Feb 13, 2012 | Management, Strategy
Michael Porter transformed strategy development 30 years ago by asking two simple questions:
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- What are the drivers of industry profitability?
- What are the drivers of profitability of an individual firm in an industry?
He then provided a framework to analyse both, his “five forces“.
The possibility, and ease of entry of substitutes is one of the 5 forces that dictate strategy, and this remains the case, it is just that the possibility of finding an acceptable substitute is infinitely greater now than it was 30 years ago when the original thinking took place.
Almost every industry you can think of has been transformed in the last 10 years by the power of the web to offer substitutes. Access to substitutes of both the product of, and supplier to any business, immediately and transparently, is infinitely easier that just a decade ago.
Oh, and new industries have been spawned that have decimated, and changed forever those legacy industries, and most did not see it coming.
Porter’s framework got it right, it remains right, it is just that the time frames he worked with are now way shorter, and the entry/exit barriers lower. The net has completely altered the tactical dynamics, but the strategic thinking behind the model remains sound.
Feb 10, 2012 | Communication, Social Media
The risks, as well as the benefits of social media Social media are now slowly becoming recognised, particularly as the list of companies who “should know better” gets longer.
Given the potential for social media to trash a brand built over decades almost overnight, any responsible due diligence and risk assessment process now takes in social media as a key component of an enterprises value.
An often used first step is to encourage the evolution of a “code of conduct” to guide behavior. Many large companies are now doing this, including Coca Cola. Their code is on the net for all to see, and sensibly, they are allowing it to evolve as behavior in social media evolves. The Coke code is a great place for others to start thinking about how they want their employees and other stakeholders to interact in Social media. An alternative is to go back to first principals, and ask what you as a consumer of SM expect from a site, the list would be a bit different to the Coke one, more like this, on Social Media Examiner.
However you go about it, fact is that you need a robust policy to keep out the robots & trashers that is transparent, and rigorously executed, whilst enabling the evolution necessary in an ecology changing every day.
Feb 8, 2012 | Change, Management, Operations
It seems paradoxical to me that the most successful company on the face of the earth over the last decade, one that has been successful because of their astonishingly good product design, have not leveraged that innovative capacity into their operational design.
I refer of course to Apple, whose profit in the December 2011 quarter was $13.3 Billion, and they became, again, the most valuable company in the world.
The woes of Apple’s supply chain, particularly Foxconn have been extensively covered, and most, if not all of Apples customers would be familiar with at least a small part of the story.
Around the developed world, and increasingly elsewhere, it seems consumers are developing a conscience, they care about more than just product performance, and are evolving to make purchase decisions that includes some consideration of the “integrity” of the product concerned, from organic food, to sports shoes, to coffee, and now to electronics and gadgets.
Innovation is way more than just making the products better, it is also about making the supporting structures better, improving the whole operational chain, not just the consumer facing end.
Imagine the innovation Apple could bring to the manufacturing supply chains they employ if they took a small piece of their enormous and well deserved profits from their product design, and focused on operational design. Instead of observers using Toyota Production System as the benchmark, in 10 years it would be the APS, Apple Production System, and their profits would have soared again.
Oh, by the way, if Apple managed to create an APS, their improved profits would come not just from their superior design of the whole value chain, their APS, but because consumers do truly care about the integrity of what they buy. In that event, a few of the building blocks for a re-emergence of manufacturing as a economic driver in the US and Europe would be put into place.
Feb 7, 2012 | Branding, Marketing
The net has changed everything.
In the “old days” consumers brand choices were made from a small pool of acceptable brands that was defined by experience, limited access to detailed information, and advertising.
Once a brand had been purchased, the well understood “cogitative dissonance” kicked in, a psychological process which justifies an action already taken, and served to make the walls of the brand pool tougher. It didn’t much matter if the purchase was a major one like a car, or a bar of soap, the processes were similar.
Now, these purchase drivers have been thrown out the window, as consumers have quick access to vast amounts of technical information, performance data, and user reviews to inform and shape the purchase decision. This has led to the pool of acceptable brands becoming much wider, and shallower, in many categories, it has almost ceased to exist beyond a measure of awareness.
Consumers now buy many brands. The old notion of brand loyalty has been seriously discounted by consumers who are brand promiscuous. Assessment of value that take in a whole range of factors not previously important in any but the first, and perhaps second purchase now shape behavior. Availability, word of mouse, the view of the crowd, supply chain transparency, perceived social responsability, and many more. Consumers are seeking more reassurance from the social media, and less from the mass marketing notions of brand positioning and loyalty.
The message is if you do not deliver value at every point in a consumers journey with a product, do not expect them to stick around, as there is a viable alternative within easy reach.
Feb 6, 2012 | Branding, Marketing
Brand-building is an infinitely more difficult exercise in the current environment. Gone are the days when you could throw a bunch of money at mass media, and use it to drive distribution and consumer trial, and if the thing was any good at all, gain some measure of “brand”.
The rules have evolved dramatically, they are both simpler to articulate, but as with many simple concepts, harder to execute, as in their simplicity lies great challenge.
- Never build expectations that may not be fulfilled.
- Communicate a very clear promise that differentiates the product in a way meaningful to the behavior of the user.
- Build trust by over delivering consistently
- Innovate beyond familiar boundaries whilst retaining relevance to consumers.
See, easy!
