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strategy and business
 / Summer 2004 / Issue 35(originally published by Booz & Company)


The Innovator's Prescription: The Relevance of Brand Relevance

IBM was a trend driver during the latter half of the 1990s. At the time, many firms were attempting to show their relevance in the emerging world of networked business. Although terms such as “network computers” and “information superhighway” lacked the traction to create a new business category, IBM succeeded with “e-business.” After introducing it in late 1996, IBM ultimately spent more than $5 billion building the e-business label and positioning its business units within that context.

Trend responders closely track the emergence of trends and the evolution of subcategories, and take responsive action to keep their offerings current and relevant. Because neglecting a trend is risky and driving a trend is rarely an option, developing trend responsiveness capabilities is the best strategy for the majority of companies.

Learning to be a trend responder is feasible for most firms, but it is not easy. It involves two primary capabilities. The first is to recognize and evaluate trends. Organizations that do this well share several characteristics: an externally oriented, market-focused culture; an information system that captures and distills intelligence; top management concerned with market dynamics; and solid business strategists who are empowered to act. Evaluating a trend can be more difficult than identifying it. Will it represent a worthwhile opportunity, or are competitive intensity and overcapacity already predictable? Is it real and substantial, with a value proposition behind it? Can the firm realistically participate, given its strategy, assets, and competencies?

Trend responders must also be able to modify, reposition, and/or rebrand their offerings so they remain relevant despite the market’s evolution. Any repositioning or rebranding needs to be respectful of the brand’s heritage and compatible with the ability of the brand and the organization to deliver on the promise. The company needs to develop a point of difference from competitors, with a unique take on the new product category or subcategory.

The fast-food industry today is a good case study in trend response and relevance. McDonald’s, Wendy’s, Burger King, Pizza Hut, Round Table Pizza, Taco Bell, KFC, and others make up the “traditional” fast-food category. Customers of these chains value upbeat, familiar, convenient, economical offerings. In recent years, the industry has seen the rise and rapid growth of a “healthy fast-food” subcategory, populated by such brands as Subway, Souper Salad, and Sweet Tomato, attractive to customers who value the attributes of fast food but who also are interested in healthy eating. The subcategory is driven by an overall trend toward health consciousness, evidenced by such phenomena as increased interest in physical fitness, more health news coverage, legal attention to the problem of obesity, the popularity of diet plans, the growth of the organic foods industry, and the success of health-oriented food retailers.

Augmented by the healthy fast-food subcategory, which is drawing in customers for whom fast food previously was not relevant, the total fast-food market is now larger. There is thus an opportunity for the incumbents. But the new subcategory is also taking customer dollars away from traditional fast-food marketers, and transferring preference and spending to the newer, more relevant brands.

The relevance challenge for incumbents is to respond both to the threat the new subcategory poses and to the opportunity it represents. They must analyze the new category’s components and dynamics; they must also analyze the forces behind the emerging subcategory and the customer segments it is attracting, and determine which niches they themselves can exploit.

A variety of strategic responses is available to the traditional players. They could attempt to build sales and loyalty from their core customer group — by improving product quality, enhancing the customer experience, or attempting to inject energy into their brand marketing. In this strategy, growth might not necessarily be a priority. In fact, an “incumbent market” strategy could be accompanied by some downsizing and cost reduction to reflect the downward trend of the still substantial market.

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  1. John Gorham, “Charles Schwab, Version 4.0,” Forbes, January 8, 2001
  2. David A. Aaker and Erich Joachimsthaler, Brand Leadership: Building Assets in an Information Economy (Free Press, 2000)
  3. Clayton M. Christensen, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail (Harvard Business School Press, 1997)
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