The Rotman School of Management’s Roger Martin writes on the Harvard Business Review blog that “business schools are generally dedicated to narrow knowledge fields and opposed to integrative knowledge, they have assiduously maintained two separate disciplines in marketing and strategy to the benefit of no one.
It’s no secret that in many industries today, upstream activities—such as sourcing, production, and logistics—are being commoditised or outsourced, while downstream activities aimed at reducing customers’ costs and risks are emerging as the drivers of value creation and sources of competitive advantage. Consider a consumer’s purchase of a can of Coca-Cola. In a supermarket or warehouse club the consumer buys the drink as part of a 24-pack. The price is about 25¢ a can. The same consumer, finding herself in a park on a hot summer day, gladly pays two dollars for a chilled can of Coke sold at the point-of-thirst through a vending machine. That 700% price premium is attributable not to a better or different product but to a more convenient means of obtaining it. What the customer values is this: not having to remember to buy the 24-pack in advance, break out one can and find a place to store the rest, lug the can around all day, and figure out how to keep it chilled until she’s thirsty.
Downstream activities—such as delivering a product for specific consumption circumstances—are increasingly the reason customers choose one brand over another and provide the basis for customer loyalty. They also now account for a large share of companies’ costs. To put it simply, the center of gravity for most companies has tilted downstream.
The strategic question that drives business today is not “What else can we make?” but “What else can we do for our customers?” Customers and the market—not the factory or the product—now stand at the core of the business. This new centre of gravity demands a rethink of some long-standing pillars of strategy: First, the sources and locus of competitive advantage now lie outside the firm, and advantage is accumulative—rather than eroding over time as competitors catch up, it grows with experience and knowledge. Second, the way you compete changes over time. Downstream, it’s no longer about having the better product: Your focus is on the needs of customers and your position relative to their purchase criteria. You have a say in how the market perceives your offering and whom you compete with. Third, the pace and evolution of markets are now driven by customers’ shifting purchase criteria rather than by improvements in products or technology.
“When Marketing Is Strategy,” Harvard Business Review
According to Mike Porter, author of Competitive Strategy, a firm creates a sustainable competitive advantage over its rivals by “deliberately choosing a different set of activities to deliver unique value.” Strategy therefore requires making explicit choices—to do some things and not others—and building a business around those choices.
In short, strategy is choice.
The great Harvard marketing professor Theodore Levitt used to tell his students, “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole.” Every marketer agrees with Levitt’s insight. Yet these same people segment their markets by type of drill and by price point; they measure market share of drills, not holes; and they benchmark the features and functions of their drill, not their holes, against those of rivals. They then set to work offering more features and functions in the belief that these will translate into better pricing and market share. When marketers do this, they often solve the wrong problems, improving their products in ways that are irrelevant to their customers’ needs.
When people find themselves needing to get a job done, they essentially hire products to do that job for them. The marketer’s task is therefore to understand what jobs periodically arise in customers’ lives for which they might hire products the company could make. If a marketer can understand the job, design a product and associated experiences in purchase and use to do that job, and deliver it in a way that reinforces its intended use, then when customers find themselves needing to get that job done, they will hire that product.
Marketing myopia is a term used in marketing as well as the title of an important marketing paper written by Theodore Levitt. This paper was first published in 1960 in the Harvard Business Review, a journal of which he was an editor. “Marketing Myopia” suggests that businesses will do better in the end if they concentrate on meeting customers’ needs rather than on selling products.
The myopic culture, Levitt postulated, would pave the way for a business to fail, due to the short-sighted mindset and illusion that a firm is in a so-called “growth industry.” This belief leads to complacency and a loss of sight of what customers want.
Businesses invest billions of dollars annually in market research studies developing and testing new ideas by asking consumers questions they simply can’t answer. That’s because neuroscience is now telling us that consumers—humans—make the vast majority of their decisions unconsciously.
Steve Jobs didn’t believe in market research. When a reporter once asked him how much research he conducted to develop the iPad, he quipped, “None. It isn’t the consumers’ job to know what they want.” And according to some measures, the iPad became the most successful consumer product launch ever.
Marketers are living a delusion that the conscious mind, the self-chatter in their heads and the so-called “verbatims” in surveys and focus groups, are the guiding forces of action. They are rationalising the need for the wrong tools aimed at the wrong mind.
Not surprisingly, there is a sea of sameness and mediocrity and merely 2 out of 10 products launched succeed.
The truth is the unconscious mind, the seat of our motivations, communicates in feelings, not words.
Executive Vice President and Group Planning Director at Deutsch LA
“Stories are such a powerful driver of emotional value that their effect on any given object’s subjective value can actually be measured objectively,” assert Joshua Glenn and Rob Walker on their website Significant Objects. The entire site is home to an experiment that sets out to prove it.
Glenn is the author of Taking Things Seriously: 75 Objects with Unexpected Significance. Walker is the author of Buying In: What We Buy and Who We Are, and was long the “Consumed” columnist in The New York Times Magazine. Their experiment was aimed at answering the question, How much does a product’s value rise if you attach a story to it?
The answer, it turned out, was 2,706%.
Read the details of the experiment via Inc.
Stories are a particular type of human communication designed to persuade an audience of a storyteller’s worldview. The storyteller does this by placing characters, real or fictional, onto a stage and showing what happens to these characters over a period of time. Each character pursues some type of goal in accordance with his or her values, facing difficulty along the way and either succeeds or fails according to the storyteller’s view of how the world works.
Their format is not what defines them. Wherever you find human-scale characters playing a larger role than facts or proclamations and a clear lesson you can apply to your own life, you know you’re in the presence of the unique persuasion tool known as a story.
Myths are the glue that holds society together, providing an indispensable, meaning-making function. British anthropologist Bronislaw Malinowski said myth “expresses, enhances, and codifies belief, it safeguards and enforces morality, it vouches for the efficacy of ritual and contains practical rules for the guidance of man.” What we value and what we do not are codified and shared in our myths and this makes them enormously powerful—and necessary.
When myths are functioning properly, they bring us together and get us to act by using a specific formula that appears to be universal across all cultures.
Our mythic landscape has become brittle because many people have rejected the notion of thinking symbolically—and that’s unique to our rationalist modern society. Today, we demand to know if something is true or not. This is why science and religion compete so furiously. To the modern mind, only one can be right, and the other is wrong. To the mythological mind, both can easily be true. Held to the standard of literal truth, traditional myths start to crack.
Today in our extremely diverse society, we perceive the functions of story, explanation, and meaning as dispersed among the realms of religion, science, and entertainment. When it comes to closing the myth gap, no one of these is stepping up to provide the complete myth packages we need.
Here’s why: religions continue to play a powerful role in providing explanation and meaning, but please don’t call the teachings contained in their holy texts stories. Today’s mainstream religious leaders fear nothing more than the perception that their teachings sink to the level of myth. Mainstream religious communities ask that their religious stories be believed literally—and that price of entry proves too high for many. Religious myths are far from dead, but this rigidity caused them to drift further and further from universality.
Science, too, which now offers a powerful alternative to religion in terms of explanation, has shied away from the discussion of meaning. And, mainstream science, like religion, chooses not to present itself as a collection of stories at all.
Movies and television dominate our vibrant realm of imaginative storytelling, and most carry only a single burden—the expectation to entertain. Some entertainment is so popular as to achieve the status of universal cultural reference point. But few of our entertainers accept the responsibility of providing audiences with a genuine explanation of how the world works or offering deep meaning.
While pockets of forward-thinking religious leaders, scientists, and entertainers have attempted to reunify story, explanation, and meaning in their work, they all remain firmly out of the mainstream. And for a myth to function in society, it can’t exist on the fringe.
Of course, the opening of these gaps has been profoundly uncomfortable. Psychologist Carl Jung signalled an early warning about the myth gap just before the outbreak of World War I. Myth, he said, “is what is believed always, everywhere, by everybody; hence the man who thinks he can live without myth or outside it, is an exception. He is like one uprooted, having no true link with either the past, or the ancestral life within him, or yet with contemporary society.” In other words, societies without myth might easily fall apart.
Not long after Jung began to fret about men without myths, industrialists came face to face with an existential crisis of their own. World War I had mobilised the American economy to produce a tremendous quantity of material goods. Once the machine got rolling, it was no simple matter to turn it off, even once the war ended. The job and stock markets of an urbanising America absolutely depended on continued production, or economic freefalls would ensue. But production of what? There was simply not enough demand to meet the supply. The myth gap was matched by an equally disturbing demand gap.
Thus the opportunity for a new kind of mythmaker—the marketer—presented itself. In fact, American political leaders of the time practically begged marketers to step in. As a result, the marketer went from a product pitchman to a major player in our cultural destiny.
Market innovation has long been dominated by the world view of engineers and economists—build a better mousetrap and the world will take notice. This functional point of view certainly has merit. But, because it is the only way that we approach innovation, the better-mousetraps approach has had the effect of eclipsing a very different innovation world view—champion a better ideology and the world will take notice as well.
The market power that can be garnered by advancing innovative ideology has long been understood outside the business world. For politicians, artists, and social activists, innovative ideology is the name of the game. Think about Gloria Steinhem or Ann Coulter, Martin Luther King or Nelson Mandela, John Wayne or Bono, Ronald Reagan or Hugo Chavez, Greenpeace or Focus on the Family. In fact, the phrase “build a better mousetrap” would not be so familiar if its author, Ralph Waldo Emerson, had not advanced an immensely influential romantic spin on American individualism.
These individuals and groups became immensely influential by advancing innovative ideology, and thereby developing intensely loyal followers. The same phenomenon is found everywhere in consumer markets. For example, farmer–cookbook-author–television host Hugh Fearnley-Whittingstall, author Michael Pollan, the international Slow Food movement, and the American grocery retailer Whole Foods Market, amongst others, have transformed food consumption for the upper middle class. These cultural innovators have championed an alternative approach to agriculture and food as an ideological challenge to the dominant scientific-industrial food ideology. They have brought to life the value, even necessity, of winding the clock back to some sort of pre-industrial food culture in such a way that it is irresistible for the upper middle class in the United States, the United Kingdom, Canada, and other countries. Relying upon what we term myth and cultural codes, these cultural innovators have massively transformed food preferences. We call this phenomenon cultural innovation.
Cultural innovation has been ignored by management strategists, despite its pivotal role in launching and reinvigorating any number of billion-dollar businesses. The Body Shop, Ben & Jerry’s, Marlboro, Method, Whole Foods, Dove, Budweiser, Harley-Davidson, the Mini, Starbucks, Coca-Cola, Levi’s, and Snapple, to name a few, have all profited from cultural innovations. When these enterprises advanced a more compelling ideology—leapfrogging the staid cultural orthodoxies of their categories—consumers beat a path to their doors. We assert that, in ongoing conversations to improve the management of innovation, the cultural dimension of what we consume deserves a prominent seat at the table
Innovation boils down to providing a step change in the value proposition (or, if you prefer marketing language, significantly better benefits for a given price). Innovations beat out existing competition on the tangible benefits that count in the category: medical instruments that save more lives, cars that in longer with higher miles per gallon and less carbon emissions, cell phones that have more applications, hard drives that hold more data and are cheaper and smaller and more reliable. In other words, these better-mousetraps innovation models are based upon the world view of the economist and the engineer—a world in which it is only the material properties of what we buy that is important.
Curiously, this is not how consumers see it. Consumers—the ultimate arbiters of market innovation efforts—often find offerings to be innovative even though they seem quite pedestrian from a product-design standpoint. It turns out new businesses do not necessarily require radically new features that fundamentally alter the value proposition.
Consider beer. From a better-mousetraps perspective, the American beer market has long been a mature category—a notorious red ocean that resists innovation. Many product innovation efforts have been tried, and the vast majority have failed despite their seeming combinatorial creativity. Brewers have tried to follow blue-ocean strategy for many years. Combining concepts across categories, they have launched beer + energy drinks (Sparks, Be), beer + tequila (Tequiza), beer + soft drinks (Zima), and so on. All these supposed innovations were failures in the mass market.
Now let us look at the beer category from an ideological viewpoint. While the product—the beer itself—has seen only minor changes over the past 30 years, the category has been very dramatic in terms of the cultural expressions that consumers value. Incumbents have been pushed aside by new entrants with better ideology. In the popular price tier, Budweiser took off in the 1980s with branding that showcased men working cheerfully and industriously in artisanal trades, men whom Budweiser beer saluted with a baritone-voiced announcer proclaiming “This Bud’s for you!” The results were startling. The beer brand quickly became the go-to choice for working-class American men. By the middle of the decade, Budweiser was unchallenged as the most desirable beer in the country.
By the early 1990s, Bud’s ideology had lost resonance and the business sank, to be replaced by its stable mate. Bud Light took off in the 1990s to become by far the dominant American beer brand, speeding by the brand that had pioneered light beer as a product innovation, Miller Lite. Bud Light tastes little different from Miller Lite. Rather what was different was a decade’s worth of silly Peter Pan stories of men who engage in all sorts of juvenile hijinks, which conjured up a new kind of rebellious masculinity for adult men.
Consumers place such a high value on iconic brands because they play a crucial role in society. Iconic brands use their products and consumption occasions as a platform to perform a special kind of story—a myth. These myths are performed primarily through advertising, though all facets of marketing—product design, retail environment, packaging, public relations, product placements, and service delivery—can contribute to the myth.
Myths are stories people rely on to organise their understanding of themselves and the world. They work to shore up fragile world-views and identities. What was previously the work of the great religions has been taken over in large part by commercial substitutes—the products of mass culture of which the brand is one important type. Myths are neither fact nor fiction. They are neither arguments that must be tested for veracity, nor fables from which we learn moral lessons. Rather, myths present a way of understanding the world so compelling that believers feel it must be true.
Just as each religion has its iconic prophets, saints, and martyrs, today’s commercial myths have their own icons—political leaders, athletes, actors, businesspeople, and, increasingly, brands.
The name of the game in cultural innovation is to deliver an innovative cultural expression. Since cultural expressions consist of an ideology, which is “brought to life” with the right myth and cultural codes, we examine how innovation works across these three core components.
Cultural blue oceans are fundamentally different. From a cultural perspective, blue oceans are defined by latent demand for ideology, not latent demand for functionality. According to technological and mix-and-match models, opportunities are always out there in the world, lying dormant, until the right new technology or creative mix-and-match offering comes along. People always want better functionality. Ideological opportunities, in contrast, are produced by major historical changes that shake up cultural conventions of the category, a social disruption. These shifts unmoor consumers from incumbent brands, and prod them to seek out new alternatives. It is an emergent kind of opportunity that is specific to a historical moment and a particular group of people.
Likewise, the cultural innovations that respond to these opportunities are fundamentally different from better mousetraps. They are composed of specific cultural expressions, which are conveyed by the brand across consumer touchpoints.
Ideological opportunities provide one of the most fertile grounds for market innovation. Yet, these opportunities have gone unrecognised because of the extraordinary influence of economics, engineering, and psychology on management thinking. These disciplines, as different as they are, share a common assumption—in order to simplify the world, they purposely ignore cultural context and historical change. These theories remove all the messy bits of human life in order to present a tidy theory that is easy for big companies to work with. We argue that is in these untidy hard-to-measure parts of social life that some of the greatest innovation opportunities lie.
Over the course of time, phenomena enter our collective consciousness as mysteries—things that we observe, but don’t really understand. For instance, the mystery of gravity once confounded our forefathers: when they looked around the world, they saw that many things, like rocks, seemed to fall to the ground almost immediately; but others didn’t—like birds, and some seemed to take forever, like leaves. In art, there was the long battle to understand how to represent on a two-dimensional page what we saw in front of us in three dimensions. Music continues to be a mystery that confounds: what patterns of notes and sounds are enjoyable and make listeners feel happy and contented?
We start out with these mysteries, and at some point, we put enough thought into them to produce a first-level understanding of the question at hand. We develop heuristics—ways of understanding the general principles of heretofore mysteries. Heuristics are rules of thumb or sets of guidelines for solving a mystery by organised exploration of the possibilities.
So why do things fall down? We develop a notion of a universal force called “gravity” that tends to pull things down. In art, we develop a notion called “perspective” that guides our efforts to create renderings that appear to the eye to have three-dimensions rather than two. What kind of music to people like to listen to? We learn about chords, and then create song types like ballads, or folk songs, or the blues. If one follows a set of guidelines, one will likely create something that people enjoy listening to.
Heuristics don’t guarantee success—they simply increase the probability of getting to a successful outcome. They represent an incomplete understanding of a heretofore mystery. In any given field, some people barely understand heuristics, while others master them. The difference between them is the difference between one-hit-wonder Psy, author of “Gangnam Style,” and Pharrell Williams, author of scores of hit songs.
In due course, increasing understanding can (though in many cases it never does) produce an algorithm: a logical, arithmetic or computational procedure that, if correctly applied, ensures the solution of the problem.
In the modern era, a fourth important step has been added to the sequence of mystery to heuristic to algorithm. Eventually, some algorithms now get coded into software. At the coding level, there is no longer any judgement involved: the plane lands on the basis of computer instructions that are nothing but a series of 1’s and 0’s, because our understanding of gravity has moved from a mystery to a heuristic to an algorithm to binary code.
The progression of the “march of understanding” described herein has important practical implications for today’s businesspeople. Broadly speaking, value creation in the 20th century was about taking a fundamental understanding of a mystery—a heuristic—and reducing it to a formula, an algorithm—so that it could be driven to huge scale and scope.
This move from heuristic to algorithm was repeated over and over throughout the 20th century. For these companies, success depended not so much on a superior product, but on a superior process, and each is an example of the relentless “algorithm-isation” that paved the way for massive value creation in the 20th century.
This dynamic accelerated in the latter part of the 20th century when many algorithms were driven to code. While coding enables an incredible increase in efficiency, it is also true that with coding comes the end of judgement: patterns of 0’s and 1’s have no judgement or artistry—they just automatically apply an algorithm. In many respects, the extreme achievement of the 20th century is soulless numbers. Neither all bad or all good, this is simply the result of the combination of the relentless march of understanding (from mystery to heuristic to algorithm) with the relentless march of Moore’s law.
Will there be more relentless algorithm-isation? I don’t think so. I believe that we will look back on the 20th century as a tour de force of producing ‘stuff’—lots of it, as efficiently as possible. I believe we are transitioning into a 21st century world in which value creation is moving back to the world of taking mysteries and turning them into heuristics. I see the beginnings of a fundamental backlash against algorithm-isation and the codification of the world around us—a realisation that reaching to grab the benefits of scale often involves accepting standardisation and soullessness in exchange.
I believe the 21st century will go down in history as the century of producing elegant, refined products and services—products and services that delight users with the gracefulness of their utility and output; “goods” that are produced elegantly—for example, that have the most minimal environmental footprint possible, or that produce the fewest workplace injuries, whether it be broken limbs or repetitive stress syndrome.
The 21st century presents us with an opportunity to delve into mysteries and come up with new heuristics.
Rotman School of Management, University of Toronto
Synthetic Out of the often-disparate demands presented by sub-units’ requirements, a coherent overall design must emerge.
Abductive It is primarily concerned with the process of visualising what might be, some desired future state, and creating a blueprint for realising that intention.
Hypothesis-driven Primary is the design hypothesis, which is conjectural and, as such, cannot be tested directly. Embedded in the selection of a particular promising design hypothesis, however, are a series of assumptions about a set of cause-effect relationships in today’s environment that will support a set of actions aimed at transforming a situation from its current reality to its desired future state. Cycles of hypothesis generation and testing are iterative.
Opportunistic As the above cycles iterate, the designer seeks new and emergent possibilities. It is in the translation from the abstract/global to the particular/local that unforeseen opportunities are most likely to emerge.
Dialectical The designer lives at the intersection of often-conflicting demands—recognising the constraints of today’s materials and the uncertainties that cannot be defined away, while envisioning tomorrow’s possibilities.
Inquiring and value-driven Open to scrutiny, willing to make its reasoning explicit to a broader audience, and cognisant of the values embedded within the conversation. It recognises the Weltanschauung of its audience. While the architect imbues the design with his or hew own values, successful designs educate and persuade by connecting with the values of the audience.
The view that an industry is a customer-satisfying process, not a goods-producing process, is vital for all businesspeople to understand. An industry begins with the customer and his or her needs, not with a patent, a raw material, or a selling skill. Given the customer’s needs, the industry develops backwards, first concerning itself with the physical delivery of customer satisfactions. Then it moves back further to creating the things by which these satisfactions are in part achieved. How these materials are created is a matter of indifference to the customer, hence the particular form of manufacturing, processing, or what have you cannot be considered as a vital aspect of the industry. Finally, the industry moves back still further to finding the raw materials necessary for making its products.
I do not mean that selling is ignored. Far from it. But selling, again, is not marketing. As already pointed out, selling concerns itself with the tricks and techniques of getting people to exchange their cash for your product. It is not concerned with the values that the exchange is all about. And it does not, as marketing invariably does, view the entire business process as consisting of a tightly integrated effort to discover, create, arouse, and satisfy customer needs. The customer is somebody “out there” who, with proper cunning, can be separated from his or her loose change.
The customer (and the satisfaction of his or her deepest needs) is not considered to be “the problem”—not because there is any certain belief that no such problem exists but because an organisational lifetime has conditioned management to look in the opposite direction.
Even the most seasoned researchers can’t always get people to articulate their unmet needs.
Good designers spend time with the end-users of the products and services they create and involve them in the process of designing and making. They will often conduct ethnographic research to understand what it is that people actually need and want, rather than make assumptions. Through this process, designers often uncover latent as well as known needs. This ensures the products and services that are eventually created are useful, useable and desirable.
Ethnography is a description of a social group based on recorded observations of and interaction with individuals and their environments. Observations are descriptive because of the volume of data and are interpretive to make this data useful. Research is a systematic investigation that establishes knowledge.
Ethnographic research is the attentive observation, the experience, and the systematic documentation of a social group in order to establish knowledge.
Innovation is the successful implementation of creative thought and is important to business success. An important element of the creative thinking process is problem finding, an area where ethnographic research is a valuable tool. Ethnographic research allows the designer to understand consumers, including how they act, what they want, and what their attitudes, perceptions, and behaviours are. The designer can discover unmet needs and understand the impact of a product within a specific context. Ethnographic research can enable products and services to meet more market and consumer needs, thereby reducing the risks of introducing a new product.
People have a need for meaning in their lives
Ethnography provides rich insights into how people make sense of their world. For example, people incorporate rituals into their lives—but some rituals are large and public while others are small and private.
By examining the artefacts that reflect people’s lives, we learn what they value and hold dear. As a result, we can design products and services that evoke meaningful experiences for them.
Cultural norms influence design decisions
Ethnography reveals the ways in which cultural norms shape people’s perceptions. For example, some cultures emphasise the shape of the body and seek ways to accentuate it, while others try to minimise it. The role and use of colour can also vary greatly from place to place. By examining how people express themselves through style and ornamentation, we gain insight into how people define themselves within a group or a community.
As a result, a company’s brand and products will resonate with customers instead of striking a culturally off-key note.
Make communications powerful
Things need to be understood
Ethnography helps us learn how to communicate more effectively with target audiences, in a language and way they really understand. For example, a poorly designed communications piece can create confusion or anxiety.
By observing how people process information, we learn what words and design elements evoke desired reactions. We also discover whether people miss information completely.
As a result, the message comes across more clearly.
Ethnography enables us to create for the global marketplace
Ethnography helps us learn how products, technologies, and communications flow in the global world. Branding, experience design and point of purchase elements all tell a story. Compare how experiences work around the world, even for the same products and services. By examining local tastes, we see opportunities that are new and exciting.
As a result, we can create brand experiences that are both globally consistent and locally relevant.
What people say is not what they do
Ethnography highlights differences between what people perceive they do and what they actually do. For example, while people say they eat in a healthy way, they sometimes make less-than-healthy food choices.
By observing what people do (rather than taking them at their word), we learn more about the choices they make and how they perceive and
filter their own actions. As a result, we can create environments or messages that connect with people’s real emotions and intentions.
Behaviours provide clues to where problems exist
Ethnography vividly identifies people’s “pain points” and guides the way towards solutions. For example, the obvious solution to improve the morning commute is a cup holder.
But an experienced ethnographer goes beyond the obvious and sees how to make the experience even better—such as putting the cup
holder on the left (where it’s easier to reach while driving) rather than in the centre console (where it can be distracting).
Seeing these nuances means that the resulting products make people’s lives truly easier.
In the absence of radical product innovation, marketing can create a similar effect by finding ways to get people to re-envisage what the brand stands for. The innovation is extrinsic, not intrinsic. In cases like these, marketing creates additional and related experience that improve the brand’s value to its customers.
This strategy may take the form of a repositioning exercise that finds a new way to make what the brand stands for different and relevant to its potential consumers. A brand can create perceptions of difference based on its values, personality, tone of voice, and the causes it espouses. But—and this is a big but—this form of advantage is only as good as your last execution. Relying solely on intangible differentiation puts the marketer on a treadmill that requires continued successful implementations.
That said, even a generic category benefit can create a point of differentiation if a brand makes the benefit its own. Take, for instance, Johnnie Walker and the idea of progress. After a two-year research program designed to identify a motivating idea on which to base its marketing, the brand team identified the concept of progress as one that resonated with consumers around the world. Rather than being satisfied with demonstrating their existing status through the traditional trappings of success, the research found that men now aspired to demonstrate continued personal development and achievement.
Mark Murray, director of global consumer planning and brand building DWBB at Diageo, states:
By identifying itself with the universal values associated with the concept of progress and allying that idea with the image of the striding man and a strong marketing campaign, Johnnie Walker managed to carve out a “different enough” positioning in people’s minds. The end result has been a dramatic reversal of fortunes for the brand, with strong increases in sales and marketing share.
To the best of my knowledge, Johnnie Walker did not change its product; the brand relied on marketing to create a perception of difference. But that did not stop the “Keep Walking” campaign from helping increase Johnnie Walker’s sales by 48 per cent in just eight years. In other categories, product innovation is often the means by which brands seek to achieve advantage. This type of advantage is often short-lived, but, as Murray puts it, “the challenge is to sustain the feeling of difference.” And sustaining that feeling is often easier than you would expect. Not only is it very difficult for competitors to displace a well-established idea, but people also equate “first” or “original” with “best.”
Conventional wisdom holds that firms are largely stuck with the competitors they have or that emerge independent of their efforts. But when advantage moves downstream, three critical decisions can determine, or at least influence, whom you play against: how you position your offering in the mind of the customer, how you place yourself vis-à-vis your competitive set within the distribution channel, and your pricing.
In choosing how to position products, managers have tended to pay attention to the size and growth of the market and overlook the intensity and identity of the competition. Downstream, you can actively place yourself within a competitive set or away from it.
The persistent belief that innovation is primarily about building better products and technologies leads managers to an over-reliance on upstream activities and tools. But downstream reasoning suggests that managers should focus on marketplace activities and tools. Competitive battles are won by offering innovations that reduce customers’ costs and risks over the entire purchase, consumption, and disposal cycle.
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An incumbent is not helpless: It can stay ahead of competitors by continually redefining the market and introducing new criteria of purchase