Brands Create Customers

Can a company’s board of directors damage the company’s brand, even if the board has no stipulated brand responsibilities? I think the answer is “yes” if the board fails to execute wisely in two critical areas. First, if the board hires a CEO unable to articulate a brand vision that advances the company beyond competitors. If  the brand vision fails everyone fails: customers, employees, partners, shareholders. Second, the board can damage the brand if the board’s own actions become so controversial and/or questionable as to taint brand credibility and trust.

Types of brand damage that can occur

As I see it, the types of brand damage that can be caused by a poorly performing board of directors can include:

1. Loss of customer confidence if board decisions make the brand appear weak, unfocused, or without clear direction. The brand assumes an element of risk.
2. Loss of employee confidence if board decisions appear reactive and non-strategic, or if the board-appointed CEO can’t articulate a coherent brand vision of what the compan stands for, where it’s headed, and especially “Why?”
3. Loss of investor confidence if a pattern of board decisions points to lack of unity at the top, internal politics over strategy, and/or a designated CEO who seems ill-equipped to meet expected challenges. As investors sell shares the brand loses asset value, and may approach break-up value (sold for parts).
4. Board missteps may lead to difficulty recruiting top CEO candidates because no executive wants to work for a company with an unsteady board. Consequently, the brand may be starved of executive leadership.
5. Board missteps may lead to loss of confidence by channel partners if the company’s brand pales in comparison to brands of competitors. Competitors are quick to seize on any apparent band weakness.

The HP board and the HP brand

Available evidence suggests that the board of directors of HP would seem to meet the two brand-negative conditions noted in the opening paragraph. The Hp board has appointed CEO’s who turned out to be a bad fit for HP, and the board’s own missteps have compounded HP’s problems. HP’s recent CEO’s have been at the flashpoint of turmoil and controversy, and so has the HP board itself, most notably in its internal spying and pretexting scandal of 2006. This week the board named Meg Whitman as HP’s seventh CEO since 1999. Ms. Whitman replaces Leo Apotheker, whose fit with HP was questioned 11 months ago when he replaced Mark Hurd. Hurd had lost the confidence of the board after a highly publicized battle over sexual harassment allegations and expense report irregularities. The board’s actions in terminating and suing Hurd also drew criticism.

Brands are designed to be seamless vessels of seamless value, but at HP seamless transitions appear to be the exception rather than the rule.

A board described as “nearly dysfunctional”

From the New York Times, on the day prior to the Meg Whitman announcement:

The mystery isn’t why Hewlett-Packard is likely to part ways with its chief executive, Léo Apotheker, after just a year in the job. It’s why he was hired in the first place.

The answer, say many involved in the process, lies squarely with the troubled Hewlett-Packard board. “It has got to be the worst board in the history of business,” Tom Perkins, a former H.P. director and a Silicon Valley legend, told me.

Interviews with several current and former directors and people close to them involved in the search that resulted in the hiring of Mr. Apotheker reveal a board that, while composed of many accomplished individuals, as a group was rife with animosities, suspicion, distrust, personal ambitions and jockeying for power that rendered it nearly dysfunctional.

A board that didn’t interview the CEO that it named

As noted in the previous link, the HP board unanimously voted to appoint Apotheker as  CEO  in September, 2010, but only the four board members on the search committee had interviewed him. The remaining eight board members had no interest in meeting him for a face-to-face interview. This is disturbing from a brand perspective. One might ask: What was the board thinking? This was a candidate for the highest position at HP, a man who would define and execute  HP’s vision, values and strategy going forward. Certainly he was a man critical to the success of the HP brand. How can you not look him in the eye, size him up, plumb his vision and values, measure him against the challenges confronting HP, and determine first hand if he is fit to be a successor to the esteemed William Hewlett and David Packard?

“Jarring strategy shifts” and a stock price plunge

Eleven months after the HP board unanimously agreed on Apotheker’s appointment, the CEO was sent packing. Apparently, Apotheker had no clue of his impending termination. The HP stock price had plunged a stunning 47% during his short tenure, during which he had proposed “jarring strategy shifts.” These included:

1. Proposing to sell or spin off HP’s core PC  business—which accounted for a third of HP’s revenue—without any plan in place at the time of announcement. This raised numerous strategy questions, sent investors reeling, and sent the stock price downward.
2. First touting HP’s entry into fast-growing tablet market using WebOS software (from Mark Hurd’s $1.2 billion Palm acquisition), and then several months later abruptly cancelling it, and proposing to exit the WebOS line of business.
3. Announcing the acquisition of software company Autonomy for $10.3 billion, without clearly defining how the acquisition would contribute to HP’s market growth and revenue. In addition, the price paid for Autonomy was questioned as being too high.

Saving HP from a brand of confusion

HP is a brand of . . . what? Brands provide clarity of company purpose. When brands are mismanaged the result can be a brand of confusion, where the company may struggle to fit a category, but falls short of a brand that can command a context. HP is an established brand and certainly not “broken,” but Apotheker’s recent announcements raised more questions than answers—and brands are answers. Apotheker’s legacy to incoming CEO Whitman is a gnawing sense of confusion regarding HP’s new direction. What’s the new context of HP? Is HP pulling out of consumer markets? How does Autonomy take HP to the next level? And how do proposed radical changes translate to the bottom line?  What’s the vision, and the plan? As her first order of business Whitman needs to erase any potential brand confusion from the minds of employees, customers and investors.

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The amazing success of Apple’s category-creating iPad raises some important brand strategy questions for high technology companies. What makes a “next-generation” product that creates its own category? Can traditional brand methods power a next-generation product leap? Or do we need a “next-generation” brand approach, with a new form of brand and brand strategy? Lastly, does Apple’s impressive brand achievement (Mac, MacBook, iPod, iTunes, iPhone, iPad) suggest a new brand strategy template?

These are critical times for brands in the digital era

These are critical times for brands in the digital era, as brand strategy and innovation strategy converge. Brands can no longer be treated as add-ons after the fact. They need to be baked in from the get-go, as methods of creating new customer value through the innovation process. As such, brand strategies can help power a sustainable first mover advantage. Brands late to the party can be reduced to peripheral players, on the outside looking in. Luckily, we can observe a “next generation” and “new category” transition first hand with the emergence of the iPad. The “Post-PC” iPad can teach us valuable brand lessons.

Is the iPad a next-generation product?

We can begin by asking, “Is the iPad a next-generation product?”  Writing in reference to the iPad as a “Post PC” device, Horace Dediu identifies key factors in  next-generation computer transitions, based on the historical computing transitions of Mainframe > Minicomputer > Personal Computer > Tablet.

He concludes:

I would suggest that the definition of a new generation of computing is that the new products rely on new input/output methods and allow a new population of non-expert users to use the product more cheaply and simply.

Consequences of moving from one product generation to the next

Dediu then enumerates the consequences of moving from one product generation to the next:

1. Consumption increases
2. Skill required decreases
3. Support required decreases
4. There are new applications and use cases
5. The economics are not favorable for incumbents
6. The economics are favorable for new entrants
7. The older generation slowly fades through diminished growth but never disappears.

It would seem that the touch-screen digital tablet exemplified by the iPad certainly marks a next-generation product.

The iPad as a “Post-PC” product

Steve Jobs likes to claim that the iPad represents a “Post-PC” product, a new category beyond the reach of conventional PC approaches (not to mention traditional PC companies.). He contends that tablet manufacturers locked in conventional “PC” modalities—trivial hardware features coupled with an outsourced operating system— can’t match the seamless user experience that the iPad delivers. Apple develops the operating system, user interface, tablet device, key apps and processor for the iPad, enabling a high level of system integration and fluid, intuitive operation.

You can see Jobs drive home these points in the first 10 minutes of his keynote at the iPad 2 launch event.

Competing brands stumble, and can’t keep up

Some of Jobs’ comments are hype, to be sure, but the fact remains that the iPad has seemingly created a category unto itself in the year since it’s initial launch. Competitors aren’t keeping up.

Some examples:

1. The Motorola XOOM has recently been released, but isn’t complete.
2. The 10 in. Samsung Galaxy Tab is being re-designed.
3. The BlackBerry PlayBook has yet to ship, amid marketing turmoil.
4. The HP TouchPad (Palm WebOS) has yet to ship. April?
5. The Microsoft tablet won’t arrive until late 2012.
6. The ViewSonic tablet with two OSes seems cobbled together.

The biggest (apparent) loser is Microsoft, the iconic PC company. Microsoft invented the “tablet PC” a decade ago, and got nowhere with it. When the new Microsoft tablet arrives in late 2012 it will probably be competing against a third (or fourth) generation of competitors, including the iPad.

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Many eyes in the brand world will be focused on Nokia tomorrow (February 11) when new Nokia CEO Stephen Elop announces a long-awaited turnaround plan for the struggling mobile phone giant. The event in London is a big deal because, quite frankly, the Nokia brand is on the brink. In smartphone market share and profits Nokia has been battered and bruised by iPhone and Android. Its brand has been hammered, too, virtually knocked off the map in the US.

A big announcement to address some big brand questions

From a brand perspective, the February 11 announcement will hopefully answer a multitude of pressing brand questions: What’s Nokia’s new brand vision? What’s the new brand strategy? How will Nokia lead its customers in ways that Apple and Google can’t match? Will the brand be energized to deliver a full suite of customer value, as a complete customer experience, or will it be downsized to the brand of a supplier? The latter would signal a major step down for a visionary market leader.

This was a brand problem from the get go

In my view Nokia needs a sweeping brand reformation because its many problems (and they’re very serious problems) stem from a gradual but deep dereliction of brand. Nokia’s troubles were a brand problem from the get go. There was no overriding brand vision to overcome the device-centric silo-ism that fragmented and smothered Nokia’s own forces of innovation. Without that vision to orient R&D to strategic customer outcomes, market opportunities were missed and massive development budgets accomplished little.

Mindset problems are brand problems

A common critique of Nokia is that it suffered from an insular, “prove it to me” mindset that shot down new ideas and thwarted initiative and change, enabling Apple and Google to run away with the smartphone market. I would argue that mindset problems are brand problems. They’re a “way” of preserving operational status quo. They can pull the plug on brand vision, and they can cripple the holistic view of the customer that products need to innovate successfully. A common result is products that frustrate users.

Elop: Nokia must now fight “a war of ecosystems”

Elop has laid out Nokia’s challenge in his fiercely blunt “burning platform” memo to employees. (Well worth reading in its entirety.) After citing the painful details of how Nokia lost its market leadership to the iPhone, Android and other competitors, Elop concludes:

The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, e-commerce, advertising, search, social applications, location-based services, unified communications and many other things. Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem. This means we’re going to have to decide how we either build, catalyze or join an ecosystem. [emphasis added]

So that’s Nokia’s newly defined task: how to build, catalyze or join an ecosystem. I find it a bit strange, though, that customers are not included in the ecosystems described. To me, customers are the most important part.

The brand as prime mover of the ecosystem

In the February 11 meeting I’d be looking for a more customer-focused concept of ecosystem to emerge, one with fewer elements than Elop lists, and one with deeper brand relationships. As I see it, the customer is the focus of the ecosystem, and the brand is the prime ecosystem mover. It’s brand vision and values that give the ecosystem meaning and direction, and make the ecosystem productive. And I would make it one ecosystem, not many. A multitude of ecosystems creates potential conflicts and might even generate debilitating intra-ecosystem rivalries.

Keep the ecosystem simple

The Apple iPhone ecosystem is hugely successful and not complicated. It exists for the benefit of customers, to make the purchase and use of iPhones as easy and delightful as possible.  Apart from the wonderfully designed iPhone and iOS, the ecosystem is iTunes, the App Store, Apple retail stores, the developers who craft the apps, the apps, Apple customer service, and iPhone customers who provide feedback. Much of the ecosystem is embedded in the iPhone itself. The moving parts of the ecosystem are kept to a minimum. It’s through the focus and quality of the ecosystem that everything “just works.”

An alliance with Microsoft?

The latest rumors are that Nokia will announce an alliance with Microsoft to feature  Windows Phone 7 mobile OS on Nokia smartphones. This would be a sea change for Nokia, which has heretofore produced both devices and software, and desired to own the full user experience. The Nokia brand has been the Nokia handset running custom Nokia software. Nokia’s Symbian OS is used worldwide, and its new MeeGo OS was slated for upcoming smartphones.

A prediction on what to expect on February 11

Horace Dediu of the highly respected Asymco blog has ventured his predictions of what the February 11 announcement might bring.

1. There will be a multiple OS strategy
2. The US market will be the first to see a new non-Nokia OS. I would guess Windows Phone with AT&T.
3. Low end devices will remain with Symbian due to price considerations for the chipsets, components.
4. MeeGo will be phased out in phone products but development will continue for tablets

This may seem like a radical departure, but in many ways it’s not. Nokia has nothing to lose in the US as its platforms have zero traction. By maintaining Symbian for low end devices, they can still aim for differentiation where Nokia feels it still has distribution and cost leverage. This strategy will also allow speed in time to market.

I would add that in the US a Nokia/Microsoft mobile phone alliance might be considered  in last place behind iPhone, Android, RIM’s new Blackberry touchscreen OS and the new HP/Palm webOS phones and tablets.

Where does all this leave the Nokia brand?

Where does all this leave the Nokia brand? There are some serious brand implications in the above February 11 scenarios. Here are some key questions that the Nokia meeting will need to address:

1. An agreement to use Windows Phone OS means that as a brand Nokia no longer owns the complete user experience. It’s now shared with Microsoft, at least in US smartphones. Doesn’t this diminish Nokia’s brand stature?
2. A Nokia handset running a Microsoft OS is hardly a “Nokia smartphone.” It’s half Nokia, half Microsoft. Who owns the brand voice? Whose vision will lead customers?
3. By giving up the smartphone OS Nokia apparently downgrades itself to a device supplier. As such, it’s no different than HTC, Samsung, LG, etc.  Doesn’t this weaken Nokia’s potential hold on customers?
4. If Nokia adopts Windows Phone OS for its smartphones, Nokia becomes dependent on Microsoft for smartphone OS innovation. The Nokia brand could be compromised if Microsoft fails to innovate as fast as iPhone and Android, to name only the top two competitors. How does the Nokia brand handle this?
5. If Microsoft makes the OS and Nokia makes the device, who directs and manages the ecosystem? Whose ecosystem is it? For that matter, whose customer is it?

A brand, when properly constructed, helps its customers interoperate with the universe. Yes, it works at that level, and on those many, many levels in between. Let’s not forget that the genius of brands is that they have no limits. The value of brands is that through them, customers have no limits.

So yes, brands are big picture tools, for very big spaces. They help customers get from A to B, and to worlds beyond.

Wayfinding should be baked into brands

Brands negate the void, and the abyss. The best brands are a form of cultural orientation, and leadership. They certainly lead us on a directed brand journey of their own invention. Thus, some element of wayfinding should be baked into brands.

Brands might embrace new forms of signs and signage, directional cues as cultural cues, at all sorts of scale and resolution, the more personal the better.

Personal brand applications will have a key role to play in these developments. They can transform brands into a mobile sense, leading customers into (and through) new terrains. (A brand has no future if all it can do is lead customers in circles.)

A Slate series on signage

Slate has a nice series on signage and wayfinding beginning with The secret language of signs. It’s rudimentary signage, and for starters, not a bad place to begin.

Map the world and your customers will follow

In its series Slate has interesting examples of hand drawn maps, and how they can provide more meaningful/useful/human information than conventional maps. Yep, in brands we’re also in the mapping business.

How does your brand map the world? The universe? Customer want to know.

You’re in luck. You’ve been invited to a Windows 7 launch party. Here’s your chance to catch the full force of the Windows 7 brand, head on. They’re planning the party now. So come on in. Join the fun:

Where’s the effing brand?

If you watched this party pooper for even a minute your reaction may be the same as mine: Where’s the effing brand? And who are these people? Why are they here? This is the brand’s coming out party. The brand is the show. Who gives a flying frig about party favors?

Set the brand free

There’s a Windows 7 brand in here someplace, begging to be freed. It’s stashed away in one of the cupboards. Or behind the sugar. Or buried in the fruit. Someone with decent brand sense (like Steve Jobs) would find it in a hurry. He would drag it to daylight, amp up the vision, forge an identity and unleash it on the world. That’s what this video should do.

Facilitators get in the way

Sadly, these folks don’t have a clue as to what the brand is, or where it’s headed. The way they’re talking, a Windows 7 launch is a sleepover.

And they talk too much.  Brevity is the soul of wit, and of brands. The beauty of a brand is that it is, gloriously. The brand tells its own story. It’s immediate. Facilitators get in the way. We want the brand experience, not theirs.

Brands are binary

Truth is, brands are binary. In the brand world you’re great, or you’re garbage. There’s no in-between. These folks are launching the brand one step from the trash compactor. Go figure.

At Apple’s most recent earnings call COO Tim Cook began his portion with a short riff on Apple’s vision and character, to reassure analysts that Apple was in no imminent danger of collapse with Steve Jobs away on medical leave.

We are on the face of the earth to make great products

Some of what Cook said was quite profound. He said this about Apple:

We believe that we are on the face of the earth to make great products, and that’s not changing.

Not many companies see themselves–and their challenge–in such an elemental context. What’s amazing is that this is an entirely credible statement coming from Apple. They have the game-changing products and services to back it up.

Could Michael Dell say the same thing about his company, with a straight face? How about Steve Ballmer? Would anyone believe them?

Are there people in Redmond placed on the face of the earth to create the Zune? That could be scary.

The brand as destiny

What Apple taps into here is the brand as destiny. It’s the brand as primordial power, a prime mover of creation, culture and context, and never, ever, an add-on.  It’s akin to Dylan Thomas’s, “The force that through the green fuse drives the flower.”

Great companies know the feeling. The brand is an operating principle that pervades all aspects of the business. It’s a force, and poetry, and something like kaizen.

Tim Cook’s statement at the earnings call

Here’s more of what Tim Cook said when he first spoke during the earnings call. There’s perhaps a wee bit of (excusable) puffery, but the values and the focus seem dead on.

There is extraordinary breadth and depth and tenure among the Apple executive team, and they lead 35,000 employees that I would call wicked smart – and that’s in all areas of the company from engineering to marketing to operations and sales and all the rest. And the values of our company are extremely well entrenched. We believe that we are on the face of the earth to make great products, and that’s not changing.

We are constantly focusing on innovating. We believe in the simple not the complex. We believe that we need to own and control the primary technologies behind the products that we make, and participate only in markets where we can make a significant contribution.

We believe in saying no to thousands of projects, so that we can really focus on the few that are truly important and meaningful to us. We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot.

And frankly, we don’t settle for anything less than excellence in every group in the company, and we have the self-honesty to admit when we’re wrong and the courage to change. And I think regardless of who is in what job those values are so embedded in this company that Apple will do extremely well. And I would just reiterate a point Peter made in his opening comments that I strongly believe that Apple is doing the best work in its history.

Full transcript of the call.

In business, the company that listens best often lasts longest. The brand approach to business teaches that you don’t have to be the loudest, flashiest or most intrusive voice to build the strongest customer base. You simply have to listen to what your primary partners—your customers—have to say.

After all, they’re your brand partners. And they’re saying it for your benefit.

The New York Times has an example: Believe it or not, someone’s listening.

Listening is the province of brands

Listening is the province of brands. While marketers may lapse into sales pitch mode at the drop of a hat (full disclosure: mea culpa, mea maxima culpa), brands listen as marketers never can. That’s because brands are structured as joint ventures with customers, where listening is as fundamental as breathing. A brand is an active collaboration in context, and it is the brand’s ability to listen that keeps that collaboration alive.

Listening is the province of brands because brands are a team effort, a pursuit of shared objectives and mutual goals. Do we listen closely to our teammates? Yes we do—without giving it a second thought. Listening comes naturally to brands because it’s a basic function of teaming and working together.

Listening is part of the brand experience

Listening is a also vital part of the brand experience. Let me clarify that: how you listen to your customers is a big part of their brand experience. A “rich” brand experience is one rich in listening and conversation, where communication flows freely. The deeper the brand, the deeper the listening. (In many respects, the engine of sustainable brand growth is not the big campaign, but the many individual instances of listening and conversation along the way.)

Brands that thrive on listening

The brands that listen best are often bottom-up brands structured as platforms to advance and grow customers. These brands tend to be hands-on, direct and participative. The more they listen to customers the more they can learn, and translate that learning into innovation. While they may utilize surveys and focus groups, the ultimate goal is real-time listening through front-line employees, where company and customer forge the leading edge of the brand.

Such brands treat customers as friends and allies on a shared brand journey. They listen intently, step by step.

Image: Self portrait, Vincent van Gogh — Wikimedia Commons

General Motors has announced that it is now “reviewing” the future of its super-sized Hummer SUV brand. A 60% plunge in sales in May focused GM’s attention on the brand, which had been slipping in recent years as gasoline prices soared and social criticism of the brand became more pointed.

GM’s options

According to industry analysts, GM’s primary options are to downsize Hummer vehicles to achieve better fuel economy, introduce some sort of hybrid or alternative-fuel power plant, or sell the brand outright. The downsizing process had already begun with the Hummer H2 and H3 models. Hummer concept cars are even smaller. If GM closes its two Hummer plants in the US, the only remaining Hummer production facilities would be in South Africa and Russia. That would leave a marginal presence.

Holes in the Hummer brand strategy?

The announcement by GM was not a total surprise. The Hummer had been hurting. Why, though, did Hummer paint itself into such a brand corner in the first place? Where was the brand strategy to advance the business beyond easily foreseen challenges? Indeed, future business books may cast the hulking, gas-guzzling Hummer as a brand that fell seriously behind the customer curve, if not grievously out of touch with reality. “Hummer” may wind up as a textbook case of how not to craft a brand.

Let’s take a closer look at the Hummer brand strategy.

Brand strategy, vision and approach

As we’ve noted many times before, a brand is “company potential X customer potential.” In reviewing a brand strategy we always begin with a set of diagnostic questions about the brand approach and its objectives, as they involve the customer. The following are some of those questions:

1. Is this brand part of the solution, or part of the problem?
2. What kind of (proactive) customer is this brand trying to create?
3. Where is this brand leading its customers?
4. What’s the vision behind the brand? What is it a brand of?
5. How does this brand innovate to create more customer value?
6. How is this brand a platform for customer growth?
7. How does the brand collaborate with customers?

There’s neither space nor time to answer these individually, so what follows are some general comments.

Gross vs. green

Since its inception, the Hummer brand has been a conspicuous flash point for condemnation by “green” activists and conservation groups. They view it as a threat to the environment because of its large size, unregulated emissions and heavy fuel consumption. It’s almost as if GM invited the waves of green opprobrium as a way of differentiating the brand—as a politically incorrect, crush-all-comers beast, positioned for those who felt threatened by an eco-friendly world.

Strategically, though, why bring out a brand with so many anti-green connotations when the vast majority of world brands—and GM itself—was beginning (in the 1990′s) to go gung-ho green, with the (green) writing clearly on the wall?

This was a battle that “gross” could never win. What was GM’s brand vision? Hummer certainly seemed to be leading customers toward a dead end.

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