My husband and I had two choices of hotels for our stay last weekend at a destination wedding—Hilton Garden Inn or Best Western. The choice was a no brainer. More on that decision shortly, but first, let’s take a diversion into the history of brands. My parent’s honeymoon story was a family favorite. Married in Pittsburgh after WWII ended, Bill and Bernie drove to Miami for their honeymoon. The first night, they stopped at a hotel and dad unpacked the car, bemoaning that mom had not packed one (smaller) overnight bag. Mom entered the room, looked around, and then said, “It’s neither clean nor lovely enough.” Five stops later they found an acceptable motel. The process repeated itself the second night. Thankfully, the marriage survived. It’s no wonder then why Dad rejoiced when Howard Johnson’s motels popped up along turnpikes across America. He…
The danger of turning opinions into facts
One of the hardest challenges facing leaders is making decisions in the face of uncertainties. To deal with the discomfort of uncertainty, some leaders turn their assumptions and beliefs into “facts” in their mind. That’s unfortunate. Stick blindly to ill-informed thinking, as some prominent leaders have done, and you’ve doomed your company to decline. Let’s look at some examples. Ironically, it was a Kodak engineer (Steve Sasson) who invented one of the first digital cameras in 1975. Three decades later, Kodak’s leaders made decisions seemingly based on a belief that digital photography would have a slow uptake, even though by that time digital cameras dominated the marketplace. Why? Digital technology made saving and sharing photos effortless. Blockbuster believed stores offered the most convenient video rental and purchasing experience. Its CEO turned down an opportunity to purchase Netflix in 2000. “Netflix doesn’t do anything…
Retaining brand relevancy through business model evolution
McDonald’s new CEO, Steve Easterbrook, accepted a huge problem as his to solve. The former darling of the fast food industry is losing customers. First quarter revenues fell 11 percent. And unlike IBM, which uses share buybacks to maintain earnings per share (EPS) growth in the face of declining revenue, McDonald’s EPS plunged over 25%. Meanwhile, McDonald’s ingredient costs, wages, and healthcare expenses are rising, thus making a quick turn-around challenging. As worrisome, franchise owners are rightfully upset. So what happened? McDonald’s failed to stay relevant to consumers, forcing the behemoth into catch-up mode. But being late to the party extracts a price. Former customers who had ruled the chain out as it fell behind might consider McDonald’s as a meal option again. But winning new customers’ will require more than closing gaps. McDonald’s is curbing antibiotic use in chickens, for example. It’s…
A winning membership business model
The woman wore brown leather hot pants, a beige silk blouse, dangly earrings and over-the-knee black heeled boots. Thankfully, she was thin. Her partner, also in his late 20s, wore grungy jeans and an expensive leather jacket whose collar hit his rock-star-length locks. Next to them was an elderly Hispanic grandmother trying to keep tabs on three grade-schoolers, most likely children of her working daughter or son. An elderly blond women, her face the work of a terrific plastic surgeon, stood comfortably in very high-heeled shoes. Her Channel sunglasses matched the color of her Fendi handbag. Added to the mix was a teenage male covered in tattoos, wearing black flannel Turkish pants and a sleeveless matching top, despite the 72-degree weather. Each shopper’s cart was brimming, all with very different mixes of merchandise and groceries. Welcome to Costco where you feel you are…
Does the breadth of your offering create or steal customer value?
I just spent 10 minutes thinking unkind things about Eddie Bauer. I even shouted an anguished swear word, piercing the silence of my otherwise quiet home. My husband Nick had an overnight guest – our toddler grandson – while I was away and had forgotten to fold up the Eddie Bauer portable crib. Trying to be serious in my home office with a baby crib in my eye’s sight was not working for me, so I decided to take on Nick’s assigned chore and put the crib away. The task should be straightforward I thought. (It’s not IKEA furniture after all with one page of instruction containing no words.) It seemed like I should have been able to unlock the crib’s sides by squeezing plastic handles to collapse the unit, and then put the far-more-compact unit into its zippered case. But as I…
Profiting From Free
Can a free offering and a financially sustainable business model co-exist? Look at the evidence. Wikipedia. National Public Radio. Mozilla’s Firefox browser and the LINUX operating system. Facebook, LinkedIn, Twitter, Instagram, YouTube, Gawker. The Moodle software platform for on-line educational experiences. All free and all appear to be financially sustainable. A free offering and financial success succeed when leadership is thoughtful about how it monetizes the free offering. Let’s explore why an organization may want a free offering and then how the organization can make money in other ways. Why free? First, your target market may not be able to afford to purchase what you want to offer them, the case for most non-profits. UNICEF serves truly poor children around the world. Or you may want to build volume to gain network or economies of scale effects. It is doubtful that Facebook would…
Is your scope too narrow or broad?
All too often, companies take the scope of their offerings as a given, delaying changes that make the organization ripe for disruption. Kodak stuck with “film” as its core business while competitor FugiFilm Holdings, Inc. accepted the inevitability of digital replacing film. Fugi transformed its business by leveraging its chemical and processing capabilities into liquid crystal displays and beauty products. The change was traumatic -– thousands lost their jobs -– but, unlike Kodak, Fugi company exists and is growing. The WSJ is full of change-in-scope decisions. HP is splitting into two parts, enterprise solutions on one side, printers and PCs on the other. Unless HP can make a go of 3-D printing, I expect Lenovo or Dell will acquire the printing/PC unit as computing shifts to mobile devices. IBM is harvesting its more commodity-like businesses to double down on mobile, software and the…
Move up the food chain to move up the profit curve
Are you losing customer loyalty or competing increasingly on price? Perhaps it’s time to redesign your business model to solve a higher-level problem. I call this strategy “moving up the food chain.” Let’s look at two recent examples in the news. Target is adding solution-focused advice and services for college students to help them answer the stressful yet fun-filled question, “How will I decorate my dorm room?” Like other chains, Target has the products college students need; it even built brands to address small-space needs with on-trend products. Its new additions will reinforce Target’s value promise – enjoy your shopping experience and feel confident about your purchases. A newly produced YouTube series “will provide tips and tricks that college students can use while designing their own dorm or off-campus spaces. YouTube stars Todrick Hall, Mikey Bolts, Tiffany Garcia and Ann Le will each…
Business model innovation opportunities in pharmaceuticals
In a recent WSJ article, Joerg Reinhardt, chairman of pharmaceutical giant Novartis AG, shared a fundamental business model innovation insight: “We need to add value – life prolonging or quality-of-life benefits – that are meaningful enough for payers around the world to say, ‘Yes, I’m willing to pay a premium over generic opportunities.’” To create such benefits, Reinhardt is devoting a higher percent of revenue to R&D than most competitors and consolidating researchers into four centers to increase synergies across teams. Reinhardt has business model strategy partially right. Healthcare payers should not pay a premium if that premium does not translate into real benefits. In the past, fear of generic drugs’ quality encouraged many people to favor branded versions. But after decades of safe generic drug production, “assurance” is no longer a differentiator for branded drugs. Unless the branded drug produces significantly better…
A business model turning big data into smart data
Companies are increasingly finding that “Big Data” doesn’t mean “Smart Data.” And that difference is opening up a new business opportunity for software and consulting firms to turn big data into actionable and profitable insight. One of those firms is 18-month-old Zoomph. Founder Ali R. Manouchehri says their platform turns “big data into little data” by enabling marketers to listen, curate, analyze, visualize and syndicate social media content in real time. With Zoomph, clients find the most relevant influencers, engage in real-time polls and create engaging and inspiring visualizations of social media content for their websites, mobile devices and other screens (e.g., football score boards, event displays and lobby screens). Zoomph projects encompass a broad array. On one end is figuring out if social media conversations on Facebook, Twitter and Instagram containing the term “pressure cooker” are about terrorism, bridal gifts or cooking….