Thursday, February 08, 2007

Five Blunders That Inhibit Growth And Profits

As I pursue my day to day job of creating hit consumer technology products, and then pitching those products to potential clients, I see many behaviors repeated by company leaders. And, it is not just within the small group of company owners and executives with whom I have direct dealings. Some reactions and choices -- really bad ones -- are ubiquitous across the technology industry. I thought a short report on some of the top bad leadership blunders would be helpful.

1. Ignore reality -- we'll do it our way.
The best example of this idea in practice is the more than five years of observation we have of every music player and online music store company on the planet completely ignoring the data available from observing the success of Apple's music offerings, and, insisting to do it "their way," instead. Anybody with an I.Q. above dirt can see that Apple's sustained market dominance is based on customers wanting a simple to use, easy to operate pairing of a free desktop jukebox application and store interface with an equally easy to use portable music player. The integrated approach of the iPod + iTunes software + iTunes store has hit a home run each season, going into its sixth year now. How long before some clever company leader sees the obviousness here, and makes the investment to compete... based on accepting these customer preferences, instead of on attempting to modify customer preferences?

Lesson: Pay attention when a competitor has a hit product. It is a hit for a reason. Embrace those reasons. Make your customers as happy as their customers. You'll win. (If perhaps two or three companies had thought this way in 2001 - 2002, the iPod would today have a 20% market share, not 80%.)

2. Build many average products, instead of one great one.
What's the best television made? The one by Panasonic? Sony? LG? Well, the reality is that these companies combine to have hundreds of "televisions" on the market. Is there a hit product in the mix anywhere within these three big brands? Nope. Not one. Is there a significant difference between a TV model from either brand at any given price point? Not really. The sorry reality here is that none of these three brands focuses resources on creating a true hit product for consumers. They are aimed at hitting every price point and feature combination possible. It's a shame, too. Sony used to make some hit products. I miss them. So do a lot of people.

Lesson: Look at the customers buying products in your market space. Look at what makes them smile, what makes them frown. Invest resources into building fewer products that create more smiles. These are called "hit products." Embrace the concept.

3. Ignore brand management reality.
This one is evident in virtually every consumer electronics company. And, crazily, great brand management is more a science than some black art, and is among the best documented elements of marketing. Pointless brand extensions, dumb efforts to "unify" the brand through making all products look the same, forcing the parent brand onto inappropriate niche products instead of just launching a new brand, launching new brands onto core products where the parent brand has long-standing market power, all of these ghastly errors are basic points taught in every college marketing textbook. Do company leaders not read college level marketing materials? Not to continually beat up on Sony, but that's a great example of how making repetitive brand management errors can neuter even one of the world's most well-known brands.

Lesson: Treat your brand as your company's number one most valuable asset. Nurture it. Protect it. In the end, it's all you really have.

4. Ignore opportunities for growth.
It amazes me how many company leaders actively avoid chances to create real growth in their companies. Instead of moving into new markets, embracing new technologies, adopting newly emerging strategies, these guys cling to the "thing that got us here." Great. What you did to make money in the 90's probably looks pretty stale to your channel and retail customers these days. Is "clinging" really what you should be doing? This is the thinking that put Polaroid into bankruptcy. Instead of embracing the idea that its Polaroid brand stood for "all things imaging," the management clung to the instant print platform that "got us here." Great move, guys. Whew. I humbly suggest that those guys missed the chance to become the number one brand in consumer digital cameras.

Lesson: Find the broader meaning of your brand and embrace any new step that strengthens that broader market message.

5. Reject ideas that are not in your business plan.
Folks, the consumer technology industry is a constantly shifting landscape. Any company leader who thinks he can write "a plan" for the year and then stick to it, and remain competitive, is nuts. Your business plan is only as good as your current product cycle. If something smarter comes along, from whatever source, embrace it.

Lesson: Work your buns off to make what you already have going as profitable as possible. But keep your eyes open for new approaches and new vectors that can take you to places you were not previously considering.