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The strategy of radical beauty

By Mark Di Somma

Should you climb a mountain because it’s there, or because you believe you have a more than reasonable chance of conquering it? In a commercial setting at least, I’ll plumb for B – because presence alone is not a rational reason to participate. I continue to be intrigued though by the human instinct to believe that the odds are there for beating. I watch brands plunge into markets where they honestly believe they can do what others have failed to do for no other reason than that they believe in themselves and/or they have little respect for the current participants.

Believing in your own brilliance and/or relying on the incompetence of others however, as Michael Porter reminds us, is not a strategy. In fact, it’s nothing short of a gamble.

In a wonderful article on “How strategists lead”, Professor Cynthia Montgomery of the Harvard Business School gives a telling example of how some great companies have fancied their chances in the furniture manufacturing sector, only to become a cropper. They have, she says, looked to invest in a sector which, on analysis, has deep fragmentation, poor marketing, low brand awareness, high competition, high transportation costs, low productivity, eroding prices, fast imitation, slow growth and low returns.

Tellingly, all the companies cited in her article entered the sector believing they could change it, and all have since left.

Professor Montgomery’s point? That “the competitive forces at work in your industry determine some (and perhaps much) of your company’s performance”. In other words, if you fail as a brand to truly appreciate the forces working against you, you essentially fail to account for how and why you will beat them at their own game. In the case of the furniture manufacturing sector, what Montgomery’s analysis shows is there is no money to be had in this sector. It’s inherently unprofitable, so “The strategist must understand such forces, how they affect the playing field where competition takes place, and the likelihood that his or her plan has what it takes to flourish in those circumstances.”

Critical word here – flourish. As in out-perform, not just participate in, or even improve on. Without a deliberate and measured plan to actually redefine how business can be done profitably in a sector, brands are in effect simply adding their roll-call of products to an already crowded beauty parade in what may well be an “unhelpful” competitive environment. What’s missing, as Montgomery so rightly points out, is “a brutally frank and open confrontation of the facts”. You can’t win in the furniture manufacturing sector by simply being another furniture manufacturer. Unless you are prepared to turn all the rules on their head, as IKEA did, the incumbent market forces will inherently work against you.

The role of the strategist is to find “radical beauty” – an idea/product/approach/model that fulfils everything customers are really looking for and at the same time is sufficiently distanced from the status quo to defy conventional sector limitations.

The global coffee market doesn’t need another coffee brand. The global airline industry doesn’t need another airline. The world doesn’t need any more ad agencies. Unless you actively plan to bring something radically beautiful to those markets that others haven’t brought and can’t instantly bring (at the first sign of your success), stay off the mountain.

More reading

Crunching on cacti
Not a problem: success pivots on what you solve, not just what you know
Brand dynamics: the shapeshifting of brand likeability
Twinkle, twinkle, twinkle …
The business of cloning
You can’t lead as a brand if you follow another brand
Great brands unearth

Additional perspectives

Time looks at whether Virgin America’s strategy is right for the times. Virgin America: Why an Airline that Travelers Love is Failing

15 reasons why “no-one else has complained”

By Mark Di Somma

1.     They didn’t have time
2.     They couldn’t be bothered
3.     They didn’t want to interact with you a moment longer than they had to
4.     They didn’t know how to complain (because you didn’t make it easy)
5.     They didn’t feel they could talk to you
6.     They didn’t think you could change
7.     They didn’t think you would care
8.     They didn’t think it would make any difference for anyone else
9.     They didn’t think you’d listen
10.  They thought you’d be rude and defensive
11.   They think you’re incompetent
12.   They don’t like you
13.   They never intend coming back
14.   They want you to fail
15.   They’ve already told all their friends to avoid you via social media

More reading

Crunching on cacti

By Mark Di Somma

An airbrushed problem is not an easier problem to solve. In many ways, it’s actually much more difficult because the nature and extent of the problem itself is encoded in euphemisms, which usually means that the potential impact is also encrypted.

I call these deflections and understatements “icing the cactus”. Generally, they involve playing up the momentary nature of what has happened (“unseasonal”, “untimely”), playing down the likely effects (with words like “blimp” and “unfortunate”) and playing off one action or group against another (“there’s no doubt it would have worked if …”)

Personally, I’ve always held with the Stockdale paradox: that organisations need to present issues frankly and without blinking, at the same time as they must utterly believe in their ability to be resolved. You can’t fully solve what you don’t fully know, and therefore what you are prepared to fully admit to.

Actually, problem solving itself is a misnomer – because the problem itself is seldom the problem. The real problems are usually the attitudes, mindsets, blindsides, denials, assumptions and stupidities that created the problem. That’s why people apply icing – to avoid admitting the connection between what was decided and the extent of the damage that was subsequently generated. They don’t want the search for an answer to turn into their search for a job.

If I’m running such a session, I generally open with three statements:
• Great companies make mistakes – because otherwise they wouldn’t be ambitious enough.
• Greater companies admit mistakes – because otherwise they wouldn’t be trustworthy enough.
• And the best companies hunt for mistakes – because otherwise they won’t improve enough.

Sessions like this are uncomfortable, awkward, emotional and vital. If you run the session right, everyone will emerge with an uncensored understanding of what went wrong, and, with guidance, they can draw on that to clearly and fully think through what to do next.

At times though, it really will feel like you are crunching on a cactus with your bare teeth. So, if you’re the one charged with fixing whatever’s really happened, here’s a little thought I call on to keep me persevering when everyone else doesn’t want to know or is playing with the truth: Keep going, because if you leave enough icing on the cactus, every prick will hide.

More reading

The great customer vanishing act: what happens when you can’t track them?
Not a problem: success pivots on what you solve, not just what you know
Brand dynamics: the shapeshifting of brand likeability
Twinkle, twinkle, twinkle …
The business of cloning
Always be branding
You can’t lead as a brand if you follow another brand
Great brands unearth
Is your brand ready for the experience war?
Brands at the speed of life

Story myths

By Mark Di Somma

Great brands have great stories. But a great story doesn’t automatically create a great brand. For years we’ve told ourselves a story about what story is and how it works: develop a product; build a story around that product to give it value; sell that product at a greater degree of profit. We’ve allowed ourselves to believe that stories are the lynchpin of competition and that the best storytellers will win.

But that in itself is a myth.

Ultimately consumers don’t buy a story. They listen to a story. They are influenced by a story. But what they buy is a truth that directs their behaviour, captured in a story.

You don’t succeed just because you have a story. You succeed when you have a story that inspires people to buy your brand. The most beautiful, uplifting story in the world won’t cut it commercially if it doesn’t achieve competitive connection – if it doesn’t provide customers with reasons to connect with your brand at the expense of someone else’s.

Stories may influence behaviours. But only when powerful and distinctive motives drive the stories. In other words, only when, as Rajant Meshram says, it has “ground truth”. And only when the experience customers receive then lives up to the story they allowed themselves to buy into.

Otherwise, it’s a fairy tale.

More reading

Handpicked – the wider opportunity of curation
Not a problem: success pivots on what you solve, not just what you know
Affirmation: how to make a brand experience really count
Is your brand ready for the experience war

Other perspectives

Reporting season

By Mark Di Somma

Excuse the extended silence. Reporting season is an all consuming time of year for me. In addition to actually writing a number of annual reports, I do a lot of travelling and lots of meetings with senior managers.

I look forward to it every year.

People are often perplexed. You’re into brands, they say. Why do you want to write annual reports? They position this as if it’s an either/or. I’ve never seen it that way. After all, what are brands for if not to generate profits for investors?

Their question also implies annual reports are just a writing exercise. Again, I’ve never seen them that way.

To me, annual reports are cues to sit down with decision makers one on one and quizz them in detail about what they did, why, what happened and what it all means at year end. I get to understand something of how the business worked over the last 12 months. And I get to hear the stories from the inside. It’s a chance to talk through the dynamics of a sector, the impacts that companies are watching, what their plans are, the tension points … In fact, it’s a huge opportunity to get multi-disciplinary views of the market and the entity from the actual people in charge of bringing home the results.

Here are 6 things I noticed companies seemed keen to talk about this year:

Margin
Justifying capital expenditure in challenging economic times
Shareholder returns (particularly dividends/distributions)
Investment grade rating
Contribution to the wider community and indeed the national economy
Diversity as a CSR metric

Why demographics matter

Why do demographics matter?

By Mark Di Somma

A study by Catalina Marketing appears to cast significant doubt over a veritable pillar of media marketing. Demographic targeting, it seems, often falls wide of the mark. Catalina researchers looked at 10 brands targeted at households headed by women ages 25 to 54. They found that, on average, just 15 percent of the ads playing in those households reach the people that account for 80 percent of sales. Read More

The contradictions of eyelashes and data

By Mark Di Somma

We're drawn to brands that know how to make us smile. Data doesn't teach you that.Christine sends me this image of a VW with eyelashes attached to its front headlights. And all I can think is “There’s just no way on God’s good earth that big data can predict this.”

It’s flirty. It’s girly. It’s extraordinarily popular. And I don’t get it. Thing is – I don’t have to. It’s not for me.

I’m the first to admit I’d probably never have thought of this. But clearly someone else did – and they made it fly (probably with every man in the vicinity snorting in disbelief).

Read eyelashes on a car in a number of ways. The power of the woman consumer in the car market for starters. The wish by consumers to distinctualise a brand by adding a form of self expression. The opportunity to build a short-term brand on the success of another brand.

What you can’t read into it is this. There is no way that a spreadsheet could have predicted this would take hold. In much the same way as no-one would have foretold that putting a plastic flower in the Golf originally would send sales through the roof.

It’s categorically impossible to foretell the success of such whimsy on the basis of numbers alone. In fact, its unpredictability is exactly what makes it such a fascinating idea for some – and a complete mystery to others.

This idea touches something that data can’t reach. It reaches past people’s disinterest, their preoccupations, the things that fill their heads … and it ignites a smile. In a world of predictive data and behavioural patterns, research groups, focus committees and mind-readers, every test result you are fed as a marketer is inferior to your understanding of one very, very basic question.

Who will smile – and then, how much will they buy?

More reading

Other perspectives

Brands look to personalisation in 2012 (www.fruktcomms.com)
The Brand Building Power of Personalization (www.brandingstrategyinsider.com)
Brands can have a personality too (www.damniwish.com)
Ads that entertain don’t sell and isn’t selling the goal of advertising ? (www.newmediaandmarketing.com)

Market leadership: why innovation needs to engage, not just impress

By Mark Di Somma

Blair points me in the direction of Booz & Company’s 2011 Global Innovation 1000 for some interesting insights as to why innovation works for some and not for others. (Thanks Blair.)

According to Booz & Co, innovation spending increased in 2011 to $1.15 trillion globally. The 1000 companies that Booz & Co surveyed represented almost half this spend and in the last year their innovation spend was up 9% on the previous year.

However, what interested me was the news that the companies that spent the most were not necessarily those that got the most out of their innovation investment. In fact, the top 10 innovators (Apple, Google, 3M, GE, Microsoft, IBM, Samsung, P&G, Toyota and Facebook) out-performed the top 10 spenders in three key metrics: revenue growth; EBITDA and market capitalisation.

So innovation can work but it doesn’t always work, and it doesn’t work the same for all. What really counts is the context in which innovation is applied. According to the report, 44 percent of companies who reported that their innovation strategies are clearly aligned with their business goals —and that their cultures strongly support those innovation goals — delivered 33 percent higher enterprise value growth and 17 percent higher profit growth on five-year measures than those lacking that alignment. (By contrast, over half of companies reported that their innovation programmes and their business strategies and culture were out of alignment, and 20% of companies didn’t even have an articulated innovation strategy.)

My own view is that the distinctions between innovation and improvement have been blurred in recent times, and the advantages of focus over finance have been overlooked. With so much hoopla about innovation in the business press, it’s tempting to believe that any change is innovation and any innovation will work.

But keeping up is not the same as forging ahead and brands need to be a lot more judicious in that regard in their identification of what they are developing. What may look like adjacent innovation at the outset can, at the pace at which markets move today, be little more than incremental improvement by release date. Incremental improvement is vital of course – but it’s not a gamechanger. It simply keeps you up to speed in the game you’re in.

More importantly, true market leadership is powered by exciting ideas not just impressive ideas. It seems to me that too many companies judge the success of their innovation programmes on technical shifts that wow colleagues and industry insiders. But the significance of these breakthroughs does not necessarily translate to marketability and therefore sales. And the changes themselves are not necessarily in line with where the company is heading, what the brand represents or where demand will rise.

There’s a significant difference between invention and innovation in a commercial context. Invention makes something new. Innovation contributes something new. It actually changes the company’s possibilities. That won’t happen if innovators don’t develop engaging innovation; innovation that doesn’t just solve a problem but actually meets a tangible and evolving need in fascinating ways.

Engaging innovations are the ideas that will power the business forward because they will gamechange the sector to your brand’s advantage, lift margins, meet future market needs, inspire customers to buy and directly contribute to the purpose you have set yourselves as a business.

Does your innovation programme do that?

If not, let me make two suggestions. First, change the innovation conversation so that it does.

Secondly, and even more importantly, change the participants in those conversations. If there’s not a senior marketer in the loop, changes are your circle’s either plain wrong or not wide enough.

More reading

The new role of marketing
The great customer vanishing act: what happens when you can’t track them?
The portfolio approach to strategy
The fall of the wall between customers and culture
The power of being purposeful

Other perspectives

4 ways brands fail to maintain brand loyalty

Maintaining brand loyalty: 4 ways brands get it wrong

By Mark Di Somma

Most good marketers know how to gain top of mind. Good marketers are adept at widening the funnel at the top end. They’ve good at introducing new lines, new variants, new dimensions – in order to attract new customers. They know how to work with their agencies and their internal teams to fashion a story that intrigues to draw an audience. They know how to weight media flights and craft promotions that persuade consumers to call or to visit. They’ve learnt to charm. Competition’s taught them to do that well. That used to be their biggest challenge. Read More

Market adjacency

Market adjacency – have you asked the two key questions?

By Mark Di Somma

The model for achieving ambitious growth is well documented: a combination of organic and inorganic growth that sees companies looking to gain market share at the expense of their competitors in markets they already occupy, as well as looking for inorganic growth through an adjacent market strategy and/or prospecting for high-return greenfields markets beyond that.

Organic growth often stems from increasing brand likeability within the industry that your consumers already associate you with. In today’s economy, in most sectors, it’s a zero-gain scenario. In order for you to win market share, someone else has to forfeit.

There are at least two other options for organic growth that we should discuss. You can look to specialise within a market – selecting niches and tapping them for profit. It’s not always the easiest way to find above-market margin, but it’s certainly an option in sectors where specific skill adds value and the field is swamped with middle-market generalists. Or you can look to pincer your middle market competitors by having offerings on either side of them – below them, to compete on price, and, above them, to compete on prestige, with an “upgrade” strategy between those two stations to pull consumers through from high volume to high profit. In most cases, the zero-gain dynamics still apply, at least for now. To win, you need to take market share off an incumbent, and keep it away from them.

At the other end of the growth opportunity spectrum, the high-risk, high-return innovation of green field industries takes capital, faith and patience, and lots of each.

But what of adjacency? As convergence brings us closer to what Charles Prabakar refers to as the “boundaryless industry structure” inherent in the social media/digital technology driven global business environments of today, what opportunities for growth exist there?

Adjacency is all about finding business beyond your core. It’s about identifying new markets that intersect with what you do well. It’s about new geographies, new audiences and redefining the value that customers receive based on what you know/can do. It’s the space between where you are and disruptive innovation. As such, it seems like the pragmatic middle ground, ripe with untapped revenue, ready for those looking to step beyond what they already do and looking to use brand extensions to maximise the return from their current brand equity.

Most companies, it seems to me, tend to judge “adjacent growth opportunities” on competitor strength, synergy of skills, market attractiveness, application of technology and availability of partners. Those are the technical requirements.

What they don’t necessarily factor in are the two questions that a strategic marketer would ask:

1. Are we fundamentally believable, and ultimately are we more desirable to consumers in that new space than our competitors?

2. Why? (In other words, what are we bringing to this new market from the market we know that the incumbents don’t have because they haven’t been there?)

If you’re not entering a market or even a different part of your current market to change it, you’re simply entering it to fill it. A market that’s untapped by you is not, by presumption, an untapped market overall. Most markets are full enough already with companies that have a home-ground advantage. And if indeed it is a totally empty market, then there’s probably a very good reason for that. No-one wants to buy.

You may see an alignment between your current brand positioning and another sector, but the fact is that the world doesn’t need another coffee brand, another shoe brand, another brand of beans. Unless of course you’re going to do things with coffee, shoes or beans that revolutionise what consumers experience or that noticeably add to what they already experience with your brand, what are you bringing to the market that’s extraordinary? And by extraordinary, I mean – more than what they get already.

If you can’t answer that, the “growth” you see is probably a mirage. It may look like expansive return, but really it’s just presence based on hope. Don’t go there.

More reading

Strategy: 11 ways to purposefully achieve growth
Market leadership – the –out and the –est
The business of cloning
Always be branding
You can’t lead as a brand if you follow another brand
Great brands unearth
Is your brand ready for the experience war?
Brands at the speed of life
Seen and not herd

Other perspectives
Great reading from one of my favourite authors in this area. Someone who definitely knows how to do it right. Christopher Zook: Beyond the Core (Choosing your Adjacencies)
Case study of Cisco’s work in this area: Cisco’s Commitment to Smart+Connected Communities: Transforming Cisco from an Internet Plumber into a Solutions Architect
Forbes article on The Rise of Radical Adjacency