Archive for the ‘Product Development’ Category
In this week’s Business Surgery, Conor Wilcock discusses the merits of ringing in the changes
As far as months go, March was pretty tumultuous. I recently upped the proverbial sticks, threw caution to the proverbial wind, and flew across the (not so) proverbial Atlantic Ocean to begin anew a life in the United States. Such an upheaval brings change thick and fast, whether you like it or not. I’ve had to swap my Ss for Zs, and my right-hand drive for my left-hand drive. I’ve even had to kick Elizabeth II from my wallet in anticipation of Messrs Lincoln, Hamilton and Jackson setting up stall (Queenie seems pretty disgruntled about it, even though I keep telling her it’s nothing personal).
All of this got me thinking about change in other arenas as well, namely business (after all, this blog isn’t called “personal surgery”). Why do companies feel the need to change? Is it healthy for companies to initiate change as standard? Are there occasions where change is ill-planned and can jeopardize future performance?
At this point, I did a little digging, and encountered an article by Stephen Hall, Dan Lovallo & Reiner Musters in the McKinsey Quarterly: “How To Put Your Money Where Your Strategy Is.”
Though the full article is available to subscription-readers only, the abstract captures the gist of the argument:
“Most companies allocate the same resources to the same business units year after year. That makes it difficult to realize strategic goals and undermines performance.”
In a nutshell, the article claims that a company which constantly evaluates the performance of business units, and allocates resources according to market opportunities, is likely to be worth more than a company which has a more stagnant strategy: one which allocates capital consistently every year.
“Worth more” to the tune of 40% over 15 years. 40%. Staggering stuff.
The article proceeds to make two interesting observations:
Upon first glance, I was waving my researcher arms in the air in celebration at this article. Of course change is good! Of course stagnation is bad! By habitualizing change, companies will ride on an inevitable path to profit and shareholder glory.
Or perhaps it’s not quite as straightforward as that.
To get to the bottom of this, we need to make a number of distinctions. Firstly, evaluation and change are two very different things. To change something for change’s sake can be damaging indeed. Has anyone bought a can of Coca Cola II recently? I didn’t think so. Regular (if not constant) evaluation on the other hand, is necessary and rewarding. Companies should replace the old adage with (the admittedly less memorable), “If it ain’t broke, evaluate it anyway.”
To extend on the point, there is a difference between positioning oneself for change and actually changing. Companies should never allow themselves to sink into the mire by assuming that resources are being allocated appropriately. The “plain sailing” approach renders companies susceptible to the iceberg of spiralling losses. And this is where research comes in. Research can help establish when and where change is necessary. The key here is that evaluation can lead to a “no” decision as well as a “yes” decision. Both have their place, both are valuable, and both can lead to reduced costs and increased margins.
That being said, let’s return to the article in question, which suggested a positive correlation between level of resource allocation and shareholder returns. Given how impactful change can be on future performance, companies need to commit to change and do it in the right way when past the point of no return. A second article published by the London Business School entitled “The New Change Equation,” warns of the perils of the Big Bang approach to change:
“Considerable time and effort is placed on announcing the forthcoming strategic agenda…yet life remains the same. The illusion of change substitutes any reality.”
Once you’ve got the green light, don’t be afraid to put your foot on the gas. If companies are smart enough, there’ll be another set of traffic lights a short distance ahead with another “go/no go” decision to be made. Let’s just hope you’ve remembered to drive on the correct side of the road…
In this week’s Business Surgery, Cristin Malone comments on the importance of listening to the market.
How does a company that had a 90% share of the photographic film market in 1976, begin to have financial troubles just a few years later and eventually file for bankruptcy in 2012? I am referring to Kodak, whose factory was once the glory of Rochester, NY, and is now described as a relic as employment has plummeted from 62,000 to less than 7,000.
Kodak’s demise cannot be blamed on the economy. In fact, many sources point to the company’s late entry into the digital film market as its pitfall. As I thought further on this, I came across an interesting contributor article in Forbes, in which the author Avi Dan brings up a note-worthy point in his article entitled, “Kodak Failed By Asking The Wrong Marketing Question”. The author explains that although Kodak invented the first digital camera in 1975, the company was slow to market this new product in fear that it would damage its traditional film business. According to Dan, Kodak focused more on selling its film products than adapting to the new digital marketplace:
Arguably, the best way to determine “what business are we in?” is by defining who is our customer? It is clear that there was a disconnect between Kodak and its customers. It made me think, could the downfall of such a big company really come down to the fact that they ignored the needs of their customers?
Listening to your customers can be difficult, as it is not easy to tell if you are getting that gold nugget that will move your business forward or if you are receiving feedback that will soon be obsolete. Steve Jobs said it best:
There is some truth in this statement, as understanding the market’s needs can actually result from providing them with what they think they want and measuring success – but how do you become innovative enough to know what to give them?
Regardless of how I approach all of these questions, I think Kodak’s failure resulted from not listening to the needs of the market. By listening, I am not just referring to simply listening to your customers, but are you listening to changes in the market, are you listening to the voices within your organization, and are you really understanding the impact of what you might hear?
Kodak may actually have been its own enemy; it was probably too big of a company to have one cohesive strategy and was not nimble enough to make the necessary changes. I do believe that whatever hindered Kodak from this decision could have been solved through research: it would have enabled Kodak to better understand how to listen and react to the needs of the market. A good research agency can help a company organize all facets of information (internal and external), and also help the company become more cohesive by providing actionable recommendations and key insights on potential opportunities.
What are your thoughts here? Does Kodak’s fall really come down to its inability to listen to the market? Or are there other issues that may have caused the company’s downfall?
Check out some articles on Kodak:
In this Thursday night insight Paul Hague looks at the phenomenon of The Girl With The Dragon Tattoo and argues that “product” isn’t everything.
Have you read The Girl With The Dragon Tattoo? It’s a great story, there’s no doubt about it, but the story of how the book became a bestseller is even more incredible. Written in his spare time as a hard-working journalist, Stieg Larsson first called it Men Who Hate Women. Having finished his whopping manuscript and without publishing it, he began his second book. When this was finished he wrote his third. And then he had a heart attack and died. Only after his death were the books published.
The publishing of his books is another incredible story. The rights to the books in the UK, where it began its huge success, were bought by Quercus, a small and unknown backstreet publisher. The owner of Quercus became so desperate to shift copies he gave them away to people in parks and he planted dozens on the back seats of taxis and on tube trains. Today Quercus has moved to luxurious offices in Bloomsbury Square, and its revenues trebled to £15m in the first six months of 2010 on the back of the Larsson phenomenon.
So what can we learn from this? It seems to me there are at least five lessons:
My insight today is that we should always take care to put as much emphasis on the other parts of the marketing mix as the product itself. Ralph Waldo Emerson once said that, If a man can write a better book, preach a better sermon, or make a better mousetrap, than his neighbour, though he build his house in the woods, the world will make a beaten path to his door. I am not so sure that The Girl With The Dragon Tattoo would have had such a large path beaten to its door without a little bit of marketing help.
In this week’s Thursday Night Insight, Julia Cupman takes a brief look at Apple in an attempt to understand how the brand has become so successful.
The iPhone 4 is currently one of the newest and hottest gizmos around, and so in demand that, here in the suburbs of New York, incredibly no Apple store and no AT&T store has one stock.
Back in April this year, Apple announced that it had sold 50 million iPhones so far, 35 million iPod touches, 450,000 iPads, and hundreds of thousands of many of its other products, bringing the total number of devices running on the platform to a staggering 85 million. At the end of April this year, the brand was valued at $83.1 billion – one of the top 10 globally, and up 32% from 2009.
A brief Thursday Night Insight isn’t enough to explore how this global behemoth has risen, consumed, and manipulated the masses, and so I will draw on just three key critical factors that I believe are at the core of Apple’s success:
A strong brand portfolio. Apple has built its own distinct empire: the “i” family, including the iPhone, iPad, iPod, iTunes, iMac, etc. Its brand portfolio covers products in 3 different markets: computers/laptops, mobile phones, and digital music. This means that Apple is protected should there be a downturn in any of these product segments.
In addition, these diverse products have created a platform for new product development, enabling Apple to enter new markets relatively easily (as was the case with the iPad), while also substantiating its leadership position in innovation.
The various products within the Apple family have attracted mass market appeal. Apple’s strong brand portfolio continually nourishes the corporate brand, stimulating and feeding ongoing demand for its offering. Apple and everything it embodies has become a global icon.
A focus on innovation. Apple has revolutionized the consumer electronics industry in bringing the digital world to one’s fingertips – changing communications, maximizing information retrieval, and introducing new forms of entertainment. The company has stood up to giants such as Microsoft, Google and Nokia. In constantly reinventing the wheel, Apple is undeniably a leader in innovation.
Selling an experience. Apple has created a differentiated customer experience model in reconstructing the accessibility and fulfillment of customer wants and needs. Virtually whatever the customer wants, the customer can get, easily and cost effectively. Apps for cooks, apps for traveling, apps for managing money, apps for working out, and hundreds of thousands more. There is even an app that locates public toilets. In short, Apple goes far beyond selling a product; Apple delivers an experience, transcending communications, entertainment, and the infinite world of information.
Apple attracts consumers through innovation, and then engages with them by selling an experience, locking them in to the Apple brand. Apple is so in sync with the pulse of the market, that its followers become advocates of the brand.
We probably all want a bite of the Apple. Understandably, b2b marketers might claim they are disadvantaged compared to Apple, as the likes of industrial products are a far cry from sexy consumer gizmos. However, key to successful marketing is the ability to transfer ideas from successful companies, and to adapt and build on these ideas. With that in mind, I leave you with 3 questions as take-aways from this Apple insight: