Tuesday, October 27, 2009

Strategic Planning Analogy #286: Who’s Strategy is it?

Let’s imagine for a moment that a friend of yours asked to borrow your conservative-looking car for a few days. Being the nice person you are, you let the friend borrow the car.

After those few days are up, your friend returns the car. To your shock and horror, you notice that your friend had made changes to the automobile. The exterior had been repainted to a color you do not like. Flame-like decals were put on the sides of the car. The interior was redesigned in an awful checkerboard pattern. The carpeting was replaced with some awful shag that looked like something out of a 1960s Hippie “Love Van.”

Naturally, you would be furious with your friend for trashing up the look of your car. You’d probably say something like, “What is the matter with you? I let you drive my car for a few days and you totally destroy its appearance. Have you lost your mind? This was MY car! You had NO RIGHT to change it like that!”

You friend answers as follows: “I knew I’d only be using the car for a short time, but during that time I wanted to be able to make a statement. I wanted to car express my personality.”

At this point, you’re probably ready to scream, “Well now you can express yourself on a check to pay for all the damage you did to my car!”

It’s hard to believe that someone would be that disrespectful of your car. After all, it is your car. It belongs to you.

Yet something similar seems to occur often in the business world. A newly hired CEO, CMO or strategist will come on the scene. As the new person in the company, they want to quickly make their mark on the firm. They want to make a statement and express themselves. As a result, they start to make all sorts of changes to the brand.

The consumer then screams back, “What are you doing to MY brand? You are destroying it! You had no right to make those changes! Make it the way it was before!”

Remember the debacle of “New Coke?” There was a consumer revolt because the consumers felt that “their” brand had been violated. New Coke had to be eliminated and the classic form needed to return.

The Coca-Cola brand was like the car in the story. Consumers felt they owned the brand. The executives, who tend to stick around in their job for a only short time, had “borrowed” the brand and returned it as an ugly “New Coke.”

The principle here is that consumers of a brand tend to stick around longer than the managers of that brand. So, in essence, the brand belongs to the consumer and the managers are only borrowing it for a short time. Therefore, our brand strategies should take more of a “borrower” approach.

A typical CEO holds that position for about 3-4 years. A CMO typically holds its position for only about a year. A Chief Strategist probably falls somewhere in-between. This is a very short period compared to the expected life of the brand or company being managed.

The only one sticking around for the long haul tends to be the consumer. In many ways, they are the ones who own the brand. After all, branding success depends on creating the proper image/position in the mind of the customer. The customer owns their mind. They don’t like people playing mind games to mess it up (even more than they hate having people mess up their car).

Look at what Pepsi did in 2009 by redesigning all of its brand logos. Between the cost of the redesigns and the cost of the transferring all of the visuals to the new look, Pepsi probably spent well into the hundreds of millions of dollars world-wide.

What were the results? First, the redesign of the Tropicana orange juice carton was received so poorly by the consumers that Pepsi had to return to the former design. The consumer response was “How dare you change MY juice carton. You made it ugly; change it back!”

Changing Gatorade to “G” caused a lot of initial confusion for the customer. Is this the same old Gatorade I’m used to or did you mess it up like Coca-Cola did with New Coke? As for the other Pepsi logos, I doubt one will ever be able to find a positive return on the huge investment. The new management over-stepped and wasted a lot of money.

Remember, we are only borrowing the brand/product/company for a short time. We need to act more like borrowers. As a borrower, we should manage by a few rules.

Rule #1: Do Not Ignore the Legacy You Are Inheriting
Typically, the brand/product/company was around for a long time before you got there. You are not starting with a clean whiteboard. That whiteboard is already filled with years of impressions and experiences between the brand and the customer. Some of those impressions/experiences are etched in pretty deep. You cannot just erase this history as if it never occurred.

Before embarking on any strategic or cosmetic change, first make sure you understand all of that historical heritage. That legacy tends to box you in on your strategic options. Depending on the history, certain strategies will be compatible. Others will not.

Coca-Cola’s legacy was around authenticity. Coke was “the real thing.” Coke was “it.” The historically-based impression was that the Coke formula was the enduring essence of refreshment throughout the generations and that everything else is a poor imitation.

This legacy boxed in the strategic options. Throwing away the old formula and replacing it with a new one was not compatible with this legacy. If old Coke was “real” then new Coke had to be “fake.” If old Coke was “it,” then new Coke was “not it.”

Based on the history one has inherited, you only have permission to go in certain strategic directions. If you stray too far from history, consumers will tell you that you had no permission to do so and will try to force you to return the brand back. We talked more about permission in a recent blog.

In this Web 2.0 world, the customer has more power to fight back than ever before. So do not ignore the history you are inheriting. Pay heed to impressions already in place. Go only where history allows you to go.

Rule #2: Remember Where the Battle is Taking Place (the Consumer’s Mind)
To win with the consumer, you have to win at the point where decisions are being made—in the mind of the consumer. You do not own the mind of the consumer. You can visit it, but trust me, the consumer is very protective of what goes on there.

As I said earlier, if you think someone is going to be mad because you messed up their car, just watch what happens if you try to mess up their mind.

Therefore, treat the consumer’s mind with respect. Respect the historical impressions which already are already embedded in the brain. If you stray too far, your message/strategy will not be believed.

Remember, you are only a visitor, borrowing a bit of their mental attention.

Rule #3: You Are A Caretaker of the Brand For the Next Generation
Just as the brand/product/company was around well before you got there, hopefully it will be thriving well after you leave. You are a caretaker of the brand for only a brief time. If you are a poor caretaker, you will destroy the brand’s long-term viability.

If you only think short-term, you can find many ways to get a quick bump in profits. Some of these tactics, however, can destroy the long-term prospects.

Think of the luxury fashion industry. The heritage is wrapped up (in part) in exclusivity. In the near term, one can get a boost in luxury goods sales/profits by taking the brand to the masses. However, once the masses embrace the brand, the exclusivity heritage can be destroyed. In the long-term, this will lead to defection from the brand by luxury customers. Once the luxury customers no longer embrace/endorse the brand, the masses will no longer see the value, so they will eventually reject it as well. The net result is that the short-term boost lead to long-term brand destruction.

Remember, the key determinant of stock price is anticipated future cash flow. If your actions appear to be destroying long-term prospects, the stock price will be depressed, even if you get a near-term bump. Keep a long-term perspective in your strategy. When you hand off the brand to the next manager, give them a strong brand.

We are managers for only a brief period in the life of what we are managing. We are inheriting the legacy of those who came before us and we are leaving a legacy to those who come after us. The best strategies understand this larger perspective. They take advantage of the opportunities provided by the old legacy and create enduring strength which transcends our tenure. After all, the brand really belongs to the customer. We are only caretakers.

When I was a Boy Scout, we were taught about treating nature with respect. We were told that we were nature’s caretaker on behalf of future generations. When it came to camping, the rule was to “leave the campgrounds in a better condition than you found it.” I’d say this concept applies equally well to strategic management.

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