Incenting innovation



I believe in the value of innovation and creativity as a business driver. I think it is one of the last competitive advantages. And running a business, I always find that “what gets rewarded, gets done” so I am always thinking about how to link the two.

I’ve been reading a lot lately about companies naturally trying to cut their costs during these tough economic times and marketing is a place where they usually look to find savings. One such article (http://adage.com/article?article_id=136266) discusses how Coke is moving to a pay for performance compensation model in which they decide the “value” of a project and then their agency partners have the opportunity to make a profit only if certain targets are met.  

Don’t get me wrong. We’ve put a number of pay for performance programs in place that have been very effective and I advocate for getting paid for the value of the ideas you bring and the business impact you create.  If companies want innovative ideas to drive their business, they have to get away from the model of “value equals time spent”.  But this type of model can incent safety and short-term performance rather than innovation and long-term growth.  Why?

1.    Brands and relationships with consumers are built over time
2.    Not every innovation works but because the profitability of every innovation is eroded over time, you need to keep innovating.
3.    Much of marketing today is designed to be a service to a consumer.   

Companies can have both but one-size fits all incentive programs won’t work. You can certainly reward short-term performance indicators but you also have to find ways to reward innovation and creativity…even when it doesn’t work. Because the one idea in five that really takes off will offset the cost of the four that didn’t.

I would imagine that if I worked at Apple, for every iPhone and iPod, there are several others on the floor. It’s the same in marketing. Brands need to incentivize partners to find new product connections and innovative ways to create engaging experiences for consumers. Some of those will work and some won’t but if like Apple or Method or any number of other companies that believe in creativity as a competitive advantage, you will reap the rewards.  

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