Sunday, May 31, 2009

Published: May 30, 2009

When I saw this article in the Sunday New York Times I knew I had to share it with our community. Developing intellectual property (IP) strategies to secure market positions is critical and must be an early part of the planning process. This is a key component of our class on Implementing Growth Strategies being given this coming December.(

This article focuses on the importance of corporate logos, one component of an IP strategy, in conveying a critical message either business-to-consumer or business-to-business:

“Behold the new breed of corporate logo — non-threatening, reassuring, playful,
even child-like. Not emblems of distant behemoths, but faces of friends.
“A logo is to a company what a face is to a person,” said Michel Tuan Pham, a
professor of marketing at the Columbia Business School. “It’s hard to memorize
facts about a person when you only know their name but you haven’t seen their
face.” So logos remind consumers about companies’ traits and pluck at emotions — “the glue that ties all the information about the brand name together,” Mr. Pham

TONED-DOWN TYPE Bold, block capital letters are out. Their
replacements are mostly or entirely lower case, softening the stern voice of
corporate authority to something more like an informal chat.
“Logos have become less official-looking and more conversational,” said Patti Williams, a professor of marketing at the University of Pennsylvania’s Wharton School. “They’re not yelling. They’re inviting. They’re more neighborly.”

I chose two examples from the article (the second trademark is the new one for Wal-Mart and Kraft Foods):

The following appeared in Kraft’s press release describing their new corporate direction which serves as he underpinning of their new logo:

"With a new purpose and values setting a fresh direction, Kraft Foods also gave
its corporate logo a facelift to more clearly deliver “delicious.” Starting
today, people around the world will begin to see the new identity that
deliciously features a smile, the natural reaction to delicious foods and
experiences, and a colorful flavor burst. It signals to employees, consumers and
investors what the new Kraft Foods is all about."

Friday, May 29, 2009

Break Down Internal Barriers

One of the most insidious barriers to growth is the silo mentality prevalent in companies of all sizes but particularly large ones. The barriers range from being a mere nuisance to out and out stagnation where the internal silos almost consider their counterparts more of an “enemy” than the competition. Furthermore, companies are never organized to meet specific customer challenges; they almost can’t be. There must be efficiencies in organizing around functions, manufacturing process; technologies; brand; actual customers; etc. So, to gain the full benefit of the company’s capabilities in attacking a customer challenge, leveraging across the silos is critical. The following are some interesting approaches to enhance communication across these barriers:

•Publish everyone’s objectives and activities on the intranet so that people
know what other people are working on.
• Organise cross-functional teams for all sorts of projects. Make them as loose or as formal as you see fit but be sure that there is good mixing and that all the departments involved contribute.
• Arrange plenty of social and extra-curricular activities e.g. sports, quizzes, book clubs, hobby clubs, special interest groups etc.
• Have innovation contests where cross-functional teams compete.
• Have frequent secondments between departments.
• Deliberately rearrange the office layout from time to time so that people move desks and sit with new groups (or adopt a hot desk approach).
• Organise a cross-functional innovation incubator.
• Encourage department managers to look for ideas, input and solutions from
outside their departments. Publicly praise managers who do this.

Friday, May 22, 2009

Wal-Mart Steps Up Its Game in Electronics Aisle

Since we started the blog, we have followed the travails of three food chains—Starbucks, Dunkin Donuts, and McDonald’s. To me this saga is a great example of the dynamics of competitive separation and what happens when competitors, through their drive for more market share, end up diminishing their separation with the resulting increased competitive pricing. See the Competitive Separation section on our blog site (

Although the situation is a bit different, the closing of the electronics giant Circuit City created the opportunity for a reshuffling of the major players – Best Buy and Amazon who enjoyed a solid position in the higher end of the retail electronics market plus Wal-Mart. Wal-Mart first had to overcome an image and positioning challenge in the higher end of the home electronics business:

"Wal-Mart fought for years to be taken seriously by electronics makers that
wanted to cultivate a top-of-the-line image. Apple, for instance, didn't
sell its music players at Wal-Mart until it released the inexpensive iPod
Shuffle, and released the iPhone at Wal-Mart only after it had been selling
through Best Buy."

Best Buy is for sure still the share leader but Wal-Mart is making major gains:

"Best Buy retains a lead in U.S. consumer electronics retailing with 22% of the
total market, based on market-research estimates from Stevenson Co. But Wal-Mart has been quickly gaining. Circuit City filed for bankruptcy last November and
closed its stores in March. Its closing left about $11.1 billion in annual
revenue up for grabs, estimated Deutsche Bank."

The impact on pricing is what you would expect:

"Its moves are fueling fierce price competition. An Acer netbook, or small portable computer, that sells for $328 on is $329.99 on sells a MSI Wind 10-inch netbook for $309.99. The same machine was reduced to $298 from $308 on"

An interesting side benefit for Wal-Mart is also emerging:

"Wal-Mart also is leveraging a more subtle advantage it boasts over standalone
electronics chains: a mom-heavy clientele. Retailers say women often have final
say over household purchases of new video games and televisions. "

As with the coffee wars, we will continue to follow this story. One of the approaches Best Buy has taken to combat the price pressure of both Wal-Mart and Amazon is the creation of the Geek Squad (, a VERY successful service organization that sets up sound and computer systems for Best Buy customers. It will be interesting to see if this approach is sufficient to create competitive separation for them and/or whether the others will take their own action in this regard.

Wednesday, May 13, 2009

The Innovation Sandbox

by C.K. Prahalad

To create an impossibly low-cost, high-quality new business model, start by cultivating constraints

A key leadership role is establishing Decision Criteria that direct decision making for project resourcing. When disseminated broadly, they set the discussions across the organization and enable transparent, rapid decision making. As a powerful example, Professor Prahalad developed a set of Decision Criteria for offerings for the middle to lower levels of the human pyramid in emerging markets. They are simple in nature but very powerful in their direction and hold for any offering for this market segment:

1. “The innovation must result in a product or service
of world-class quality.
2. The innovation must achieve a significant price reduction — at least 90 percent off the cost of a comparable product or service in the West.
3. The innovation must be scalable: It must be able to be produced, marketed, and used in many locales and circumstances.
4. The innovation must be affordable at the bottom of the economic pyramid, reaching people with the lowest levels of income in any given society. “

By definition, Decision Criteria set boundaries that form the structure for what Prahalad calls the innovation “sandbox”….

““because it involves fairly complex, free-form exploration and even playful experimentation (the sand, with its flowing, shifting boundaries) within extremely fixed specified constraints (the walls, straight and rigid, that box in the sand). The value of this approach is keenly felt at the bottom-of-the-pyramid market, but any industry, in any locale, can generate similar breakthroughs by creating a similar context for itself”

What I love about the metaphor is that it counters the belief that process and specifically the Decision Criteria stifles innovation. From his example, it is clear these criteria do not stifle innovation --"the sand, with its flowing shifting boundaries"--but channel it --"the walls, straight and rigid, that box in the sand".

Tuesday, May 12, 2009

New Ads Will Stir Up Coffee Wars

“The coffee war between Starbucks Corp. and McDonald's Corp. is coming to a boil this week, as the two chains launch national marketing campaigns.”

As Starbucks Touts ‘Perfect’ Cup, McDonald’s Promises an Affordable Lift
(WSJ, May 4, 2009 - Read Full Article Here)

We discussed a powerful tool called the Value Map which positions products by their perceived tradeoff of price and quality (value). The Value Map was best described in Richard D’Aveni’s book on Hypercompetition and highlights the importance of competitive separation to the stability of the marketplace. I used it very effectively while running businesses as well as consulting them. It helps view the marketplace in the context of the perceived value from a target group of customers/consumers.

It is a construct of the price charged by competitors vs. the market average and the value of delivered, non-price attributes (function and emotive) both as perceived by the customer; it is best accomplished by using a third party to gather the information.

“The faceoff comes at a critical time for both companies: Starbucks is struggling to hold on to cash-strapped consumers, while McDonald's, which has been riding a strong wave of sales, helped by its inexpensive menu, is betting it can persuade people to buy fancy, though still relatively cheap, coffee drinks during a recession.”

First, you establish a list of no more than 10 non price attributes that your customers feel are critical and have the customer rate them from 1 to 100. The X-axis positions your offering as well as your competitors as a % of the total possible rating. The same is done with price by asking the customers what they perceive your price is vs. their competition; this can also be accomplished by an analytical price analysis if you feel uncomfortable discussing prices with your customer.

The Fair Value line (FVL) is the points of equilibrium where your customers feel they are paying an adequate price for the perceived quality they are getting. Now some possible scenarios:
- If your offering is left of the FVL, you are charging more than the perceived value delivered. You can expect price erosion unless you add more value
- If you are to the right of the line, you are not charging enough for the perceived value delivered and should consider increasing your price. This happens to be where most of my DuPont offerings were and we did refocus our efforts on increasing price accordingly.
- The trend over time always favors the customer/consumer (except in healthcare which is another discussion): either pricing will tend to drop for the same value delivered (FVL moves down); or more value will be delivered at the same price (move the FVL to the right); or prices will lower while more value is delivered (the FVL moves diagonally down).

“On Tuesday, McDonald's will begin marketing its coffee drinks on TV, radio, the Internet and in print, portraying McCafĂ© as a fun, affordable brand that can make even the most mundane daily tasks more enjoyable………
But Starbucks has taken barbs seriously from McDonald's and other rivals, including Dunkin' Donuts, and is fighting back. On Sunday, Starbucks began running newspaper ads advising consumers against trading down to cheaper coffee. "If your coffee isn't perfect, we'll make it over," one ad says, "If it's still not perfect make sure you're in a Starbucks."

The battle among Starbucks, Dunkin Donuts, and McDonald’s is a classic example. Before the “wars” started, there was clear separation—McDonald’s was A on the FVL; Dunkin Donuts was B; and, Starbucks was C. Once the “wars” started principally over their breakfast businesses, the competitive separation is diminishing towards the middle. What strikes me about this article is the differing approaches to repositioning themselves to avoid more perfect competition—when everyone is B. The Value Promise or the quality of the FVCL includes function, emotive, and economic components and all must be used in position your offering vs. competition.

It has been awhile since my last posting –I am recovering from our son’s wedding!!

I made an improvement to the blog by grouping the postings by topics highlighted in our “puzzle model” for easier reference in the future. Visit it at