Not “should,” but “can” you emulate Apple?

September 18, 2012 //
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In “The perils of best practice: Should you emulate Apple?” the McKinsey Quarterly examines the practice of copying successful companies, and uses Apple as a case in point. The theme is, can you identify best practices, and is it a good idea to copy them?

If only it were that easy.

You should also ask the “can” question: Can you emulate Apple and its best practices? More abstractly, can you copy the best practices of your more successful competitors and steal some of their market share, or begin to outperform the market yourself?

I don’t have the answers, but here are some considerations.

The VRIO framework talks about:

  • Value
  • Rarity
  • Imitability
  • Organization

(1) Does your product/service/solution provide value to the customer; (2) are you the sole or one of very few providers with that capability; and (3) are there notable barriers to copying your offering? In comparison to yours, how do competitive offerings stack up?

Most importantly, is your company organized in such a way that you can (could) consistently exploit your market differentiation? Being the best isn’t good enough, it’s being able to defend being the best that matters, and that’s what “organization” in VRIO speaks to.

“O” is about all the things that are hugely difficult to emulate:

  • Operational effectiveness and excellence
  • Corporate culture that learns from success and failure
  • Ability to innovate — interpret signals from slow and fast culture
  • Comp plans that foster innovation
  • Customer-centric service design

Only when what you deliver is valuable, rare, and difficult to imitate, and you are fantastically well organized will you be able to emulate a company like Apple, or your very best competitors.

And then it’s not about emulation, but about domination. Taking a cue from the Five Forces: for example, what inputs could you dominate to keep competitors at bay? Apple has signed huge contracts for glass for its portable devices, purchasing as much as 70% (if I recall correctly) of the available supply. That (a) creates shortages for competitors, and (b) drives up the price for the remaining manufacturing capacity. In your business, do you have enough cash to manhandle your competitors’ supply chains?

Back to the larger questions of should and can you emulate Apple, which has a Superstack—a nearly wholly owned and fully integrated value chain (infographic PDF).

Accenture Superstack

Accenture Superstack (appropriated w/o permission from Superstack PDF. Sorry.)

[FWIW, as much as people say that Google purchased Motorola Mobility for its patents, I can just smell the Superstack synergies, which likely weren’t lost on Google. Watch for a similar Microsoft move. . .]

In an era of outsourcing and specialization, how vertically integrated are you? Should you engage in M&A or, against the recommendation of the Five Forces model for many alternate suppliers, should you have just a few highly symbiotic, tightly coupled single-vendor relationships. How would those be affected during economically tough times?

What does your more successful competitor really deliver? Is it a product or an experience? Apple delivers a fully integrated and portable experience. You can watch the photos you took on your iPhone either on your iPad or even on your TV via Apple TV. You can listen to the music you purchased on your iMac via your iPhone or iPod. Apple makes available what matters to you in your personal life anywhere you want to experience that. They’ve made a conscious choice to leave the office behind. Microsoft, Google, and Oracle will fight that battle (not just with data availability, but secure portable application availability).

The “should you” question really is about strategy. What do you want to be when you grow up? And will emulating someone else actually get you there?

The “can you” question really is about capabilities. Can you successfully implement similar strategic and tactical choices that will ostensibly result in the same outcomes for you as they do for your competitors?

Which question you ask first is of academic importance—they’re two sides of the same coin, and in both cases the answer needs to be “yes.”

Ask yourself these questions:

  • What is our company good at?
  • What is our company bad at?
  • What is our competition good at?
  • What is our competition bad at?
  • Is our product valuable, rare, and inimitable?
  • Are we organized in a way that provides value (triple bottom line?), and is that organization difficult to copy (causal ambiguity).
  • Who are our direct competitors; who is entering our space with a similar solution; what dissimilar (substitute) solutions exist that accomplish the same outcome?
  • How are our competitors organized?
  • Do we have a clearly defined strategy, and is everyone in the company aware of this strategy and working toward its success?
  • Is sameness a viable differentiation strategy? Yes? No? For what reasons? What gaps need to be plugged?
  • Do we have a brand in good standing?

Then you can ask yourself: Should I copy my competitors’ best practices? By now you ought to know if they would add value to your organization, and if you could implement them successfully.

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Categories Strategy

Customer Segmentation

September 4, 2012 //
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Someone asked me today what the ideal customer is, so that he could target similar companies. I answered in the form of a question: “Patient, stupid, bags of money?” Of course, that’s not true, those types of customers make you dumb and make you lose your edge.

The real question was about segmentation. How can you tell what your best customer type is? There are myriad formulas for that. You want to be in good good standing with your customers, so net promoter score matters. You want them the to pay their bills on time (low risk credit score). You want them to give you repeat business (customer retention; customer lifetime value). You want them to be low-maintenance, self-sufficient. Then you want to do some cohort analysis to see if you can identify other commonalities that will let you target a specific sub-segment of a market.

Blah blah blah…

Your best customers appreciate that you make them more money, and in return they help you make more money. Simple.

Your best customers are those who realize real value from your solution, and who acknowledge that by paying you back with sending new customers your way unsolicited; you are in a mutually beneficial relationship. Are you tracking this metric?

Once you’ve identified that segment, look inward to see what you are doing for them that makes them appreciate you. Other customers have the same solution but either aren’t realizing the same value, don’t know that they are realizing the same value, or realize it but still don’t send you new business. Why?

Ask yourself, what are you doing for those that send you new business? Have you trained them better than others to fully exploit the capabilities of your solution? Are you still nurturing them post-sale so that they feel appreciated and consider you a partner instead of a vendor?

It’s not what you are offering but what you are doing that makes the difference. Find that and make it scalable, and you’ll have found the key to riches.

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Categories Marketing

MoBaBu Strategy

August 31, 2012 //
1

There are two well established and universally accepted business-level strategies: cost leadership and product differentiation. Cost leadership lets you compete on price while still maintaining above average profitability (compared to your peers), and product differentiation lets you compete on benefits (personal utility) that purchasers will gladly pay more money for.

Think dish washing liquid vs. Rolex watches. Both compete in industries that address broad audiences, but Palmolive does not position itself as a luxury solution, and Rolex, even though it’s “just” at watch, does not position itself as a mass market product.

Price isn’t so much the driving factor—although income strata do play a big role—as needs and desires are.

Maslow's Hierarchy of Needs

Copyright Wikipedia

Mapping these products against Maslow’s hierarchy of needs (above), Palmolive sits between Physiological and Safety (eating off clean dishes means you won’t die from food poisoning, but also your neighbors won’t be impressed that you have clean dishes), and a Rolex watch is nestled in between Esteem and Self-actualization (any watch will tell time just as well, but this one reminds you and the people around you that you are awesome).

These strategies are not mutually exclusive; every company strives for cost efficiencies, differentiation, and market leadership of some sort. But either strategy requires markedly different organizational, operational, and marketing execution, which is why a company must decide how it wants to compete, what it wants to be when it grows up.

But what about the middle of the pyramid? How can you compete there when it’s generally assumed that if you don’t lead in cost or differentiation that you can at best earn average profits? There is a third strategy: Most Bang for the Buck (MoBaBu!). MoBaBu lets you cover the Safety-Love/belonging-Esteem spectrum.

Sure, Rolex might provide more bang for the buck when compared to Urwerk, a pretty good $75,000 watch (sorry, I haven’t done my homework on surfactants in dish detergents). But that’s not the point. There are broad categories where companies have established MoBaBu leadership. Hyundai in automobiles for example—they may only be 95% as good as Toyota or Honda in fit, finish, and performance, but at a lower cost and with a lot more features. You definitely get more for your $.

Come to think of it, that’s what Consumer Reports “Recommended” rating is all about.

MoBaBu isn’t just a mishmash of cost and differentiation strategies. It does require both elements, but most importantly MoBaBu requires customer insights, market foresight, and true leadership: a corporate culture of empowerment that creates and rewards engaged employees who communicate upward what they think the market can really benefit from.

MoBaBu shoppers are not on the cutting edge, but they sure can do simple value math, and retire comfortably because even though in their minds they never truly sacrifice, they still are thrifty. Marketers are well advised to engineer for this savvy subculture that has great spending power and is experiencing recession fatigue.

Is your organization structured to exploit this opportunity?

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Categories Marketing

Duck, and cover, marketing automation is here.

August 29, 2012 //
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“Automation” carries many promises, all of which somehow revolve around efficiency (even accuracy is a measure of efficiency). Do more with less; do it better, faster, cheaper. Everyone wins! Marketing automation is just such a marvel—it’s the fire-and-forget weapon du jour. A very good one, but not without its pitfalls.

Marketing automation specifically refers to email marketing automation, as well as collecting the data and metadata this generates. Marketers get to script and automate an entire campaign, with full branching, which then unfolds as responses and non-responses occur. The promise is that human resources can then be deployed less toward lead nurturing, and more toward lead conversion.

Here are two recent marketing automation examples:

1) I recently made a reservation at a Westin hotel. I like that chain, the rooms are large and beds are nice. Several days prior to my stay I received an email requesting that I please respond with my estimated time of arrival. I responded saying I expect to arrive between 4-6 PM. Two days later I receive the exact same email with the same request.

2) My friend Ronald purchased an item from IKEA, but the box was missing a key component to finish assembly. He reached out to customer service via email, detailing his purchase (including a copy of the receipt), and asked to be sent the missing part. The response email thanked him for his job inquiry—he never applied for a job, he just wants his bookcase to stand up.

Marketing automation did exactly what it promised it would do: it made people at the Westin and IKEA more efficient because they could focus on onsite issues while the computer managed offsite issues.

Marketing automation also did the exact opposite to us recipients—it made us less efficient, made us mad, and endeared us less to brands we like to champion.

Lesson to marketers: Test, test, test. Monitor, monitor, monitor. And don’t waste my time.

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Categories Marketing

[Personal] Branding

August 25, 2012 //
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Yesterday: It’s not what you know, it’s who you know.

Today: It’s not who you know, it’s who knows you.

Tomorrow: It’s not who knows you, it’s who knows you better than you know yourself?

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Categories Marketing

Elevators Don’t Have Budgets

August 23, 2012 //
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Myth has it that one of the keys to business success is having a great elevator pitch. The Harvard Business Review just published a blog post on this: “Win the Business with this Elevator Pitch“.

You won’t.

It’s not that the guidance is poor as far as sales pitches go. But you won’t be selling anything on elevators. You can’t. And you shouldn’t try! A sales pitch requires that you’ve done your homework on the person you are pitching to (just like in baseball), otherwise you’ll just be spouting generic MBA-speak drivel. When everybody’s needs and motivations are unique, can you honestly be well-enough prepared to give the contextually appropriate pitch to each person you’d like to sell something to just in case you meet on an elevator? How many pitches will you need? A hundred? A thousand?

Don’t sell. Instead, elicit curiosity, then create a hero.

You don’t need an elevator pitch, you need an elevator speech (an elevator value proposition in MBA-speak) that will keep the other person thinking of you long after you’ve parted ways. For that to happen you need credibility (inherent authority), empathy (the ability to meaningfully relate), and then a mind-blowing value proposition.

The Goal (North River Press) by Eliyahu Goldratt, gives just such guidance, I just don’t think it was envisioned to be used on elevators. On the very last page, Dr. Goldratt proposes some very simple and infinitely powerful management advice. All you need to do to properly manage is ask three questions:

  1. What to change?
  2. What to change to?
  3. How to cause the change?

In other words:

  1. Identify the problem. (root cause)
  2. Propose a preferred outcome.
  3. Implement a solution.

And that’s your elevator speech. And you only have 15 seconds to deliver it—five seconds per paragraph. Back to credibility, empathy, and value. They map perfectly to problem, desired outcome, and solution.

  • Introduce yourself by name. Don’t use your title or company name, else the shields go right up because the person you’re talking to will immediately know you’re about to “pitch” something. (Sale lost.)
  • Establish credibility immediately by referencing a shared experience—event, person you know in common—that can establish you as a trusted resource, or by asking a question that you know affects the industry and causes pain, which positions you as an expert. You do this to be permitted the next step. (Else, no credibility, no next step.)
  • Reference others that have solved that problem. (Expertise.)
  • Instead of blurting out a solution, list the benefits others are realizing from this solution. Cite a statistic or figure that surpasses the industry benchmark for average performance. (Must not be about money, but must translate into money.)
  • Let your audience know you can help them achieve the same benefits (and make them a hero in the process).

Good sales people and solutions make their customers heroes. Bad sales people only care about themselves.

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Categories Marketing

Ratings ≠ Satisfaction

August 19, 2012 //
1

The premise of Angie’s List is extremely appealing: accurate reviews that you can trust, because reviewers pay to participate. This simple reversal of the usual relationship—where the vendor pays to participate, but users can post for free—significantly cuts down on fraud, or should.

My wife has been subscribing to Angie’s list for about six to nine months now. She has sourced many contractors to provide quotes, and has selected quite a few of them for regularly recurring engagements.

The relationship is fantastic until the time comes for the contractor to actually perform the job. Each one has either performed poorly, or not at all. Examples of failure include doing a job not in keeping with the quality promised; not returning for work after a schedule had been agreed to; or repeatedly missing the same first rescheduled appointment (because the contractor keeps not showing).

One contractor showed up on time, but had forgotten he’d already agreed to the job. He showed because he thought he was coming over to give an estimate instead of doing the actual work, after he’d already been by the week prior to give an estimate where he was awarded the job.

So far the failure rate is 100%. How can that happen, considering that real people are posting about real experiences with these businesses?

My wife and I theorize that that these businesses have become too successful too quickly. We make this assumption because many of the contractors have told us that most of their business now comes from Angie’s List. They actually make a point of telling us this to communicate “social proof,” to imply that it’s safe to buy because a lot of people have chosen this service and are very satisfied with it.

We are guessing that most haven’t yet learned to say “no” when they can no longer perform their jobs at their usual high quality. They like the money, but they can’t seem to grasp the importance of customer satisfaction—weird, when considering that their businesses grew because of customer satisfaction.

And that’s a real problem everywhere: thinking the sale is over when contracts are signed, and as a result putting growth ahead of customer satisfaction.

Last week CMS Wire ran a webinar called “Rethinking Web Engagement – Leading with Content Marketing.” On the broadcast Robert Rose showed a revised shape of the sales funnel; not funnel- but hourglass shaped.

Rober Rose Sales Funnel

Copyright 2012 Robert Rose

To readers of this blog, the concept that the sale is not complete and the brand in jeopardy until the customer is satisfied, is not new. But the visualization is a wonderful reinforcement and reminder that customers are our least plentiful asset. And they are the fulcrum around which our businesses revolve.

Word of mouth marketing is still the most powerful marketing out there, and that’s what Angie’s List is monetizing for itself. But Angie’s List seems to be misunderstood by contractors for preselling customer satisfaction, instead of reselling customer satisfaction ratings.

You can buy customers, but no business can buy customer satisfaction; you have to create it (and maintain it).

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Categories Marketing, Marketing Axiom

Brands Are Ephemeral Assets (not quite part 2)

July 31, 2012 //
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As a follow-up to my previous post, Bloomberg just ran the story that the reason for Joel Ewanick’s ouster as CMO at General Motors was his sponsoring of the Manchester United jersey, and the terms (read: cost) of that agreement.

It makes total sense for GM to be on the chest of ManU players. Fantastic global exposure and a very good brand defense strategy.

The real issue, in my opinion, is not cost, but the fact that Ewanick chose Chevrolet as the mark to appear on the jerseys. He made the right move, then completely ruined it by pairing a crappy automobile brand (I’m excluding trucks) with a hugely successful global sports brand.

Great idea! Wrong brand!!!

The right move would have been to put the GM logo on the jersey. Whether or not you like GM’s products, it’s difficult to argue with the company’s success as a global automobile manufacturer. Yes the company has fallen on tough times recently (as has Manchester United!), but in advertising we don’t discuss finance, we exploit emotion.

The money allows Manchester United to continue shopping for global talent (while the Glazers suck the club dry for money), allowing the club to continue asserting itself in domestic and international competitions. And as ManU’s games are broadcast internationally—a huge viewership!—GM will receive valuable brand impressions in both established and emerging markets.

A win-win, if you know how to play it right.

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Categories Marketing

“Social” CEOs

July 30, 2012 //
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CEO.com, in collaboration with Domo, recently published the  “2012 Fortune 500™ Social CEO Index” research report. The “research” cites the percentage of CEOs using social media, versus the general public’s use.

For example, 3.8% of CEOs have registered for Twitter, vs 34.3% of the U.S. population. But 25.9% of CEOs have LinkedIn profiles, whereas only 20.2% of the U.S. population does.

The implied conclusion is that since someone else is doing something, you should be doing it, too. Never a good-enough reason by itself to do anything in business (if you know how to define and execute strategy).

For LinkedIn, my guess is that the number of business professionals with LinkedIn profiles is actually higher than 20.2% rate of the total population (e.g., my eight-year-old nephew doesn’t have a LinkedIn profile), but that’s beside the point.

In the end (pg. 4), the report does provide a conclusion, a neat listing of benefits based on an employee survey, such as (among others):

  • 78% want to work for a social CEO
  • 94% believe social CEOs will enhance the company’s brand

However, NONE of these and other benefits came from the CEO.com/Domo research itself. They all came from other research conducted by BRANDfog and IBM, neither one of which is directly cited in the notes.

If you want to read the CEO.com/Domo, report, here’s the link: http://www.ceo.com/wp-content/themes/ceo/assets/F500-Social-CEO-Index.pdf (PDF; now you don’t have to register and surrender your privacy to get something useless in return).

For some really useful insights, here’s the link to the BRANDfog research: http://www.brandfog.com/CEOSocialMediaSurvey/BRANDfog_2012_CEO_Survey.pdf (PDF).

I can’t locate the IBM research cited. (I also didn’t look very hard.)

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Categories Marketing

Brands Are Ephemeral Assets

July 29, 2012 //
1

A while ago I wrote about soccer (i.e. football) and commercial sponsorships. A month later I learned that Manchester United was planning to go public on the New York Stock Exchange, which made Casillero del Diablo’s advertising that it was the “official wine partner” of Manchester United seem almost prescient. The company had apparently placed itself in a good position to ride the coat tails of ManU’s global media push.

What Casillero del Diablo didn’t count on was the Glazer family’s inability to comprehend where the actual financial value of ManU comes from: the consumers of the ManU product.

On Thursday, The Guardian posted “Manchester United’s New York setback exposes failings of Glazers plan,” by Stuart James. The piece nicely describes the IPO that the Glazers had planned, and how it would offer no value to buyers (you really wouldn’t be able to call them “investors” based on the terms proposed).

A first IPO had already failed in Asia, where a rabid fan base exists. Fans in Asia have committed suicide when they were not able to secure tickets for the team’s exhibition matches. All that  the Glazers seem to understand is that they are currently owners of an internationally valuable trademark, and that the next best place to exploit that would be the NYSE. But not many people in the U.S. care about the sport or that team in particular. NASCAR, on the other hand, would be a smash hit IPO.

What the Glazers do not understand is that a brand exists only in the mind of the customer/consumer. And that makes a brand ephemeral. The definition of ephemeral is “short-lived,” but we know there are hundred-year-old brands, and older. What ephemeral refers to is that as soon as you disenfranchise the consumer—the individual who gives your product or trademark brand status—this asset loses value.

Being ephemeral is worse than being intangible. Patents are intangible, but they have a guaranteed shelf-life. And the Glazers don’t seem to grasp that you cannot just milk a brand for revenue without also nurturing the brand consumer, which is the process that gives a brand longevity.

Customer satisfaction gives your brand life and keeps it alive.

(Innovation helps, too, but that’s based on “utility” which is unique to each consumer.)

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Categories Marketing
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