Innovation & marketing

Peter Drucker said that a business has to perform two functions, in order to be a viable business: innovation and marketing. Let's explore that!

What it means

Peter Drucker stated that the basic functions of a business, are innovation and marketing. Some things he said about this:

(1)

The entrepreneur always searches for change, responds to it, and exploits it as an opportunity

(2)

Innovation and marketing are the two basic functions of a business

(3)

The function of a business is, to create a customer. And to do that, a business must innovate: It has to bring something new. And it has to market that innovation

How about the small neighborhood supermaket?

How about the small neighborhood supermarket, here around the corner? I don't see much innovation or marketing going on there. But they are already in business for decades:

Their original innovation: Location

Location is likely their most significant competitive advantages and innovation:

If they’re the only supermarket in walking distance, they have a monopoly of convenience. So, the innovation was, opening their shop at that specific spot
In Drucker's terms, this might be an example of Innovation as the creation of customer value in a new way
Like not inventing the wheel, but putting a wheel where people needed it.

Other original innovations

Habit and routine: People shop there out of habit, especially if they’re older or without transport
Lack of competition: If no one is trying to take their market share, they don’t need to innovate or market aggressively
Moroccan & halal cuisine: Although not a selling point for me, many customers surely appreciate their offers fitting halal and Moroccan cuisine
Cheaper: Coriander is much cheaper with them than at the closeby AH and Jumbo
Specific offers: They have some products that the closeby supermarkets don't have, like couscous.

A new innovation: Being open on Sunday

A major differentiation between them and nearby supermarkets used to be, that they were open on Sunday, once legislation allowed this some decaded ago. Is that innovation or marketing?

It needs both. Let's start with innovation:

It's surely a selling point and maybe a major aspect of their value proposition for some customers (e.g., those that only visited on Sunday)
service innovation: Changing the way service is delivered
Business model innovation: If this tapped an unmet demand

This surely also involved marketing: If they were open on Sunday but nobody knew, they could just as well not be open on Sunday.

Open on Sunday - Innovation treadmill

Eventually, the area supermarkets also opened on Sunday, usually longer hours than Reif:

Initial innovation: Reif opens on Sunday — stands out, attracts customers
Marketing: People notice, tell others, maybe even shift their routine shopping day
Competitive catch-up: Other supermarkets adopt Sunday hours, some even extend them
Result: Reif loses its edge unless it innovates again or differentiates in another way.

Innovation: Speed

I originally expected that visiting Reif would be faster than visiting Albert Hein or Jumbo, but it is often suprisingly time-consuming because there is often a small queue, but only one clerk. Additionally, their PIN machine worked very slowly, probably over a POTS line
Some years ago, Reif upgraded their PIN device - Overall experience can still be painfully slow
Recently, local supermarkets introduced self-checkouts, making it much faster to shop there - And consistently so.

Competetive advantages

Maybe a bit besides the topic of this chapter, but some potential competetive advantages that Reif may have:

Flexibility: Run by (I think) two or three self-employed entrepreneurs. E.g., no problem to stay open longer if a customer needs something
Price advantage: Being self-employed, they are likely to be willing to work cheaper than employees, as they might be more motivated
Personal & friendly approach
Speaking Arabic
Meeting needs of Moroccan folks in the area
Better prices on some products
Some products (except for specifically Moroccan) that are not available at the nearby supermarkets.

AH, Jumbo, Aldi & Dirk van den Broek

Comparison

Feature/Brand	Albert Heijn	Jumbo	Aldi	Dirk van den Broek
Focus	Quality & convenience	Price + Service + Fun	Pure price	Low price + local charm
Product Range	Very wide	Wide	Limited	Moderate
Service Level	High	High	Minimal	Medium
Digital Experience	Advanced	Strong	Minimal	Basic
Price Level	Highest	Competitive	Lowest	Competitive
Target Audience	Middle/upper class	Families	Budget shoppers	Local price-conscious

What if Dirk vd Broek would copy AH?

What would happen if Dirk van den Broek would decide to copy Albert Heijn's proposition as closely as possible?

Maybe in the short run:

Some customers might perceive Dirk as being upgraded
Appealing to some new customers
Alienating some existing customers.

In the longer run:

AH's proposition has been developed and honed for over more than a centurty - Dirk won't be able to just copy it
No differentiation: Dirk will loose its differentiation
Dirk would become a weaker, fake copy of AH, trying too hard to be something it isn't

It will probably lead to the demise of Dirk.

Convergence in maturing markets

The thought experiment above, about Dirk copying AH's proposition, isn't that far-fetched: It happens a lot in maturing markets, where space for differentiation becomes smaller over time. In the end, only a couple of players remain, that are able to differentiate. The large mass of 'me-too-companies' will likely disappear or be relegated to very small and unattractive niches.

Examples:

Car industry: 100 years ago, cars were much more differentiated than now. With the room for differentiation diminishing, only brands with very clear propositions survive and thrive
PC's: PC's, or IBM clones are mostly indeed just clones: Boring beige boxes. Dutch clone manufacurer Tulip, at one time tried to differentiate themselves by launching 'Herman Brood PCs', that looked like paintings, rather than beige boxed. However, together with Olivetti, IBM itself, Commodore and probably many, many other PC manufacturers, it disappeared

Thousands of freelancer programmers

How about the probably thousands of freelance programmers, available through platforms like Upwork or Fiverr? Are they all doing some innovation + marketing?

Freelancers are not entrepreneurs

For starters, Drucker’s statement refers to what distinguishes a business from a simple craft or profession. A business, in his sense, exists to create and deliver something new (innovation) and get it into the hands of people who want it (marketing). It's not just about doing a task; it's about systematically creating and selling value
Marketing: These freelancers are surely doing some marketing, like having a profile on these sites. In that sense, every freelancer can be seen as a 'micro-entrepreneur', marketing their capacity and skills as a service
Innovation: For sake of simplicity, let's assume there is no innovation, and they basically all have the same skills.

So, so far, these freelancers do capacity + marketing, rather than innovation + marketing. Personally, I am inclined to see freelancers not as businesses. They are just like employees but under different conditions - And this is something that Drucker also states somewhere in the first pages of his book Innovation and Entrepreneurship.

Transition from freelancer to entrepreneur

To make this point about freelancers not being entrepreneurs clearer: Let's assume that some freelancers develop specific propositions, like 'fastest WooCommere specialist', or that they use libraries to pull off some magic that otherwise wouldn't be feasable. Yes, they would now do innovation and they stop being freelancers - At least, according to my view: By this time, they would probably do more than just rent themselves out for a per-hour fee.

Like the products in a webshop?

Let's take it a step further: Maybe those freelance programmers should be seen similarly to the products in a webshop: Like the freelancers as a 'product' in a massive catalogue and the platform doing the overall marketing to the clients?

Where this comparison fails: Upset is not a webshop with 20,000 identical medior allround programmers with a West-European background. There is some very minor differentiation between each freelancer, with the freelancers responsible for their 'micro-branding'.

Markets with lots of generic players

In many markets, there is a limit number of differentiated and leading players, and a lot of generic, 'me-too' , low-differentiation commoditized or undifferentiated players. How do they do, concerning innovation + marketing?

Electrical guitars

As an example: The market for electrical guitars has 10-30 differentiated players, starting with Fender and Gibson.

They survive on marketing

There are also lots of commodity brands: lots of copies of Stratocasters or Les Pauls, often made in the same few factories in Asia. How come they still exist?

Low entry barrier: OEM/ODM manufacturing makes it easy to create a guitar brand without doing much innovation
Low differentiation: Many don't bother with strong branding or product uniqueness
Still viable? Often, yes — especially in e-commerce (Amazon, AliExpress, etc.) where basic marketing and SEO can get a brand some traction.

But these brands usually don’t thrive. They survive - with marketing being the only differentiator. Some brands win by simply being better at content marketing, influencer partnerships, or customer support.

Don't survive - thrive

Just in case you want to do more in your business life than just surive:

Situation	Results
No innovation - no marketing	Business never starts
Only innovation or only marketing	Survival Not much fun or satisfaction (for me, at least)
Innovation + marketing	Best changes to thrive, even when the innovation is just subtle - See Scrub Daddy for an amazing example

Not bad - just unremarkable

A business that relies on marketing only, is not necessarily a bad business - it's just an unremarkable one.

Book publishers in The Netherlands

How about book publishers? There are probably hundred if not thousands of publishers in Netherlands. Do they all somehow innovate + market themselves?

Difference with freelancers

This is an interesting case, as it is different from the earlier case concerning freelancers: Even when there are 10,000 similar freelancers available on a certain market, they are finite in the sense that each of them, can only work one hour per hour - Whereas each publisher could probably sell an unlimited amount of books, if there was such a demand.

Innovation

Most likely, all publishers innovate somehow, no matter how subtle. E.g.:

Publishers that publish...

Martial arts books
Classical royalty-free books
Traveling books
LGTB-friendly children's book
books on recycled paper only
using different media
with AI-generated content.

Additionally, every editorial judgement is a very small innovation on its own.

Marketing

And yes, probably all publishers market their material. If not, they probably stop being publishers.