Internally Coherent Strategy

In “The Coherence Premium”, featured in the June edition of the June Harvard Business Review, Booz & Co’s Paul Leinwand and Cesare Mainardi advance the idea that strategy should start with recognizing what your firm does well that customers value and that competitors can’t eclipse and then building a core set of best-in-class capabilities to uniquely deliver on those products/services.  If done well, the authors contend, the market will reward the company with higher growth and returns.

The three elements to deriving a company’s “Right to Win”:

  1. Way to Play – organizational alignment around the company’s value proposition
  2. Product and Service fit – portfolio alignment around the enabling core capabilities
  3. Capabilities System – the “engine of value creation is the 3 to 6 capabilities that allow companies to deliver their value proposition”

Great examples are provided in Walmart and the consumer health business of Pfizer (positive examples) as well as Anheuser-Busch and ConAgra Foods (not so positive).  Interesting chart correlating their “Capabilities Coherence Score” and EBIT.

It’s a very clean approach which is intended to create value for the corporation in the following four ways:

  • Strengthens competitive advantage by continually enhancing capabilities (employees and systems)
  • Focuses strategic investment (organic and inorganic)
  • Produces efficiencies of scale, leveraging capabilities across a “coherent”portfolio
  • Creates alignment between strategic intent and day-to-day decision making

They state:

“Most companies don’t pass the coherence test because they pay too much attention to external positioning and not enough to internal capabilities.  They succumb to intense pressure for top-line growth and chase business in markets where they don’t have the capabilities to sustain success.  Their growth emanates not from the core but from the acquisition of apparent “adjacencies” that are often anything but…”

Powerful idea, aligning your company’s “strategic capabilities system with the right marketplace opportunities”.

The Embrace of Attentiveness

Interesting video interview with Nicholas Carr regarding his new book, The Shallows: What the Internet is Doing to our Brains.  In it he speaks about a kind of tyranny of multitasking, where focusing on one thing is almost a counter-cultural activity.  Rather than casting “ubiquitous multitasking” as evil, he seems to be reminding us of the power of deep engagement and its link to true innovation.

I thought Carr’s warning at the end of the video clip not to lose “open-ended engagement with the world…[in favor of a] narrower definition of creativity as just a matter of problem solving rather than a broader definition that is all about challenging convention…” has salience when it comes to market leadership.  I think when you’re on the outside looking in, disruptive innovation feels so unsettling because while some were focused on simply solving problems, others were taking a more fundamental, deep look at the landscape and coming up with truly creative responses.

Faith in Finding the Way through LOTS of Data

“Sergey’s Search”, in this month’s Wired (http://www.wired.com/magazine/2010/06/storyboard-sergey-parkinsons/) starts with the fact that Google co-founder Sergey Brin knows he is at a higher genetic disposition to develop Parkinson’s disease.  It’s helpful that his wife is a founder of 23andme, an online genetic testing firm.  And not surprising that given his genetic predisposition, massive fortune, Stanford computer science background and subsequent Google enterprise, that he would invest in advancing Parkinson’s research with a non-traditional, information-theory/computing orientation.

This orientation inverts traditional biomedical research on it’s head, from an emphasis on small, “purer” data sets to “tons of data, a deluge of information, and then wade in, searching for patterns or correlations”, sometimes referred to as an “exaflood” of data.  The article mentions that Jim Gray (Microsoft research and computer scientist) believes that the evolution away from the practice of proposing and then testing an hypothesis to looking for patterns in the data would revolutionize scientific research.  Andy Grove, also a Parkinson’s sufferer, has called for a “cultural revolution” in scientific research.

Beyond the direct implications for biotech research (which is significant in itself), it also made me think about research in support of strategy development.  How often have you felt that someone had an answer or scenario in mind and was just looking for confirmation as you entered the data gathering stage?  I can remember on more than one occasion working with my colleagues to suspend the need to fill in the white spaces with new product ideas and to yield to wading in the thick of the information and see what patterns emerge.  The best strategies, that are robust enough to stand up to a multifaceted review (market, competition, core competencies, technology, distribution, etc.) and yield sustainable competitive advantage, are often the result of just such data explorations.

Organization as a System vs. a Machine

In the current edition of Strategy and Business, the article “Seeing Your Company as a System” (http://www.strategy-business.com/article/10210?gko=20cca) is worth reading. It provides background (and tools) on some insightful management thinking that lays out the case that the metaphor of a machine for the organization is outmoded and that systems thinking is a more viable framing.

I find many of the ideas very compelling, from Senge’s five disciplines which center on organizational learning to Thomas Johnson’s thoughts on Quantitative Distractions.

I have often thought, in managing teams, that organizations are like organisms…and, to use an over-used phrase, that attending to the ecosystem is critical. Driving functional excellence without attending to the principles of systems thinking can be misguided at best.

Learning a Lesson from B2C, Where Content is King

I recently listened to an interview on NPR’s On the Media with Michael Hirschoern www.onthemedia.org/episodes/2010/06/18/segments/156251?utm_source=feedburner&utm_medium=%24{feed}&utm_campaign=Feed%3A+%24{otm}+%28%24{On+the+Media}%29 which gave an interesting history lesson on an idea advanced by Whole Earth Catalog‘s Steward Brand at a “hacker conference”, that Information wants to be free….and that this concept was embraced and adopted without attention to the rest of his comment, that “Information wants to be expensive, because in an Information Age, nothing is so valuable as the right information at the right time.”

I found the NPR interview so interesting that I dutifully picked up the July/August edition of The Atlantic to read Hirschoern’s successfully promoted article www.theatlantic.com/magazine/archive/2010/07/closing-the-digital-frontier/8131/…and I’m glad I did.

While I found it interesting to think about as a consumer, I couldn’t help but try and digest it from a B2B perspective, where we’ve long known that creating content that our customers value is expensive, difficult to create, and more difficult to sustain.  Anyone in B2B can recall instances of customer newsletters/magazines, tech tips, seminars, satellite conferences and the like started with great enthusiasm only to fade over time under the burden of sustaining the production of powerful, relevant, and credible customer content.

Of course the internet is awash with valuable B2C content, much to the chagrin and potential demise of newspapers, movie studios, and “record” labels.  Hence, lawsuits against peer-to-peer sharing of songs, aggressive pursuit of illicit copies of videos on the web, and news content creators experimenting with subscription access to their online content.  Makes sense to me…if there’s value in the content, people will pay.  And from a business model perspective, if there’s costs associated with creating the content, either people will pay (if there’s value) or they won’t (and those businesses will, and argueably should, ultimately fade away).

Back in the B2B world, we’ve also tried to bend the physics which govern business models by accounting for content creation costs under customer satisfaction and retention rationals.  After all, if customers are successful with our products, then switching will be harder for them.  And given the rising complexity of many B2B products, scaffolding our customers to be ‘expert users’ will help not only retain them as customers but also help them rationalize the investment they made in acquiring our solutions.

Having said that, I believe that there’s two primary classes of content being created by B2B companies, and if you think about the customer lifecycle (hat’s off to David Aaker and the other marketing gurus at Prophet), one class of content is focused on the awareness and adoption part of the customer lifecycle and the other class is focused on the implementation and utilization of our solutions (which I talked about above)….but they’re both important, expensive content that if well done, will have value and relevance to the business customer.

But what about the content that gets created in the service of raising customer awareness of an unmet need (for which, of course, you have the perfect response), of potential solutions in the market, and for your company and brand as a credible leader in a market?   Ahh, you say, that’s PR and Advertising…the promotional push that accompanies the launch of your new entrance into a market or provision of a new product.  We know that this part is expensive, especially if well done.  We also know it’s tough to measure it’s impact (brand awareness, positive market perception, purchase intent, win/loss/deal participation rates, and sales all some of the “traditional” ways of measuring impact).

As I’ve hinted, I think the whole content discussion is invaluable to B2B marketers for three reasons:

  1. Content “framework”:  For a 21st century citizen, it’s relatively easy to think of news or a song as “content”.  In the B2B world – and setting aside those organizations that provide information (aka content) to their customers as their raison d’etre – the rest of us often see content as ancillary to or a byproduct of the products and services we develop, market and sell….and rarely do we think of the PR, customer training or seminars in the rich content framework that exists in the B2C world.  In fact, content is often lost in the discrete tasks which create that content, whether it be issue advocacy as advanced by strong Public Relations, end user tech tips and training, or user documentation.  Rarely do these content creators gather together and set out, with content creation at the center, to think about creating the content ecosystem that will be needed to support the entire customer lifecycle, from awareness through happy utilization.  Perhaps the content “framing” suggests ways of re-engineering the discrete processes for more productive, effective content creation.
  2. Attuning content to the customer lifecycle:  In the business environment it seems intuitive that content that supports different phases of the customer and product adoption lifecycle will need to meet different objectives.  That’s not to say that core content couldn’t satisfy the needs for more than phase…in fact, I’m suggesting the opposite.  If you start with the lifecycle requirements and understand how the need changes, it is likely that content will be able to be leveraged and built upon over time.  If you start out by envisioning the content lifecycle, the development plan can be established to support ongoing requirements.  For example, in the medical device space, the data that get’s generated to support regulatory submissions may be leverageable for PR, sales and customer training, and promotions.  Indeed, some phases of the content delivery may have a revenue model associated with it (advanced training, seminars, use optimization training, etc.) which could help underwrite the entire content creation process.
  3. New Measurements:  The consumer world is very comfortable with having customer engagement and affiliation with a brand as important endpoints of content sharing.  Meanwhile, in the B2B world, more traditional measures predominate around the brand, product, and user experience.  NPS, a relatively newer measure, may be awkwardly stuck between the new and old measurement worlds, with new measures shedding interesting light on the vitality of the customer relationship (and by extension, whether they will recommend others to buy from you).  Regardless, taking a page from the B2C content perspective, measuring the quality of customer interactions with our content may provide meaningful insight into the health of our customer relationships, their satisfaction with our product and service delivery, and ideas for future solutions (Michael O’Toole and the digital mavens at PJA can help with this).

I think there may be synergy between the three ideas, with the content focus creating more customer engagement across the customer lifecycle, with a revenue model which supports sustained content creation….that is if, and it’s an important if, the content is remains valuable to the customer.

Growth is my Co-pilot

I was on a panel at a marketing gathering as the reality of the Great Recession started to settle in and I heard a number of my colleagues speaking about going for growth.

Growth is good.  So what’s wrong with that?

Having been in businesses that were growing and others that were not, the choice is clear!

The question for the room, and perhaps in many corporate conference rooms when reviewing multi-year business plans:  Is growth a strategy?

Let’s set aside the element of timing, which brings into consideration that an opportunity becomes less and less attractive as more and more entrants realize there’s a growth market and bring their solutions to the market (driving down price and margin and driving up competitive intensity and commercialization costs).  Let’s assume for a moment that your firm’s market intelligence is superior and the opportunity has been identified early in the product adoption lifecycle.

So if we can reasonably go after this growth opportunity, why shouldn’t we?

Well maybe we should…but in these instances my inner Michael Porter begins to speak.

If all you’re trying to do is essentially the same thing as your rivals, then it’s unlikely that you’ll be very successful.

Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different.

Innovation is the central issue in economic prosperity.

What struck me when the panel was speaking about marketing and strategy in this ‘reset economy’ was that there was no conversation regarding the fit of the growth opportunity with the unique capabilities or identity of the firm.

Unique insights, technology, channels, etc. that allow us to provide an offering that provides better value to the customer than the competition could the be basis of a good growth opportunity.   Can you solve a customer problem with a solution that is not easily duplicated or replaced?  Does your solution not only provide value in itself, but does it provide cascading benefit to your entire portfolio by being a meaningful extension?

What about your brand?

Whatever homework you did (or didn’t do) in support of your brand prior to the Great Recession is paying off now, as customers have retreated to more trusted brands.  It’s a tough time to move into markets which are outside of the identity you’ve established with existing and potential customers, where initial credibility may be low and customers are seeking the higher ground of known suppliers.  And given that firms are spending less on the kinds of advertising and marketing that build brand identity in favor of demand creation, you may not be able to afford the kind of branding building to help establish your firm as a credible supplier, much less drive awareness of a solution from an unexpected provider (which will all impact your solution adoption rate and costs).

My comments on the panel were that growth is not a strategy, that finding the right growth opportunities is fundamental (particularly in the “new normal”), and that these days I’m really listening to my inner Michael Porter.

You Can Call Me Chevy

A recent article in the NYT’s regarding an internal General Motors memo to its employees and dealers to use the full brand name, Chevrolet, and eschew the consumer pet name “Chevy”, gave me pause as a marketer.  Having led multiple branding and rebranding efforts, I’ve published company Brand Books which laid out very similar guidance. So how to reconcile this with the gut feeling that the “suits” at GM clearly got this wrong?

I think clarity comes when you think about where in the brand creation process you sit. When creating new brands or trying to clear up significant brand confusion from the use of variants or legacy labels, getting coherence and consistency around a brand is critical. Invest in those unified brands, and it’s just possible you will be able to break through the clutter to gain awareness…and then beyond that, hopefully build positive associations with that brand.

The Chevrolet brand has been part of GM since 1917 and already had some brand equity at that time as Lois Chevrolet was a successful race car driver (this despite the fact that one of the first Chevrolets was called the “Baby Grand”, both a comment on its size and cost).

After almost a century of brand building, Chevrolet has moved way beyond the awareness generation stage.  In fact, I would argue that the adoption by the public of the brand, and it’s successive shorthand, is the surest mark of brand success (reference FedEx’ move to align its company brand of Federal Express with consumers’ moniker).  The company’s responsibility now is to tend to the brand’s positioning and messaging in order to ensure it’s as positive an asset as possible….not to try and yank the brand away from the public and redefine it in a vacuum (especially not in today’s age of consumer participatory branding and marketing).