Research indicates that 72 per cent of CEOs across Asia are worried their brand will lose relevance in three years. Data supports their concerns. In the 1960s, a company’s life expectancy normally exceeded 60 years. Today, it is approximately 18 years — and declining. Just a decade ago, if a brand was winning in its marketplace there was a sense of confidence that the future would be similarly successful. Yet today, even the biggest corporate can find itself side-lined in a short space of time — who would have bet on Spotify surpassing Apple as the dominant player in digital music?
In a recent discussion with a C-suite executive at one of Singapore’s largest companies, an executive told me that he could navigate and protect his current revenue base for several years from the disruption facing his business. However, he believed that in 10 to 15 years, the company’s revenues would be a fraction of what they are today. He said that was an issue for his successor’s successor, and he was not prepared to fully embrace consumer-centric innovation to prepare the company for success in the long term.
The reluctance to take risks is understandable. Even companies that pride themselves on being future-focused and taking bold steps to increase market share, can get things wrong. When P&G bought Gillette in 2005 for US$57 billion, their strategy was clear — they wanted to dominate the growing men’s grooming segment. It was widely thought that the acquisition would be the stuff of MBA masterclasses for decades to come.
Except it wasn’t. Gillette’s market share plummeted, as did their revenues and profits in a manner almost unprecedented, in the FMCG industry. How could a brand that had dominated for so long let this happen?
Very simply, Gillette failed to innovate around consumer frustrations. They had made incremental improvements (epitomised by increasing the number of blades in a razor from three to four and then to five), rather than identifying emerging frustrations in consumers lives that their products could meet. Consumers found themselves locked into buying high-priced replacement blades, making inconvenient trips to retail outlets and having poor shaving experiences caused by reluctance to buy high-priced replacement blades.
Transformational success comes from mapping consumer frustrations that have not even been articulated as needs at the time. The conundrum is reflected in Henry Ford’s famous quote,
“If I’d asked people what they wanted, they would have said faster horses,”
concisely articulating that to deliver transformational innovation you need to go beyond what your consumers can express.
These frustrations offer amazing opportunities for brands and businesses that can find ways to solve the core problems. Conversely, they become major threats to incumbents that fail to find solutions.
Digitisation opened the door to change of what had become a complacent business model. Dollar Shave Club’s promise was radical and simple: no retail presence, but instead, a digital subscription model guaranteeing fresh blades at an affordable price delivered to your door automatically each month. The shaving experience is preserved at a lower price with a more convenient, tailored delivery method.
Newer brands have captured 31 per cent of revenue share growth within the last four years — an increase from 27 per cent from prior years. The barriers to entry and the cost of launching a new brand have never been lower. It’s never been clearer that companies need to prepare for the future, but this should be seen as an opportunity rather than a threat.
The road forward may have its obstacles, but the opportunity can be seized with a data-driven approach that answers three key questions:
- What does my future market look like?
- What is my biggest opportunity in that market?
- How do I make it happen?
The answers can ensure that investments in innovations are targeted and have a high degree of certainty that they will succeed. This maximises return on innovation investments, by identifying the innovations that are most likely to succeed at a very early stage, saving time, money and resources, while also lending credibility in the short term to in-house innovation programmes. Which CEO would not want to embrace that?
Thoughts from Lucien Harrington, Managing Director at Lynxeye Singapore.
The article was originally posted at Entrepreneur.