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Business Strategy - Consolidation to disruption - MIKE'S FINAL

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Business Strategy - Consolidation to disruption - MIKE'S FINAL

  1. 1. Business Strategy The slow change from consolidation to disruptors and innovators The business paradigm is rapidly changing, with established companies and brands increasingly less able to protect their market share against smaller and more agile disruptors. By Dr Thomas Oosthuizen. The slow change of business from consolidation to disrupters, innovators and high value-added competitors is causing many companies to re-think their future. This is because they have realised that the more innovative companies are able to achieve far greater levels of profitability – whether in products, services, retail models, business models or any other unique way of working. Just as business is changing, so too is brand marketing, which is evolving as a result of digital disruption. The simple truth is that rapid technological advancement is changing brands, whether they want to accept it or not. Similarly, even if a large and established company writes off new upstart disrupters as being merely peripheral, they may very quickly become central. It is a reality that businesses have to contend with; the world has changed and continues to do so at a faster pace every day. Indeed, even if an established company genuinely believes that nothing in its market will change, it still has an obligation to review whether its competitive context will evolve and to rethink how it works and markets. From full-frontal attacks to brand fragmentation I call the break-up of many industries – into a plethora of consumer offers and brands – fragmentation. Fragmentation is not a full frontal attack on any given brand, or even an industry, but it does signify that the paradigm of competition is changing. It reflects the art of the possible and captures the most desirable fragments of customers from incumbent brands This makes many others sit up and take note. It also causes the industry leaders to experience a low level of discomfort and the visionaries to ask serious new questions.
  2. 2. Right now, many brands are large and almost omnipotent, making it difficult to assess how digital technology will change some industries. It is also not as though every large brand will lose all their customers overnight. Yet it is a reality that every single big brand will at some point lose customers to small flanking brands. This movement of clients may not be large at first and will often start with the more agile, profitable and aware consumers. But the early adopters may, in time, become more a mainstream trend, which is when the big players really start to feel the effects of fragmentation. For example, over the years the banks have lost much of their traditional product and service offers to other brands. This may not have impacted the organism significantly, but it is indicative of a trend that will accelerate with the availability of new technologies and the ease with which new brands are established in the digital era. Managing fragmentation within a business is facilitated with personalised media and far greater depth of consumer insight. Yet, fundamentally, defending one’s market share must start with acknowledging that fragmentation is happening in the marketplace. Brand representation moves from two dimensions to interactive give-and-take The tradition of brand marketing was based on brand representation of a ‘flat’ surface. This means it was based on what the brand wanted to present to the consumer, rather than any kind of meaningful engagement with customers. It literally started with posters. The brand held up a sign telling you what it delivered. It was simple, direct, show-and-tell. Much of brand strategy is still based on that thinking. Some industries, like tobacco, are still (literally) stuck in that paradigm. Established brands seem to find it very difficult to accept that consumers can engage with them as equals now. This engagement relies on a far deeper level of consumer insight; mass marketing and segmentation are simply not enough when individual consumers react and engage in their own unique ways. Brand authenticity lies in being able to do the same. Such two-way engagement cannot be faked, it has to be real. Being ‘average’ cannot do this either, as a brand is expected by consumers to deliver what it promises. This new and immediate communication demands a far greater interaction between marketing and the other operations of a business. Hence, marketing has now become totally central to the organisation and, while many companies may claim this was the case before, in my experience it rarely is. There was even a time when I produced
  3. 3. little 3D figures of consumers and put these in the centre of boardroom tables to represent what the business was really about. Retail interface is changing, evenif most retailers do this kicking and screaming The growth of e-commerce is forcing the retail and media industries to rethink how they operate, although this is taking much longer than expected. Some brands are starting to use QR codes for example, as are certain consumer magazines and store merchandisers. Virtual reality is also emerging in the more dynamic stores and media brands such as Sports Illustrated and National Geographic. Yet, the vast majority of retail stores and media continue to operate the way they used to decades ago. Even the early adopters of e-commerce, such as Amazon, are still stuck in a simplistic notion of predictive analytics. The brand has not moved on from its initially very innovative ability to predict the products and brands you may be interested in. This is despite the much-improved depth of data they now have about a specific individual. More data arguably enables a far greater depth of engagement with the consumer. Yet, to deliver this requires great agility and the adaptation of existing data, marketing technology and business operations. Given the array of data, social platforms and new technologies now available, the level of ‘distraction’ for the average company has also multiplied. Distraction is bad for weak brands and will attack the weakest first. At the very least, it forces companies to put consumers first, understand them well and leverage technology to engage them as effectively as possible. Not doing so leads to a competitive disadvantage that will haunt large brands that ignore it. Market share lost is not easily won back. So, for companies, the message is to change while it’s still possible and debate options while you still can. Waiting does not make a company more competitive, it simply forces the business into a corner faster. It is always better to change when you are not yet forced to. Technology enables consumer fragmentation The most marked impact of digital technology is on individual consumers. They are able to live a life of personalised interface with their friends, peers and brands. Consumers can construct their impulses, communications, networks, interests, information and entertainment in their unique ways. They can now live in their own worlds. The construction of individual reality has happened. People now create content on an equal footing with brands and large companies. They review, praise or criticise as equals with the biggest brands. They are able to make far
  4. 4. more informed decisions about products and brands than ever before. They can access vast sources of information – some highly specialised – when reviewing issues or making brand decisions. Consumers decide to share a brand’s content. Or they decide to ignore it. All-in-all, the public is in control. They have so much access that they pay attention for a very short time and then move on. This means innovation around brands and the brand experience have increased significantly. Now not only are consumers bored faster, they are also tempted by competitors more quickly. This means innovation is key, a mindset still fairly foreign to most companies. Digital technology enables total personalisation, contradicting the very principle of market consolidation The fact that digital technology enables total customisation is diametrically opposite to the traditional mass-marketing approach. A brand can now build a very personal, engaging, authentic relationship with the consumer – something that is fast becoming the new norm. The key issue for marketers is that this is now expected by consumers; hence it is no longer something a company may consider as an optional strategy. For some years, we have had brands such as BMW offer a certain degree of product customisation. Today, with a brand like the innovative Tesla electric car, this personalisation is near-infinite. The car can almost take on the requirements, needs and personality of its owner. From being able to adjust controls, update its own software overnight, or welcome its owner into the car, the Tesla is able to offer a degree of personal comfort no other vehicle has been able to achieve to date. This is largely because of a sophisticated, yet simplified technology interface. The notion of seamless consumer engagement in a consistent and integrated manner has always been elusive to brands. Manual systems, human failure, disparate technology and varying infrastructure all made consistent brand delivery complex and almost impossible to attain. Today, however, technology enables this. As the Internet of Things grows, as systems integrate and online and offline marketing channels converge, brand experiences will become more manageable and seamless. Yet, for it to happen, brands need to think this way. It will not happen if they see digital technology as an adjunct to the central business processes and the rest of marketing.
  5. 5. The best brand, regardless of category, sets the standard of engagement and experience There is something akin to ‘the butterfly effect (the concept that small causes can have large effects) in business. This happens when something small that one brand does resonates across all other brands, even if just in a tiny way. Once done, nothing else is the same thereafter. It changes the way in which consumers view all other brands, regardless of category. As an example, if my bank delivers an exceptional new experience, then that becomes the level at which I now expect other brands to behave. It re-sets the scope of engagement of all other brands. Even within the constraints of data privacy, we do not like it when our bank does not know us, or tries to sell us the same thing again and again. So while we are apprehensive of our data becoming freely available, we are also unhappy if our brands do not use it to our advantage. For example, we happily share everything about ourselves on LinkedIn because we believe it will benefit us. Is this not another paradox of modern marketing? Brand experiences are no different from experiences with friends. The better you know your friends, the more able you are to remain close to them. The more intuitive an interface becomes, the more authentic it becomes. Technology enables it, but also makes it imperative. To conclude A new business universe demands a new marketing approach. This means really putting consumers at the centre of the business and knowing as much as possible about them. Brands must leveraging technology to engage them in the way they want to be engaged. It means innovation now has to be a far more central capability of most companies. For many businesses, this also means the uncertainties it deals with have multiplied many times. Living with contradictions has become the new normal. Similarly, the changed world demands a new management style with greater agility and, arguably, the imminent demise of companies stuck in conservative paradigms. None of us can claim we know exactly where the future lies, or even what technology will be capable of in our field of endeavour. But we do know it can no longer be business as usual. We know we need to ask the hard questions, even if we won’t have answers at times. We know we will need to be agile. And we also understand that will need to inculcate innovation into our culture and DNA.
  6. 6. Ends Words: 1 940 Dr Thomas Oosthuizen is Global Consulting Director at Acceleration. With over 30 years of experience, he is a marketing and brand strategy expert working with many global leaders in their field. Oosthuizen holds a PhD in Integrated Marketing Communications and has been a judge on many marketing industry award panels.

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