We’re about at the midpoint between the release of Forbes’ “The World’s Most Valuable Brands” report back in last July and Interbrand’s “Best Global Brands” report which is due out on September 15th (it usually gets picked up by Businessweek.)  You know those studies which report, for example, that Coca-Cola is the world’s top brand, or that Google’s brand value at $39.7BB is still way off from Apple’s at $57.4BB.  So I thought now would be a good time to raise a concern I have about these methodologies.

But before you peg me as “one of those people” who make sport out of bashing these analyses, let me assure you that I see tremendous value in brand valuation (see related posts below).

brand valuation can be valuable

For corporate valuation purposes, being able to quantify the economic value contributed by brands (vs. other assets) is extremely, er, valuable.  And in many cases intangible assets like brands (and intellectual property and workforce know-how) are what truly differentiates a corporation and enables it to combat competitive and other attacks, so it can be helpful to measure and track their value relative to competitors and the category average.

I’m also aware of the common criticisms waged against brand valuation (their results are skewed because private companies are not included, it’s misleading to try to reduce the richness of a brand into a single number, etc.) – as well as its misuse (the head of advertising for a leading consumer electronics firm told me her company leadership used brand valuation to evaluate the performance of her group.)  But even these are not my primary cause of concern.

What I take issue with is a specific aspect of the valuation methodology which seems to be present in all the brand valuations I’m familiar with:  a factor to account for the impact of brand on purchase decision which gets applied on a category basis to each company’s market value.

brand impact is factored into all methodologies

Interbrand’s method incorporates a “role of brand analysis” which is described as “a measurement of how the brand influences customer demand at the point of purchase…We use in-house market research to establish individual brand scores against our industry benchmarks to help us define the role a brand plays within the category.  For example, we know that Role of Brand is traditionally much higher in the luxury category than in the energy and utilities sector.”

Forbes’ describes its approach to incorporating category-level brand impact saying, “We allocated a percentage of [net earnings] to the brand based on the role brands play in each industry. (Brands are crucial when it comes to beverages and luxury goods, but not so much, say, with airlines, when price and convenience are more important.)”

Even the more rigorous, albeit lesser known, brandmetrics study incorporates such a factor in its modified Delphi forecasting technique “which is used to work out the percentage of the brand’s value added profits that are directly attributable to the brand.”  It calculates the influence of the brand on core premium profit generators (control of costs and customer relationships for example) to determine the “brand premium profit” by category – e.g., the portion of economic profit attributable to the brand for media titles is 80-90%, retail 63-67%, and energy 45-50%.

The problem with these category-level brand impact factors is that they assume brand impact is the same across the category and brand impact is a given for the category – neither of which are safe assumptions.

brand impact varies

It’s incorrect to assume that brand impact is universal within a category.   Consumer decision-making is not so clear cut.

Need-states play a significant role in how important a brand is (a need-state is defined by a group of consumers who seek similar product benefits and attributes in a particular usage occasion).  Take hospitality – different people in different situations pay attention to brands very differently when it comes to choosing a hotel.  If you’re a wealthy businesswoman on an expense account or family with kids traveling to a foreign country, your hotel selection might be driven a lot by brand, whereas a road-tripping college student probably couldn’t care less.

Brand impact also varies within category depending on whether your brand is at the high or low end. Generally speaking, brands are more important at the high end where attributes other than price have stronger influence.  You probably don’t know or care what brand of cheap flip flops you bought at the beach this summer but you’re sure to remember that your Manolo Blahnik’s cost your entire paycheck.

brand impact isn’t a given

It’s also incorrect to assume that the impact of brand is static for a category.

All it takes is one company to launch a serious effort to make brand make more a difference, and the dynamics of the entire category change.  Jet Blue made lots of people care about the brand of airline they selected; Cuties made me more selective about the brand of tangerine I put into my shopping cart; Shoebox made my friend spend more time in the greeting card aisle.  Before these brands came onto the market, their categories were driven more by distribution – but now brand plays a much greater role.

And as category structure changes, brand impact changes as well.  If a category is dominated by one player, like Google in search, brand probably doesn’t have as much impact as it does in a highly crowded category like apparel retail.  A strong challenger can either break up a monopoly and increase the role of brand in a category by giving people a choice in brands – or it can make brand differentiation much less important by commoditizing the category with super-low prices.

Finally as the impact of a category changes, so does the impact of brands in the category.  This past June oil company brands became a lot more salient to a lot more people when the BP well exploded.  Right or wrong, I’m guessing people are now paying more attention to the gas stations they patronize.  Likewise, the brand wars between Evian, Aquafina, and Dasani have probably fizzled as less people drink bottled water now.

what do you think?

I understand why brand valuation firms feel a need to incorporate a measure of brand impact – they’re trying to isolate the brand from the business.  But until there is a more accurate, more dynamic way of accounting for brand impact, I’m afraid I can’t fully endorse any of the methods.

What do you think?  Do current brand valuation methods appropriately account for brand impact?  I’d love to hear your POV.

related posts:

• a little sticker makes a big difference
• best global brands dos and don’ts
• brand value creation — financial

(the image above is the cover of a book, Brand Valuation, by Interbrand)

Ever run or cycled into a headwind? You have to work a lot harder to make the same progress that normally comes a lot more easily. Conversely, running or riding with the wind at your back is a glorious feeling.

On a recent ride, I had plenty of opportunity to consider how headwinds and tailwinds apply to business as I tried to distract myself from all the huffing and puffing I was doing just to maintain a decent speed. Here’s what I came up with:

The prevailing “winds” of business can make a huge difference in the amount of effort a company has to exert to be successful. Market shifts like the emergence of a new technology or the discovery of a new raw material create a tailwind which companies can use to their advantage (e.g., You Tube enjoyed a rapid ascent thanks to the democratization of video-recording capabilities) — or a company’s foundation can be threatened by a headwind like when Kodak found itself blown away by how digital imaging transformed the use, value, and meaning of cameras and picture-taking.

Consumer trends also create head- and tailwinds. Demographic shifts like the growing aging market have fueled the success of Oil of Olay’s Regenerist skincare products, while attitudinal changes like the growing concern for the environment drove (pardon the pun) Hummer out of business.

Developments in channels and distribution function like winds as well – shopping malls and mobile payment providers are operating in head- and tailwinds respectively. Political environments speed and slow businesses as the impact of recent changes in taxation, regulation, and healthcare demonstrates.

Although a generous wind at your back doesn’t guarantee success, business is generally better when the winds are working in your favor. Entrepreneurs would be wise to ascertain the prevailing winds of the market before developing their business model and plan. And established players need to maintain enough nimbleness to navigate the changing winds in their business environment.

But it’s not always possible to go with the flow – and sometimes there’s more to gain from zagging when others zig. Fritz Maytag didn’t allow his microbrewery, Anchor Brewing, to get caught up in the category’s popularity whirlwind of the 1990’s, and so the label continues to enjoy a strong reputation and high price premium today. At a time when most e-commerce companies are using a drop-ship model to offset inventory risks in a volatile economy, Zappos has engendered remarkable customer loyalty in part because chooses to face the headwind and manage its distribution in order to control the customer experience.

So the point is not to avoid headwinds – but rather, to be aware of the head- and tailwinds impacting your business and to develop your strategies and run your operations accordingly.

If you’re determined to tackle a headwind, some lessons from my running and cycling experiences apply:

- go slow and be deliberate – When it comes to headwinds, B.F.I., an abbreviation for Brute Force and Ignorance which I’ve heard the Army uses, is not the way to go. I’ve learned the hard way that trying to blast through a headwind when working out rarely works. The same goes for business.

Pace yourself and prepare for a long, hard haul. You’ll want to dole out expenditures slowly, set interim goals which keep you on track toward your ultimate objective, and double-up on efforts to boost morale. And you’ll want to ensure every step you take moves you closer to your goal, which requires careful analysis and planning. Accenture Institute for High Performance researchers report that conservative financial management and a bias toward profitable internal growth over acquisitions enabled companies to successfully face the headwinds of the early 1990’s recession.

- remove detractions and distractions – When I cycle into the wind, I zip up my jersey and crouch down a bit in order to lessen the mass for the wind to catch. I also keep my focus on the road and don’t look around as much, so that I can channel all my energy to the ride.

In the same way, businesses should cut – or at least delay — activities and programs which aren’t core to the mission. You’ll want to focus all resources on the task at hand and eliminate the things (bureaucratic processes, stale partnerships, and perhaps even cultural norms) which are slowing you down. Unfortunately in some cases this might mean cutting jobs. Kodak has emerged from a potential demise in part by slashing its workforce from 60,000 in 1982 to around 7,000 today.

I believe running and cycling also hold some valuable lessons for operating in tailwinds:

- don’t become overconfident – I can’t tell you how many times I’ve unknowingly run with a tailwind and chalked up my speedy time and great feeling to my training, only to turn around to head home and get woken up from my delusion by the strong headwind.

When your company experiences success, it may be tempting to attribute your progress to having the smarts that your competitors don’t, or to running a more efficient operation, or to having superior leadership. While all of these may be true, it’s likely that the winds of business have also been working in your favor.

You need to keep your corporate ego in check and not become overconfident. Taking favorable market conditions for granted can blind you from the need to develop new strategies and capabilities. So far Apple has been riding a great wave – I hope the recent antenna-gate isn’t evidence of dangerous arrogance.

- conserve some resources. Taking advantage of a tailwind makes sense. When I’m running with one, I pick up my pace knowing I can go farther and faster than normal. And I enjoy it, for sure. But I always conserve some energy, even if I’m not on an out-and-back route and worried about facing a headwind on my way back.

I never know when I’ll need an extra boost to get around a detour – or if a yellow light is going to necessitate a last-minute sprint across a large intersection – or even if another runner comes up on my heels and my competitive spirit kicks in. Likewise, companies should always be prepared for surprise detours, deadlines, and competitive attacks. Andy Grove’s famous motto “Only the paranoid survive” definitely applies here.

Sheryl Adkins Green, Global Vice President of Brand Development for the iconic cosmetics brand Mary Kay Inc., is my guest for today’s interview.

She has some important insights to share about how to build a brand across many different countries and cultures.  She speaks not only about understanding the differences and commonalities among women around the world, but also aligning the organization around that understanding.

And she should know!  Sheryl leads the company’s global product strategy including product positioning, packaging, product education and pricing.  Prior to joining Mary Kay, Sheryl was the Vice President and General Manager of the Pro-Line International Division of Alberto-Culver.

I met Sheryl a couple of years ago and have really benefited from her wise counsel and support ever since.  I think you’ll really enjoy hearing from her.  Have a listen!

other interviews:

• omar green on solving customers’ problems
• les mckeown on the path to success
• michael tchong on trends to pay attention to

Bloomberg BusinessWeek’s publication of its “The Popularity Issue:  America’s most popular products and how they got that way” makes some fascinating statements about today’s business culture — but not because of the items it named (although those do make for an interesting read.)

The fact that a business publication would devote an issue to things which are “popular” and that it plans to do this every year (as this issue was named its “1st Annual”) suggests that popularity is a concept businesspeople care about – which is an interesting, and not necessarily  good, development.   Further, the methods by which BusinessWeek measures so-called popularity reveal the vagary in any undertaking to understand popularity – which leads to some important implications about business success.

First, some context.  The TOC of the issue features the following subhead:  “A guide to America’s favorite stuff:  the food we eat, the sneakers we wear, the churches we visit, the colors of cars we drive. Not the coolest or best – just the ubiquitous, omnipresent No. 1s.” (emphasis mine)

And the piece itself ends with, “Our mission here is not to judge but to use the best available methodology—it varies widely from item to item—to determine the winners of the never-ending popularity contest that is the American economy. Your taste may differ. In fact, we’re sure it does.”

So it seems the BusinessWeek people define popularity by breadth – that is, the most popular items are the ones with the broadest awareness or penetration.  Most of their metrics support this – they use unit sales to name the most popular brands of cereal, sneakers, underwear, sports cars and more – and share of traffic indicates the most popular airport, vacation spot, and church.

But the problem is breadth of awareness or penetration is not an indicator of appeal or affection.  To understand this, we have to look no further than a story which ran as a sidebar in the BusinessWeek piece – it chronicled the unlikely rise to stardom of Olivia Munn, the co-host of G4’s Attack of the Show!

Despite her better-than-average looks, Munn was a somewhat unremarkable figure until she joined the show and flamed her sex appeal among its geek fans by assuming the personas of sexy, domineering female characters with a goofy sense of humor – she’s now ranked No. 8 in this year’s Maxim magazine’s list of hottest women.  Munn herself admits, “Popular doesn’t mean people like you.  Popular just means that people know who you are.  In the end, it could all go away.”

Clearly broad “popularity” is tenuous and not the best aspiration for companies.  Just because people know you and buy you doesn’t mean they like you.

It’s more appropriate to align with dictionary definition of popularity:  regarded with favor, approval, or affection by people in general (popular. (n.d.). Dictionary.com Unabridged. Retrieved August 13, 2010, from Dictionary.com website)  We should stay true to the root meaning of word which is borrowed from the Latin popularis in 1490, originally meant common or “belonging to the people“. (Etymology Online entry for Popular, April 05, 2009.)

Dollar sales is a slightly better indicator of popularity, then. By factoring in the price people pay for products, we get a better indication of their affection for them.  The BusinessWeek piece does indeed use this measure to report on the popularity of deodorant, soda, lipstick, and alcohol brands.

But I would argue that even dollar sales isn’t the most accurate read on what’s hot and what’s not.  Distribution dominance, an underdeveloped category, or strong advertising and promotion can generate more sales at a higher price point for a brand which is not necessarily preferred.

Companies are better off measuring esteem.  Wikipedia states, “Popularity is the quality of being well-liked or common, or having a high social status.”  If we truly want to understand popularity, we need to measure how people think and feel, not simply what they buy.  Do they hold the brand in high regard?  Do they prefer it?

In the end, though, I question whether popularity is really the right goal for many brands. If you’re competing in a mass market category and have the resources (distribution power, ad and promo dollars, etc.), then aspiring to win the hearts of as many people as possible makes sense.  More power to ya, Coke, McDonald’s, and Ford!

But the reality is most companies don’t have these resources – and actually, they don’t need to.   Especially in today’s new media environment, companies can reach specific targets and stimulate purchase and cultivate strong affect among those discrete groups.  These brands might be less popular but they’re no less powerful when it comes to generating sales volume, staving off competitive threats, and commanding a price premium.

Plus generally speaking it’s easier and more efficient to go deep vs. broad.  And given the fickleness of our fad-driven culture, stronger, more focused appeal is more sustainable than broad awareness.

This counters much of the prevailing wisdom in business these days.  Most companies seem to be fixated on generating buzz – they want to get as many people talking about their products as they can.  There’s no such thing as bad buzz, it seems.  But awareness and conversation don’t build a brand – strong attachment and affection does.

It would have been far more instructive for BusinessWeek to have run a “Most Loved” issue, but then, perhaps it wouldn’t have been as popular!

In a post earlier this week, I started to address why some companies don’t operationalize their brands.  I suggested that there are 3 kinds of business leaders who fail to leverage the full potential of their brands.

The first are Naives:  “Naives simply do not understand the full potential of their brand.  That the brand is the core of the company is a foreign concept to these business leaders.  They don’t know what they don’t know.”

Then there are Aspirers:  “These people are knowledgeable about brands and definitely interested in leveraging them more broadly and substantially, but they don’t know how or they’ve run into roadblocks in their efforts to do so.”

Today we come to Emperors.

The last group of business leaders is comprised of people who think they are leveraging the full role and value of brands, but they really aren’t. Just as the emperor in the popular children’s tale foolishly wore clothes made of “invisible” cloth, these “Emperors” fool themselves and others into thinking that creative ads and clever marketing programs are enough to build a brand.  They spend a lot of money and energy on promoting their brand externally, but they don’t consider or they even ignore the internal, operational changes needed to actually deliver their brands’ value.

Unlike Naives whose omission of a brand-driven management approach may be attributed to their lack of knowledge, Emperors’ resistance is the product of skepticism.  They choose imperial nakedness out of distrust and cynicism about brands.

They think of operations and brand as two separate things.  In Emperors’ minds, the operations of the company fulfill the purpose and objectives of the business – i.e., making a product, offering a service, etc. – while the brand is the icing on the cake.  But when you operationalize the brand, there is no such distinction.

Emperors are often entrepreneurs who thrive on launching new ideas but who are less skilled at driving an operational system in a focused, integrated, consistent manner.  In an effort to propel their new business, these entrepreneurial Emperors often develop creative ideas on a one-off basis and disregard the disconnect between their aspirational vision of the brand and the stark reality of a fledgling operation.

Leaders of image-oriented businesses such as fashion and automotive also tend to be Emperors.  Because their customers’ purchase decisions seem to be based primarily on style and status, their focus tends to be on what the company says (the image it projects in advertising and marketing) vs. what it really does (the value it delivers in daily operations.)

And some retailers and restaurant leaders are Emperors because they are so preoccupied with pricing and promotions that they overlook many of the opportunities to build their brand through the in-store customer experience.

Really Emperors can be found in all sectors of business.  Most company leaders don’t operationalize their brands because they are skeptical of the brand’s role as a business driver.  They wrongly resist putting stock in something they consider to be too conceptual or qualitative to pass muster in an analytical or performance culture.

An intervention may be the only way to challenge an Emperor.  Only when forced to be thoughtful and honest about the way they currently view and use their brand will they discover the gap between delusion and reality.

—-

If you’re on the client side of the business, I’m curious to hear whether you see yourself in any of these 3 descriptions – Naives, Aspirers, or Emperors — or perhaps you’re someone who “gets it?!”  If you’re on the service provider side of the business, what kind of leaders do you most commonly encounter?  Please let me know!

My intent in outlining these categorizations is not to judge or criticize people – in fact, it’s the opposite.  I hope this might be a helpful step on everyone’s brand-building journey.  If we clearly understand the challenges before us, there’s a greater likelihood of surmounting them.

related posts:

• why not operationalize brands? part 1
• what’s a brand for?
• express vs. operationalize

Over coffee the other day a colleague asked me a question I actually get asked a lot:  Do you find that people “get it?”  By “it” he was referring to operationalizing the brand, the approach I teach and help my clients implement.  He asked because he’s found, as have I, that although many company leaders claim to understand the difference between expressing and operationalizing a brand, the fact is, most don’t put their brand in the driver’s seat of their organization.

Our talk prompted me to think about why this is the case.  Most business leaders are eager to leverage the full potential of their brands, but they’re not following through. 

I concluded that most are held back by holes in their experience, roadblocks in their organizations, or their own blinders.  I would say business leaders fall into one of three categories when it comes to the subject of operationalizing their brands.  (In today’s post, I’ll outline the first two, and later this week, I’ll conclude with the third.)

Naives.  Some business leaders can be described as “Naive” — those who think of brands only in literal terms.  To Naives, a brand is simply a logo or perhaps at most an advertising campaign.

The buzz that brands have received in recent years has piqued the interest of Naives but they’ve been misled by misinformation from so-called experts.  Many agencies, consultants, and even authors talk about “branding” in terms of slapping the company logo on everything, or using a particular color or tagline consistently, or working the social media circuit.  As a result, after researching how to build their brand, Naives usually end up with a long list of things they think they should be doing, but they remain unconvinced that any of them are going to have an impact on their bottom line.

Not surprisingly, executives with technical or financial backgrounds usually fall into this group.  In these leaders’ experience, brand development has usually been something relegated to the marketing department — so their exposure to what a brand really is and how to use it properly has been limited.

Salespeople are also often Naives, because of their relentless focus on the sale.  Brands may serve as fodder for a great sales presentation, many salespeople believe, but they’re unsure of their value beyond that.  And leaders of B2B and technology companies may not recognize how a strong brand can impact their relationship- or innovation-based business models.

Naives simply do not understand the full potential of their brand. That the brand is the core of the company is a foreign concept to these business leaders.  They don’t know what they don’t know.

In order for Naives to operationalize their brands, they need to learn to think about brands differently.  An open mind and a willingness to test a new approach are the required first steps for these folks.

Aspirers. Another category of business leaders are “Aspirers.”  These people are knowledgeable about brands and definitely interested in leveraging them more broadly and substantially, but they don’t know how or they’ve run into roadblocks in their efforts to do so.

A typical Aspirer is a former Chief Marketing Officer who has taken on line operating responsibilities – a common occurrence at packaged goods companies.  Having worked with brands throughout their careers, these Aspirers see the potential brands have for creating value throughout the organization but they lack the internal traction to implement the brand-driven approach.

Other Aspirers may have previously worked at or heard about other companies which have opertionalized their brands and are interested in engaging a similar one in their organization.

For Aspirers the key needs are instruction and equipping.  They need to learn the specific tools and methodologies and examples which make a solid business case for operationalizing the brand.  They need help in conveying the importance of the brand to every stakeholder of their organization and persuading them to adopt the brand as the driver of the business.

I hope this has provided some good food for thought so far.  Please check back on Thursday for my description of the final group of business leaders who aren’t operationalizing their brands.

related posts:

• brands vs. branding
• gaining the competitive edge
• missing the brand boat

Today I interview Omar Green, the Director of Strategic Mobile Initiatives at Intuit.

I met Omar when I moderated a panel on “Mobile: New Business Models, New Markets” at the Red Herring North America conference last month.  I was so intrigued by the work Omar and his team are doing, I wanted him to share some of it with you.

Omar has been at the center of several of Intuit’s recent mobile application launches including GoPayment, which is a mobile credit card acceptance service in conjunction with Sprint/Nextel.  Prior to Intuit, he was director of personalization technologies at SaveJe Technologies where he created one of the first user context-sensitive mobile operating systems.

Although Omar’s  resume sounds pretty tech-y, I found his comments really insightful and Intuit’s approach to solving customers’ problems quite enlightened.  Give a listen:

other recent interviews:

• les mckeown on the path to success
• michael tchong on trends to pay attention to
• jeanne bliss on beloved companies

Forrester’s Customer Experience Forum 2010:  Creating Breakthrough Customer Experiences featured a fantastic line-up of speakers — including company leaders from client organizations as diverse as H&R Block, FedEx, and Sprint, as well as thought leaders from Forrester and other service providers.

From all of the presentations, it was clear that “creating breakthrough customer  experiences” (defined on Wikipedia as “the sum of all experiences a customer has with a supplier of goods or services, over the duration of their relationship with that supplier“) requires systematic, cultural, and organizational changes within a company.

Here are some of the best bits from the presentations (including a brief video of John Costello, Chief Global Customer & Marketing Officer, at Dunkin’ Brands talking about the efforts at his company):

other content recently posted elsewhere:

• my take on Forever 21′s new store in Times Square (video)
• dueling ads: iPhone vs. Verizon (a blogpost on imediaconnection)
• notes and quotes from the Red Herring North America 2010 conference
• Bigger Isn’t Always Better (article from QSR Magazine)

Now that summer is officially here, I wanted to take a look back at the past 6 months and see what kinds of conversations had been sparked by brand as business bites. The following are the top posts from each month in terms of number of re-tweets, comments, or emails they generated – I’ve also included some of the commentary.  I’d definitely like to hear more, so please take a look and then add your voice to the conversation by clicking on the “comments” link below.

January

Brand impact in 2010 – I started off the year with a post of three key areas that I predicted brands would have an immediate and significant impact – M&As, social media and networking, and workforce engagement.  Apparently this last point resonated with quite a few folks – including:

Jacco DeBruin:  Great points and couldn’t agree more. Especially the “workforce engagement” is often undervalued but essential since it is all about delivering and exceeding (high) expectations in this transparent era. Happy new year!

Ray Hartjen:  Interesting thought on workforce engagement, and really important for companies and employees to fully understand and embrace. After all, the brand is really nothing more than a reflection of the people of an organization, both past and present. Good post, DLY.

February

The post, in csr, nike just does it, praised Nike for its Corporate Responsibility Report FY07-09.  My read of the extensive report led me to believe Nike is giving CSR more than lip service.

Mark Anderson agreed:  As a prior VP/GM of NIKE Swim and NIKE Inneractives (intimates – Brandy Chastaine – world cup), I can tell you that NIKE practices what they preach and they were on the sustainability bandwagon way before it was the popular thing to do!  They did it a long time ago because it was the right thing to do – not because it would make them look like a participant to their consumers.  NIKE doesn’t just promote sustainability issues – they invest in it – considering it their responsibility and they employees are inspired by the commitment that they witness day in and day out.

Jonathan Salem Baskin didn’t:… I still don’t buy it (it’s still marketing hype). The reality of its business model is 1. Producing products in Third World factories is cheaper than doing so in factories closer to the markets it serves…If Nike cared about doing the right thing it would make gym shoes in Maine (or something), but that would never happen. 2. Shipping products around the world, which is probably one of the most environmentally wasteful/damaging activities any company can do… 3. No number of partnerships with special interest or single-issue pressure groups erases the simple fact that doing the right thing is about business practice, not how Nike chooses to narrate it….

And Tom Asacker left the cryptic comment:  Reality is the name we give to our disappointments.

March

Having completed an extensive retail audit for one of my clients, I wrote a post to share my thoughts on six best practices in retail.   I wrote about great retailers like Wegmans and The Container Store which have distinctive brand personalities, offer 2.0 cross-channel shopping experiences, and reflect strong organizational culture and values.  It got bounced around the Twittersphere a bit, thanks in part to John Moore.

It prompted Marc Rullo to ask:  While the retailer, any retailer is a brand destination unto itself, how does the assorted brands within that retailer (brand destination) fair?…Once upon a time a retailer was defined by the brands they assorted and the expertise they provided to support those brands to the end user.  Then the value of retailers brand (differentiation) and their house brand became much more paramount based on volume and obvious margin opportunities compared to historically established recognized brands with less direct margin opportunities.   These are elements of the bundle of attributes as well…..

Janet Morgenstern Passani commented:  Enjoyed your retailer post. IKEA’s out-of-box campaigns inspire consumers to be bold w/ their purchases. http://bit.ly/9Klpi1

April

Marketing myopia was a post I wrote after reading an op-ed written by Larry Light, marketing guru and former McDonald’s CMO.  Larry had argued that marketing “needs to assert its rightful role making it the central force of brand-business management.” I questioned if the issue is whether marketers should try to increase the marketing function in the organization — or whether they should try to increase the marketing capability of the entire organization.

Craig Hoffman wrote a couple of thoughtful responses – excerpts:  I’m a firm believer in making the marketing pervasive in an organization!  It only helps spread the message and reinforce the benefits of buying a product if everyone who comes in contact with the company gets a similar feeling… its up to management to keep the focus in the right place.  I think management has a role to create a belief for all employees about their company that makes them want to “sell” their company from all angles…I think companies who get this right will be more successful at generating and sustaining revenues with stronger margins, allowing for greater possible profits to retain!  Companies that “live their brand” come to mind – Google, Apple, Gore, Lululemon all come to mind as examples.

Ric Brockmeier added:  Well thought argument Denise. It’s critical for companies 2 see that they must be marketing driven not just have a mkt dept

Pierre Loic-Assayag offered a different perspective:  Marketers see the future of their contribution being jeopardized, squeezed between Executive Management slashing budgets and customers much more vocal and opinionated about “owning” the brands they care about.  As a recovering marketer, my sense is that the marketing function probably has a very bright future but it needs to be fundamentally redefined. Successful marketers won’t be defining the brand they represent but rather make themselves an indispensable resource to fans and brand advocates who will be the ones shaping the brand and probably products/services.  Twitter, Harley Davidson, Trader Joe’s are some very interesting examples of fans taking over brands and very skillful marketers trading control for greater brand equity.  Food for thought…

May

In May, Rich Thomaselli from Advertising Age called me for some comments for an article he was writing, “If Consumer Is Your Agency, It’s Time for a Review.” The piece turned out to be a great analysis of how the use of John Q. Public to develop ads has “jumped the shark” (as Rich refers to it).   It sparked a lot of commentary on AdAge’s site:

Richard Todd Aguayo wrote:  Give a million people a shot at making a hole in one, you’ll surely have a winner. That doesn’t mean you bet on that winner to win the Masters.  Professionals are called such for a reason.

Carl Hartman agreed:  Crowd sourcing is the same as Craig’s List or any of the sites that cater to freelancers. It is bottom feeders looking for a great deal, without regard to the quality of the message. Crowd sourcing is like using a shot gun to shoot down a jet flying at 30,000 feet. – Rarely, you’ll hit something. Usually a bird or one of Dick Cheney’s friends – but it won’t be the real target.  Everyone wants it cheap. The cheapest way is always the most expensive. — It is not about cost, it is about value.

Brian McMath dissented:  …Will UGC ever reach the ultra-polished, slick-as-hairgrease production quality that today’s average 30-second TV spot exhibits? Of course not. But why should it? That’s not what it’s for. Contrary to what the author thinks, these people are not out to replace you. UGC is just one more way to get people to engage with a brand, to open up that all-important dialogue with the consumer…

I wrote the consumers as creatives post to explain some of my thoughts further and to pass along the comments which ended up on the editing room floor.

June

Reposition? just do it was a post contrasting two big and juicy brand repositioning projects I’m working on.  I predicted one is going to be successful and the other, not, or at least less so, and explained why.  Essentially it comes down to whether or not the company leadership will decide that taking on such the risk of a significant repositioning is the right thing to do, and if they’re going to do it, to decide to “do it anyway” and to “do it well.”

Mark Gallagher commented:  As always, you make a great point. Fear of change is often the single biggest obstacle preventing companies from reaching their goals. However, what impresses me most about your post is your honesty. Not many consultants would preemptively state that their client was likely to fail. Usually that sort of talk is reserved as an excuse for why the new direction didn’t work, AKA “the client failed to properly implement the strategy.”  Your honesty is as refreshing as your insights.

Thanks for making it a great first half of 2010!

I was fascinated by the story told in a recent strategy+business piece about Herman Miller, Inc., the “office-furniture maker.”  That descriptor belongs in quotation marks because it seems the company is as adept at building breakthrough business practices as it is its cool Aeron chairs.  The article offers a peak into the great company behind the great brand.  I’ve culled from the piece insights about what Herman Miller is designing in its business lab:

1.  change as a strategic advantage – Most companies may tolerate change and the best ones anticipate it, but Herman Miller has embraced it in a way that would cause companies half its age to marvel.

The company has successfully undertaken fundamental changes to its business model and its culture throughout its long history (the company was founded over one hundred years ago, in 1905) — change from investing in the current product stream to funding a skunkworks operation; from adversarial relationships with its suppliers to a consultative ones; from batch manufacturing to lean manufacturing; from static furniture to programmable environments.

It’s not been easy – the strategy+business piece calls the prospect of change “mind-bending” as it relates the story of the company’s search for a manufacturing solution to address encroachment from lower-priced competitors.  But the company’s willingness to change, combined with its capacity to execute it, is remarkable.

2.     360 degree collaboration – The company’s skillful practice of positive, productive collaboration originates in its tradition of hiring outside designers.  In its early years, it engaged Charles and Ray Eames to produce groundbreaking designs including the iconic Eames Lounge Chair.

Its collaboration with designers continues today, with its recent hiring of experts to inform the development of its Creative Office. The outside team has created a “stream of innovations” from which the Herman Miller executives choose a subset for development.

This open-ness to partnering with outsiders shapes practically every aspect of the business.  It works with its suppliers to implement the lean manufacturing principles honed in its own plants, providing its own experts to work on suppliers’ shop floors to introduce the changes.

The company also is using collaborative partnerships to gain new capabilities, calling on a building manufacturer to teach it how to build infrastructure.  In return it is teaching its dealers how to be as “healthy and successful as possible – and to help them best represent Herman Miller’s strengths.”  Its engineers regularly visit dealer sites to observe installations, identify waste to cut, and to reduce delivery time by improving logistics.

3.    market- not product- or materials- oriented design – When given the bold aspiration of doubling the size of the company’s business playing field in 3-5 years, the researcher in charge, Gary Miller, began by asking, “What are the unsolved problems out there?”

He didn’t limit his investigation to conventional fixtures (using LEDs only as substitutes for standard incandescent light fixtures, for example) – nor a conventional approach to design.  As his team examined trends and studied current products, they discovered, “Incumbent companies plied the waters of many established, but separate, oceans of commerce – but none were exploring the unchartered waters in between them.”  So that’s where they focused.

With this market-oriented approach, the company “has moved itself from selling furniture to providing the entire building enveloped with intelligent infrastructure.”  And in doing so, it has identified adjacent markets which will provide new streams of revenue at a time when its core business is flattening.

4.    business school for all employees – Participative management has been a key operating approach at Herman Miller.  Max De Pree, CEO of the company in the early 1980’s, explained the philosophy: “Each of us, no matter what our rank in the hierarchy may be, has the same rights: to be needed, to be involved, to have a covenantal relationship, to understand the corporation, to affect our destiny, to be accountable, to appeal, to make a commitment.” (emphasis mine)

This meant that when markets contracted in the 1990’s, the company instituted EVA (Economic Value Added) training for all employees in order to restore the firm to solid profitability.  “It didn’t matter if [employees] were involved in buying, selling, building, designing, billing, paying, or financing…they were expected to embed EVA into their thinking.”

More recently, the current downturn has once again put the company under serious financial pressure and it has furloughed its employees every other Friday.  But also once again it is teaching its employee base how to employ a broad business mindset to keep the business sustainable.  Using a wage recovery plan which pays people back for lost wages if the company reaches its goals, CEO Brian Walker believes employees learn “to make progress through the management practices that had sustained the company for so long…”

5.    new ways of thinking – A common thread runs through the company’s history – challenging the norms.  A few examples:

Boundaries not briefs – As noted previously noted, Gary Miller, the leader of the LED project didn’t want the usual ideas so he engaged an unusual team.  Prohibiting the hiring of furniture designers, he instead got a special effects designer, a computer designer, and an architect to form the team.  And instead of a product brief, he simply gave them boundaries.  This structured freedom approached yielded a host of innovations which “reinvent many aspects of office interiors” and “redefine how people would think about personal space, office geometry, privacy, and illumination.”

Advocacy not approval – Miller also took a norm-busting approach to managing up.  He offset the “not-invented-here syndrome” and “the tyranny of the urgent” by asking the CEO, CFO, and two other leaders to sit on his internal board of directors.  “The objective was to have top decision-makers invest themselves in the work…’The idea,’ he says, ‘was to change the dynamic from traditional review-and-approve to advocacy.’”

Balance not blow-off constraints – Charles Eames, taught the organization that “the first task of a designer was to recognize ‘constraints,’ including factors like price, size, production, time, strength, and support, and that the best design was the one that best balanced them.”  Instead of pursuing the artistic purity of “good design,” the company has sought to answer the “real questions:  Does it solve a problem?  It is serviceable? How is it going to look in ten years?”

I hope you are as inspired as I was by this peak behind the curtain at Herman Miller.  What other companies are operating their own business labs?  Please let me know.