In the 1980s and 1990s, Circuit City was the leading electronics retailer in the United States with about 400 stores nationwide. From 1982 to 1999, Circuit City generated cumulative stock returns 22 times better than the market, beating out Intel, Wal-Mart, and GE. Circuit City’s future looked bright. However, when the dynamics of the market changed, Circuit City rested on their existing brand equity.

In the 1990s, Best Buy entered the market with an innovative retail strategy. In an effort to gain market share, Best Buy secured prime real estate positions and invested in gaming, the creation of an e-commerce website, and viral marketing. But even though Best Buy had changed the retail electronics game, Circuit City stayed the course.

Circuit City laid off their highest paid sales personnel to reduce costs, which negatively impacted customer service. And while Best Buy was paying a premium for the best retail locations and opening new stores, Circuit City stayed with their current stores and failed to update their design. In 2009, Circuit City went bankrupt. Could bankruptcy have been prevented? Perhaps not, but a brand repositioning may have helped.

Brand repositioning is different from rebranding. Rebranding is essentially re-skinning a brand, focused on brand identity and the perceptions and associations of that brand.  Repositioning delves deeper than the skin, and involves changes to some or all aspects of a brand’s positioning strategy, including:

•    Target market
•    Frame of reference (space in which the brand competes)
•    Core benefit the brand provides
•    Reason to believe the brand can deliver on this benefit

Companies should consider repositioning their brand when they need to alter their strategic direction, adapt to changing consumer preferences, bring in new customers, and/or differentiate from other brands.

As in any major corporate change, not every repositioning effort is successful. Several best practices can be employed to avoid common pitfalls and mitigate some of the risk involved.

Secure CEO buy-in

CEO commitment is essential in a brand repositioning effort. The CEO brings credibility to the effort and shows the company’s commitment to change. Furthermore, the CEO is the only person within an organization who can drive change in all functional areas within the company, create a vision, and gain support from key stakeholders.

Engage the whole company

A company’s greatest asset is its people. If a brand repositioning initiative only involves the marketing department without support from sales, finance, engineering, consumer service, and manufacturing, it is likely to fail. Since repositioning is more than “re-skinning” the company, it must go deeper than marketing.

Remember your history

An excavation into a company’s history can lead to new insights and illuminations and reveal core competencies and what differentiates the brand from their competitors. Looking back can help a company move forward and gain inspiration from the company’s founders.

Understand your target market and consumer needs

It is important to listen to your consumers and ask for their feedback. By speaking to current users and non-users of the product or service in question, a company can better understand what resonates with their target market, and what might resonate with ancillary target markets.

Make the new branding believable

When a company repositions their brand, they may say, “We have the best consumer service and we offer the lowest prices. We are fun, reliable, and innovative. We are the best.” However, if it isn’t true, consumers will not trust the brand. The brand’s message should be uplifting and positive, but it must also be honest and believable.

Consistently project and reinforce the branding

Communication of any positioning needs to be clear and consistent so that consumers can easily understand the brand’s benefit to them.

Image source: jakerome

In the wake of a tumultuous decade, many consumers are actively voicing a loss of confidence in big business. This cynicism coupled with a heightened awareness around social and environmental issues have placed a lot of companies on the defensive.  Over the past several years, a number of our clients have approached us with a similar challenge:  a need to improve their consumer-facing image to develop emotional connections and build a foundation of trust.

While the core issue was similar for many of our clients, the execution of each engagement varied.  We have worked on innovation, positioning, messaging, and CSR-platform projects, all with this end goal in mind.  The question that remains is whether these efforts have the desired effect of re-engaging a disenchanted consumer.  In order for any efforts to be believable, the approach must be holistic.

Kaiser Permanente re-engages consumers

Kaiser Permanente is one company that has had a successful run at re-engaging consumers. Five years ago, the company launched a new messaging campaign to reposition the healthcare giant in the prevention and wellness space.  The push came as a direct response to falling membership as well as lack of awareness among the general public.  The company believed that the negative opinion held by non-members was largely due to a “lack of a strong and consistent voice in the general consumer market.”  From this need came the “Thrive” campaign, whose focus was not on how Kaiser cares for the sick, but rather how it delivers wellness and enhances the overall quality of life.  Most would agree that this has been a fairly successful advertisement campaign.  It clearly resonates with consumers who feel that there is much more to health than healing the sick.  However, is this just a great messaging campaign?

A holistic approach reinforces consumer branding

Kaiser is actually backing up its brand message with a slew of innovations through an institution-wide effort known as KP Innovation.  Their goal is to align every consumer touch point – from the waiting room experience, to the doctor patient interaction, to the way patient information is stored and transferred - with the overall brand positioning.  In 2007, the company began building a Total Health Environment, which involves applying design theory to all aspects of Kaiser’s operations.  A team inventoried Kaiser facilities to identify areas that were not “thriving,” and they drew inspiration for revitalizing these aspects from outside industries like hospitality and retail.  They also spoke with consumers to identify pain-points within their current experience.  They translated their findings into plans that will be used to build new facilities and remodel existing ones.   They are designing greener buildings, increasing the use of natural light, making waiting rooms more welcoming, selecting cozier chairs, making patient rooms more comfortable, and choosing color palettes that are brighter, just to name a few changes.  These changes not only improve the look of the facilities, they have also been shown to improve overall patient satisfaction.

The healthcare provider has also launched additional innovative initiatives that align with the wellness positioning.  A number of facilities have on-campus farmer’s markets that offer healthy produce for employees and members.  In addition, the provider teaches health and wellness classes that cover many topics including stress relief, smoking cessation, chronic disease management, and even yoga.  For patients that do not want to come to the facility, Kaiser also offers online support tools weight loss, nutrition, stress reduction, pain management, and smoking cessation.  All of these efforts are Kaiser’s attempt to show both consumers and employees that they are serious about keeping people healthy.

So it looks like Kaiser’s catchy tag line, “live well and thrive,” may be more than empty promises. Peter Andruszkiewicz, President for the Kaiser Foundation Health Plan of Georgia, Inc., says this about the effectiveness of the KP Thrive campaign:

“In Georgia and nationally, it has successfully increased the number of people willing to consider KP for membership. It has also significantly increased the perception across multiple audiences that KP is serious about proactively keeping people healthy.”

Atul Gawande first examined the lethality of combat wounds in a 2004 New England Journal of Medicine. He noted that despite the invention and use of even more devastating weapons, the wounded-in-action lethality rate (that is, the rate of death among those wounded in combat) had fallen in every major US war until “settling” at roughly 25% after WWII. Even the Persian Gulf war in 1991 had a lethality rate of about 24%. But then, somewhat inexplicably, the combat lethality rate in Iraq and Afghanistan since 2001 dropped to just under 12%.

The notion that the lethality rate “settled” at 25% after WWII is somewhat misleading. The rate actually follows a somewhat predictable, logarithmic path. If you were a military planner in 2001 asked to estimate the combat deaths of a long war in Iraq or Afghanistan, you would have used this logarithmic model. It would have predicted a lethality rate of 20.5%. The exact rate, of course, could not be predicted with much precision. So it would have been useful to know the range of lethality rates to expect. The model would predict that the actual rate would likely be between 14.2% and 26.8%.  This would have been consistent with an ongoing improvement over the most recent experience in the Persian Gulf in 1991, when the lethality rate was roughly 24% (albeit on a very small base of wounded). It turns out that the rate for the current war, as of January 2010, is only 11.7%, which is much lower than the 20.5% expected and even well below the range of what would be expected. Why?

There are two ways to think about this. The first, explored by Gawande, is that the improvements prior to 2001 were the result of a process of discovery that led to incremental improvements year-over-year. This explains the near-constant decrease in the lethality rate every year since the Revolutionary War. Gawande attributes the significant improvement in the 2001-2010 rate in Iraq and Afghanistan to a change in the basic principles of R&D used by the military. After all, there have been no advances in medicine since the Persian Gulf War in 1991 significant enough to explain the transformational improvements suggested by steep decline in the lethality rate. But what if this seemingly smooth process of improvement is really the result of a series of big breakthroughs? These would lead to significant reductions in lethality followed by relatively flat periods of lethality.

This explanation is plausible. Antiseptics and anesthetics were more widely used after 1800, the use of combat medics was pioneered in the Civil War and amputations were more widely used in the Napoleonic period before WWI. During and after WWII, fields hospitals and MEDEVACs became regular features of combat. These inventions could explain a step-function pattern rather than a smooth process of continuous improvement. In this context, the recent improvements in lethality are simply a result of a significant innovation. Without a significant improvement in medicine to explain the lethality declines, the step-function improvement must be in the systems and processes rather than the quality of the medicine or surgical techniques. Indeed, Gawande outlines several reasons for the recent improvement, which include:

• More widespread use of body-armor and eye-protection
• The development of Forward Surgical Teams (FSTs) of leaner and more mobile units of 20 surgeons, nurses, medics and other support personnel who are farther forward, closer to battle.
• A military surgical strategy focused on damage control, not definitive repair, “whatever is necessary to stop bleeding and control contamination without allowing the patient to lose body temperature… Surgeons seek to limit surgery to two hours or less, and then ship the patient off to a Combat Support Hospital (CSH), the next level of care.”

These are examples of improvements in the systems and processes rather than the invention of new medicines or surgical techniques. Gawande’s thesis that the recent improvements have been driven by a focus on systems and process performance. But this transformation is a step-function breakthrough in a series of step-function breakthroughs.

There are two general conclusions from Gawande’s observations. First, true innovation and improvement in disciplines like R&D and Product Development are more often the result of step-function breakthroughs than from continuous improvement. Second, a focus on performance can lead to further breakthroughs as the process of discovery reaches diminishing returns.

Sources: Military Care for the Wounded from Iraq and Afghanistan and Better: A Surgeon’s Notes on Performance

What do successful brands like Zappos, Google and New Belgium all have in common? Their employees exhibit passion and energy for their company, their brand and their ability to deliver on the brand promise.

At Zappos, they position their brand to be “a service company that happens to sell shoes among other things.”  However, providing great service requires a customer-focused culture. So their number one core value for the company is “Deliver WOW through service.” They train and empower their employees to live and deliver “WOW,” and make “WOW” part of the every day vocabulary.  All new hires at Zappos.com Las Vegas headquarters, “including accountants, lawyers and software developers,” are required to go through Customer Loyalty training.

At Google, they realize that in order for employees to be champions of the brand, they must also be champions of their own products.  It is a culture norm for all employees to use Google’s products daily in their work, and there are ways to easily relay feedback and share ideas for the innovation process.  To make sure the “Google blinders” aren’t on, employees also try out all of their competitors’ products.  Through this practice, employees stay up to date on continuous product iterations and innovations that occur each day, and most importantly, know first hand what sets the Google brand apart from everyone else.

New Belgium is a microbrewery in Colorado with a large and loyal following. New Belgium has built a brand based on sustainability, which they preach internally as well as externally. After one year of employment, all employees gain an ownership stake in the company and a customized New Belgium bicycle, which symbolizes the company’s commitment to sustainability. Employee ownership also empowers employees to carry forth the brand on their own, without a mandate from above. In 1998 employee owners voted unanimously to turn New Belgium into the first wind-powered brewery. In addition, 1% of all revenues go to environmental non-profits.

All of these examples show great practices in internal branding, which can be defined as programs and tools to inspire and engage employees to “live and deliver” the brand. As many successful brands have learned, employees can be your most passionate and powerful brand champions.  However, brands can also fail because they lack the organizational buy-in, energy and momentum to achieve a sustainable and recognizable position in the marketplace.  Studies show that, on average, only about one-third of employees are actually highly engaged champions of their brand. This means, that many brands, new or existing, are at risk of failure.

Lessons

We recently worked with a company to develop a strong, recognizable brand and positioning and faced this very challenge – how to engage the entire organization to be champions of the brand.  Based on this experience, we wanted to share our learnings with you, because not all brands are like Google and gain instant brand enthusiasts in the hiring process.  When we started this work, we were focused on two important steps: 1) creating an effective and compelling brand strategy and 2) effectively launching the brand in the market.  However, there remained an extremely important step in the middle – launching the brand internally.  To do this, we first thought about our biggest organizational obstacles.  For any company embarking on an initiative to brand internally, here are some important questions to consider in determining the challenges ahead:

•    Do senior leaders believe enough in the importance of branding and the brand itself to stand behind it and invest in its success?
•    What is the current mindset of employees at the start of this initiative? Have there been failed branding initiatives in the past that may cause employees to be more skeptical?
•    How large and spread out is the organization geographically, and are functions and regions well aligned and in close communication?
•    Has the company ever had a customer centric mindset that lends itself to the importance of branding, or is there a “build it and they will come” mentality?
•    How well do employees believe in the strength of the current offering and its potential?

Even if your answers to these questions make you skeptical about the outcome of an internal branding initiative, our recent work in this area has unveiled some key initiatives that will increase your chances of success.

•    Have it come from within
•    Build circles of influence
•    Don’t just tell…inspire
•    Educate and engage
•    Make it more than words on a page

Have it come from within. When developing or revitalizing a brand, it is important to make employees feel like they are part of it.  When people feel responsible for the brand’s origin or direction, they have a lot more passion and ownership, versus when they are told by Marketing or the powers above what the brand is to be.  Methods to instill ownership of the brand range from a simple employee wide survey to gather opinions, to one-on-one interviews with various stakeholders, to having people from key regions and functions react to iterations in the brand’s development.

Build circles of influence. This is particularly important for large, complex organizations, in which Marketing is limited by the reach and number of people on the team.  Before a new brand strategy is rolled out to the entire organization, it’s important to immerse select employees in its development.  These individuals could be:

•    Organizational leaders: Senior management or individuals with strong influence within the company
•    Early pioneers: Individuals or groups who will be the initial implementers of any new brand strategy “proof points” in the market
•    Motivators: Employees with a natural skill to inspire others in the organization around an idea and who have strong passion for the potential of the company
•    International counterparts: Individuals in offices around the world that serve in one of the three roles above

Don’t just tell…inspire. In sharing the brand strategy with employees, it is important to take measures to inspire them to believe in the brand and its promise. This is important because emotions help people care.  When people are emotionally engaged by an idea or initiative, they are more likely to become part of it and take action.  Some methods to inspire include immersion workshops to generate excitement around the possibilities of the brand, or creative forms of media to communicate the meaning and essence of the brand.  These could include an object for their desk that illustrates the soul of the brand, a compelling brand film that conveys the emotional promise, or mocked up visuals illustrating the “imagine ifs” for the future brand.

Educate and engage. Knowledge is power, so it is important to create a central forum to educate the organization about the brand and all of its elements.  It is also important to clearly connect the brand strategy back to the role of every individual in the company.  Concepts that stick in an organization are clear, not abstract or ambiguous. In order to make something clear and easy for others to understand, you should explain it using concrete images that take advantage of existing schemas in the audience’s mind.6 Without this information, employees, especially those outside of Marketing, are disengaged from the brand.  An individual who works in Accounts Payable is not likely to realize that her actions and dialogue with customers, partners or vendors can speak volumes about the brand.  Many brands address this through a creative and inviting brand website that is accessible to employees, vendors, partners, etc. and contains information, guidelines, role play scenarios, etc. as well as a place for open dialogue and questions.

Make it more than words on a page. Depending on past experience with the organization or previous employers, many or some employees prefer to reserve their efforts and go into “wait and see” mode when a new brand strategy is launched internally.  Without tangible proof points that the company is making impressive changes in its approach to align with the new brand, they might feel as if they are wasting their energy on something that will never come to fruition.  This does not mean that a company has to spend millions changing its entire go-to-market approach to turn employees into believers.  In fact, new branding efforts that are broad and spread too thinly across every aspect of the organization lose their meaning and commitment and are usually unsuccessful.  Instead, the best approach is to identify select initiatives within the company that will have the biggest initial impact for the brand relative to the level of required investment, and start there.

Conclusion

“A brand that captures your mind gains behavior. A brand that captures your heart gains commitment.” When implementing a new brand strategy, employees can be your toughest customers, however, when the organization is rallied around the brand, it can be a formidable force in the market.  We have seen this through the incredible success of brands like Zappos, Google and New Belgium, all of which have enviable brand ambassadorship.  By capturing employees’ hearts, giving them the tools and information to engage, and proving leadership’s commitment to execution, an organization can succeed in creating powerful brand champions.

Sources:

Brandeo. Brands: Zappos Brand Based on Great Service Not Lip Service
Building a Customer Focused Culture, Presentation by Tony Hsieh, CEO of Zappos
Interview with Google employee
www.newbelgium.com
“7 great places to work” CNN.com
Employee Brand Engagement: It’s Not a Myth—Happy People Make Happy Businesses.
Made to Stick: Why Some Ideas Survive and Others Die, Dan Heath and Chip Heath
Scott Talgo, Brand Strategist
lil 1/2 pint

Marketers are a lot like consumers. Both are human, and both are fallible. As humans, we all have a limited capacity for digesting and making sense of information. Which is a problem, since both marketers and consumers are being confronted with more information than ever before. This dichotomy was forecasted as early as the 18th century by French philosopher Denis Diderot:

“As long as the centuries continue to unfold, the number of books will grow continually, and one can predict that a time will come when it will be almost as difficult to learn anything from books as from the direct study of the whole universe. It will be almost as convenient to search for some bit of truth concealed in nature as it will be to find it hidden away in an immense multitude of bound volumes.” Encyclopédie (1755)

The same principal holds true in a professional context. Case in point: the NASA Challenger disaster in 1986. The scientists who tried to persuade their superiors to postpone the launch had all the right data, but it wasn’t presented in an easily digestible form, as statistician Edward Tufte points out in his book, Visual Explanations. These are the two charts scientists had describing the O-ring erosion, which led to the crash.

It is only when this same data is charted along a temperature axis (thanks to Tufte) that the problem becomes abundantly clear: cooler temperatures increase the chance for damage.

Of course, not even 18th century French philosopher Denis Diderot could have foreseen the emergence of computers and the internet, which have put massive amounts of data within our reach. As marketers, we now have access to enough numbers to make our heads spin, from volume projections to time spent on websites and everything in between. And while all of this information can make our jobs easier, we need to make sure that we aren’t overwhelmed by it.

So what does all of this mean? Information is, at its basic level, a tool that we use to make decisions. Before diving into all of the information at our fingertips, we need to ask what decisions it is enabling us to make and filter out unnecessary information accordingly.

We also need to make sure we are giving consumers the right amount of information, as too much can only get in the way. Consider Apple, an over-used but nonetheless relevant example. In product packaging and on the products themselves, Apple displays only the relevant pieces of information. The only visible words on the computer I’m typing on right now are “MacBook Pro.” Beyond that, the product design speaks for itself, and Apple has recognized this.

That’s not to say everything should be simplified. In today’s consumer-powered market, many consumers are looking for large amounts of product information when making purchases. But this information shouldn’t be thrust upon them. Rather, it should be easy to find when sought out by consumers.

The bottom line: Keep it simple, know your end goal, and use information selectively to achieve it.

Image source: AskTog.com

With new product failures exceeding successes, is it surprising that the rate of failure is not declining over time? As innovators, are we learning from our failures? John T. Gourville, of the Harvard Business School, may have part of the answer. He argues convincingly that the answer may be the psychological costs created when new products force consumers to change their behavior. Essentially, he argues that new products must not only provide a significant perceived benefit (i.e.- less costly, faster, stronger, etc.) but also provide minimal behavioral change.

An illustration of this idea is the difference in adoption between the dishwasher and the microwave oven. The microwave reached 60% household penetration in 15 years while the dishwasher required almost half a century. The behavioral change from using a conventional oven to using a microwave oven (i.e. -open door, press button and cook) was minimal compared to the change in behavior required to use dishwasher.

Image source: susanonline

Open innovation, by definition, requires that a company understand and assimilate highly specialized information from diverse inputs outside of its traditional competencies. That sounds scary. It requires the company to develop a new set of capabilities. That sounds even scarier to anyone who has tried to teach an old company new tricks.

Among the most important of these new tricks is how to quickly and effectively triage information. To accelerate this process (and do it right) many companies have learned to use external subject matter experts to quickly and inexpensively synthesize information and assess innovation opportunities. It may be tempting to find the expert with gravitas but those having the most success are not using the big name HBS authors. They are tapping the “everyday” expertise of disciplines as prosaic as pharmacists, chefs and even auto mechanics. This “innovation triage” is a capability that tomorrow’s best-in-class innovators are mastering today.

Image source: safoocat

The word innovation is pervasive in business today. So pervasive, in fact, that the Wall Street Journal has identified something called innovation fatigue, which IBM lampooned with its Innovation Man Ad. But most of us know that real competitive advantage is the de facto product of some form of innovation. So which is it - lampoon or savior? The problem is that innovation as a business discipline has come with its share of hucksters and snake-oil salesman who define innovation as “facilitating a culture of out-of-the-box, goal oriented, value added, disruptive, web 3.0″ thinking. For all of us in the business of innovation who are not selling snake oil, I propose the following basic definition:

Business Innovation (biz’-nis in’-e-va‘-shen) n. a significant change to an existing business process, program, product or service that leads to profit growth

Note that under this definition innovation is well beyond “product” and, above all, it must lead to profit growth. Lampoon or savior? Profit growth sounds much more like savior to me.

Every so often I see a presentation or read a book that brings clarity to something that I have learned intuitively through my client work but haven’t quite articulated yet. Last week’s Front End of Innovation conference provided several of these moments of illumination.

Microsoft taps hard-core gamers to create the Xbox

Dev Patniak, the author of Wired to Care told the story was about how Microsoft entered the gaming and entertainment spaces. Several years go Sony’s Playstation represented a serious threat to Microsoft. With a DVD player and Internet access, Playstation was positioned to challenge the PC as one of the primary information and entertainment devices for the home.

Microsoft hired a team of hard-core gamers – people who indulge in all-night marathons of “first-person shooter” games driven by immense volumes of caffeinated energy drinks. This team created the Xbox and launched it with the blockbuster game, Halo. It was the most successful new game system launched in the US in over 20 years and successfully countered the Playstation threat. A few years later, Apple launched the iPod. Microsoft again recognized the threat. They moved quickly to have the Xbox dream team develop a response for Microsoft. The result was the Zune – a total failure. How was Microsoft able to enter one market with entrenched, mature competitors successfully and utterly fail in another using the same exact team and approach?

The difference between the Xbox and Zune

It turns out that the Xbox development was an “empathic process.” In other words, the developers knew exactly how to handle the thousands of little everyday decisions about how to create the Xbox because they intimately understood the life of hard core gamers. They were gamers. They literally developed a system based on their intuition as gamers. This team of gamers was completely disconnected from the audiophiles who were the initial buyers of mp3 players. They developed the Zune from reading research reports about the target segment. They had no intimate knowledge about the life of audiophiles and they never engaged any experts or luminaries with tacit, intuitive knowledge about audio.  Therefore, they had no intuitive basis for making all the daily decisions that impact what the product would look like and how it will be positioned.

Innovation success through empathizing with consumers

This pattern of success-through-empathy has been repeated at companies like Harley-Davidson (they all ride motorcycles) and Jet Blue (the CEO flies coach 2-4 times a week to intimately immerse in the customer experience). P&G makes its senior management spend several weeks living with research participants so they better understand, at an intuitive level, the lives of their target consumers. The primary idea is that corporations often mute rather than amplify our intuition about customers and we can lose touch with the outside world unless we create innovation processes that enhance our natural empathic abilities.

Polo Ralph Lauren is a highly empathic company. It never conducts market research – no focus groups, no ethnographies, not even secondary research. And yet it has developed and continued to maintain strong brands without gathering and analyzing data about consumer preferences and buying habits. This is almost heretical in the world of brand marketing.

But is it? I would make the case that Polo Ralph Lauren, like Harley-Davidson, is among the most empathic organizations. Walking around the Polo Ralph Lauren headquarters in Manhattan is like stepping in to catalog photo shoot in Nantucket. They all wear Polo Ralph Lauren and more importantly, they live the Polo Ralph Lauren lifestyle. Polo Ralph Lauren hires people who understand the target segment because they are the target segment. And their leadership embodies the values and lifestyle. People at PRL develop an intuitive sense of the styles and colors that will shape the next season’s fashions by living everyday in the world of their consumers. They are intuitively equipped to make the thousands of decisions about fashions and colors and advertising and branding that will strengthen their brands and appeal to their consumers because the result is intuitively appealing to them. Just like the bearded men on the assembly line in Milwaukee and the caffeinated gamers in Seattle have an intuitive sense of how their work will appeal to, well, them.

Image source: aagre_ve

The Front End of Innovation conference is coming up May 18-20. (r)evolution principal Brad White will be speaking. To stay on top of all the latest happenings before the conference, make sure you check them out:

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