Chapter 12 - brand STRATEGY ARCHITECT
In a general sense, we use the word architect to represent strategic and organisational leadership inputs into Brand Chartering for two main reasons:
·Chapter 11 has argued that brand architects who build linkages between levels of branding (eg corporate branding and product sub-branding) can direct higher level advantages - integrating a company's total goodwill and leadership capabilities - than those who only have a portfolio of fragmented brands to work with
·A successful architect tries to ensure that everything connects up, for both practical day-to-day operations and long-term qualities like (re)creating robust and flexible environments for people's working lifestyles. Architecture seems a natural metaphor for the new wave of strategic and organisational schools of thinking that companies need to embrace if they are to replace long-term planning by something more proactive in a fast moving world. At this stage we must defer to Hamel and Prahalad who have pioneered a new school of strategic thinking to get a direct feel for keywords in the new vocabulary of "strategic architecture".
|Table 1 : Hamel & Prahalad's New Strategic Lexicon |
One doesn't get to the future first by letting someone else blaze the trail. So what is it that compels some companies rather than others to take up the difficult challenge of inventing the future? What allows some companies to create the future despite enormous resource handicaps while others spend billions and come up short? Why do some companies seem to possess over-the-horizon radar while others seem to be walking backwards into the future? In short, what does it take to get to the future first? At a broad level it requires four things : (1) an understanding of how competition for the future is different; (2) a process for finding and turning insight into tomorrow's opportunities; (3) an ability to energize the company top-to-bottom for what may be a long and arduous journey toward the future; and (4) the capacity to outrun competitors and get to the future first, without taking undue risks.
Implicit here is a view of strategy quite different from that which prevails in many companies. It is a view of strategy that recognises:·it is not enough to position optimally within existing markets; the challenge is to pierce the fog of uncertainty and develop great foresight into the whereabouts of tomorrow's markets.
·the need for more than an incrementalist, annual planning rain dance; what is needed is a strategic architecture that provides a blueprint for building the core competences needed to dominate future markets
·less concern with ensuring a tight fit between goals and resources and more concern with creating stretch goals that challenge employees to accomplish the seemingly impossible
·the quest to overcome resource constraints through a creative and unending pursuit of better resource leverage
·competition often takes place within and between coalitions of companies, and not only between individual businesses
·to capitalise on foresight and core competence leadership, a company must ultimately preempt competitors in critical global markets; that the issue is not so much time to market, but time to global pre-emption
Hamel & Prahalad, "Competing for the future"
This chapter will suggest ways of exploring how branding processes interconnect with strategic decisions. We will deliberately present some "far out" agendas, and suggest the need for always distinguishing between "then" and "now". You have to take a point of view of "then" in your business and decide which aspects of this already require immediate action.
The histories of great brands (see ThinkPiece 1 on Brand Benchmarking) show that their formative stages benefited from top-level thinking within the company which was intense, iterative and foresightful. Layer upon layer of branding advantage was built up in a process that merited the label of "founding a leadership system". Companies with major investments in brand architectures should be organisationally devoted to inputting top quality think time into their business processes to perpetuate the roles of brands as leadership systems and as strategic integrators of core competences (ie organisation-specific means of adding value). The reality can be different as we shall briefly indicate.
Corporate diversions which undermine brand process and leadership foresight
The quotation in Table 2 is extracted from a book on Business Process Reengineering. Its authors speak from the perspective of partners of one of the world's "Big 6" accountancy firms.
|Table 2 : surprising new assets|
There is constant tension between the accountant - valuer of old assets (cash and tangible items) - and the operations executive - the orchestrator that believes he should invest to enhance the value of all his assets. Cutting-edge leaders of business today concentrate more on the new assets (brands, process capabilities, people and knowhow) than the old, putting up to five times more effort on the new assets than ten years ago.
(1993), Business Process Reengineering, Johansson, McHugh, Pendlebury, Wheeler (Coopers & Lybrand), Wiley, 1993
From time to time, arenas of intellectual thinking and organisational functional routine have conspired to relegate the status of the brand below even that of intangible asset, to invisible - and even absent - process. Functional barriers to realising brands as leadership systems have come from such imposing sources as classical theories of corporate strategy, and valuation procedures tied to preserving the sanctity of the balance sheet.
Michael Porter has made great contributions to corporate strategy and competitive advantage, but early editions of his tomes did not even include the brand in his indices. Porter's frameworks were detailed about how tangible assets evolved competitive advantages, but much more patchy on the practical powers of intangible leadership systems. These frameworks were conceived in an era when today's greatest change forces, such as globalisation affected only a minority of branded industries and only in partial ways. Certainly, the cumulative impact of all mass communications was then a fraction of what it has now reached. And in the days of tangible asset power, the nearest thing many businesses had to an electronic media was the telex machine.
Scholars have since begun to recast corporate strategy. From a quantitative analysis of European companies adding most organisational value from 1981 through 1990, Professor Kay identifies the three topmost capabilities which are sustainable and appropriable within successful companies:
·Architecture (defined by Kay as "a system of relationships within the firm, or between the firm and its suppliers and customers, or both")
All of these capabilities are intimately related to how fast and coherently a company learns. We suggest that the leveraging of all three of these capabilities should be inseparable from the strategic art of branding leadership systems. This appears to be confirmed by evidence from Hamel and Prahalad that winning companies are those that infuse into classical strategic and management frameworks new thinking on banner brand process, core competences and foresightful leadership purpose.
Several human inertias can prevent companies from embarking on new brand strategy thinking. They include the habits of older generations, plus the fact that recent crops of MBAs are too often examined on curricula that do not quickly catch up with revolutionary thinking particularly where course materials rely heavily on historical case studies.
Neither is the influence of financial analysts likely to have a positive effect on branding's long-term capabilities. In a 1993 MORI survey of top influencers of UK corporate governance - sampling 97 captains of industry from the UK's 500 top companies, 146 equity fund managers and 34 city editors and broadcasters - UK companies were perceived to be relatively adept with brands and poor at strategic thinking. The mindsets of most of these respondents did not make the mental link between branding and strategy.
We also doubt whether foresightful thinking on brand architecture is likely to be enhanced by the relatively new system of brand valuation, which came to prominence in the late 1980s. This system has been devised to comply with accountants' insistence that valuations must be compatible with the balance sheet's founding philosophy - all figures must be justifiable on the grounds of proven past performance.
This sort of brand valuation may help a company do the following:
·Appraise what it may get if it wants to sell off a brand
·Indicate the value to the company of brands where these are its major resources. By presenting the wealth of the company in a good light, management decision-making need not be put unnecessarily on the defensive, eg by predators or by bureaucratic rules with arcane effects. (A particular example of the latter frustration occurs where local accounting regulations require that a board goes back to shareholders for approval, where any acquisition exceeds a certain percentage of assets recorded in the balance sheet. In this case, when brands as a company's major assets are excluded from the accountant's reckoning, the board might end up having to spend most of its time convening extraordinary general meetings).
Balance-sheet aligned techniques of brand valuation cannot help resolve the fundamental paradox of the brand: the major corporate asset whose worth is no more than the power of future sources of advantage invested in it.
Navigating leadership systems in times of global revolution
At this turn of the millennium, earth dwellers are living though an era of global revolution in the way that world class businesses operate. Said The Financial Times (20 September 1994) "Companies grown fat on regional dominance now find themselves seventh in a global market where only three will thrive. Big companies, in English-speaking countries at least, are in a Maoist state of permanent revolution."
Foresight is needed to turn risks, otherwise associated with revolution, into opportunities. Timing is a critical art especially for the owner of dominant brands whose organisation can be lulled into a false sense of security. Forces for global revolution do not materialise overnight, they have been looming for years. In the late 1980s, Peter Drucker identified many key forces as megatrends, that is irreversible trends that are already happening but whose impacts are yet to come (see
ThinkPiece 5). Earlier, Theodore Levitt foresaw why the globalisation of markets would one day herald a revolution in consumer benefits. The times of sand may be running out fast on the locally fragmented ways that branders used to work and profit from.
All branding and leadership decisions need to be context specific. But if you contribute to branding in a consumer-driven industry, you must be prepared to brainstorm emerging patterns for leveraging global revolution so as to see what learning points may apply to your own leadership systems.
Here is one of the brainstorming questions which we use regularly in workshops on strategic architecture. What, can you learn from successful Brand Franchising models given that some of branding's biggest success stories in recent years - eg McDonald's, Benetton, Body Shop - have used this evolutionary form?
First, two obvious points:
·Successful franchising involves making a delivery system competitively strong and then having the capability, if chosen, to replicate it fast and globally
·In making and renewing process strengths, franchising often capitalises on having privileged access both to a living distribution system and a consumer laboratory. The franchise founder uses the original franchises as prototypes and role models for testing evolution of the business system, and perfecting consumer values.
Second, two less obvious points:
·Brand franchising requires you to focus on partnership strategy as well as competitive strategy
·Brand franchising frees you to question what in the total industry chain you need to own. Your aim should be to keep control of the brand's added value, whilst ensuring that the economics of the whole delivery system are world class. What should you pick from both manufacturing's and retailing's distinctive competences, so that you own branding's added value leadership rights while giving a fair and secure long-term deal to all your partners?
This process of branding mixes two critical forces for perpetuating brand momentum:
- strong leadership by a brand owner responsible for world class quality and value
- strong local buy-in and iterative feedback on maximising the brand's impact both in terms of consumer relationships and business development
Third, a "case future" - a story of two leadership systems which, at time of writing (1995) are evolving in ways that are revolutionary because:
·on the one hand, we have no idea where these two companies will evolve in ten years time
·on the other hand, wherever these companies go, traditional consumer goods competitors are having to reassess the whole economies of their branding systems. One of the companies in the case future (Cott) has over a five year trajectory multiplied its 1989 turnover of approximately $30 million by a factor of twenty five, and in the process started to raise questions about the effectiveness of some of the greatest branding systems the world has so far known.
Excerpts from the stories of two Canadian companies : Loblaw's and Cott
In 1983, inspired by the innovative foods developed by the UK retailer Marks and Spencers for its own brand St Michael, Dave Nichol, director of new product development for the Canadian supermarket retailer Loblaw, launched his company's own upmarket branding system - President's Choice.
All President's Choice lines evolved as super-premium offerings. But at least four types of flagship line served to confirm the fame which President's Choice was designed to cultivate:
·High quality fresh and chilled food recipes served to make Loblaw's as famous in Canada as Marks and Spencers is in the UK, as a provider of food lines which seem to merge supermarketing and delicatessen
·The President's Choice's "Memories" Range whose products are both exotic in presentation and convenient to use. They thereby add spice of life to consumers' dinners and make Loblaw's a continuously fashionable talking point. Imagine how two typical lines - President's Choice Memories of 1) Ancient Damascus tangy pomegranate sauce and 2) Szechwan peanut sauce and dressing - convey their own storylines.
·Category best of kinds : eg a chocolate cookie "The Decadent" whose loyal fan club claims it to be the world's best manufactured cookie.
·Category emulators, which sought to deliver a taste similar to the big brand leader but at a lower price.
Nichol was proud of his product winners and strongly marketed their exclusive benefits for Loblaw's. "I have the ultimate retail weapon" said Nichol, referring in 1991 to the Decadent Chocolate Cookie Chip's which had just outsold Canada's erstwhile brand leading cookie "Anybody who loves The Decadent Cookie has to shop in my stores". It soon seemed natural to suggest that retailers outside Canada could benefit from President's Choice as a winning program of merchandise and Loblaw shops were delighted to be showcased to visiting retailers to prove the point". In its first decade of existence, President's Choice merchandise was evolving into international retailer programs, including twelve US chains (eg at America's biggest Wal-Mart where the program was called Sam's American Choice); a Hong Kong chain; K-Mart Australia where the program was called Australia's Choice.
By then, Nichol was convinced that President's Choice had most of the critical elements needed for a world brand. He was close to inventing the one big threat that branded manufacturers had not associated with the concentration of retailer power - namely the capability to distribute products with proven consumer appeal through a global distribution network. Recently, manufacturers' brands have had to adjust to many reverses at the hands of big retailer chains within national markets, but now it appears that they cannot even rely on transnational marketing as their unique right to brand.
By 1994, Loblaw was buying annually US .7 billion dollars of President's Choice products for its own stores and a similar amount of President's Choice products for its retail customers outside Canada. So exporting the program doubled Loblaw's buying power, without the company having to make any extra investment in hard assets or inventories.
In Loblaw's, we have a retailer which is also working as a virtual supplier to international retailers. A retailer who claims that launching new President's Choice lines is a marginal cost, whereas manufacturer brand line launches in the US could easily cost $50 million. Big as Loblaw's shock waves have been to some manufacturer's branding systems, they may turn out to be only a scene setter for things to come due to the evolving ramifications of a second leadership system whose source is attributable to President's Choice's cola. This was Cott Corp.
In the words of Canadian Business Magazine, Gerry Pencer was in 1989 president of the family's company "then a meagre little Montreal bottling outfit called Cott Corp., which sold cheap soda pop under its own label". In early 1990, Pencer discovered that Loblaw needed a new supplier for its President's Choice cola, met Nichol and was told that what was needed was a cola product as good as Coke or Pepsi but cheaper. Nichol has subsequently confessed that he had thought it would be unlikely that he would see Pencer again, but for what actually happened next we return to Canadian Business Magazine. "Pencer was back in Nichol's office within a few weeks, having bought the right to use Royal Crown Cola Inc's recipe. Nichol helped Cott modify RC's cola recipe, and relaunched President's Choice cola in March of 1990. It was an instant hit, and soon accounted for the majority of Loblaw's Ontario cola sales".
A lot of things happened in the next four years:
·Cott's production of private label soft drinks sold in Canada has reached as high as 85%. And the company now sells soft drinks into more than 50 retail chains in the US, including giants such as Wal-Mart and Safeway. Pencer has also developed a growing stable of international clients for his soft drinks business including major retail chains in the UK, Spain and Japan.
·Canada may seem to be an unlikely epicentre for an earthquake in world branding but Canadian Business reporting of the local scene seems pretty devastating. "Certainly, the threat of private label is real enough. In Canada, Coca-Cola Beverages lost $143 million in 1993 and closed eight plants - in part because it lost share to private-label brands. Pepsi's new Pepsi Max cola and Nabisco's Chunks Ahoy! cookie probably owe their existence to the private label threat. "Innovation hadn't been there from the national brands" says Pepsi-Cola Canada Ltd's president, Ron McEachern. "The growth of premium private label is a wake-up call".
·Cott has also increased its presence and breadth in supporting retail programs. For example, at Safeways (the second largest supermarket chain in the US) Cott has helped out with various aspects of the Safeway Select program including packaging, sourcing and specification of products. In support of this process, Cott has been buying stakes in suppliers of Loblaw's other President's Choice lines. Then in the middle of 1994 Dave Nichol joined Cott, which has also been attracting other marketing luminaries like Don Watt whose design work has been key to the presentation of many leading retailer programs. The strategic intent of Cott is well signposted in Table 3, extracted from Canadian Business August 1994.
|Table 3 : Will Cott become a virtual General Foods?|
Says Heather Reisman Cott's President "Pencer likes to say let's see if we can create the next General Foods. He's probably projecting a decade, but there is a fundamental transformation taking place in the whole food chain. Who manufactures, how they work with suppliers, how they work with retailers, how the marketing happens. If we understand that change, we could build a giant company".
What this means is that Pencer thinks he's figured out how to use other companies' manufacturing facilities and expertise to build his own conglomerate. For instance, when faced with making soft drinks for an exploding market, Pencer negotiated "copacking" deals that saw existing bottlers use their excess capacity to pump out his product. Pencer has bought three bottling plants in the US and is building a new Montreal facility, but he relies heavily on copacking deals with a network of Royal Crown bottlers in the US. In Europe, he is expanding through similar arrangements with Benjamin Shaw and sons in the UK and Cadbury Schweppes on the continent.
Now Pencer wants to catapult from soda pop into a full range of products and services, replicating the operating philosophy of his soft-drink business as he goes. As Reisman explains it, private-label soft drinks sell better when they are part of a comprehensive, well merchandised program. The company will create packaging for a retail program and help locate suppliers. It will refine recipes and develop the products themselves. All of this Cott will do, ostensibly free of charge, in the belief that it promotes the company's core business.
Cott plans eventually to spread the costs of these services over as many as six or seven categories. All must be high-volume, high-profile products that currently do not return enough profit to the retailers. They must all, in other words, resemble the soft-drink category of a few years back. Pet food is one promising category. Snack foods, beer (including non-alcoholic beer) and juice-based drinks may prove to be others. Cott is buying into these President's Choice supplier companies in order to gain expertise in their product categories, and to test the vision.If more opportunities become available and other product categories fit the bill, Cott is "definitely open" to further investments says Reisman. The plan is to negotiate more excess capacity deals, manage more relationships and leverage Cott's intellectual capital. "I'm not saying we don't have to own anything" says Reisman "but we don't have to own things, in the way the old world did, in order to create value. If we wrap our ingenuity around someone else's bricks and mortar, we add value and make money. It's not so much a "new-age General Foods" as a kind of "virtual" General Foods."
Extracted from "The Hired Hand Waves Goodbye", Mark Stevenson, Canadian Business, August 1994
As with all brainstorming exercises, you will need to take out your own context-specific conclusions as to what threats and opportunities could result from somebody doing a Cott to your industry's added value chain.
In brief, Cott appears to be in the business of identifying world class product formulae and then franchising these products through developing partnerships with countries' existing retail chains. So far, Cott has shown amazing adaptability in establishing its beach-head in different country's added value distribution chains. Its beach-heads have included:
·In Canada, its entry point was into and then learning from, the President's Choice retail program
·In the US, most retail chains are regional and not nationwide competitors. This allowed Cott to start by offering many retailers an exclusive advantage -the promise of a world class retail program - within their region.
·In the UK, a handful of major supermarketing retailers are dominant nationwide. Cott has exploited the country's comparatively lax visual identity laws to convince retailers that they will all be missing out if they do not exploit their opportunity to develop "lookalike" brands to the full. So designer-red American cola formulations are, as of early 1995, produced by Cott as Sainsbury's classic cola, Safeway's select Cola, Woolworth's American diner cola, and (in an extraordinary three-way partnership) cola produced by Cott, branded by Virgin, and premiering in Tesco supermarkets.
It may be wise not to underestimate the confederation of entrepreneurs which seem to be a core part of Cott's strategy. For example, Cott seems to be replicating its networking pattern through like-minded partners, as revealed by the following extracts from UK press coverage.
|Retailer Nick Kirkbride has joined the Virgin Cola Company as its new managing director. The Virgin Cola Company is a joint venture between Virgin and the European subsidiary of the Cott Corporation. It oversees Virgin's soft drinks business, including its own-brand cola and forthcoming energy drink, understood to be called Pure Virgin Energy.|
Kirkbride has also spent five years at management consultancy McKinsey. His connection with Virgin goes back six years, when he worked at Cadbury Schweppes alongside Simon Lester, who is now managing director of Virgin partner Cott Europe.
Marketing Week, February 24, 1995
Branson is leading the chase in the cola market. In line with his taste for David-and-Goliath battles, Branson has pumped up his ambitions since launching Virgin cola in November 1994; now his ultimate goal is for his cola to be the number one brand.
In his 50/50 venture with Cott, he hopes to capitalise on the Virgin brand name and launch the drink this year in Asia, continental Europe and the central battlefield of the cola war - America. Branson accepts that it may take him the rest of his life to knock Coca-Cola from the top spot, but believes he has the brand and product to do it " We have come up with a drink that people prefer to Coke that is also much cheaper". Branson believes that there is room for three main global cola companies. " I hope the market will support three" he says "I would certainly hate Coke to go bust".
The Sunday Times, 5 March 1995
Ironically, Cott's strategy appears to be targeting brands that have built individual product categories, eg colas, into fashions that are on the world's shopping lists. In brainstorming mode, you now need to consider questions that old branders still feel to be heresies : Has Coca-Cola invested in an essence that was too big for a single product compass? What is it about Coca-Cola's brand architecture that has stopped the world's most refreshing and friendly drinks going beyond colas? At some stage, could not Sprite and Fanta have been interweaved more closely into Coca-Cola's mental tapestry without prejudicing the company's goal of maximising cola's share of the global stomach? Isn't it slightly strange that Coca-Cola now markets Nestea (under Nestle's brand architecture) instead of Co-tea? Will the strategies of Cott and worldwide retail franchisees mean that high added value global fashions associated with singular product categories become a thing of our passing millennium? What categories offer continuous scope for product innovation - or other fast evolving capabilities - to secure their manufacturers' right to brand?
We asked a senior figure in the soft drinks industry to bring his own sense of balance to this debate (Table 4).
|Table 4 : Leaders find their own way to go closest to consumer needs|
1) What is noteworthy about Cott and Virgin is that basically they use the resources of others. This has to be the best way to avoid risk and achieve good margins. If Virgin cola flops, there appears to be no real loss to Branson. Putting the package together (as bankers once did) has to be sound strategy.
2) Consumers are discriminating and long run success depends on taste - the first test for any cola will in the end be do you want to drink it day in day out? For example, even though Pepsi often wins in a blind test (ie a one-off serving), it does not seem historically to have achieved the same permanent drinkability as Coke.
3) The big markets for these brands are turning to Africa, India , China, and the rest of Asia. The lion's share of the cola market will go, as the market develops, to Coke and Pepsi. Competing entries will come in after the markets are established.
4) Remember that even in the UK, a hot summer may produce an impulse market of half a billion dollars of colas not easily tapped by Sainsbury, Cott, Virgin et al. This is bought from non-grocery outlets. The key, as always, is whether the product is within easy reach when you feel thirsty. This is where Coke scores with its distribution and merchandising systems.
5) The end position will come when you can make decent drinks in your own home. You are then likely to want to drink the brand leaders, who will presumably patent their cartridges so that outsiders cannot use their system.
We have also surveyed (in 1995) thirty marketing directors in the UK focusing on the question: could an added value chain of any of your core businesses be at risk to somebody perpetrating a "Cott-Virgin" attack on it? To our surprise, over 90% said yes.
Survival qualities of brand leadership systems
In competing for the future, models of brand leadership will be far more diverse than 20th century branders have been accustomed to. Some brand leadership systems will continue to be configured around advertising-led investments, as many were in the twentieth century. Some, like President's Choice and Cott, will involve investments which are virtually advertising absent (at least at the high risk stage of product launch). They make great savings in costs thereby. Companies will need to foresee how characteristics of specific product categories will determine what kinds of marketing investments you need for the architecture of your branding system to be fit to lead.
When an industry's product processes reach a plateau of maturity - as appears to be the case in products Cott is targeting - the needs of retailing channels cannot be expected to coincide with those of the manufacturer's brand. Products that are apparently easy to copy are fodder for retailers' own brands.
A diametrically opposite business context involves production processes and product categories which are themselves in a fast moving stage of evolution. Here, the architect of a brand leadership system needs to prioritise : making a realistic vision of the future your own business case; helping stakeholders to see your part in this future; and moving consumer aspirations towards new products even if the company has selectively to focus its own business competences and technological partnerships to deliver the new added values. Consider future markets for multimedia products as the emerging technological pioneers of digital communications space. Companies' right to compete in this environment already involves forging corporately suitable branded joint ventures etc in the evolutionary race of "pre-marketing" digital industry. Arguably, brand leadership reputation within the industry as the leading player in particular core competences is currently even more important than consumer reputation in transient product markets (assuming, of course, that you are not doing anything reckless with in-market reputation among consumers).
Alternative perspectives on the value of the IBM brand
How would you evaluate the real worth of the IBM brand today? Unlike the position advocated in table 5, we would not dwell too much on current in-market consumer shares.
|Table 5 - Our tip : no better buy in the world at around this price!|
The US magazine, Financial World, has a paid circulation of over 500,000 readers. In 2 August 1994, it reported results of a brand valuation survey carried out by FW staffers.
"Here's a shock: The IBM brand name is now worthless. That's just one thing we discovered in valuing 290 of the world's most popular brands.
Of the 290 brands surveyed, 14 had negative or zero value... In such cases, a competing generic product could have generated high profits on the same level of sales.
IBM is in trouble because, while pouring millions into its mainframe business, it neglected the general switch into personal computers. And as PCs became more and more of a commodity, they began selling more and more on price. Now, thanks to low-cost producers like Dell, IBM is a big loser"
"If nothing else " says Raymond Perrier of Interbrand " what brand valuation does is to get marketing and financial people to talk to each other in the same language - the language of brand value, because it involves every part of the business".
We do not know what to make of a valuation of the IBM brand on the basis of past performance in the personal computer market. If asked to evaluate the IBM brand, we would concentrate on examining the foresight with which the company is leveraging and confirming its pre-marketing reputation as a world class leader of core competences. Would you prefer to partner or to compete against IBM as various multimedia markets evolve? We would bet that IBM will take first pick of partners needed to develop many of these markets of the future.
Taking a fresh look at whether branding processes are robust as leadership systems
In branding a leadership system which is strategically robust, the architect must concentrate on owning the added value chain of a company's sphere of business by serving
· the changing needs of consumers
· the dynamic interests of other stakeholders in the company or between the company and its consumer franchise
· the evolution of the company's core competences and partnerships as profitable marketplaces change in substance or in focus
With many new forces of change emerging and interacting with each other, we suggest that all companies need to conduct regular topline reviews into the robustness of their branding processes and overall strategic architecture. Note, for example, how viciously a brand leader's audiences can interact to the detriment of its reputation.
|Table 6 : how great is the knock-on effect of any stakeholder on the relationships of all other stakeholders?|
Writing in 1989, we advised branders to think through the magnifying impacts that journalists would increasingly have on world class brands.
"Fame and the high international standards expected of world class brands make them natural candidates for global news headlines. Like superstars, megabrands own the hallmarks which journalists revel in:
·They have differentiated themselves as the world's number one in something
·They offer stereotyped images which can be used in international copy with few words of introduction to the reader
·As celebrities they are fair play for public scrutiny where the ground rules of the popular media are passive adoration of success and "rotweiller" investigation into failure. Branded contradictions will prove to be as naggingly self-destructive as human scandals.
World class brands as the most public faces of international corporations are drawing an increasing share of media attention. This trend will accelerate as parochial news barons are being replaced by transnational news merchandisers. All of this puts a premium on a corporate appetite for what-iffing alternative future scenarios in relation to their impacts on brand processes."
Since making this observation, we wonder whether we understated the case given such examples as:
·1993 : Marlboro receives globally critical publicity over a local pricing manoeuvre. As the shares of an increasing number of brand owners suffer, Wall Street christens the day of the price cut as Marlboro Friday. We doubt whether Marlboro's marketing tactic would have made any global headlines in earlier years before it became the world champion of all brands with a reported valuation of over 30 billion dollars of goodwill.
·1994 : Unilever starts European detergent "Power" wars. In 1994, Unilever brought PR into its branding mix in a big way offering leading European newspapers exclusives on one of the company's biggest ever new product launches featuring the "power" of an aluminium detergent catalyst - to be launched simultaneously across Europe as the culmination of a ten year R&D program. PR boomerangs back in an even bigger way when you find out in the marketplace that there has been a product slip up somewhere between R&D and marketing.·1994 : Intel's overt branding of the chip's importance inside the PC added value chain was a strongly executed strategy apart from one side-effect. It became too much for IBM who, as both manufacturer customer and rival producer of chips, was prepared to join in a global PR war over a technical and very infrequently experienced imperfection in the Intel Pentium. Part of IBM's purpose in this was to redress the balance of global perceptions as to whose brand contributes most as a quality guarantee to the end-consumer of personal computers, and presumably future products which include computer chips in their ingredients.
Before discussing some exercises for interrogating brands from a variety of strategic perspectives, we deliberately present an unusual definition of branding a leadership system. It can be used as a road test to ensure that a company does not have any fundamental organisational barriers to developing a harmonious architecture between strategy and brand process.
Try defining branding as the business process of developing relationships which makes people act, feel, or look smart?
.Take a mental timeout to get a first feeling of why branding, directed in this way, acts like the "DNA" of competitive business strategy:
·Ask yourself the ways in which company staff act smart? Feel smart? Or look smart? And you will start to develop a list of subtle insights into how companies create and accumulate value.
This is vital when brand's raison d'etre is service-oriented or built on core competences involving accumulation of human knowhow
·Make consumers the subject of these questions and your list will be reflecting components of human value judgements - rationale and emotional - which are made by purchasers and end-consumers.
This is vital for brands which involve end user fashions and culturally reinforced consumption beliefs
·Then ask yourself who else to apply these questions to : partners which the company needs in its marketing channels, eg Retailers? Sourcing Partners, eg Suppliers? Journalists? Management Consultants? Business Analysts? Governments? Society?...
This is vital for re-examining wider roles of branding such as:
·influence over total added value chain, eg getting a fair share of industry surplus
·gaining geographic privileges, eg ultimately being the kind of global insider where every country competes to host parts of your organisation
·leveraging goodwill which can spiral virtuously or viciously through media circles and/or across stakeholders
·Finally, ask whether the profit-seeking objectives of a company's sphere of business relationships in a specific marketplace are short-run or long-term. Business teams really do need to know where they stand, otherwise internal market championing within an organisational can go wildly askew. Notoriously, we know of a bank which makes decisions on which of its businesses are 'core' every six months. A business unit manager newly accorded core status frankly admitted his plan was to put his business unit's logo on every piece of corporate literature he could get his brand on as a means of staying core. This was apparently the way to build your own internal empire irrespective of corporate costs or of consumer needs.
Although, the smart relationship definition of branding may sound quite simple, we have often found that it has save a lot of time. If a company has no consistent owner of strategic investments and/or no owner of brand processes, it is best to face up to this from the start.
In the remainder of this chapter, we summarise some precepts from new strategy and branding schools of thinking which we find useful in brainstorming how to brand corporate leadership systems which exploit foresightful contributions from across the organisation. The items which we will review are listed in Table 8. This is not an exhaustive list of the interconnections between strategic thinking and branding process. The strategy architect will need to supplement this with context specific brainstorming.
|Table 8 - Strategic precepts are branding precepts, and vice versa|
·Strategic architecture and foresight
·Keys for the brand architect : banner brands, core competences
·Added value chain and industry surplus - alternative models of branding
Strategic architecture and foresight
Foresight, strategic intent and architecture are some of the outstanding contributions to organisational exploration of strategic leadership made by Hamel and Prahalad in "Competing for the future". The extracts from their book, featured below, have been chosen to give a feeling for why a networking spirit of management has an increasingly critical role to play in forming an integrated and continuously actionable corporate strategy.
|Table 9 : New architects for old planners|
"Not only must the future be imagined, it must be built; hence our term "strategic architecture". An architect must be capable of dreaming of things not yet created - a cathedral where there is only a dusty plain, or an elegant span across a chasm that hasn't yet been crossed. But an architect must also be capable of producing a blueprint for how to turn the dream into reality. An architect is both a dreamer and a draftsman. An architect marries art with structural engineering.
To build a strategic architecture top management must have a point of view on which new benefits or "functionalities" will be offered customers over the next decade or so, on what new competences will be needed to create those benefits, and on how the customer interface will need to change to allow customers to access those benefits most effectively. Strategic architecture is basically a high-level blueprint for the deployment of new functionalities, the acquisition of new competences and the reconfiguring of the interface with the customer.
Strategic architecture is not a detailed plan. It identifies the major capabilities to be built, but doesn't' specify exactly how they are to be built. Try a cartographic analogy: strategic architecture is a high level map of interstate highways, not a detailed map of city streets. It is specific enough to provide a general sense of direction.
Creating a detailed plan for a ten- or fifteen- year competitive quest is impossible. Planning assumes a degree of exactitude (which price points, which channels, where to source from, what merchandising strategy, what exact product features) that is impossible to achieve when one looks out beyond the next two or three years. Insisting on such exactitude before embarking on a new strategic direction is a recipe for inertia and incrementalism. Luckily, it is possible to create a broad agenda for functionality deployment and competence acquisition." Hamel and Prahalad, Competing for the future
Hamel and Prahalad stress that the architectural leader determines how the company's business evolves through clarification of strategic intent in ways that everyone in the organisation can action. Table 10 lists some of the primary distinctions they aim to harness in crafting a strategic architecture instead of operating strategic planning the way that (western) companies have often done.
|Table 10 : Strategic architecture - the new style rules|
·Incremental improvement in market share and position
·formulaic and ritualistic
·existing industry and market structure as the base line
·industry structure analysis ( eg segmentation analysis, competitive benchmarking...)
·tests for fit between resources and plans
·capital budgeting and allocation of resources among competing projects
·individual businesses as units of analysis
·business unit executives
|Crafting strategic architecture|
·Rewriting industry rules and creating new competitive space
·exploratory and open-ended
·an understanding of discontinuities and competences in the base line
·a search for new functionalities or new ways of delivering traditional functionalities
·enlarging opportunity horizons; tests for significance/timeliness of new opportunities
·development of plans for competence acquisition and migration
·the corporation as unit of analysis
·the collective wisdom of the company
·line and staff driven
| Renewing resource leverage|
>·building consensus on strategic goals
>·specifying precise improvement goals
>·emphasising high-value activities
>·fully using the brain of every employee
>·accessing resources of partners
>·combining skills in new ways
>·securing critical complementary resources
>·reusing skills and resources
>·finding common causes with others
>·shielding resources from competitors
>·minimising time to paybackExtracted from Hamel and Prahalad, Competing for the future
A user's view of how these contrasts play out in organisational practice is summarised in Figure 1. It is part of the EIU's research library and was originally compiled by Geoff Dance from his experiences in the late 1980s as vice president of strategic planning at Colgate Palmolive when the firm used the approach of strategic intent to help bring a unity of purpose across its far flung operations.
Banner brands serve to connect up the goodwill that a company has won in a variety of its market territories : across nations, across product categories and over time. They are the highest level brands that a company directs as leadership systems and are therefore most strategically capable of linking up the goodwill of all of a company's stakeholders.
A company name - when it is branded - is a banner brand. Thus Sony brands its corporate meaning on every product and in the process offers consumers the ultimate guarantee - connecting the product to all the goodwill that is Sony's - as well as a visible confirmation to the world of its evolving breadth of core competences. Other banner brands evolve in a variety of forms to flag up goodwill which an organisation interfaces with multiple marketplaces. Examples:
· in Sony's case -Man connects up a lot of markets with a hip sense of style which goes beyond what Sony by itself conveys
· in the L'Oreal portfolio of cosmetics, the fashion strategy of Laboratoire Garnier is used as a distinctively different banner for product sub-brands than those that are presented as L'Oreal's own produce.
Banner brands may not have been needed in bygone days when local marketing segmentations were a highly profitable tactic of competitive marketing. But the tide is turning - or has already turned - wherever the primary advantages of business competition are international, or consumers demand that their brands visibly deliver world class quality and value. In the heydays of multinational operations - probably the 1960s and 1970s - organisations like Unilever and Procter & Gamble assigned brand managers to what were effectively thousands of different targeting devices across the world. The days that international organisations can profit from such fragmented brand management systems are disappearing forever (see chapter 13). Strategically, these classical brand-manufacturing organisations need to transfer a lot of goodwill residing at local-product levels to higher levels of their brand architectures (eg by presenting products as sub-brands to suitably developed banner branding systems - see eg Brand Benchmarking of Nestle and Gillette).
Thoughtful companies do not need to wait to be struck by a "future shock of consumerism". It is already evident that consumers with access to global information prefer branding systems that deliver them experiences of the world's best quality and value. They do not need unnecessary local presentations whose additional organisational complexity benefits nobody (apart from providing work for mountains of brand managers). Between branding's local and global extremes, there is a proper branding balance to be practised. In part this involves organised mixing of the best of global and local marketing activities; usually, it implies that other organisational processes will also need to be reconfigured.
To start to (re)focus on this issue in a brainstorming session ask for your own sphere of business:
·What new critical success criteria apply to World Class marketing? In particular, how do they reverse success criteria where local (geographical, product or business unit, short-term) marketing operations once came first?
·How do banner brands leverage the new critical success criteria? Some crucial points to note are:
Banner brand momentum offers global strategic economies in accommodating new products
A strong banner brand addresses two primary needs of competing in global markets:
·The race to global market - if you have developed a world class product, you want to get it to all markets fast, before a competitor copies it and benefits from your innovation
·Cost to communicate to global market - a new line, sponsored by a banner brand which already has an appropriate global awareness can incur communications costs which are only marginal - compare this with the cost of going global with a new brand estimated by advertisers today as involving a cool billion dollars or more.
(It is remarkable that some companies are still embarking on the route of developing new global brands with advertising of very narrowly scoped product domains. Business historians will look back on this as one of the great strategic wastes of the late twentieth century)
Anyway, modern consumers do look to the company banner behind the brand
|Serve and serve again|
"Virtually everything we buy is a combination of product and service. For a brand to be successful, the service element will have to become more dominant.
This fact in turn will imply, in an era of technological leapfrog, that the company brand will become the main discriminator. That is, consumer's choice of what they buy will depend less on an evaluation of the functional benefits to them of a product or service, but rather more on the assessment of the people in the company behind it, their skills, attitudes, behaviour, design, style, language, greenism, altruism, modes of communication, speed of response, and so on - the whole company culture, in fact.
Take some phrases, whether from consumer-speak or strategy-speak, and dig deep:
Core competences - increasingly consumers do hunt these out and are prepared to see banner brands for their service competences first and their products second. Examples include:
·The UK's biggest grocery brand is now Sainsbury's merchandising competence sloganised as "everyone's favourite ingredient", portrayed by advertising campaigns featuring celebrities' favourite cooking recipes made out of Sainsbury own labelled produce, and retailed through nationwide stores offering a good balance between quality and value for money
·It is no longer just engineering freaks who talk of Honda as being world class in engine technology. We doubt whether those who have heard this word of mouth support can have this impression overwritten by any amount of advertising by a competitive car model which chooses to campaign on this USP
The company behind the brand. You increasingly hear this phrase used by consumers. Either in disappointment when a brand appears disassociated from it maker ("you wonder if there's something wrong with it if they will not put their name on it") or because of the immediacy of a strong corporate reputation ("if they make it, it must be good").
The highest form of guarantee - in the authors' personal experiences and in research of consumers' anticipations, there is widespread confirmation that consumers tend to get much better service - or indeed compensation - if a banner branded product fails than if products branded at a lower level of goodwill go wrong.
The lifetime relationship - do not underestimate the human capacity, where delighted by a product, to return for more from the same company. Banner branding makes it easy for customers to become loyal to you if your range of produce is world class. Fragmented branding does not. Consumers do sometimes seem to be ahead of manufacturers in deducing that if a company is proud that all its products are world class it will banner brand them. If it's not, it won't.
|Regarding consumers' relationships with corporate brands, two vital components of successful positive relationships are : trust in the brand and consumer satisfaction with the brand.|
Trust in a brand has been defined by Eric Baron as:
TRUST = (1/RISK)*CREDIBILITY*INTIMACY
Many corporations act as if only credibility counts. They act as if producing good quality products and services, which gives the corporation a good image for dependability and reliability, is sufficient to gain the consumer's trust. They forget two other critical factors. First, the greater the level of risk consumers perceive, the less likely they are to place their trust in the brand. Second, the degree of intimacy is a measure of a brand's success in creating a personal link with the individual consumer. It means showing that the brand knows the consumer.
SATISFACTION = PROACTIVE + SUPPORTIVE
People want to deal with companies which they see as innovative, ambitious to succeed, ingenious in the development of new ideas and hardworking. In image terms, this can be summarised by the term proactive. However all this proactivity comes down to aggressive salesmanship unless customers perceive this energy as being as a response to and in support of their needs. So supportiveness communicates to the customer that a company listens and responds appropriately.
Extracted from a chapter by Max Blackston "Beyond brand personality" in "Brand Equity and Advertising" edited by D Aaker and A Biel
Banner branding of multiple stakeholder relationships
As a process which is directed as a Unique Organising Purpose, the banner brand goes far beyond mere consumer communications of a product's Unique Selling Proposition. The organising opportunity involves cultivating the goodwill of many audiences at the same time. In Chapter 3 we noted how many audiences McDonald's reached through the act of opening their Moscow business. As another example of relevance to any service industry, consider "Roverisation" - a process instigated by Sir Graham Day on his appointment as Chairman of Rover Group in 1986. As authors Hankinson and Cowking have observed, Day instilled real meaning in the process of moving from a product-orientation to a consumer-orientation with one of his favourite sayings "If you love the consumer to death, you can't go far wrong". One of the key factors in Rover's remarkable progress over the last decade was the adoption of this attitude of mind in everything that Rover people do and represent : from factory workers' enthusiastic pursuit of quality production to Rover dealerships which represent the service interface of Rover with the consumer. The company's two UK advertising tag lines are : Above All, it's a Rover; and Above All, we're Rover Dealers. These have become integrated banner meanings for quality expectations associated with Rover's whole range of cars and customer services.
Banner branding of organisation-wide involvement
In World Class Brands, we wrote:
"Much has been written about Japanese corporate man, his practice of consensus and the importance of the company to his way of life. At work, the Sony man simply wouldn't do anything that was unSony-like. Sony quality becomes a matter of the care you take if you see yourself as part of the Sony family. This is the company working as the brand at its most powerful. the bond between the company and the outside world, through employee-product-service-trade-consumer-society, is communicated, almost ritually, by means of the corporate symbol. Product lines are seldom advertised on Japanese television without clear identification of the corporate symbols which warrants it. Almost subliminally, the Japanese consumer vets new products for their corporate status. Reciprocally, the esteem in which the corporate badge is held throughout the community returns to the pride of the individual employee."
Research by Hamel & Prahalad confirms that the basic stocks in trade of the banner brand's goodwill are : reputation, recognition, affinity and domain. Intuitively, wherever these four communications properties of banner brands are concerned, there should be opportunities for almost every department of the organisation to contribute actively to the brand's purpose. Note (from chapter 14) that purposeful leadership systems are continuously rewarded by higher levels of employee motivation and cooperation than those that are not part of an organisation-wide culture or whose goals are couched only in terms of financial goals.
Experiences of Brand Chartering have been structured as a call to action for these four communications property rights of banner branding (reputation, recognition, affinity and domain) in every department of an organisation - and indeed to evolve a form of organisation where networking is encouraged and departmental barriers are dissolved. We can search out and accumulate these components of a brand's power at every practical level of brand process - creating, managing, directing. For example, from our opening chapters on creative sub-processes we were particularly concerned with:
·scoping a brand's domain in chapter 1 on Brand Essence
·maximising a brand's recognition power in chapter 2 on Brand Identity
·reviewing how a brand's reputation and affinity evolves with corporate culture and values in chapter 3 on brand history
Core competences are a good strategic concept as long as you are prepared to question iteratively what these really mean for your corporate purpose. Gary Hamel suggests starting with three questions:
·Does this process make a disproportionate contribution to customer value?
·Does it offer the opportunity to build competitive distinction?
·Is it applicable in other businesses, locations or products?
We find that a core competence search has particular values in its own right. It can mix strategic and organisational thinking and implementation in ways that previous corporate procedures have often failed to do. Examples:
·By looking beyond any single departmentalised perspective, the competence quest can be used to facilitate real teamworking in organisations that are not well practised in this habit. Indeed, it can be a trojan horse for developing a networking style of organisation instead of a departmentalised or hierarchal one.
· A new focus for an organisation's priorities is cultivated both in the final recognition of a core competence in itself and by sifting through the kind of values that the core competence embodies. Ask teamworkers to hunt out for competence winning values in their own words such as:
-nobody can do this better, cheaper, quicker
-they create value (that customers can recognise) and fit the company's core business visions
-they can be flexibly configured into a total market leadership delivery system either through the firm's own resources or in partnership with other firms
-they are sustainable and differentiated processes which can give their firm unique advantages
-they accelerate our learning
·It is clear that meaningful core competences often revolve around long-term acquisition of people skills and motivation : be these Honda's engineering; Marks and Spencers relationships with suppliers and consumers; American Express's transaction systems and evolution of club relationships. Delight in the fact that brand leadership of world class quality and value often depends on organisation-wide learning of core competences and the focused sustenance of this through a relevantly exciting vision. Western leaders will need to over-rule short term financial analysts and reinvent the Japanese-style notion that the goodwill invested in a company's brands is the organisation's primary commercial licence to prioritise long-term inspiration over short-term expediency.
·Conversely, the thorough and honest appraisal of core competences can help a company to realise what it is not capable of doing without:
-forming compatible and long-term partnerships with other organisations
-re-engineering processes whose economies "or ways of working", whilst once conventionally wise, are foreseen to be redundant in a world class environment or which will become liabilities on foresightful understanding of trends that are already happening
In these kinds of ways the hunt for core competences can be viewed as an activity which integrates vital service characteristics such as:
·the learning company
·employees' motivation to stretch themselves and each other (eg by recognising that each is an internal customer of another)
Master players at the core competence game go on to institutionalise this as an ongoing activity. Japanese companies have invented various ways of playing this. One is Hoshin Planning (or literally planning planning) described in Chapter 14.
Another way is to publish a list of upcoming market opportunities and to get individuals to compete as to which new development network they wish to join. Team leaders become more like football coaches than managers in their motives for transferring people in and out. In part they are aiming to match the best people with the most important projects, but they are also configuring teams so that can learn from each other. By creating some form of internal bidding system which respects both employees' proven talents and their personal learning choices, business unit directors have an incentive to ensure that their key people are being rewarded with the most interesting challenges. This is actually a very different dynamic to those old-style western hierarchies where departments had bosses with their own political agendas. It is not only in London's Downing Street that the Prime Minister has been known to place a personal priority on ensuring that his seat is beyond the reach of any rising talents.
The discipline of a focused search for core competences can also assist a company's understanding of which stakeholders it must bring on board in branding a leadership system. Hundreds of millions of consumers need not always be the world class marketer's direct focus. Earlier in this chapter, we saw that Cott's virtuosity involves supporting the world's leading retailers with products it believes are near to perfection in the sense that further innovation is superfluous. Conversely, if your sphere of business leadership involves a fast moving component technology whose evolutionary applications are sustainable and varied, you may foresee brand leadership, as Sharp does with its world of liquid crystal displays (LCDs) in figure 2, as primarily revolving around partnerships formed to develop other companies' markets.
Sharp pioneered commercial applications for LCDs over twenty years ago. The company projects (ie brands) its future visions with ambassadorial vigour and enthusiasm. For example, Sharp foresees that the LCD is an ideal candidate for the man-machine interface of the future; it is already being used for both output and input functions. In the car of the future, Sharp foresees drivers checking their positions on an LCD map on the dashboard.
In combination the concepts of banner brands and core competences are likely to take on ever increasing importance in global markets. As Hamel and Prahalad observe "being first from concept to market is no longer enough; the real winners are those companies who individually or as players in a partnership are first to global market." If you extend the development chain backwards you may see that competence acquisition often precedes product concept. So does learning faster than competitors where the heart of future consumer demand actually lies.
We suggest one more way of interpreting Hamel and Prahalad's vision of banner brands as a company's roof and core competences as its floor. The company which Charters both brands and competences empowers teams to focus on the two most productive streams of questions that a learning company can ask. These integrate the capability to add value by brand organisation and through strategic implementation. We would bet heavily on any CEO who continuously has both of these up-to-date scripts on-hand beating any competitive CEO who does not.
(For further experiences with core competences see ThinkPiece 6)
|Reengineering accountancy - the case for debate|
Core competences and banner branding are the kind of flexible concepts we will all need as witnesses of two revolutions in the environment which world class companies must pace themselves for. These are:
·change from the industrial era to the post-industrial information era
·change from competing in markets with hard and fast local borders to the ultimately far greater and freer competition of "glocal" global and local marketing.
Accountants have hindered the great brand changeover from product branding to banner branding by trying to count up brand worth on the basis of proven past performance when almost every other kind of business person can see that meaningful brand leaders are dynamic assets. Fortunately, accountants have not yet got round to trying to value the other great intangible - core competences - and it is to be hoped that they do not until they have reengineered their own profession.
Who ever said that the strength or weaknesses of a world class company's horizons-for-performance could be counted up every 3 months? Indeed, if you can do this why not audit a company's results every day, and all the world can be accountants, and then all wealth production can be counted precisely and in the process precisely extinguished.
The new reality which Hamel & Prahalad architectural school is forcing us to confront is that world leading products will often involve longer development processes than new product outputs of recent decades. They will require greater combinations of resources brought to bear in the pre-marketing phase than products which survived because they only had to be locally competitive. Increasingly, they will not be the produce of one company's stock of competences resources but will instead of need to draw on the best networking capabilities which groups of companies could offer.
Henceforth, business units will need to plan how to delight future customers by knowing what specific corporate focus of excellence they leverage and what gaps in corporate knowhow they must fill through partnering companies. They should not be isolated counting houses within a company whose foundations and managers' incentives (and careers) stand or fall on every quarters' results.
Like most things, the practices envisioned here only sound revolutionary if you are not already organising them. A primary reason why leading Japanese and Asian companies continue to outperform Western counterparts is the longer time horizons they use to evaluate marketing success. They have found forms of financial back up that are consistent with world class intent and realisation. They are not burdened by short-termism and over-accounting.
We have argued for a new form of marketing discipline which networks its added value learning across the organisation instead of departmentalising itself. Similarly, we argue for a new kind of accountancy skill that teamworks instead of acting as short-term judge and jury. Doubtless there will be professional backlashes as the millennium changeover takes place. Professional luddites who want to talk themselves out of participating in world class business have that right individually, but societies will not thank them where they sacrifice the competitive advantages that nations and regions would otherwise have enjoyed by co-hosting the greatest wealth producing companies and added value spheres of business the world will come to know. In "World Class Brands" (1990), we argued that the greatest threat to world class marketing as companies entered the nineties was overbranding. Writing in the mid 1990s, we now argue that one of the greatest threats to elevating communal prosperity is situated in those regions of the globe where companies are subject to the extraordinary false precisions in business thinking which over-accounting directly and indirectly causes.
Karl Watkin is a rare species : British and an entrepreneur who has made his millions from manufacturing during the recession of the early 1990s. He deserves an audience:
|"Over the past 30 years the UK has systematically destroyed its manufacturing base, losing 50% of its share of world manufacturing trade. Time after time, we have allowed strategic industries to be sold overseas.|
We are involved in a third world war, a war of economies which we are losing. The fact of the matter is business leaders don't know there is a war - the "what war" attitude, born of complacency. We need to change the whole business culture of the UK. Why, for example, do we need 20 times more accountants per head than either Germany or Japan?
Teamwork amongst members of the EC is a crucial element. We should play to the combined strengths of the team rather than drag it down to the lowest common denominator. Members including the UK have much to learn from the manufacturing strengths of each other. Germany, for example, with its high level of support for manufacturing quality and design. Italy, with its emphasis on its network of subcontractors."
Extracted from Business Life, April 1995
Who controls the added value chain and profits most from a sphere of business?
In diet soft drinks : is it Nutrasweet as patented owner of the lead ingredient? Is it the branded manufacturers of diet drinks? Is it the retailers who present the merchandise to consumers?
In PC computers : is it the manufacturer of the computer chip? The brander of the computer box which consumers physically interface with? Or the brander of the software which consumers mentally interface with?
There are no easy answers, but recently many branded manufacturers could have benefitted by doing more scenario building on the strategic logic of promoting somebody else's branded component without at least securing a partnership deal or favourable terms over the long-run.
This issue will grow more pertinent as technologies and competences continue to overwrap each other. If and when a market's produce promotes itself through the home shopping capabilities of multimedia highways, who other than the media owner will gain from the integration of communications and distribution channels as one and the same?
Back from the future, we can see in Table 12 why McKinsey's advocate that branders can no longer afford to assess their progress on market share alone.
|Table 12 : Winning the right to brand|
Focusing on market share seems to concentrate attention on competing manufacturers, when perhaps the key need today is to understand the total system in which a company operates. Adopting a total system perspective is critical in a world where suppliers and customers are more sophisticated, always seeking to shift the balance of power and gain profit at the expense of each other. Market share, we would therefore argue - if taken as the primary aim - is fundamentally misleading.
In fact, marketing should be measured against market surplus. By market surplus we mean simply the difference between the price paid by the consumer and total industry costs - ie the total profit earned by suppliers, by manufacturers and retailers. This new measure introduces two critical changes in perspectives : it focuses on profit rather than simply on income or revenue (hence capturing the different profitabilities of brands and channels) and it focuses on the total system and the profits earned by everyone within it. It stimulates concentration not only on grabbing share from direct competitors, but by exploring how total industry surplus might be increased (through adding extra value for the consumer), or how industry costs can be cut through increased supply chain efficiency and it focuses attention on whether supplier, manufacturer or retailer is strategically secure in retaining its share of the total profit pie.
The right to brand will tend to go to the company that, other things being equal, meets three criteria:
·it is part of a winning value proposition
·it controls the core assets to deliver the value
·it owns the consumer relationship in the most efficient way. McKinsey's : Winning the right to brand
Make a list of some of the main trends encountered, so far, in this chapter:
·the strategic need to focus more of the brand architecture on higher level branding
·the interconnections between core competences and the branded delivery of world class quality and value
·the need to partner as well as compete
·the need to pre-market and post-market as well as market
These trends point in one common direction. Major brands and business strategies must now be directed hand in hand as unique and total business strategies. In other words, there is no longer an automatic model for operating brands successfully; enduring models of branding will need to be business strategy specific. In directing brand processes of this nature, everyone in a branded business team should take Kenichi Ohmae's advice in Table 13 to heart.
|Table 13 : The discernible sequential pattern in consistently successful, foresighted decision-making|
The business domain must be clearly defined
The forces at work in the business environment must be extrapolated into the future on the basis of cause and effect, and a logical hypothesis on the most likely scenario must be stated simply and succinctly
Of the many strategic options open to the business, only a few may be chosen. Once the choice is made, people, technology and money must be deployed very boldly and aggressively. By concentrating more resources in support of fewer options, the company gains a bigger edge over its competitors in those businesses and thereby improves its success rate. This is why successful and unsuccessful companies diverge so greatly over time.
The company must pace its strategy according to its resources rather than going all out to achieve too much too soon. It must guard against overreaching itself.
Management must adhere to the basic assumptions underlying its original strategic choice as long as those assumptions hold. But if changed conditions demand it, they must be prepared to change even the basic direction of the business.
Kenichi Ohmae, "The mind of the strategist - the art of Japanese business", McGraw Hill, 1982
The branding of leadership systems in the future will need to be a highly proactive process. An enthusiastic appetite for what-iffing change scenarios will be vital. ThinkPiece 3 provides a general list of change factors. You should selectively brainstorm which of these need priority attention in your business environment and foresee how branding processes can take advantage of them.
Why brand? How do core relationship foci evolve in branding leadership systems?
Some of the best training exercises for strategists involve thinking the unthinkable. Occasionally, it will be worth your while to go back to the beginning and ask the questions : do we really need to brand and why?
We suggest two reasons for believing the question "why brand?" is not as naive as it might appear. (There are surely other reasons which you may also brainstorm).
First, a sea-change is under way in the economies of branding processes which suggest that future efficiencies in mass marketing will pay no particular respect to the ways and means that have evolved in the 20th century. Do the 2010 test now:
·Do you believe that in 2010 the main consumer media (and therefore the main economic means of brand communications) will still be television broadcasting (one way, national (not international), and disintegrated from buying and communications processes)?
·Will the consumer "point of sales" environment in 2010 for your sphere of business resemble today's?
·What will be the extremes of world class quality and generic pricing points in your markets?
·What form of organisational network will be your biggest single competitor (allowing for your base scenario on globalisation trends in your sphere of business)?
Remember Cott, at least as a warning sign. We suspect that evolution of the manufacturing-retail hybrid or partnership team has a lot further to go in packaged goods markets. Some of the rifts between manufacturers and retail chains today will look pretty costly when consumers have more global information on what world class quality and value can deliver.
Second, Figure 3, based on preliminary research being carried out at The Management Centre of The University of Bradford, serves to illustrate that branding processes do have different foci. Questions about "why" and "on whom" deserve different answers for different products. We need tracking devices to help illuminate areas where brand processes have previously relied on blind leaps of faith:
·Do all managers believe that the purpose of their branding process has the same relative investment foci? Are investments of branding resources actually controlled to fit with these relative priorities? Do the diamond shaped forms evolve in different patterns that can be explained:
·by sphere of business,
·between winning and losing organisations?
Are there other identities such as countries and cities which would benefit from a structural clarity of purpose related to which stakeholders' needs they are intent on being closest to and why?
Research of this sort is in its infancy. This is surprising when you consider that we are talking about processes whose evolutionary forms are now quite commonly valued to be multi-billion dollar assets. In certain senses they are both the main engines of corporate strategy and the most valuable property rights the world has ever invented.
Primary strategic features of a powerful banner brand are relatively easy to picture
(eg Figure 4).
However, the supporting corporate architecture - of strategy, organisation and brands -requires an increasingly integrated approach to master change and to balance such opposite needs as global and local, competing and partnering. Foresightful exercises and attitudes for crafting strategic architectures and interconnecting brand processes have been discussed in this chapter.
What Peter Drucker once called the only two added value functions of organisations - marketing and innovation - may in a future vocabulary of corporate leadership be called "the two added value schools of thinking". If you prefer to emphasise a process vocabulary, read "brand team networking" for marketing, and "core competence learning" for innovation. The strategic architect must champion appreciation of these values across departments of an old company until the departments disappear and the new company is a network.