Is advertising an expensive substitute for true innovation?

The above question was instigated by my friend Abhishek’s observation on an interesting blog post at Techcrunch on how Apple & RIM have garnered a disproportionate share of the mobile phone industry’s operating profits despite a small share of handset units and revenues.Abhishek credits it to product innovation and rightly so.I however want to take his observation a step further and dwell on the relationship between innovation,advertising and operating profit.

When Apple innovates and introduces the i-Phone,there is massive curiosity because it’s a product that has never been seen before.People started talking about it in wonderment,throw in a couple of blog mentions,e-mail forwards and before you know it word-of-mouth kicks in across the globe.All it takes to put the final nail in the ‘demand coffin’ is a much awaited,much hyped launch press conference by Mr Jobs to have consumers queuing up overnight for the i-Phone.On the other hand,to the best of my knowledge,in the last 2-3 years,the Nokia’s of the world haven’t had a blockbuster product.Good phones but no real innovation.So how do they create demand? MBA textbooks teach you that advertising creates or stimulates demand.So Mr.MBA-grad-turned-marketing-head-of-Nokia spends millions of dollars on advertising and in all fairness to him,sells millions of phones.But at a cost –  millions of dollars spent in advertising.

So Mr Jobs truly innovates,spends less on advertising and laughs all the way to the bank while Mr Kallasvuo,the Nokia CEO attempts to innovate,spends a lot on advertising,hears the cash register ring but doesn’t laugh as loud as Mr Jobs on his way to the bank. So the more amazing and relevant the innovation,the less your advertising costs and the more disproportionately large your operating profit.

This phenomenon really makes the point that today innovation & design is the real differentiator between companies.And that Steve Jobs is a bloody good marketeer!