Jack Welch, renowned CEO of General Electric, used to say that your business should be #1 or #2 in your market. If not, get out. This belief was derived from the famous PIMS work begun in the 1960s. Initiated at General Electric, PIMS, Profit Impact of Marketing Strategy, focused on identifying factors that would impact economic success. ROI (Return on Investment) was the primary measure of success, alongside Return on Sales (ROS) and real (organic) growth.
PIMS, still around today, generated several critical correlations and a plethora of actionable insights. One major finding was about Relative Market Share. PIMS research indicated that higher relative market share enables economies of scale, reduces unit costs, and strengthens relationships with suppliers.
The #3 brand will be at a disadvantage, with weaker competitive advantage economics.
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Brand owners may not be knowledgeable about PIMS, but they are knowledgeable about competing in markets where the struggle is to move up from #3 or below to #1 or #2.
Recently, a number of high-visibility brands have changed hands. Brand owners who could not dig out of the holes created by failed strategies decided to sell rather than live in hell. Rather than spend resources to turn around the brand, the decision was to get out now.
Kellogg’s (the Kellanova division that includes snacks such as Pringles, Pop-Tarts, RXBAR, International cereals, Eggo, and MorningStar Farms), Allbirds, and Pizza Hut were sold to others who believe they can make a go of these unwanted brands. Kellogg’s, Allbirds, and Pizza Hut may operate in different categories, but they fell victim to tendencies that always lead to trouble. Losing relevance, disregarding the changing world, lacking a viable Plan to Win, and holding on to what worked in the past are just some of the tendencies that led to trouble and to the sale of Kellogg’s, Kellanova, Allbirds, and Pizza Hut.
However, these tendencies for trouble are symptoms of four overarching corporate and brand failures. In one way or another, we can probably trace the failures of Kellogg’s, Allbirds, and Pizza Hut to one or all of these four failures. These failures essentially lock out a brand’s ability to turn around, compete in a highly competitive environment, and generate enduring, profitable growth. Before a brand can successfully revitalize, it must break the LOCK on:
- Leadership
- Organization
- Culture
- Knowledge
1. Leadership
Brands stay out of trouble when leadership sees ahead and creates a winning plan. Brands need to keep innovating and to stay relevant. Brands need to keep in touch with their customers. Brands need leaders who love the core products and want to make them even better. When leadership relies on the brand’s past success and momentum and falls into complacency, the brand suffers. When leadership favors new products at the expense of core products and pursues incremental degradation of product quality to cut costs, the brand suffers. When leadership creates a risk-averse, inward-looking culture, the brand suffers. When leadership hides behind an “in the year, for the year” mentality, the culture will focus on short-termism. When culture is arrogant enough to overlook a changing world with changing relevancies, the brand suffers.
We know a lot about CEOs who led dramatic, visible, and remarkable corporate brand turnarounds. Lou Gerstner at IBM, Carlos Ghosn at Nissan, for example. Less visible but equally remarkable, Steve Kaufman at Arrow Electronics pulled together a company, culture and brand shattered by a tragic fire that killed the company’s leaders and many employees. After several years of success, Kaufman realized that for Arrow Electronics to compete in a changing world, it was time to reinvent the company. From Mr. Kaufman’s perspective, this meant possibly reinventing the electronic middleman industry. His view was that it was time to change the way Arrow Electronics thought about and managed its business. Arrow Electronics was not in trouble. Arrow Electronics was not losing money; Arrow Electronics was not suffering or losing ground. Mr. Kaufman just believed that from his vantage point, the industry was at a tipping point and Arrow had to move ahead of the curve. The changes Mr. Kaufman instituted turned Arrow Electronics from a multi-million-dollar business into a multi-billion-dollar business. It was an honor to support Steve in bringing his vision to life.
In many respects, great leaders share the qualities of great corporate brands. They are authoritative, credible, responsible, trustworthy, and they have integrity. Great leaders inspire, influence, educate, support, and evaluate. Boards and shareholders should look for accountable, great leaders. If there is a focus on short-term profits, then the brand, organization, and culture will eventually suffer. But if the Board and the investors see the present and the future and want to build brands that will continue to generate enduring, profitable growth, they must ensure that great leaders are in place.
2. Organization
Is the entire company organized around the customer and the brand? Is the entire company a collaborative organization? Is the silo mentality dominant? Are bureaucratic processes still getting in the way of effective brand and business management? Are accountabilities clearly defined?
Brand Leadership must be reorganized to create a collaborative organization where all employees clearly understand their roles in brand building and know what to do. Employees, regardless of function, need to know their responsibilities and what they may need to do differently to act on the brand’s behalf. An organization that is ensiled, bureaucratic, or closed to creativity hurts brand development.
Campbell Soup was a company of canning engineers. The invention of condensed soup was a miracle of the canning process, changing the way we live for the better. However, a 1979 article reported that at Campbell, employees were not encouraged to have original thoughts; everything was run strictly according to the book – a several-inch-thick Manual of Procedures with rules on everything from ordering a new desk to disposing of a salesman’s used auto. There were few organizational changes aside from firings until Douglas Conant took over as CEO. His focus on internal organization was considered stellar and, for a company like Campbell’s, earth-shattering.
I consulted for Electrolux AB for nine years. We created a Brand University to instill the principles of branding and reinforce the brand architecture policy approved by the Board for the global brand portfolio. Year after year, employees returned from Brand University with brand knowledge, and yet, it was business as usual. Electrolux was a company of industrial engineers. The organizational power resided with those who managed the manufacturing.
When companies and brands are under pressure, they sometimes hire organizational consultants to rejigger the deck chairs. Many times, a company’s “reorg” does not address underlying problems but instead shuffles people around or re-segments divisions. Reorganization will not address the fundamental cultural defects of the business. What the strategic vision is must come first. Then, what is the best organization to achieve that vision?
3. Culture
The culture of the enterprise reflects its achievements, its understanding and appreciation of the achievements, its social institutions, and its people. The culture of the enterprise reflects its human, intellectual, financial, and trust capital.
Research shows a link between culture and employee behavior. A culture focused on quantitative month-to-month results is risk- and innovation-averse. A tough, conservative, rigid culture is not conducive to creativity and brand development. It is essential that the brand’s values be reflected in the culture’s values. A misaligned, out-of-sync culture that emphasizes brand demotion rather than promotion allows tendencies toward trouble to choke off brand growth. Culture counts. But if the tendencies take over, the brand loses. When there is a conflict between culture and strategy, culture wins. Culture and strategy must reinforce one another.
When we worked with IBM, we were assigned a culture guru to ensure our brand management presentation would fit within IBM’s system. The culture was rigid down to the way acetates had to look.
4. Knowledge
Leadership, organization, and culture are all related to knowledge. Many of the tendencies reflect a lack of knowledge or, worse, a lack of desire for knowledge. Be a learning culture. When a culture stops learning, deprived brands lose relevance, lose customer contact, and lose creativity. A collaborative, creative, open culture and organization with leadership that takes risks uses up-to-date informed judgment to build brands. Brands suffer when information and data are 1) hoarded, 2) not turned into quality knowledge, and 3) not shared globally (ROGL, or Return on Global Learning).
At IHG (InterContinental Hotels Group), there were once around 40 studies on breakfast. There was redundancy, to say the least. Yet, there was no sharing of the information. The resources spent on individual studies could have been used to advance actionable strategies.
Companies that cut back on investments in insightful information lock out any possibility of gaining the knowledge needed to keep their brands relevant. It is common to say that knowledge is power. To build powerful brands, make knowledge a competitive brand advantage. It is the responsibility of great leadership to ensure that knowledge becomes the key to a brand’s enduring profitable growth.
Kellogg’s spent decades struggling with shifting breakfast trends. At one point, Kellogg’s advertising focused on the benefits of breakfast. People bought into the benefits of breakfast but stopped at McDonald’s on their way to work. Changing views about food and weight loss affected how and when people snack. In 2003, consulting for Kellogg’s, we presented data indicating that people consume breakfast for “diet/dietary” and “delight” reasons. In between was an untapped area where optimization of diet and delight met. We also created a brand promise for Rice Krispies Treats. None of which were implemented.
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Allbirds could not wrap its mind around the premise that environmentalism is not always the main driver in a purchase. Beyond Meat ignored this human element, too. Allbirds started copying more dramatic styles like Hoka, which did not sit well with Allbirds’ core customers. Losing its core customer base was extremely detrimental. Allbirds sold its intellectual property and is now focusing on becoming a tech company.
Pizza Hut left its strong brand promise in the dust and spent years selling on price, becoming a me-too offering. Recently, it seems that Pizza Hut restaurants that are reimagining the original in-store experience have been successful. This Pizza Hut classic revisit is a testament to the power of a relevant, differentiated brand experience.
Kraft Heinz brands were mismanaged for years. There was talk about a breakup and sale. However, new leadership quashed rumors of a sale, indicating that with the right resources and plans, the Kraft Heinz brands could be saved. Some observers thought the decision to fix the brands rather than sell them was made because the brands were so beaten that a sale would be difficult. That said, Kraft Heinz leadership is not giving up on its beloved brands.
Brands can only live forever if properly managed. Hopefully, Kellogg’s, Allbirds and Pizza Hut will remain viable under the proper brand management of their new owners.
Contributed to Branding Strategy Insider by Joan Kiddon, Partner, The Blake Project, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I
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