If P&G can’t get it right, what will the rest of us do? P&G the master of consumer branding recently reported a 11% year-over-year revenue decline, more than analysts expected. The maker of Tide, Pampers, Bounty, Charmin, Crest, and Olay blames market share losses for part of the drop as more consumers switch to lower-priced products (e.g., store brands). According to the Wall Street Journal, “In recent years, Procter & Gamble has put more focus on higher priced products – like pricier Olay creams – in an effort to drive growth. That strategy has hurt the company during the recession as consumers cut discretionary spending in areas like beauty and traded down to cheaper pantry staples.” The key uncertainty facing P&G is: Where is the consumer headed? For national branded goods companies, Main Street or national big box retailers, Prada, in fact any…
Does Business Model Strategy Matter in an Age of Uncertainty?
Economics lacks meteorology’s scientific basis, although many economists make their money forecasting where the business cycle is headed (albeit with less success than weather channels). This economist has little faith in economic predictions today as they are based primarily on past trends and relationships, captured through rigorous econometric models. The depth of this recession, its causes and its global impact in a world far more interconnected than any of us understood suggest that the present will be a distinct break from the past. Time to throw out the models, as the author of Black Swan advises. ____________________ If uncertainty reigns, what are we to do as leaders and recommend as their advisors? This is the subject of a blog-conversation I will be sharing with two other blog authors whose insights I admire. Hopefully others will discover and join our conversation. Bill Welter is…
The Real Strategy Work Is Business Model Innovation
Image via Wikipedia Many business leaders debunk strategic planning. “The external environment is too uncertain,” they argue. Or, “Strategy is decided at the point of contact with our customers and markets.” I also hate strategic planning because the decisions from strategic planning are strategic in name only. We delude ourselves into thinking that we’re planning strategically, when really we’re working at varying levels of the tactical. Year long tactical plans are as wasteful as a one-year plan for parenting teenage girls. Parenting tactics are decided daily subject to vision and values. There’s no other way through the confusion this age presents, just as there’s no other way through rapidly changing markets. The core strategy decisions for an organization are deceptively simple. The challenge rests in finding answers, as these questions are highly interdependent; and, strong competitors may have already claimed the obvious business…
Commoditization Rules, Even Before the 2008 Recession
Image via Wikipedia Commoditization – Why You Need a New Business Model Strategy In response to price pressures leaders have cut (and cut and cut) costs by outsourcing, off- shoring, consolidating, etc. Marketing departments have branded around compelling emotions expressed in powerful messaging. They’ve enhanced marketing communications to the point that potential listeners are tuning out and creating their own messages. Companies have also invested fortunes in new product development. We have three times the number of brands in our grocery stores than we had twenty years ago — I know because I live in Norway part of every month and I miss rows and rows of choice. What conference agenda or its promotional material doesn’t contain the multiple mentions of “innovation”? Our efforts aren’t working. Even before today’s daunting downturn, brand loyalty and premiums were dropping while bankruptcies and industry consolidations were…
Why Business Model Innovation Matters
In November of 2008, Business Week magazine reported that Apple’s cash on hand exceeded Dell’s total market valuation. These two statistics explain how it happened – Apple net profit margin = Dell’s net profit margin plus 10 percentage points Apple operating margin = Dell’s operating margin plus 13 percentage points There is a vital lesson in the Dell-Apple financial comparison and it goes way beyond new product innovation. Apple has an incredible company-wide design competency upon which it built a differentiated business model. As a result, it introduces breakthrough new offerings while spending a much lower percent of revenue on R&D than other Top 25 innovative companies. The comparison in R&D spend tells you everything you need to know about the power of advantage and a differentiated business model built upon it. In Quarter 4 of 2008 – Apple R&D spend of 3.1%…