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The portfolio approach to strategy

The portfolio approach to strategy

By Mark Di Somma

How do you drive home a strategy to fulfil your future, when everything around you is changing?  The secret, according to McKinsey & Co senior advisor, Eric D. Beinhocker, is to radically review what we mean by strategy. In his 2006 book, The Origin of Wealth, Beinhocker argues that rather than thinking of strategy as a single plan built on predictions of the future, we should think of it as a portfolio of experiments, a population of competing business plans that exist within the decision making process but evolve over time. Read More

Brand dynamics: the shapeshifting of brand likeability

By Mark Di Somma
The "bell curve"—the probability den...

The “bell curve”—the probability density function of the normal distribution. (Photo credit: Wikipedia)

Our traditional view of product preference has for many years mirrored our view of markets. A bell curve, where products rise in popularity over time, sustain leadership through a period of maturity and then decline or are overtaken by another bell-curve driven by product development that supersedes the declining model and looks to take it to new heights. That model’s driving dynamic is demand. Its chief metric is volume. And its key pressure is time. The longer you can draw out that curve, and the more you can slow down the roll at the peak of the curve the more likely you are to make money.

Recently, two separate pieces of thinking have caused me to believe that this likeability model is now as good as dead.

Firstly, two thoughts from a really fantastic guest post by J Walker Smith at the ever-inspiring Brand Strategy Insider: “With social engagement more prevalent and more powerful, every marketing message is now subject to vetting by a crowd. No message finds its way to consumers absent the influence and input of others.” This spells the end of what Smith refers to as the “individualized encounter”. The second point he makes is that “the circles of intimacy are narrowing. The biggest trend in social networks is the shrinking of social connections … the future of social networks is a choice between Big Net and Tight Knit, and on this dimension small is the big trend.” Read the whole post to find out more. It’s great.

Second piece of thinking. This time from David Edelman at McKinsey, who envisages the consumer decision journey as elliptical: a journey that takes in multiple decision points and where marketers use social media specifically at each point to encourage people on to the next decision point. To keep consumers in this orbit, Edelman suggests, brands need to monitor, respond, amplify and lead.

I thought I’d try and connect these two streams of thinking back to the traditional brand likeability model. Doing so raised a number of intriguing questions:

Q. If the bell-curve has evolved into an ellipse or even a circle, was that change in shape influenced by the loss of the individual encounter?

My response: Absolutely. As Smith so rightly points out, consumers are no longer siloed in their decision making – “every marketing message is now subject to vetting by a crowd”. A process that once took place in a heart and mind or between small groups of hearts and minds can now be shared, discussed, justified, and opined or endorsed with reference to a whole world of other buyers. In fact, individual consumers now reference and chatter collectively in order to justify personally – because, of course, they can. And it is that pattern of gathering reasons that has fundamentally changed the shape of product life and corresponding likeability patterns.

The bell-curve tracked the collective effect of many separated individuals. The ellipse tracks the individual within the dynamics of a connected community that continually checks back on itself online. And again, as Smith points out, those orbits are becoming smaller and presumably more intense.

This model’s driving dynamic is community. Its chief metric is interest. And its key pressure is engagement. Customers disconnect from a brand when they fall out of orbit or if they are drawn into another brand’s orbit.

2. If “tight knit” is the desired dynamic, that would suggest that the tighter the orbit of Edelman’s decision journey, then the faster the time-to-purchase and the more intense the relationship. What does that suggest about marketing’s role?

My response: It suggests that the role of marketing is to feed the centrifuge by intensifying the motivation for people to feel like, and buy like, part of a community. That’s not to suggest, in my view, that traditional media is dead. But rather that media is media and content is content, regardless of channel or source. Conversation, fascination and integration clearly replace persuasion and repetition – a transition that seems to have been lost on too many brands who still seem to be looking to translate their advertising techniques into all their channels.

The dynamic that most fascinates me though is what happens at the conversion point of talkability to profitability because that moment represents the transition from “just looking and talking” to “buying and advocating”. Smith seems to be suggesting that greater engagement generates shorter consideration times and therefore, potentially, more purchasing. The key tension there will be for companies to maintain enough interest at a product and experience level to keep consumers coming back for more, more often. The role of marketing will be to maintain enough interest and dialogue to keep easily-distracted people in the community, committed to the brand and away from the many other brands seeking to gain their attention and interest – hence Smith’s point about keeping them close. All of this aligns directly with my own “upgrade culture” theory.

3. If both men are right, what is the likely effect overall on the traditional dynamics of brand likeability?

My response: There are significant implications in this shape-shift. Likeable brands still sell. But how they sell and how they judge success is unrecognisable from traditional marketing theory.

Traditional bell curves suit measuring SKUs. They monitor a traditional favouritism track between individual consumers and individual products. They also suggest, as I said earlier, that as one product dies, another is instigated to replace it, and hopefully each is timed so that the decline of one product is balanced by the emergence of another. Flights of traditional media helped fuel that demand. Consumers watched and bought.

But there is no tipping point in a circle. Things don’t ‘take off’. What they do do is collectively gather greater speed. Ellipses also support ecosystems of products and services that work together to keep customers involved. So rather than replacing, new products and services now join the orbit to push loyalty forward and old ones fall out. As Stone Yamashita have pointed out, the iPod helped transit Apple out of computing, but it was the introduction of iTunes that provided a cumulative experience better than either could have delivered alone. Together, they brought new customers into the Apple fold, with new motivations, and gave Apple fanboys more subjects and more reasons to immerse themselves in the community.

No one thing drives this dynamic. Traditional media is part of the mix – but only part. Social media is critical – but it doesn’t necessarily convert. Consumers talk themselves into buying because they’re excited about what they will own, what it will say about them and what it enables them to talk with others about.

Now instead of falling off the end of maturity and into obscurity, dying brands lose the elasticity in their ellipse. A fading brand loses momentum, the lag times between decisions and actions increase, the orbit becomes longer and eventually the whole process collapses. Conversely, likeable brands don’t peak under this model, although they may reach max speed and then start to slow down. They can continue to generate loyalty as long as they continue to generate interest. The tighter and more intense the interest and the generation of new interest, the deeper the loyalty and the more talkable and likeable they are as a brand.

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Is your brand ready for the experience war?

By Mark Di Somma

Thanks to Cato who once again this year kindly invited me to the Wellington simulcast of the AG Ideas Business Breakfast held in Melbourne yesterday. The theme for the AG Ideas 2012 Business Breakfast was how companies could use design and innovation to compete effectively in high-cost economies. Technical issues prevented those of us on this side of the Tasman getting the video feed, but there was plenty to listen to, as Dana Arnett, Dale Herigstad, Mauro Porcini and MC Göran Roos steered us through the morning. Today, I want to touch on a couple of points raised by Göran Roos in his opening statements and one or two takes on an interesting, point-packed address from Mauro Porcini, Chief Design Officer, 3M.

Porcini pitched a new social scenario; one where consumers are not just savvy, expert and demanding, but also difficult to categorise and understand because of four overlapping generations (boomers, X, Y and Z) and different geographies and cultures (which themselves were in different states of market maturity). The emergence of this social scenario, he said, has led to a sea-change in product development – where companies such as 3M have moved from developing products focused on functional tasks to releasing products that now essentially accompany experiences intended to fulfil emotional needs.

He talked about increased irrationality on the part of customers, or rather, needs that are much more difficult to rationalise, and that catering to these whimsical audiences requires organisations to function and innovate outside their comfort zones. At the same time as it jeopardises traditional corporate approaches to product development, this new market dynamic hands leadership opportunities to those prepared to mix innovation (meeting people’s needs) with customer engagement (through storytelling and prototyping)

Products now operate at three levels, according to Porcini. They must compete effectively in an age of mass customisation (meaning they must provide what he referred to as “intimate pleasure”); they must work as a signal to others that the brand user belongs to a community (because consumers want to be able to send signals about varying types and levels of status to those around them); and the products themselves must convey and carry meaning (so there must be a natural flow between the product and people).

Design, he asserted, can be a powerful contributor to all of these operations … as long as companies don’t simply see design as styling. His views echoed those of Roos earlier who, in his opening statements, said that design continues to be misunderstood, particularly in the business world. Design, says Roos, has been assigned the label of art. However, in today’s context, it is not about developing pretty things at all, but rather creating value. The objective of design is to generate and achieve behavioural change; change that is desirable for the user, beneficial to the supplier and positively impacts other stakeholders.

Apple is a living example, Roos said, of the triumph of design over innovation. Apple didn’t so much break new ground, as redesign emerging ground, and that when they do this well, everyone in the Apple ecosystem benefits. Clearly the Apple brand benefits. But so do those people who design apps that can be used on Apple devices and so do the telcos that carry the data generated by these apps. A point very well made that for me set up a key premise for the morning.

I’ve long held and expressed the view that most of the innovation hype is based on a myth – and the myth is that if you innovate, you will succeed. Not true, Roos seems to be saying. You don’t have to be the innovator – if you back your design approach enough to trump what the market has seen already. Not true either, according to Porcini, if you think that innovation revolves around products. Increasingly you must look to innovate experiences, and design products to deliver them.

Forget about satisfaction, Porcini asserted. Deliver customers magical, surprising experiences. Insist on it. So many companies, he says, set out to be exceptional and then let the magic and the pleasure be ground away during development. I smiled broadly, as did everyone around me, at his views on research. The secret, Porcini says, is to conduct research and to listen to it, but not to necessarily believe everything you’re told. Sometimes what you’re hearing is not market rejection, it’s market indecision. It’s literally a lack of imagination on the part of those being polled to see what it is you’re asking them to give an opinion on. Design led companies, he says, get that. They learn, they adjust but they don’t compromise.

Experiences are too important to be left to chance. Instead they must be carefully designed. Porcini talked us through how great experiences have a strong pragmatic flow that mirrors the sales funnel. People buy into an idea. They see and purchase. They receive/unpack and they discover. They use and interact. They keep and live with the product. And one day, they dismiss the product from their lives and they leave it behind (perhaps for an upgrade, perhaps for a competitor).

Simultaneously, he says, people’s experience with a product evolves through an emotional flow. They start out by having a visceral experience (the impulsive, purchase decision). Then they have an interactive relationship (where they immerse themselves in the product and enjoy it). At this stage, they accumulate loyalty. Finally, they have an expressive relationship, during which time they want to share their experience with others and recommend the product to all their friends. He didn’t explain why customers then move on from this expressive relationship to leaving the relationship (assuming that the pragmatic flow and the emotional flow mirror each other as a logic” magic combination), but as I said earlier I suspect it is because they upgrade and the process starts again, or they are tempted to make an impulsive decision elsewhere. In which case, I wonder whether we should see both processes as linear.

What the new social scenario does demand though, says Porcini, is that brands pack as much experience into each part of the relationship as they can. Nothing should be exempt – product, packaging, the purchase experience, web, interaction with people, facilities – all should work to delight and deliver magic.

Finally, let me share Porcini’s definition of a “design strategy” because I think it is quite different from how many companies would define it. Design strategy, he says, is business strategy that leverages design. What I got from this is that value is designed not generated, and it is quite literally born of how a company thinks.

That thought led me to review my own definition of brand strategy, which I have now amended to this. Brand strategy is how a business leverages its brand(s) to achieve its business goals. (Brands will only achieve those goals if they are prepared to intelligently design for value and competitiveness.)

So where does all this leave us? Perhaps my biggest take was that amongst the world’s big product brands at least, the war for market share is now firmly experience-driven. The experience race is on. Expect those experiences to not only come thick and fast, but also for them to become less spontaneous as companies look to design more and more of how they deliver as well as what they deliver. Expect too that the value of each experience will commoditise much more quickly as consumers come to expect surprises-by-design as a matter of course. Finally, understand that innovation in such an environment could perhaps be more accurately described as the opportunity to supercede rather than the continuing invention of the “new”. Companies like Apple have shown that out-delivering by out-designing can be highly effective if second-to-market is better-in-market.

Overall, lots to think about. Huge thanks once again to Cam and the Cato team for the invite and the hospitality.

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Human marketing
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Is behavioural change in a corporate culture all about timing?

By Mark Di Somma

“Is this the right time to change?” may not be the delaying question I often dismiss it as. To see why, read Caroline’s post at the Optimal Usability blog (subscribed to, not surprisingly, by the ever vigilant Alex).

Caroline quotes from this very astute man – BJ Fogg – who runs the Persuasive Technology Lab at Stanford University. Behavioural change, Fogg says, is what happens when Trigger, Ability and Motivation align.

When there is a trigger for change, when people can change and when they are motivated to do so, then changes in behaviour can and will occur. Otherwise, pretty much, forget it.

But each element must be of sufficient strength for the proposed change to succeed.

In order for a trigger to be powerful enough to overcome existing habit or inertia, Fogg believes it must be noticeable, associated directly with the required behavioural shift and timely (it must occur whilst we are motivated and at a time when we can still change).

Ability requires both capability and capacity to make the change required at the time.

Finally, there are three core motivations – sensation (pleasure or pain), anticipation (hope or fear) and social cohesion (acceptance or rejection).

So changing a behaviour is about much more than willpower or necessity. A key element is timing, and more particularly, being able to articulate the relevance and accessibility of a behavioural change at that given point in time. If people don’t feel sufficiently triggered, able or motivated, then a change in behaviour, no matter how sensible, will probably not happen. Equally, Fogg’s conclusions would suggest, companies should actually delay calls for behavioural change if these elements do not align or if the elements themselves are not at maximum potency.

While the approach mirrors my own in two aspects, it differs in one. I have always argued that the sequence is Inspiration – Education (ability) – Motivation. Fogg essentially replaces Inspiration with Agitation. His point, I assume, is that we won’t change until we feel we have to, whereas my own view has always been that people don’t change until they see something better to replace what they know. Far be it from me to argue with a Stanford professor. Perhaps I have indeed under-estimated the power of inertia. If that is so, then I should resequence my approach to be:

  • Agitation – people recognise or are presented with a trigger that powerful enough to incite action.
  • Inspiration – they are offered a vision of what they can achieve and/or the organisation could be at a given point in the future
  • Education – they learn how they can move from where they are to where they need to be
  • Motivation – they feel compelled to do this, individually and as a group, because of how it will make them feel, what they anticipate things will be like if they don’t change or if they do, and because it fits with the social tribe they associate with.

Interestingly, that only makes the case for perfect timing even stronger.

Hat tip to BJ Fogg. Thanks Caroline for a really interesting post about how you applied Fogg’s thinking. Thanks Alex as always.

Disclosure: Originally I thought Trent posted this. He emailed to correct me. Sorry Caroline.

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Brands shouldn’t try to make sense

By Mark Di Somma

The flipside of a marketplace where brands encourage people to buy for emotive reasons is that brands also need to counter consumers’ personal reasons not to buy.

Some of these reasons may be legacy. Some may seem to be convenient self-interest. Others may look like they’re based on ignorance, bias, selfishness. They probably don’t make sense to you.

That’s important because … actually, it’s not. It’s not important at all

The problem that matters is not your opinion of why your buyer won’t buy – it’s the fact that they have this opinion, that it’s rational to them and they have every reason to keep thinking it until they don’t want to anymore.

Chances are you won’t talk people into liking your brand. The most effective way to deal with an “unreasonable” objection is to counter with a riveting motive.

Most people think that means price. But simply dropping your price is no silver bullet. It doesn’t make you a more likeable brand. It may make you a more attractive brand – in the short term. But only until a better offer emerges.

We like brands for a range of reasons beyond what they cost: what they offer; what they stand for; how they recognise us; what others think of them; how familiar they feel; who they support; where they’re seen … Likeable brands build loyalty and affinity by leveraging how people react. They deliver based on what people value (not necessarily what they need).

If you’re not liked as a brand – there’s a reason for that, but it may not be a reason you want to hear. It may not be about quality or anything that, as I said, makes sense to you.

Likeable brands aren’t rational – in the sense that they’re not about putting up the best arguments. Brands are liked only because they absolutely make sense emotionally to the people who buy them. Great brands are very disciplined about how they feed, nurture and grow that sense of affinity, no matter how strange it may seem to anyone else.

That is perhaps their greatest strength as a brand: their ability to be logically irrational.

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Out of the blue moments

By Mark Di Somma

As marketers, we’re taught to look for patterns. Research, we are told, will give us the insights we need to predict how whole swathes of our society will react. Brands are looking to predict how buyers will act or react so that they know what to expect. Consumers themselves of course operate under no such constraints. They happily accept their own behaviours as making sense to them.

One of the great challenges we face as branders is appealing to the mercurial side of consumers. Getting to grips with the fact that they won’t always behave the way we think they should, that they will do the unexpected, the illogical, the unprecedented and the unresearchable – and that they are all the more exciting and interesting as people because of that.

Across your business, across your channels – where could you promote/allow/celebrate  impulsive moments? How could you be a platform for what consumers themselves just feel like doing, and how can you improve loyalty and profitability by doing that?

A simple way to start may be by changing one question. Instead of asking “what should happen next?” try asking “what could happen now (that people would just love to see, do or experience)?”

There just may be one thing better than being (pleasantly) surprised as a consumer. And that is (pleasantly) surprising others – or perhaps yourself.

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Customer service is worthless

By Mark Di Somma

We shouldn’t even think of “customer service” as being about something that is valuable to customers. The reasons are simple. We live in a service-focused age, and the people who buy from your brand know they’re customers. So “customer service” does not describe anything customers don’t expect and it certainly doesn’t envelope anything of particular value to them.

Every brand is a service business at some level these days.

In reality, customer service is the means to the real goal: sustained and profitable relationships forged between customers and a brand. Until you achieve that, you haven’t added any sense of worth for either party. You’ve just done what was expected.

Success is not about achieving world-class customer service or carrier-level or benchmarks or any of the other abstract customer service qualitatives that are freely bandied about. Success pivots on whether your brand delivers experiences that your customers continue to be enchanted by.

People don’t come back to a brand because they got good metrics. It’s sad then that some companies still think their job is done once they’ve delivered them.

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Strategy: why the 2% is so critical

By Mark Di Somma

As part of making his case for why execution rules over strategy, and particularly why spending too much time on strategic thinking is a waste of time , Tom Peters features a quote from Al McDonald that unequivocally states the views of the former Managing Director of McKinsey & Co on strategic planning. “Never forget implementation, boys. In our work, it’s what I call the ‘last 98 percent’ of the client puzzle.”

McDonald clearly intended this as an exhortation to focus on actions rather than wasting too much time on strategy. But I don’t read it that way. Instead, the critical point it seems to me is that the success or otherwise of nailing that huge 98 percent of the client puzzle is predicated on getting the first 2 percent, the strategic thinking, right.

Based on McDonald’s own words, the return on investment from having the right strategy should in fact make the focus on strategic thinking a no-brainer.

As Michael Porter observes: “There’s a fundamental distinction between strategy and operational effectiveness. Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different. Operational effectiveness is about things that you really shouldn’t have to make choices on; it’s about what’s good for everybody and about what every business should be doing.”

The temptation with the 98% approach is to get on and do what you’re good at, or what you can, or what others are doing, rather than taking the time to think through transforming your offering based on what strategic thinking delivers – the insights into what you’re best at and what the market craves. The crucial combination of excellence and aspiration, and the rethinking and remodelling that accompanies it, is what makes great companies outstanding. Strategic thinking doesn’t just hinge on what you can possibly do. Indeed, part of the very role of strategy is to define what you can’t do, shouldn’t start and mustn’t do any longer.

Unlike operations, it’s all about choices. Making definitive calls with choices.

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Excitement vs risk: The very different emotions driving purchase of B2B and B2C brands

By Mark Di Somma

Philip Kotler once described brands as helping people to make decisions. In a world of frenzied competition and bewildering choice, they are of course the fastest, simplest and most effective way to link a name to a perception of value. What can easily be overlooked however is that B2B and B2C brands are not just about very different types of decisions but that they also involve very different types of decision making.

For the most part, consumer brands look to influence an individual and/or groups of individuals (tribes). They are at their most powerful ‘in the moment’. They are about excitement through identification, and they are often strongly influenced by culture, taste, fashion and what’s important to people as people.

B2B brands have different drivers – and the most important of these, I believe, is that no-one buys a B2B brand alone. Normally, there are multiple decision-makers involved, each with their own specific areas of responsibility and priority. There’s normally an elongated decision process (sometimes highly regimed) where final approval for go-ahead must pass set stages alongside the many other agendas and priorities that companies juggle every day. As a result, the decision to use a B2B brand is often strongly influenced by track record, responsiveness, knowledge and of course reputation.

The temptation is to believe that B2B brands lack emotion because they are subject to highly logical decisions. That’s not the case – B2B is purchased emotionally as well as logically – but the emotions for buying B2B are very different from those of consumer brands. For the most part, B2B brands need to focus on risk alleviation. That means that in contrast to the excitement that consumer brands are looking to generate, B2B brands need to focus on generating emotions centred on reassurance – professionally, technically, financially, legally and of course personally (for those championing use of the brand itself).

A study by McKinsey of the different drivers for B2B and B2C decisions shows these different drivers at play. In both cases, brands work to increase information efficiency, reduce the sense of risk and add to the sense of value. In the case of a B2B brand, the motivations for choosing a brand lean heavily towards risk reduction (45% weighting in the decision), with information efficiency next (41%) and the sense of added value third at just 14%. The dynamics for B2C by contrast show perceptions of added value as the most important factor (40%) followed by information efficiency (37%) and then reduced risk at 23%.

Two other insights are worth noting. The first: that the sense of value add is most important for publicly visible products and services, and that the importance of a strong and recognised brand increases significantly for those products and services that are clearly visible to the end user.

B2B branding is not a licence to be faceless. Boeing, GE and many others have proven that you can be a safe pair of hands and still be a strong and deeply valued brand. Indeed B2B brands must have personality and opinions and a strong sense of fashion and evolution if they are to avoid being consigned to the OEM wilderness (where they will be eaten alive) – but their powerful sense of brand must focus on, quite literally, creating and managing distinctive security.

In my opinion, the biggest question for a B2C brand is: how can we best take our customers by surprise? Because, back to Kotler, that’s what consumers are looking for – refreshed and refreshing products and experiences.

But the biggest question for a B2B brand is: what are our customers most scared of – and why do we represent the best choice to tackle and alleviate their fears?

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Posting a profit

By Mark Di Somma

Likeability has both a top-line and a bottom-line. Social monitoring tends to focus on the top-line: mentions; retweets; likes; comments. Top-line likeability is important because it monitors partiality towards your brand – the prevailing emotion at that moment. But it can be easily swayed, by offers, for example, or news. Bottom-line likeability is the measure of how much and/or how often consumers buy. It’s the money that drips or floods out the bottom of the sales funnel. The other p – profitability.

But just as you can be famous and broke, so your brand can have strong top-line likeability without proportionally strong financial returns. And indeed, vice versa.

Part of the problem, as Brian Solis has astutely observed in this recent post, is that chasing the “soft metrics” of top-line likeability has become as addictive to organisations as chasing top-line revenue can be for sales teams. It provides numbers, sometimes giddy numbers, but not “the insights necessary to glean ROI or deep understanding of what people do and do not want, need or value.” And certainly not the insights to know what is being generated financially. Brands are measuring incidents rather than effects.

But excitement is not cash. If you’re not monitoring your likeability off your bottom line, all you’re really counting is your Facebook effect and that, as Solis so clearly demonstrates with his beer experiment, adds up to fleeting engagement at best. It is quickly eclipsed, diverted or hijacked.

Solis asserts, “Engagement is about cultivating community behavior against a defined vision, mission and most importantly, purpose.” That’s important, but I think it can be pushed even harder. Bottom-line likeability occurs when a community is so engaged with what you offer and what you stand for (through what they’ve learnt socially and/or otherwise) that they gladly buy your brands at your margins … and keep doing so.

In commerce, as in relationships, you can’t be engaged on your own. And although it’s important to like yourself, your assessment of how likeable you are, or appear, is not necessarily the most accurate reflection of how important you are in the lives of those you really count on.

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