Author Archives for Alan Hart

2 Reasons for Apple’s Distortion on Tech Sector Profitability

I received the below chart from Business Insider Monday, which highlights that without Apple the technology sector profits would be down 3% this year vs. with them profits are up 7%.  Why is Apple out performing and at such a degree against the back drop of all other technology sector companies?

Source: Chart of the Day from Business Insider
Without Apple, the tech sector's profits would have been off by 3% in 2011, according to this chart from Barclays Capital. With Apple, profits are up 7%.

There are many possible explanations and many have come before me trying to explain either the “Steve Jobs effect” or that the Apple  brand is the main component. Two points I think are at play are 1) differentiation and 2) marketing capabilities (the Big “M” marketing not marketing communications). And yes, brand is at play and I will show you that too.

First consider this statistic on differentiation, 80% of managers say their company is strongly differentiated but only 10% of customers agree (C. Zook and J.Allen, “The Great Repeatable Business Model”, Harvard Business Review, November 2011).  I think this is more true than most technology executives would allow themselves to admit. Unfortunately for those companies, this is within any organizations full control to find relevant differentiate in their respective markets.

Source: Chris Zook and James Allen, “The Great Repeatable Business Model”, Harvard Business Review, November 2011

The second is marketing capabilities, Keen’s body of academic research we know that a 1% increase in market orientation and marketing capabilities yields a 6% increase in return on assets. This coupled with a brand impact for Technology firms where 1% increase in brand equity drives over $650 million in additional cash flow the next year or over $1.3 billion in market capitalization.

Source: Keen Strategy Research

The bottom line is Apple is excelling at creating meaningful differentiation and has built the right market orientation and capabilities to manage the business and as a result the brand. Apple is also taking advantage of arbitrage (whether they realize it or not) because in the technology sector companies just are not as good on these dimensions and hence there is more upside for a firm that can get this formula right.

The Brew-off: Starbucks vs. Green Mountain

Green logo used from 1987-2010, still being us...

Image via Wikipedia

Adage reports that Starbucks will enter the single-serve coffeemaker market this holiday season. Green Mountain has largely created the category and continues to dominate it, followed by lesser known players Tassimo, Senseo, Nesspresso. Will this work for Starbucks?

Likely Starbucks will sell units and Green Mountain dropping 15% in trading after the announcement signals The Street agrees, but I think they are missing a core ingredient to this business model — Selection.

Mr. Schultz [CEO of Starbucks] pointed out that the at-home coffee machine will not cannibalize Starbucks’ own retail business. Also, he said, while Starbucks plans to offer only Starbucks-branded coffee for now, “we reserve the right to open the system to others, and we have not made that decision as of today.”

Without choice besides Starbucks, where does Mr. Schultz see volume coming from? Looks to me to be a “finger in the eye” of Kraft who distributes the Starbucks brand coffee in grocery channels. Shifting consumers from a bagged coffee to predictably higher margin per serving single-serve option will take a sizable investment from Starbucks.  This is a challenged business proposition with sizable investment to limit choice and market size this early in the game.

Keurig, the Green Mountain owned device, offers K-Cupswith almost every imaginable flavor or branded product from Starbucks to Dunkin Donuts to now iced tea and coffee products. What Keurig recognizes is that this is a network effect provided by the physical device and you have to serve the whole house along multiple need states (e.g. morning start caffeine, afternoon relaxation)  to generate growth.

I am curious to see where Schultz and Starbucks takes this and whether they see the opportunity here to create a real shift in how they have operated — from exceptionally designed, controlled choices for consumers to allowing the consumer to drive choice in their home.

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Top Brand Measurement Firms Can’t Agree, Are You Surprised?

I was reading a recent Adage article “Study Finds Marketers Don’t Practice ROI they Preach” where the author highlights the following:

MASB President Meg Blair noted that four major brand-valuation firms (Interbrand, Millward Brown’s BrandZ, CoreBrand and Brand Finance) peg General Electric’s brand value at between $30.5 billion to $50.3 billion. Two of those firms had GE’s brand value rising in the past year: one by 2%, one by 12%. Two showed its valuation falling: one by 4%, one by 10%.

Here is the visual from the report, which I highly recommend you download here.

GE Brand Value Comparison Chart

GE Brand Value Comparison from GE report to The MASB

Are you surprised? Probably not, we do need a better system and measures. More importantly as Ivan Cayabyab from GE points out the utility of these tools are suspect. We need more diagnostic, actionable and predictive measures of Brand Equity.

Keen® is working on this problem with our Brand Value Maximizer™ methodology. I would love to talk to you if you are looking for a better way.

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iPhone iMessages don’t count towards your text usage

Business Insider Chart of the Day

I like to think I am ahead of the curve on understanding technology and especially wireless, but some how this iOS feature for iPhone to iPhone messaging did not get through. iMessages do not count towards your text usage. 

This is doubly painful since I recently upgraded my plan to include unlimited text on our family plan because my lovely wife has all but left email behind and replaced with texting. Maybe I should reconsider?

Anyway, I would love to know why I haven’t heard about this until now? Was it downplayed by Apple because it wasn’t inclusive of Android and other phones? Or was it an attempt by the carrier to push cost back to Apple (their user are notorious for high data usage vs. compressed data from Blackberry devices), which has now backfired (lowering the need for text plans)?

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Can We Save Marketing?

indecision dice

Image by snigl3t via Flickr

Over the last six years, I have had a personal interest on the verge of a crusade to better understand and study lead marketers and CMOs across industries. My concern, after meeting well over 300 leaders, is marketing is lacking influence and at some companies is considered “damaged goods”.

How do we fix it? The question I hope to answer over the coming months. There are three areas of concern, which I believe highlight the main issues.

1. Communications heavy, impact light

Historically, marketers and our peers in the executive ranks have been hyper-focused on communications – the latest ad, hot new website or now how many people “like” us on Facebook. We have lost substance and, in some cases, lack the will and determination to educate our organizations on what marketing is and is not. Traditional marketers seem to be less likely to hold the CMO post. In many of the companies I have spoken with, it is more likely that someone from sales, product or operations to be in the CMO role. The stinging reality… they are doing a better job. Why? Probably because they have a broader perspective on what is driving the business and how to harness it.

2. Losing influence, merging functions

Marketing leaders have lost influence. A recent IBM study of 1700 CMOs, show that less than half of the CMOs surveyed have much sway over key parts of the pricing process, and less than half have much impact on new product development or channel selection. Being a Marketing leader is such a herculean task of political gamesmanship to drive a cohesive strategy there is now wonder that the average tenure is still less than ½ that of the CEO. Despite these odds there is still hope as it seems a trend is growing in combining posts like Chief Commercial Officer or Chief Sales & Marketing Offer or Chief Marketing and E-commerce Officer. Although a great recognition on part of CEO and board that greater ownership is needed, they still lack the strategic focus on marketing in its potential long-term impact.

3. All-stars abandoning ship, lack of pride

My gravest concern is our very best are abandoning ship. The “best of the best” marketers that I have spoken to, rarely self-identify themselves as a marketer but rather opt for a “business leader”, “business executive”, “driver of the business”, etc. When I have asked do you consider yourself a marketer, their voice gets quiet and they say “no.” Despite the fear of being pegged a marketer, almost all agree that marketing is at the core of how they approach their jobs and that marketing with a big “M” is what more organizations desperately need.

Depressed yet. There is hope.

We have to start thinking about what matters again. We need to learn from those we think of as magicians of the practice. At the heart of what marketers are trying to accomplish is meaningful differentiation and capturing uncontested demand. “Meaningful differentiation” is difference that matters and customers are willing to pay for. As for “uncontested demand”, this term comes from Blue Ocean strategy and is the whitespace source of new demand we all seek that allows our products and services to occupy a new space that satisfies a real need not previously addressed.

Let’s all get back to what matters, which should deliver the impact, influence and pride marketers are lacking today. Help save marketing!

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Kindle Fire vs. Apple iPad: A Story in Innovation Strategy

First, after a year away I am back to blogging. More to come on what I have been up to for the last year, but until then, please read on…

After reading tons of stories on the recent Fire launch and why we should “thank Amazon”, I found myself asking a different question: What is the innovation rationale for each product and will the Fire win or lose?

Wikipedia

Well it is hard to say for certain, but I will take some leaps to explain one view. It would seem that Apple had been eyeing the tablet space for some time and watched as other companies from HP to Toshiba had tried. In 2005, I was party to meetings where Intel and Asus were shopping 7-9″ screen devices to all manufacturers trying to drum up support for the form factor and their respective piece parts. What makes Apple’s story seemingly unique is that the consumer and the experience seemed to be at the heart of innovation as oppose to the previous attempts that were PCs made to look like a tablet (See picture of early HP design).

Why is this important? Well knowing the rationale for the innovation may give us all a window into how successful each will be. If Apple was starting with consumers and trying to build a better experience that was neither satisfied by the line of computers or new iPhone, what was Amazon’s rationale?

Amazon’s rationale seems to be more focused on a retail-dominate strategy, trying to increase the points of purchase (or store fronts). This is to say that Amazon as a e-commerce retailer has dominated its channel as the Best Buys and Circuit City’s of yesteryear did in physical stores. With increasing consumption and purchase occuring in mobile platforms versus on a computer, Amazon’s business model is under attack, especially in digital consumption. The primary competition in mobile purchase is Apples iTunes and App Store and with well over 100 million iPhones on the global market and 25 million iPads, Amazon has a lot of ground to make up.

To be fair, Amazon may feel that price conscious consumers will flock to the device. This is probably true for a mass market approach that make great holiday gifts, but will they still be happy with the device 6 months from now? As their recent earnings announcement and great analysis points to lower margins for some time to come and the company alludes to a “razor-razor blade” approach to making money, the strategy will only work if consumers continue to use the device and purchase at or above those that purchase the iPad and other devices. Is Kindle Fire really going to attract the most valuable consumers of digital content?

As a final rap up, the innovation rationale has delivered two different approaches to business that will make a great case study over the next year. Keep watching as consumers cast their votes (purchases). My bet is Apple wins and the Fire may turn out to be the next Zune.

The Power of “Why”

Simon Sinek’s TED Talk has been haunting me for months… “People don’t buy what you do, they buy why you do it”.

What is it that you believe? What drives you?

What does your organization believe? Does it drive how you do what you do? Is it inspiring, motivating, intoxicating?

If not, maybe you need a change. I did.

The New Face of Marketing Leadership

In the below slidecast, I highlight the findings of our recent research (starting around 7 minutes in) that spans over 60 interviews with CMOs…

I welcome your thoughts, comments, and questions. The research is ongoing now in the 3rd year.

Achieving change & transformation: What motivates us? – Dan Pink explains

A friend forwarded me the video below, a must see from Dan Pink, author of Drive and A Whole New Mind.

Key takeaways for motivating knowledge workers:

  • Pay people so that money is a non-issue
    This flies in the face of traditional motivation schema – such as bonuses and pay for performance mantras. Carrots and sticks work for repeatable or physical tasks, but not for cognitive tasks. If you don’t pay people enough, they won’t be motivated. If you do they can focus on the work and the following three items come into play…
  • Allow autonomy which allows people to explore passions and ideas
    We have all heard about companies that allow a number of hours each week/month to pursue an interest loosely related to work. Turns our this is a great source of innovation and growth potential to companies that are able to harness the creative energy of their talent.
  • Enable mastery, which challenges us to be better and is inherently rewarding to contribute
    Learning to master a skill is fun and motivating. This is why people play instruments or sports on the weekend. Dan highlights this is a driver of open-source software (e.g. Linux, Apache).
  • Purpose provides a personal connection and allows us to be self-directed in a common way
    Lack of meaning at work can lead to crappy products, poor performance or even corrupt behavior in some cases. People are looking for organizations that clearly understand and can articulate their contribution to the world. This provides context and a guide to an employees in directing their own contribution.
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Leading Outside the Lines – enabling change and transformation

Möbius transformation
Image by fdecomite via Flickr

Through my previous research with 60+ CMOs on the evolution of lead marketers — transformative leadership has emerged as a path forward. The question now on my mind is how does change take root and what can leaders do to foster the acceleration and permanence behavior  change.

Luckily yesterday, I was turned on to The Katzenbach Center by David Garrison, former CMO of Indaba Music. David was a consultant with Katzenbach before it became a part of Booz & Co. The Katzenbach Center is focused on innovative approaches to organizational change and culture.

The link to the video below is a must see and I have purchased the book. Katzenbach has honed in on one significant element at play — the informal structure and operations of an organization. Many change initiatives I have seen struggle to find the right balance of formal and informal mechanisms to effect change initiatives. What have you seen that works? Do you think informal mechanism are significant? Please comment.

Link to Leading Outside the Lines Video

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