All brands live by the S-curve lifecycle, which starts by growing its customer base and usage to increase market share, then slowly declining into irrelevancy if proper plans are not put into place. No brand, no matter how large, established and well positioned, can defy this law as consumer and market dynamics change. We have witnessed global leaders in the automotive, technology and retail industries all face the same lifecycle factor. For very astute brands, a transformation process is initiated well before performance reaches its peak where much runway for growth remains.
However, as we’ve witnessed with many recent transformations by brands such as JC Penney, The Gap, McDonalds and Blackberry, the step from where you are to where you need to be can be risky if not properly undertaken or taken too late in the game. Our firm has been helping companies manage brand transformations for more than 25 years for such organizations as International Dairy Queen, AB InBev, Tata Global Beverages and M&M Food Market, to name just a few. Here are six tips that will provide a greater chance for success, while avoiding the pitfalls inherent with managing change.
Pitfall #1: Late to Start and Comfortable with Status Quo
A big mistake is when brands wait too long to evaluate their growth trajectory and explore the next “curve” in life of the brand. It’s best to evaluate your brand position and experience during the growth stages when commoditization and competitive activities are not eroding the brand’s performance and equity.
Often, management waits until the brand has entered a state of decline to reposition and initiate a transformation process. In most cases, it’s too late. Once a brand starts down that slippery slope to irrelevance, the ability to change course becomes almost unsurmountable. It’s best to avoid late stage transformation initiatives as these typically require major changes at a high level of risk. We recommend management review the need to transform their brand during the growth period and leverage these insights around margin, sales growth and brand loyalty. Typically, margin tends to be the canary in the mine, providing advance notice that the brand is in need of change.
Pitfall #2: Being Influenced by Decision Bias
Decision biases can detrimentally impact a brand transformation as they make potentially damaging assumptions about required business strategies. Biases are prejudiced insights that are not based on relevant facts, driven by the organization’s culture selection process, metrics and history. If left unchecked, they can lead the outcome in a negative direction. A key challenge for organizations during the transformation process is to overcome any existing biases around what is considered the right solution. In a 2009 McKinsey Quarterly survey of 2,207 executives, 28 percent evaluated the quality of strategic decisions in their companies as mostly good, 60 percent said bad decisions were about as common as good ones, and 12 percent claimed good decisions were rare. To prevent decision bias from driving the project direction, we recommend reviewing all business assumptions and metrics to determine how these factors would be impacted by a new disruptive competitor.
Pitfall #3: Not Clearly Defining Your Customers’ Unmet Need
When moving from where the brand has succeeded to new areas that provide greater margin and a stronger competitive advantage, it’s important to clearly understand what customer or market unmet need you are filling. When IBM decided to move from selling computers to selling technology-based solutions that make the planet smarter, it did so by clearly understanding a global unmet need. By identifying the future need for governments and municipalities to better manage their infrastructure and cost, IBM positioned itself as the world leader in addressing those needs, well before other technology companies could respond. In doing so, IBM moved from a low- to high-margin business and set a trend for many hardware manufacturers to follow. Industry differentiation and higher margin sales could not have been achieved had IBM not identified an unmet market need that allowed it to leverage its intellectual capital.
Click here for three more brand transformation pitfalls and how to avoid them.
For recent examples of major brand transformations, read our case studies for Cable and Wireless Communications, M&M Food Market and The Source.