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When your Cadillac is no longer a cadillac brand: 5 lessons for fixing a failing brand

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Cadillac was once so strong as a brand that it became an adjective for best-in-class.  Today it has a brand problem.  Too many of its drivers are old and will soon age out of the car-buying market.  Over recent decades, German brands have trumped Cadillac on prestige in the traditional engine market, and Tesla is winning the electric market.  (Audi is fast following into electric cars.) Cadillac tried a reboot in the past, through advertising and moving the headquarters to Soho, NYC.  However, that did little in an age of transparency when actions define a brand, not spin.  The top-of-the-line GM brand began a more genuine reboot in 2018 when it moved headquarters back to its roots, Detroit, and appointed a veteran engineer as president of the brand. The brand is building for the long term, according to a recent NYT article, but let…

Define your niche to create a winning business model

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Competition is a drag on earnings. Darn, but welcome to life. The key to success comes from reducing or eliminating competition legally. Some companies eliminate competition by being the very lowest cost to meet requirements to be considered by a customer group. High-end bed linen and mattresses are pursuing this strategy with a direct-to-consumer business model, displacing high-end brands sold through retail stores. An approach beyond competing on price is to offer something no one else can do as well. You may be more expensive, but you are worth it. Think of a plastic surgeon with the best reputation in a city. Build loyalty with the customer base you target and then get them to buy more things from you. Independent bookstores have taken this approach in light of Amazon, with Barnes and Noble stuck in an unattractive middle, especially as Amazon opens…

Where Facebook took the wrong turn

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Every organization has what I call a strategic customer. It’s the target market that, if lost, creates peril for the business. For an advertising agency, it’s the businesses that consider the agency their agency-of-record, as these customers cover fixed costs. Many companies, like Amazon, have dual-sided business models: it has two customer groups, buyers of products from its platform and suppliers of those products. Is one more strategic? At Amazon’s start, providers of products and services ranked higher. Why? If publishers and authors had refused to sell their books through Amazon, we’d still enjoy visiting Borders stores. Over time, as Amazon became a required channel for most manufacturers, the company wisely changed its strategic customer to the consumer. Local stores, Prime, same-day delivery, Alexa, and other solutions to better serve us are proof points of the strategic shift. Facebook, like Amazon, has a…

Lessons from a retail chain winner and loser

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It was the best of times for Best Buy and the worst of times for Toys “R” Us in the news this week. Years ago, analysts expected Best Buy to go the way of Borders, a bookseller disrupted by Amazon’s online magic. Instead, Best Buy has held up well against Amazon. It not only avoided the fate of electronics chains that did go bankrupt (e.g., Radio Shack and Circuit City) it’s a stock we all should have purchased. Toys “R” Us, on the other hand, announced its bankruptcy this week. Economists love natural experiments, and the Best Buy versus Toys “R” Us comparison offers one for retail markets. Why did Best Buy succeed where Toys “R” Us failed? What lessons can we glean? The key takeaway: You cannot beat Amazon at its own retail game. You must win at a different game. Toys…

Forgotten wallets, Brennan’s, and Disruption in the Food Business

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A trip to my local grocery store is an almost-daily ritual, as I hate to plan dinner ahead of time. The store is also a lovely 15-minute walk from my La Jolla home, making last minute dinner decisions doable without driving. The checkout staff contains familiar faces. When I recently forgot to bring my wallet to the store, I asked Bob if he would let me sign an IOU. He’s the round-faced 35-ish-year-old clerk who always looks like he is thinking of songs rather than codes as he rings up my produce prices. “After all, I’ll be here tomorrow … just like I was here yesterday.” “No way! It’s not our policy,” Bob replied, with a tone implying I was trying to pull a fast one over him. Did his response make sense in an era when Amazon acquired Whole Foods, and two-hour…

How to Expand Without Exploding

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“Brands Expand Into New Niches With Care, but Not Without Risk,” a recent NYT article, was full compelling brand extension stories. It also contained examples in which I found myself saying, “What were they thinking?” Here are some examples from the article of both ends of the spectrum. The tagline of British luxury sports car brand Aston Martin (if you have to ask the price, you cannot afford it) is “The Art of Living.” Its recent extension into exclusive Miami Beach condos makes sense, following the tracks of its luxury speedboats, menswear, and jewelry. Aston Martin is selling exclusivity. Appreciate its designers, and you will enjoy Aston Martin’s world. Harley Davidson did the same thing, extending into clothing, home furnishings, and experiences, albeit for a different target market. But as to lighter fluid manufacturer Zippo moving into women’s fragrances, what were they thinking?…

The Healthcare Sector Braces for More Transformation: Is your business model ready?

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The Xconomy San Diego Forum on the Human Impact of Innovation offered a window into how information technology and science, marching hand-in-hand, will shape healthcare. “IBM’s Watson is not the only breakthrough game in healthcare,” was the best summary of the afternoon. Today’s unpredictable markets demand that as you maximize performance from your current business model, you must in parallel be designing and developing new business models to disrupt the current cash generators. Otherwise, start-ups will turn your company into a dinosaur. In doing this leadership work, consider four key trends highlighted in the conference. Each one alone portends major changes for a number of players in the industry and the combined effect of which will surely reinvent the entire sector. 1) Advances in “micro” medicine Healthcare technology is increasingly leading to a better understanding of what’s happening at a genetic level. For…

Be prepared for transformative change as the Next Revolution in Information Technology spreads

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Mark McDonald, a year-after-year favorite WTN Fusion speaker, created a compelling case for Information Technology’s next revolution at the recent Fusion 2017 conference. Mainframe computers, the first innovation, made Information Technology (IT) a specialty that enabled organizations to scale their operations. Client Servers, the next innovation, and the software they deployed allowed processes to be dramatically improved and automated – think ERP systems, on-line purchasing, and Human Resource systems. Next came mobile computing and the digital transformation of businesses that greatly enhanced customer experience. All of these stages were ones of mechanization, with hardware and software replacing previously manual activities. The next wave of IT-related change brings widespread adoption of Artificial Intelligence (AI), transforming IT’s focus from managing processes and experiences to managing outcomes. Large database tools, cloud computing, machine learning, interpreting text, and affordable storage and computational power have collectively moved AI…

The Returns and Risks to Niche Business Models

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Niche businesses are terrific until they are not. If you run a business with a narrow target market or far more-focused offering than your competitors, you are in a niche business. Just look around the Madison, Wisconsin area: Placon focuses on heat-treated plastic (thermoformed) packaging – not cardboard, glass, injection-molded plastic, or other types of packaging. All Placon investments advance excelling at thermoforming packaging; none are diverted. First Business Bank serves businesses and their owners, not businesses and consumers. “They know business” is a terrific brand promise. American Girl sells to pre-teen girls and their doting moms, not boys. You get the picture. Because they are more narrowly targeted than broader businesses, niche businesses can tailor their offerings, investments, and operating systems to deliver differentiated customer value—allowing them to build a very solid customer base. There is a reason Duluth Trading does not…

Macy’s slow demise

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  P&G leader Arthur Jones once said, “All organizations are perfectly designed to get the results they get!” This truism should be tattooed on every leader’s chest so that one glimpse in the morning mirror reminds them of the CEO’s responsibility. If they don’t like their organizational results, they must change the underlying design that created them. After closing 40 stores last year, Macy’s recently announced it plans to shut down another 100 this year. Its CEO blamed a change in the retail environment, taking no responsibility himself for Macy’s poor showing. Hmm. A CEO that increased Macy’s borrowings to buy back its stock, as the corporation did last year, has a lot of explaining to do. Frankly, I am mad at Macy’s. The company pursued an acquisition strategy that rolled up iconic regional department stores to leverage advertising, purchasing power, and back…

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