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Evolution based on DNA

Kathleen Ix

Innovation Director




Evolution based on DNA

The balancing act between change and continuity

In 1958, the average life expectancy of companies in the S&P 500 Index was 61 years; by 2012 that lifespan had shrunk to just 18 years, and it has since declined further still. The reasons for this: saturated markets, increased customer expectations, and the developing and flourishing of technological innovations that disrupt established companies faster than ever before. This environment demands constant change, because today only the most relevant brands can continue to grow in the long term. Many companies react to this pressure to innovate by introducing new processes, structures and attitudes. New offers are worked out in a business accelerator, agile teams develop new solutions, and established companies disrupt their own operating models. The focus is on speed, agility and change.

However, the potential gains to be made through a process of renewal are frequently not fully exploited. On one hand, innovations are often based on new technologies, so opportunities outside the core business can be overlooked. On the other hand, taking up new trends promises quick profits – but then new solutions tend to lack sustainable success. Or innovations rely solely on consumer insights, and the brand’s offering becomes generic. In the long run, therefore, what appear to be innovations can weaken the brand rather than strengthen it.

Just think of NIVEA Beauté, a sub-brand that failed to capitalize on the brand-specific expertise in skin care. Instead, current beauty trends were taken up, resulting in a diffuse brand presence. After more than 10 years, NIVEA Beauté was withdrawn from the market. Or Coca-Cola Life, the more natural and healthier cola variant thanks to the vegetable sweetness of stevia. Consumers reacted hesitantly. For Coca-Cola fans, the product seemed too green and healthy, while consumers in search of natural, healthy beverage alternatives did not think of Coca-Cola as an option for them. Today, the brand is a niche product.

Both cases have one thing in common: the sub-brand lacked authenticity, credibility and recognition. This is a problem in times of decreasing customer loyalty and increasingly fragmented shopping habits. Today, the brand is the glue that holds together different brand touchpoints. This is the only way to create consistent brand experiences and thus build trust, orientation and the motivation to buy.

Successful innovations are characterized by building on a brand’s core promise. This requires an awareness of the attributes that differentiate a brand in its category, and which are seen as strengths by consumers. Only then can the brand itself function as inspiration, filter and guideline in the innovation process, and support the development of credible, authentic solutions. By filtering out weak ideas early on, the process can be accelerated, and costs therefore reduced. The brand perspective also broadens the field of vision for new applications, and stimulates the generation of great, sustainable and unique ideas. Strong innovations can in turn rejuvenate the brand and strengthen the brand core.

Nintendo, a 128-year-old company, is currently revolutionizing the hand-held gaming category with its Switch console. Whether the user is in a car, on the train or at home, the game can be played without interruption thanks to the seamless transition between the handheld device and the living room console. This provides a unique, uninterrupted gaming experience. With the Switch console, Nintendo demonstrates its ability to intelligently combine both hardware and software. An increase of 445 percent in operating profit confirms the relevance of this innovation and its positive effect on brand success.

Sephora is a French-based, global cosmetics retail chain founded in 1969 with around 300 brands on offer. By incorporating the creation of unique beauty experiences into its DNA, the company has proactively promoted digital transformation at an early stage. Its innovative experiences include an augmented reality tool that allows shoppers to “try out” make up to see how it would look on them, and an artificial intelligence-powered recommendation to help people find the right foundation to match their skin tone. These kinds of innovations have helped Sephora become what is now the world's leading cosmetics retailer.

Successful innovations always require a return to a brand’s DNA and the differentiating strengths of a brand. The successful deployment of these "assets" in such fast-changing times as these requires a business to regularly pause and reflect. This is the only way to promote a permanent process of self-renewal, which is dynamic but not arbitrary.