Capital Bank

Knowledgeable

Resourceful

Responsive

The three adjectives or attributes may be what differentiates Capital Bank lenders from competitors’ lenders. But these three adjectives are neither a value promise nor are they reflective of a thoughtful brand platform. Before I explain why, let’s look at a winning example.

A winning value promise and brand promise example

Walmart’s “everyday lowest price” is the company’s value promise, its “True North” that drives all internal decisions. “Save more. Live better” is the brand promise that stems from Walmart’s value promise. This brand tagline expresses a benefit and it is emotional. Contrast that with “Knowledgeable. Resourceful. Responsive.” Where’s the benefit? The emotion?

Walmart’s value promise of “everyday lowest price” is terrific because it is:

• Highly relevant – addresses benefits or costs that matter to its target customer
• Unique – Walmart has built advantages that make it hard for competitors to copy its lowest price promise
• Translates into a compelling brand promise with high emotional appeal, living bettter

What’s the problem then with Capital Bank using attributes in its brand communications and as its value promise?

First, they may not be unique. If I am a business and my banker is already knowledgeable, resourceful and responsive I react with “I have that. Thank you anyways.” Capital Bank’s commercial lenders may have to knock on a lot of doors to find a disgruntled customer of a competitor.

The second problem is that attributes make for weak internal directives. The commercial bankers are not being called to deliver any specific result to clients. Lenders can easily say to themselves, “I am being knowledgeable, resourceful and responsive” and think that that is enough. But what if most other community commercial bankers in the market are also knowledgeable, resourceful and responsive? The adjectives create no momentum for change.

Third, the attributes are internally focused. They have no “What’s in it for me?” factor from the potential customer’s perspective. Relevancy and emotional appeal stem from the “What can you promise me?” factor, not the description of the bankers.

Capital Bank could do a lot better

What value promise would work for Capital Bank? I’d want to do customer and market research first, and understand the core competencies of Capital Bank, to answer this question correctly. But for purposes of this blog, here are three benefit promises that require knowledgeable, responsive and resourceful lenders plus a lot of systems, incentives, measures and partners. These promises would likely create internal change and lead a potential customer to say “Wow, I’d like that, even though I’ve been highly satisfied with my commercial lender.”

• Fastest answers – this is great for a target that must make fast decisions dependent on lending
• The best loan to protect your cash flow – this is terrific given all the uncertainty about future economic trends
• “Protect and enhance your creditworthiness. Call us first with any financial question or issue.” – this is a unique way to position Capital Bank ahead of accounting firms, whom businesses see as more trustworthy than bankers in general

Each of these value promises could then bridge to a great brand promise with emotional appeal. Can anyone recommend some great ad copy?

Note that I am not saying that attributes are unimportant, as they are. They are the “reason to believe” the value and brand promises. Capital Bank may be onto some interesting areas of differentiation for its commercial lending around knowledge, etc. But the bank’s leadership and ad agency have not done the work to create a winning value promise and brand platform.

If your internal and external communications are all about attributes i.e., adjectives that describe you, you’re not answering the compelling question that all companies must answer. What can I promise and consistently deliver that will draw my target customer to me and keep him or her loyal? Then, how do I align everything I do (including aspects of my organization’s culture) to deliver on that value promise? And, how do I communicate the value promise in a way that is emotional, compelling and stands out?

What examples of bad ads have you seen?
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For insight on business model strategy, read my recently released book, Beyond Price.

The answer rests in understanding communication challenges.

The internal communication challenge

Employees need a shared and actionable aim that advances the company’s success. It must be actionable so that employees and teams know how to go about their work. The aim must also be shared or else actions by one part of the organization hurt another part’s success, creating distrust and silo-mentality. (These two requirements are why “Grow profits and revenue” as the only aim fails.)

The best internal directive is a value promise. It’s the promise the company makes to its target customers and the basis on which it wants to win business. Internally, it tells everyone the ultimate goal of his or her work. I recently interviewed ten employees of Tasty Catering, a business caterer in Elk Grove Village, Illinois. They each knew their job was to exceed their customers’ most demanding expectations. The entire company’s business practices, including its values, are aligned to deliver just that.

Great companies build annual operating plans to advance their value promise and make it hard for competitors to copy. (To learn more about value promises see Value Promise and Profit Potential, Part One and Value Promise and Profit Potential, Part Two.)

The external communication challenge

The external communication challenge is to grow awareness, consideration, trial and purchases. Clearly the value promise is a key part of this, but effective communications must also be emotional and tell a story. The brand platform captures what’s needed for winning marketing communications.

• The brand promise – which is the value promise discussed above
• The foundation story of the company – how it became what it became – revealing the deeper values of the company
• The brand personality – which captures for example whether a company’s qualities are more like Lexus or a Ford Truck
• The brand essence – a clear list of what the brand is and is not
• The message strategy – target markets, key message and key word in the message, and reasons to believe

The brand platform drives marketing and sales, the two external facing parts of any organization.

Alignment issues are at the core of every business problem

When the brand platform is not backed up by a strong value promise that internal operations are designed to fulfill, ads, brochures, sales reps and web sites make false promises. Marketing communications become spin and customers defect. In addition, the company creates new products and services that fail to support the brand promise, diffusing brand equity.

These problems arise because all too often inside-facing employees have no idea about the basis on which the company is trying to win business. All too often, companies have not defined their value promise, much less their business model. (See Harvard Business Review’s “Can You Say What Your Strategy Is?”.)

Another mistake companies make is creating a brand promise that lacks any functional differentiators around which employees can relate how they go about their work. Brands without tangible, functional legs of differentiation easily fall down. Companies that keep changing the brand promise also create havoc when internal operations are forced to follow flavor-of-the-day priorities. While business models must change to remain relevant and differentiated, value promises should evolve, not totally disconnect from the past.

A different set of issues arise when the company has a great business model and a compelling value promise, but fails to communicate it effectively to outside audiences. Awareness rates, consideration rates and attitude towards the brand remain weak, hurting sales and margin growth.

Summary

The value of the value promise is that it aligns internal and external communications. At the same time, it aligns internal operations with front-facing marketing and sales. The net result is growth and higher margins.

It sounds so simple. Why do so many companies muck it up?

(Thanks to Scott Cooper of Marketing Engine Group, my colleague in helping companies build their brand equity and discover profitable growth opportunities.)
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For insight on business model strategy, read my recently released book, Beyond Price.

Does Your Firm Have Hidden Talent?

Boyle’s moving rendition of “I Dreamed a Dream” from the Broadway Tony-award winning musical Les Miserables drew gasps then cheers and then a spontaneous standing ovation from the audience. With a voice which made Julie Andrews, star of Sound of Music and Mary Poppins, sound amateurish, Boyle’s try-out became You-Tube’s most watched video in 2009. (Video link is below.)

Talent Boyle had in spades. But it takes more than talent to be a star. Since the April show, Boyle has transformed her persona to meet all the requirements for a successful performance career. Publicists at her side, a caring agent, a broader singing repertoire and a stylist transformed this raw talent into a stellar performer.

Along the way Boyle was forced into challenging personal learning, necessitated by the crisis that occurred when the reclusive woman could not emotionally handle her sudden fame. Today Boyle stands confidently, totally enjoying the thrilling life she has created.

Every organization has a latent talent, waiting to be developed and deployed to serve others. Like Boyle, other changes may be necessary to build a winning business model and secure success. Crises all too often induce these changes.

How might your organization – a collection of individual talents and organizational capability – shine? What customer group can you most delight and turn into raving-about-your-organization fans? What could you do to earn their standing ovation? With this in mind, what changes should your organization make to turn your talent(s) into an organizational advantage that lets you compete as one–of–one in an attractive market?

Build a business model around this talent. Define your target market. Decide on the scope of your business – what you are and what you are not. Capture and communicate the value promise that will lead customers to consider you. And identify, besides your talent, other aspects of your organization that will make your value promise challenging for competitors to copy. Finally, define the structures and strategies you’ll deploy to ensure profitability. With these decisions in hand, go execute.

Watch and listen to the Boyle video. The emotions you feel tap the universal desire of humans to express our innate talents and shine in the eyes of others.

Susan Boyle Utube

Sonja | MySpace Video
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For insight on business model innovation, read my recently released book, Beyond Price.

What Drove Toyota Management's Decisions?

Shocking, yes? But no less shocking than Toyota, the world-class manufacturing quality expert, recalling millions of cars across its product lines. Three generations after its founder created Toyota on a philosophy that built quality into every step, it turns out that Toyota’s quality has been steadily eroding.

Today, Toyota’s quality issues are deep and systemic.

After all, the company’s problems:

• Involve multiple components, vehicles and years of manufacture.
• Create dangerous safety issues – failing brakes and uncontrollable self-accelerating gas pedals.
• Were surfaced years ago yet are leading to recalls only under regulatory pressure.
• May not have had the attention of top management until after all hell broke loose. (Toyota’s CEO just recently committed to creating a senior level “quality committee” to look into the problem.)
• May not yet be truly resolved. While the accelerator fix has been identified, it’s unclear whether there’s an electrical system glitch causing some uncontrolled accelerations.
• Are not being presented truthfully. Toyota’s leaders make false statements that put Toyota in a better light, only to rescind these comments when a government agency points out the truth.

The winning value promise

Toyota’s compelling and unique value promise propelled Toyota to surpass GM as the world’s largest automobile manufacturer: With Toyota, you can have comfort without frustration, a welcomed relief in an industry formerly fraught with reliability issues from all but Honda.

Leveraging its quality advantage, Toyota built a line of cars from economy to luxury that reduced the frustration of car ownership (Lexus versus Mercedes/BMW and Camry versus GM/Chrysler/Ford brands). Its brands also increased comfort compared to Honda’s reliable line. The Prius extended Toyota’s brand promise into its hybrid engine cars.

The root cause of the Toyota’s quality problems

No one would expect 100% perfection on Toyota’s part. Suppliers and designs change, materials have defects, etc. in manufacturing companies. But quality issues in multiple parts and vehicles and a growing number of recalls over the years point to the deeper cause of Toyota’s quality issues.

New automobile component technologies (more electronic and less mechanical) should have led to new quality systems and far more careful attention to drivers’ experiences than Toyota provided. Whether it was over-confidence in its historical quality systems or pressure to keep production and profits rolling as demand grew, internal forces precluded a relentless drive to fine-tune internal systems to Toyota’s value promise as technology changed.

This drive – to align everything to the value promise while generating profitability – should be front and center in any strategic leader’s agenda. Instead, Toyota maintained its brand promise in external communications, but failed to align internal decisions with its value promise.

Another piece of evidence that Toyota lost an internal focus on its value promise comes in Toyota’s reactions to its quality issues. Toyota fixed new cars being produced without recalling cars in the field, delayed communicating quality issues to customers and regulators and made many misstatements to the public. Toyota’s historic value promise for sure didn’t drive these decisions. Rather, Toyota’s reactions have raised frustration and reduced perceived reliability of the Toyota brand, the opposite of its value promise.

The lesson

Growth often destroys brands. As companies get larger, C-Suite leaders lose the pulse of the business at the same time that communication channels to the C-Suite become convoluted or blocked. Growth and profits become aims, while delivering on the value promise becomes secondary or even forgotten. A disconnection arises – between what is promised and what is then delivered – that erodes brand equity.

Hopefully Toyota will learn the lesson that a business’ value promise must drive all internal actions and decisions. It will take an incredible communicator to instill a singular focus on the value promise all over again, a focus Toyota’s founder created and his son and grandson lost. Meanwhile, Ford and Hyundai are driving their cars and messaging right through the hole Toyota left in the market.

Do you regularly ask or hear in meetings, “What should we do in light of our value promise?” If not, make sure everyone in your organization knows your company’s value promise and get busy with alignment. Your Toyota moment may not be as public. But the lost reputation, revenue and profits will nevertheless be substantial.
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For insight on business model innovation, read my recently released book, Beyond Price.

The Recession Has Changed Consumer Behavior – Forever

A recent in-depth study of consumer attitudes and behaviors by Context-Based Research Group, an ethnographic research and consulting firm, adds to the growing evidence that consumers have changed for good. (Listen up B2B company leaders, because your customers will change along with these consumer changes.) Consumers, after living through needed financial downsizing or, for the wealthy, downplaying of wealth, have discovered there’s magic in less.

According to the authors: “Our studies portray a society moving into an era where we measure the quality of our lives in social terms before economic ones. Forty-three percent of Americans believe the recession has positively affected their lives. With this kind of positive reinforcement, we now see the potential to maintain a healthy balance between our consumer and non-consumer sense of selves.”

More specifically, across a sample representative of the US population in terms of gender, income, race, age and region:

• 78% agreed the American Dream has died — people now see how the dream had become defined in terms of material possessions rather than freedom and ideals
• 88% took steps to spend less
• 83% made permanent changes in spending and saving behavior
• 51% planned to give time and/or volunteer as a gift this past holiday season
• 83% planned to spend more time with family and friends over the holidays than they had previously
• 61% de-cluttered their home and/or consigned items

The magnitude of these changes, documents over the course of two research studies, is startling.

The report profiles four new segments of consumers, each likely to have distinct needs from products and services.

• Rational: Understanding true value and how things fit into your life (26%)
• Relational: Putting social relationships over transactions (23%)
• Balanced: Spending with thought and care, but with some fun too. (26%)
• Joyful: Experiencing true joy often from non-consumer spaces (25%)

Add in the fact that Generation X and Y workers are seeking more meaning from work, and you can be sure that your business is facing a steady headwind of change.

The Recession Has Changed Business Behavior – Forever

Another shape-shifter is the extent to which businesses have learned to produce a lot more with less as a result of the considerable belt-tightening the recession forced. Undoubtedly many businesses tightened their belt too much, which opens the door to new B2B business models. How can you help your customers “right-size” while still retaining the lower-break even point their downsizing created? One of my clients, a remarkable start-up named Pinstripe led by HR-industry dynamo Sue Marks, enables its clients to outsource recruitment and screening of workers, speeding up hiring and improving the quality of the hires.

The Business Model Lesson

Remember, when external changes occur in your markets, you and all your competitors go back to START, where a new competition unfolds. Change obsoletes leaders’ advantages and creates openings for new entrants and former also-rans. The new winners are those leaders who accept rather than fight the change, and align their company’s business model to the changing environment.

What recession-induced changes do you plan to capitalize upon? What might your competitors be planning?
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For insight on business model innovation, read my recently released book, Beyond Price.

Never forget about customer experience and how markets change.

Our economy totally tanked. Yet the Obama administration and Congress marched forward into health care as if nothing was really different. A more moderate approach to health care reform, coupled with a stronger emphasis on innovation initiatives to improve our long term economy would have been a smarter move on the administration’s and Democratic party’s part.

To what extent is your business model based on old paradigms about your target market?

Recognize competitive threats, but don’t get so focused on the threat, you lose sight of opportunities.

The terrorist threat is daunting and must be managed, much like many competitive threats businesses face. But if all US policy’s focus is on this threat, as NYT columnist Thomas Friedman wisely writes, we’ll slowly fall into ruin. Managing terrorists does nothing to advance our economic vitality. Indeed, homeland security diverted a significant percent of the basic scientific research we rely on government to fund to keep our economy vital.

What competitive threats are forcing you into a defensive position with little positive to look forward to?

Make sure any new business model is aligned well with external trends.

The majority of Americans have concluded that Democrat’s proposed health care policy was too much change and cost in light of our current economic issues. Had the bill dealt with medical-legal costs, offered much smaller entitlements, and created more individual incentives to be healthy, business and consumer public opinion would be quite different.

Is your business model aligned with where your markets are headed?

Reduce investing in legacy businesses that are likely to go by the wayside and, instead, deploy disproportionate resources into efforts that build a better business model.

The public anger over the stimulus arose because we put the nation further into debt with little to show for it. As an economist I understand some of the stimulus spending (e.g., expanded unemployment benefits and keeping police and fire officials on the job). But we lost a huge opportunity to create investments that would make our businesses far more productive. Instead, too much political pork got funded. If you must go into debt, invest in things with high future return.

Are you spending scare investment funds on things that offer little incremental return vis a vis your future? The group that created Lunchables at Oscar Mayer-Kraft fought like marines to steal resources from the bologna business. Fortunately their tenaciousness paid off and Lunchables became one of the best new products in grocery store history.

Find the investments that reduce competitive threats while creating growth opportunities at the same time.

One of the most urgent needs in our country is to stop importing oil and become energy independent. We’d reduce political threats against us, enhance our economic success and generate jobs at the same time. While cap and trade may not be the right approach in a slow economy, it’s time we recognize how we have subsidized oil and coal with our federal policies and start to level the energy playing field. The public benefit of energy independence is so great that individual companies will never invest enough. If ever there was a case for government subsidies, alternative energy is it.

The same could be said about agricultural policies and health care. Until we stop subsidizing corn and sugar and encourage farmers to invest in production of healthier foods, we will have an obesity problem and escalating health care costs.

What are the home run investments in your business? How can you obsolete competitive threats while at the same time seize attractive opportunities?
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For insight on business model innovation, read my recently released book, Beyond Price.

We will make mistakes as we go through this planning –this week and beyond. I’m more concerned about not making mistakes.

Fearing “reasonable mistakes” is a huge mistake in this process.

Leadership is effective only if you have followers. Followers are looking for credibility (i.e., trustworthiness), inspiration and competency. After reading piles of leadership books, I distilled all I learned into 5 behaviors that leaders must demonstrate through their words and actions for potential followers see “leadership” and follow.

1. Foster change and renewal
2. Articulate and model the core values of the organization
3. Enable others to achieve their full potential
4. Instill a meaningful purpose and shared vision for the organization
5. Maintain momentum

What do your actions, words and decisions say in terms of these five practices of business model innovation leadership? Are you a leader or a barrier to change?
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For insight on business model innovation, read my recently released book, Beyond Price.

“Can you advise me on a good style for my facial shape?” I asked the elderly clerk ten minutes into my trying styles on. “No. You’re on your own. But I can access the most expensive brands in the locked cases if you want.” Half an hour later, I left. The store’s “best choice” value promise failed to deliver because the owner limited differentiation to physical product alone.

The owner of this store, like many others in this challenging economy, lost a cash-paying customer. And, judging by the speed with which I lost my vision in the last year, I was the kind of customer an owner would want – a frequent buyer willing to pay full price. Had the owner invested in knowledgeable clerks or software programs to help me quickly find a winning look and feel confident in my choice, I’d be a lifetime customer, not a prospect that walked out never to consider the store again.

Whatever your value promise, take execution to the extreme. If you are winning on lowest cost, drive any cost that does not benefit customers out your door, however radical the required changes. If you choose to win on speed, leave no delay unturned. Ask your customers what would knock their socks off if it could be done.

In today’s economy, you must become best on at least one benefit or you must be the lowest cost while meeting minimum requirements to be considered. Staying stuck in the middle is no longer an option for profitability and growth much less attracting and retaining talent.

What are you waiting for? In 2010, become best for some group of people who will thank you when 1-1-11 appears on their calendars.

Happy New Year! May joy and learning be your companion throughout the year, whatever challenges you encounter and victories you create.
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For insight on business model innovation, read my recently released book, Beyond Price.

Top Business Trends for 2010

1. Downward pressure on prices in a copycat, increasingly global economy will magnify and become relentless. Before you spend more money pulling costs our of your existing business model, redefine your business model.
2. The digital revolution will disrupt more industries, removing barriers to entry and the advantages of scale. Identify how to turn information technology into an advantage before existing and new competitors use it against you. Are there new channel opportunities? Can you reinvent your value chain? Change how you work with customers?
3. Customers will trust less, being skeptical of all value promise claims. Offer transparent proof of your claims and make sure your value-promise is more than emotional.
4. Talent, especially young talent, will flock to businesses that are producing social benefit, not just profits. Identify how you can deploy company competencies or change your value-chain to make positive community and environmental differences.
5. The government business model remains broken. Business leaders need to stop hiring-out government relations and bring business’ considerable problem solving and re-engineering skills into government. Make it an encore career or send some of your best people on sabbatical to drive needed change. Pulling costs out of government, while continuing government’s essential roles will bring dollars back to your bottom line.
6. The power of aligned networks will grow. Businesses collaborating with other businesses (including non-profits) to create wealth and higher-value solutions will win. Identify the larger competitions that your business could be part of and join with others to win those competitions.
7. The future will look foggier as past success no longer guarantees future success. Expect more ambiguity and uncertainty. Volatility and uncertainty are increasing exponentially. The old rules will no longer cut it. So strengthen your learning muscles. Read broadly. Listen to people you disagree with. Stretch your thinking. Identify and eliminate hidden paradigms. Step back more often from your business to see the larger system of which your business is a part. Systems thinkers will be highly valuable in the years ahead.
8. The baby boom’s aging will once again reshape industries. This large demographic group will demand new packaging solutions, new approaches to health care, new living arrangements, new financial products, new work arrangements and new experiences. Identify ways your organization can take advantage of the baby boom’s aging. And make sure you know why Generation X and Y will want to fill the shoes the baby boom leaves empty in your organization.
9. More will be demanded from all. Be sure to say thank you daily to those who are helping you build and evolve a winning business model.
10. What will increasingly separate fast growing from slow growing companies is not industry or nation, but business model. Identify key external changes you can capture to redefine your business model and ride these forces into a terrific start of the new decade.

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For insight on business model innovation, read my recently released book, Beyond Price.

Today is my birthday, so I have asked my client Steve Paskoff, CEO of ELI, Inc. to share some of his wisdom about the importance of leadership behavior in creating a winning business model. ELI offers its clients a foundational learning platform (training products, manager tools, informal learning opportunities) built on laws and behaviors for civil treatment that enhances organizational performance.

Steve’s choice of Tiger Woods as an example is a compelling one. It shows how transparent our world has become and why leaders’ actions, not just their words, will increasingly drive how their companies are perceived. Internal employees have always judged their employer by leadership actions, not words. With the internet and instant communications, the outside world now has a window into all of our organizations.

From Steve:

Tiger Woods has been the premier sports brand for the past several years. We’ve wanted our businesses to perform like he plays golf, our kids to behave the way he acts, and our commitment and intensity to approach his impossible standards. Ultimately, his corporate message has been to trust what he endorses and buy accordingly. Maybe if we do, in some small way we can all be like Tiger.

That’s all changed. His reputation as a golfer remains intact, but his personal credibility, a key to his phenomenal business success, has foundered. Now he’s fodder for jokes rather than a model to emulate or a person to trust. From what we know, he broke no criminal laws. However, aside from committing a criminal act that would have subjected him to prison time, there is no legal penalty he could suffer that will prove greater than that which he will receive at the hands of his betrayed family and the public. One moment Tiger was a hero and the ultimate role model; the next, a bounteous resource for comic relief and anger. For a long time to come, Tiger Woods’ name will conjure up memories of his athletic accomplishments linked with his personal misdeeds. The latter will tarnish what should have been the pure genius and excellence of the former.

Organizations building their own brands should remember this painful lesson: Compliance with the law is necessary and important, but brands and business can be quickly destroyed by behavior that conflicts with their messages and stated values, whether that conduct is legal or not. The more an organization preaches values of honesty and integrity, the more powerful will be the effect when their contrary daily behavior surfaces.