Many years ago, we heard the story of a consultant employed by Coca Cola to tell them how to transform the fortunes of the company. Apparently he roamed around for a while looking at the market, then returned to Coke’s owners and dropped an envelope on the boardroom table, picked up his check and said “Everything you need to know is in there.”
When they opened the envelope, legend has it that it had a single sheet of paper inside it, inscribed with the immortal words, “Bottle it.”
We’ve told the story many times ourselves.
And there’s only one problem with such a great piece of marketing strategy folklore.
It isn’t true.
As the famous (and very useful) myth-busting website Snopes reveals here http://www.snopes.com/cokelore/bottleit.asp, while it is difficult to pin down precisely when the idea of selling Coke in bottles occurred it was probably some time around the late 1880s. Sam Dobbs, nephew of the guy who bought up the rights to Coca-Cola in 1888, got himself in trouble with his uncle by secretly selling bottles of the soft drink syrup to people using back-street bottling machines to bring it to a wider public. The objections were not based on missing the potential sales opportunity presented by bottling, but sprang from concerns about insanitary bottling conditions adulterating the drink and injuring the brand’s standing.
“There are too many folks [bottlers] who are not responsible, who care nothing about the reputation of what they put up, and I am afraid the name [of Coca-Cola] will be injured,” said the company’s owner, Asa Chandler. The bottling process at that time was notoriously difficult, expensive, and unreliable, and the fast-growing company had neither the money nor the physical resources as yet to be establishing and operating bottling plants of its own.
So whilst it would be nice to report that such staggering insights of market changing genius can occur, the likelihood is that real “sea changes” in market conditions are more likely to be born out of steady, patient work, accurate market analysis, and persistence.
But in our experience, more nonsense is written about marketing strategy – and more time is wasted – than almost anything else. So at Magnum Opus Partners we have tried to de-mystify the process of developing a winning marketing strategy. Here are some very simple rules you can follow. We explain them more, one by one, below.
Have a crystal clear vision.
Sounds easy, right? Well, honestly, it’s not rocket science, and it should be easy.
Do you have a crystal-clear vision of what you want to be, one, five, ten years from now?
Unless you have a clearly articulated vision – a concrete, measurable vision which is explained to those around you with unmissable verve and simple clarity – then your people will never buy into giving you the help you need, they will never know what you want them to do, they will operate at cross purposes from each other, and you and the business will spend half your time heading up blind alleys in pursuit of growth.
In our experience, many businesses operate without a written down, widely agreed and universally understood vision. And no, we’re not talking about those stupid motherhood-statement Vision and Mission statements that sit on a poster in the staff canteen to be ignored by all, nor the motherhood statements and platitudes in some 200 page marketing strategy document sitting on the CEO’s shelf that is never actually opened.
We mean: can you state your vision for your business in one sentence? OK, maximum two sentences. If you can’t, then it’s time you worked out why not.
Don’t try and make your business something it is not.
More businesses end up tied up in knots because they chase the chimera of a tempting new opportunity – which means heading off at a tangent into an area that the business doesn’t really understand – than almost any reason.
A common example would be expanding into another state or country with little or no knowledge of the local market, no experienced local personnel, and without a clear understanding of who your new competitors might be.
Yes, we understand that juicy over-the-border market may look like a very tasty tit-bit indeed, but you can burn through a vast sum of money getting established in it.
If a fraction of the money spent expanding into new markets was invested in marketing and re-marketing to your existing market, you’d probably get a bigger return on your investment. Less flashy, less exciting a case history, perhaps, but also very possibly safer and more profitable.
Another example is launching off into a completely new product or service category born of a desire to “diversify” the risk profile of the company. This may be a stroke of genius. (Intel moving from being a maker of hard disks to a maker of processors is a good example of getting it right.)
But in many cases, it proves to be a move that chews up more management attention (and cold hard cash) than taking more conservative steps and ensuring they succeed (such as extending a product range in a minor way, or targeting an existing product or service against a market segment that is under-exploited).
In other words, stick to your knitting, unless you really have run out of wool. There’s a reason you’re a good knitter – keep knitting!
Don’t merge your business with another as a short cut to market growth.
Or at the very least, be very, very careful if you do. In recent times it has become trendy to take companies of all shapes and sizes and somehow mash them together to create instant market mass, and theoretically achieve “cost savings” through getting rid of redundant layers of management, staff, IT and production capacity.
All well and good in theory. Fiendishly difficult to achieve in the real world, and cause of more wasted marketing effort (typically with large organisations) than almost anything else.
After all, many mergers ultimately don’t add value to companies, and even end up causing serious damage. “Studies indicate that several companies fail to show positive results when it comes to mergers,” says accounting professor Robert Holthausen, who teaches courses on M&A strategy at Wharton, University of Pennsylvania. Noting that there have been “hundreds of studies” conducted on the long-term results of mergers, Holthausen says that researchers estimate the range for failure is between 50% and 80%.
Some cautionary tales to consider. Admittedly extreme, but the principle applies to businesses large and small.
1989: Sony and Columbia Pictures
Seemed like a good idea at the time: integrate an electronics giant with a huge library of content. How could it not make sense?
The acquisition cost US$4.8 billion and the better part of another billion went to settle a lawsuit and hire new executives. But Japan’s corporate culture could not have been more alien to Hollywood’s, to the extent Tinseltown has culture of any kind. As Tokyo’s head office remained mystified and hands off, Columbia execs squandered small fortunes on perks – and on some of the worst movies ever made.
The merger was a cross-cultural disaster. Sony bailed out after just five years with a $3.2 billion write-down.
1999: Yahoo and Broadcast.com
Flush with dot com funds Yahoo shelled out a breathtaking US$5.7 billion for what was, in effect, a media streaming service using dial-up technology that was so slow it was out of date almost as the ink dried on the offer. Yahoo quickly shut it down. Ooops. Imagine if they’d put nearly $6 billion into additional advertising?
1991: AT&T and NCR
Another reasonable concept, on the face of it. AT&T had the distribution network. They wanted to get into the computer business. NCR had always made cash registers but had shrewdly branched out into personal computers.
The hostile negotiations spooked shareholders and AT&T shares promptly lost US$4 billion in value. Then then paid a jaw-dropping US$7.48 billion for NCR, more than six times NCR’s worth.
As one website puts their analysis of what ensured “AT&T’s arrogant bureaucracy treated NCR’s with contempt and NCR’s entrepreneurial spirit left with the managers who were dumped.” Anyhow, the company went downhill right away. AT&T pumped US$2.8 billion into it, took a two billion dollar write-down, and then dumped it for a US$4 billion loss. Total haircut in cash and value destruction: US$12.8 billion.
Even successful mergers and acquisitions are often also extremely disruptive of staff – and customer – contentment. Our advice? Building your own business might take more time, but the results will be more enduring. And the lawyers and consultants can get their feed on someone else’s carcass.
Last but not least, be different.
There are two ways to build a business.
One claimed way is to be the same as another business, but somehow smarter, more efficient, faster, and so on.
Right now, the growth of Uber is quoted as a great example of a business that has successfully done just that.
But in reality, Uber is not really a replacement of taxis. It is wildly different.
It is a reimagining of what taxis deliver – transport. It drills down what people really want – to get to A to B when they don’t have their own car or a public transport option – and delivers it in a new way, via private ride sharing. For facilitating this transaction, Uber take a slice on the way through, and thank you very much.
Uber is not a taxi service. You can’t point to a single car owned by Uber. It buys no petrol. It never puts a car through a car wash.
It’s a software company. Or looked at another way, it’s a retailer. It retails people who want to share a ride, for cash. And to the driver, it retails the customers.
What it isn’t is “a better taxi company”. It may be a better model for transport, but that’s something else.
In the same way, AIRbnb is not really a replacement of motels and hotels, it is a reimagining of how people find the beds they need. It’s not an accommodation service, it’s a facilitator. Many of the rooms sold on AIRbnb are also on more standard distribution channels. AIRbnb just does it better, so people use their software.
Which is the second way. Because if your business is genuinely different, people will discover it, and if it is useful, they will use it.
What makes your business different might just be how it seems or appears, (a so-called “Unique Selling Personality”) but in reality most truly successful businesses always add something to the way they do business that makes them stand out from everyone else. And then they market the hell out of that difference, to disrupt the market and pull people their way.
As we have said for many years, if everyone else is Zigging, it might be time you Zagged. If everyone else is shouting, maybe you need to whisper. If everyone else is jumping up and down, you’ll be noticed more if you stand still.
All great business started out being disruptive. Those that stay great business never forget the lessons learned during that process.
If there is really nothing about your business that is genuinely different from everyone else then you are at risk. Because someone will successfully re-imagine your industry one day, and then you’ll be playing catch up forever. You may catch up. But you may not.
So value innovation. (Just don’t be a slave to it. See “stick to your knitting”, earlier.)
How to decide what to do?
Well we would say this, wouldn’t we? But a good start is to work with an ad agency that does more than simply regurgitate advertising ideas. Find an agency – yes, we are one – that understands how markets work, that loves getting into the nitty gritty of a business and finding competitive advantage, that has the sheer intellectual grunt to help you take the decisions that need to be made to keep ahead of the pack.
At Magnum Opus Partners we have a suite of decision-making tools that we can employ to help you decide what to do next, from a simple intelligently- facilitated brainstorming session through to some of the most sophisticated decision-making tools yet devised.
We’ll challenge you. In a nice way. With only one goal in mind – achieveable, sustainable, repeatable and profitable market growth.
It might not be as simple as “Bottle it.” But experience tells us the answer is in your head, somewhere. Let’s share heads?