Upali Nag Kumar
National Head – Strategy
Is stability different for a brand that's “Two” and a brand that’s “Twenty”?
Stability as a concept is rapidly evolving. And that holds as true for a brand that is two years old as it does for a brand that is twenty.
A couple of decades back, stability meant a sustainable competitive advantage that an organization could leverage for a reasonable period of time. If one were to look at the traditional and oft used BCG matrix, an organization typically “milked” its “cash cows” to invest in its “stars” as well as its “question marks.” This framework implied that a cash cow remained a cash cow for a long enough time for the business to convert stars into new cash cows, and question marks into new stars. This framework also implied certain base stability that one could leverage to take risks.
It’s debatable, however, how much this logic holds in today’s reality. The digital revolution, globalization, low barriers to entry, and a move toward greater individualism in society have resulted in nebulous consumer preferences as well as a volatile competitive landscape. The “question mark” to “stars” to “cash cows” pathway perhaps still holds good – but the journey from one quadrant to another can now happen in the blink of an eye. To succeed, an organization needs to recognize and be geared towards dealing with this new velocity.
The biggest challenge to managing these pathways lies in what we call the “consumer.” However much we try to harness and predict human behavior using technology and data, the reality is that human beings are unpredictable and erratic. Most purchase decisions and choices are irrational and are not defined by demographics, psychographics, or behavioral segmentation.
Most consumer choice is driven by emotion, impulse, need, desire, and experiences – all of which are hard to harness and quantify, much less predict. While a “collective” cultural fabric of experiences, trends, attitudes, and fads offer pointers to behaviors, never before has the diverse “individual” been celebrated more.
Marketing expert Byron Sharp talks about there being no concept of “loyalty” anymore. What’s more, the universe of choices as well as information is now available at the tap of a keypad. As a result, selling to, and more importantly, building a relationship with the ephemeral consumer is perhaps the greatest challenge any brand faces today.
The second challenge is the blurred lines that now exist between industries and the changing definition of “competition” that has emerged as a result. Completely different products and services are now in competition. The mobile phone has challenged the camera industry. Health apps are moving in on brick-and-mortar gyms. Car subscriptions offer a viable alternative to buying a car, while travel experiences are increasingly preferred over investing in a house – and so on. Hence the competitive ecosystem for businesses is not only vast and varied but also fluid. One never knows which industry or geography the next competitor will spring up from.
In view of the above challenges, how do businesses remain stable, if we define stability as maintaining a steady trajectory of growth and profitability? In my view, the paths to stability are very different for new age versus heritage businesses.
New age businesses, often funded by large VCs, invest heavily in customer acquisition – only to find that they manage to retain a very small proportion of those customers, once another competitor comes in. The examples are many, in industries ranging from ride sharing to food delivery to online grocers. What these new-age businesses should focus on more is investing in systems, processes, technology, and intelligence to help them keep a pulse on ever-transient consumers and their changing preferences. It is critical to keep track of what will make the consumer tick – and then be geared to pivot, whether it be in the context of product, service, packaging, communication, or personalization. For a new-age brand, stability means owning and navigating transience.
Heritage businesses, meanwhile, define their stability by their production units, well-oiled logistics, and distribution mechanisms, proven marketing strategies, internal people structure, and long-term organizational cultures. However, in a dynamic economy, the way they can remain profitable is by developing agile ways of working. Very often, 20-year-old businesses are unable to pivot as quickly as a 2-year-old business because of a heavy and complex modus operandi, which, in turn, hampers quick decision making. To solve this problem, many heritage organizations are moving to form “cross-functional teams,” using technology to replace time-consuming processes, and so on – all in an effort to remain stable in an ever-changing reality. For a heritage brand, therefore, stability means internal flexibility.