to illustrate my point of how rhetorical manoeuvres make assembled things seem perfectly natural. And so there is a striking similarity between Handel and Elon Musk, Steve Jobs or Dietrich Mateschitz that has remained unaddressed in the MBA classroom. There should definitely be a case study on Handel...

Lastly, can you talk a bit about your work on Botox Cosmetic?

Sure. I’ve been following the Botox market for eight years, investigating its creation from multiple perspectives including consumer, medical practitioner, media, regulator, celebrity, and the people at Allergan in charge of assembling these and other elements.

So let’s apply the old marketing model first. Today Botox Cosmetic is the largest, non-surgical enhancement solution in North America and a multibillion dollar business. And that’s because Allergan listened to market researchers saying that ageing Baby Boomer women were craving something that’s cheaper and less painful than cosmetic surgery but also more effective than makeup. After Allergan identified its blue ocean, they smartly communicated Botox’s benefits to said Baby Boomer women, thereby making the innovation contagious.

For starters, my findings demonstrate that this actually didn’t happen, but I like how this tale pretends that everyone and everything is ready to help diffuse the innovation. You know, not just the consumers but also the regulators, dermatologists, journalists, celebrities and stuff such as botulinum bacteria, syringes, living rooms and so on. Marketing’s innovation diffusion model comes from biology. But what biologists have long understood and traditional marketing theorists still grapple with is that the virus is never simply spreading and society is also not like a more or less permeable sponge.

The contagious offering is a mutating offering. The mutation is what makes recurring cultural antibodies complicit. So my findings speak to the strategic level of this mutation. How Allergan changed emotional branding gears to make these and other actors and ingredients act in the ways they act today. How Allergan transformed the poison into a fountain of youth, what it took for the living room to be redefined as an acceptable injection site, how they made the media journalists report about freedom of expression and not about the frozen face, how they took the dermatologist out of the world of moulds and rashes and into the world of wellness and beauty. These and other processes have little to do with communicating that Botox is cheaper and less painful than cosmetic surgery and more effective than makeup and more with making markets by actively nurturing the capacity of people and stuff to act on behalf of your product in ways that make its consumption completely natural.

Markus Giesler

York University, 4700 Keele Street, Toronto, Canada

Markus Giesler draws on concepts from economics, technology studies, and sociology to inform his research in marketing. He determines how ideas and things (products, services, experiences, technological innovations, intellectual property, brands, etc.) are made valuable over time, with research focused on improving marketing strategy through an understanding of markets as evolving social systems. Giesler's research has been supported by the Social Sciences and Humanities Research Council of Canada (SSHRC) and the European Research Council (ERC) and published in top-tier academic journals such as the Journal of Consumer Research and the Journal of Marketing. Giesler has an extensive entertainment industry background. He founded his own record label at age 17 and has worked in various production and marketing responsibilities for over a decade. He lives in Toronto, Canada.