Audit, Audit, Audit

Every business person will be aware of the financial audit process where accountants pour over the books to assess whether financial reports are accurate. Or you may be aware of the quality audit process of ISO9000 series standards where external and internal auditors pour over your processes and procedures looking for breaches of standard protocols.

In some ways these activities give auditing a bad name.  They are seen as bureaucratic nit picking where the focus is on minute detail and not the overall thrust of a policy.  In respect of quality audits it has often been said that you end up with immaculate and detailed processes but that the end product can still be useless.

But auditing is important because, particularly with a marketing audit, it provides the information required to ensure that a chosen strategy will succeed.

The first half of a strategic marketing plan is effectively a series of audits.  You ‘audit’ the external macro-environment through PESTEL analysis i.e. the likely prospects in the fields of Politics, Economics, Society, Technology, Environment and Law.  You ‘audit’ the ‘micro-environment’, the external factors directly affecting a business through tools like Porter’s five forces (Suppliers, Buyers, Potential Market Entrants, Substitute Products, Competitors): And of course you need an Internal Marketing Audit.

Tools like the Shell Directional Policy Framework and the GE matrix can only be used properly when managers have solid information as to the capabilities, resources and assets.

An internal marketing audit needs to match your organisational capabilities, assets and competencies to the needs and wants of your chosen market.  This is the process of competitive positioning.

Strategic marketing planning  requires that you identify the needs of the market and identify the capabilities of your organisation.  You also need to identify the capabilities and competencies you do not have and which you need to develop to operate in chosen market segments.

So what are your organisational capabilities and assets include:

  •  Financial assets:  Not just your bank balance but the ability to get funding and access to credit.
  • Physical assets:  Your premises, and facilities e.g. Are your shops in the right location, are your distribution centres located for the most efficient supply chains?
  • Operational assets:  Plant, Production Machinery, Process Technologies
  • People assets: Knowledge levels, staff quality, number of staff, etc.
  • Legally enforceable assets: Intellectual property, franchise contract terms, production licences, etc.
  • Internal systems:  Management Information Systems, Customer databases, etc.

You also need to assess your marketing assets:

  1. Customer-based Assets:  This includes your perceived brand image and reputation; Consumer recognition of your corporate identity, brand franchises, customer loyalty, the ability to create defendable market positions and through these assets the ability to obtain higher margins
  2. Market Leadership:  Do you enjoy the benefits of market leadership.  This doesn’t just mean having the greatest level of market share.  It includes leadership of share of voice and having a distribution network which allows the greatest level of market coverage.  Do you have the power to demand prominent eye-level shelf space?
  3. Country of Origin:  Different cultures prefer and appreciate different brand and product attributes.  Does your brand benefit by its relation to its country of origin e.g. German cars have a reputation for good build quality and the quality of their engineering.  Welsh lamb and Scottish beef both have a reputation for high quality.
  4. Uniqueness of Product or Service:  Do you do something no one else does.  Do you have a key, distinctive sets of assets.  Apple have strong marketing assets in the appearance and design of their products and the level of innovation.

You need to assess your distribution-based assets.  This means assessing the size and quality of distribution networks.  This assessment isn’t just one of geography; it is an assessment of whether your distribution network allows the correct level of intensity in the marketplace.

Think of Pizza Express.  This was a business which was created with a unique identity; reasonably priced Italian food together with live music (mainly Jazz).  It expanded to a chain of 550 restaurants.  So it achieved significant market intensity, but in doing so it lost its uniqueness and became yet another high street restaurant chain.

You need to assess whether your distribution network is fit for purpose; whether you can guarantee supply lead times and react quickly to market change.  You need to assess your level of control over your distribution and supply chains.  Do you control your marketplace or, as is the case with the big supermarkets, your retailer controls the marketplace.  For example, Irn Bru is the market leading soft drink in Scotland and McDonald’s wanted to sell it in their restaurants; but Coca Cola had sufficient market power to prevent Irn Bru being sold in McDonalds and they retain their position as the soft drink supplier in McDonald’s premises.

You need to assess you internal assets which lie outside you marketing function and their ability to be deployed to assist your marketing efforts.  Can these assets be deployed to create new market advantages.  Can you use cost structures to create greater profit margins? Can you gain better productivity and plant usage (e.g. process ergonomics).  Can you gain economies of scale?  Do you have better information systems than your competitors?

Can you utilise you market alliances?  Do you have agreements with third parties which allow access to markets through local distributors?  CAN YOU USE CONSULTANTS TO GAIN MANAGEMENT EXPERTISE?  Do you have exclusive access to technological developments and processes? Can you gain through licensing and joint ventures (for instance many car manufacturers now share chassis platforms which lowers costs).  Are you able to gain exclusivity? For example, when the iPhone was launched in the UK it was sold exclusively through Carphone Warehouse.

Organisational competencies; the abilities and skills within a company, can be classed as follows:

  • Strategic Competencies:  Management’s skill and ability to push strategies forward and their ability to communicate a strategic vision.
  • Functional Competencies:  The functional skills of people in your organisation, human resources management, operations, IT, etc.  In marketing, can you properly manage customer relations and channels. Do you properly manage your product portfolio and do you have good new product development processes?
  • Organisational Competencies:  Your ability to manage the day-to-day challenges of your businesses.  This includes areas such as sales force co-ordination, the ability to run promotional campaigns such as special offers and discounts, the ability to coordinate external relationships with suppliers, distributors and retailers.
  • Internal Competencies:  The abilities and skills of those in your organisation at a strategic, functional and operational level.  This includes specialist and professional skills e.g. an HGV licence, academic and professional qualifications, etc.
  • Team Competencies: Often the sum is greater than the individual.  A team that works well and efficiently, formally and informally.  Teamwork is a skill.
  • Corporate Level Competencies: Your organisational skills as a whole e.g. the ability to exploit a knowledge base and having effective and efficient communication channels.

 

The advantages of market segmentation

I have often discussed Porter’s generic marketing strategies in this blog. As you will be aware, Michael Porter of Harvard Business School stated businesses could follow three strategic routes, differentiation, cost focus and niche.

Differentiation means developing an offer attractive to each segment of a market.  Cost Focus means targeting your spending on those areas which target customers value and offering the ‘best value’ offer in the market. Niche means choosing a narrow, target segment and developing a product offer which meets the needs of that target group.

Porter goes on to say that a firm trying to carry out more than one of these strategies simultaneously risks death in a marketing ‘no man’s land as they waste scarce resources and develop muddled strategies.

All three of these strategies rely on the management of firms understanding the importance of market segmentation.  The process of finding out what segments exist in your market and which are suitable targets for your business is critical to successful marketing.

The methods of segmenting markets sit on a spectrum from ‘descriptors’ to ‘motivators’ i.e. those factors which simply describe your potential customers to those things which actually define why consumers buy.

Using descriptors is a rather old fashioned way of segmenting markets. This is segmentation by race, occupation, geography, gender, age, etc.  When you here of businesses targeting ‘millennials’ this is segmentation by descriptor.  It is a poor method of segmentation as, in many countries, ‘millennial’ will describe about a quarter of the population.  It is not a sensible segmentation category as there will be a huge difference in the needs, wants and tastes of such a large grouping. Another descriptor categorisation is the A, B, C1, C2, D, E, system developed for the UK census.  This is segmentation by social class.  Alan Sugar may describe himself as working class, but he is a millionaire businessman and member of the House of Lords. I doubt very much that he still desires the needs and wants of someone who collects his bins.

Using descriptors to segment markets can be seen as easy, efficient and cheap.  It appears to offer quick wins and requires little change within organisations. But such an approach is tactical not strategic.

The science of market segmentation has moved on from descriptors as the primary method of segmentation.  Marketing strategists now rely on motivators i.e. what actually motivates customers to buy particular products.

This approach targets personality, the higher motivators on the Maslow hierarchy such as self actualisation needs, emotions, community and relationships, the desire for experience and perceptions of brand.

The use of motivators is real segmentation BUT:

  • It is a more difficult approach than using descriptors.
  • It requires more research
  • It costs more
  • It may lead to process inefficiencies
  • It may result in lower economies of scale
  • It is a method that thrives on changes to organisational structures and cultures.

However, using motivators to segment markets offers tactical and strategic gains to a business:

Tactical Gains

  • Better targeting of marketing activities on market segments which actually want your products or services
  • More efficient promotion of products and your brand.
  • Less marketing wastage as your mix is directed at the correct customer groups
  • Improved customer retention
  • ‘Improved’ service levels as you are targeting those who truly appreciate what you do.  You do the ‘right’ things that the segment values
  • More efficient production as you are making products which will be sought and bought.
  • You are able to achieve price premiums and through higher prices, increase profit margins
  • You will achieve more focused new product development.

Strategic Gains

  • You can create unique customer propositions by gaining insights into customer needs, and you are able to act on those insights.
  • You have clear market positioning from the customers’ perspective.
  • You are able to create a market position which separates you from the offer of your competitors in the minds of target customers.
  • You create brand value and personality.
  • You develop retention and loyalty through creating relationships with your customers
  • You can develop sustainable competitive advantage
  • You can influence your market, take the influence Apple has had on the design and functionality of smartphones
  • You can develop market leadership, not just in terms of market share but also leadership of thought and share of voice.
  • You can develop premium prices and margins
  • You can increase profitability.

Modern motivator-based market segmentation is critical to business success in the 21st century. If you are an SME and expect your business to be attractive to all, you may not be making the most of your budgets and resources.

Name brands strategically

It is critical that when you name brands you do so with your marketing strategy in mind.

You have to balance an emphasis on creating a distinctive market offering with the weight you place on the origin of your products and services.

Between these two options lies a range of brand name strategies:

  • A Corporate Brand:  This is where you create a unified approach across all products and services.  An example would be Heinz where the corporate brand dominates above a descriptive product name.  Linking products together like this creates a strong corporate image.  This approach allows economies of scale by linking product reputation and having a single marketing budget.  The reputation of one product can have a halo effect to other products in the range.  If you buy Heinz Baked Beans and see them as the premium product in that segment, you become more likely to buy Heinz Tomato Soup or Heinz Ketchup.  However, this halo effect works both ways and if a product is seen as a poor offering, that bad reputation can infect other products in the brand range.
  • Multi-branding:  This is a strategy used by conglomerates like Proctor and Gamble.  Each product or line has its own identity and brands are wholly separate.  This strategy fits with a diversified strategy where the company competes in a wide range of markets. So P&G have a cosmetics brand, a shampoo brand, several food brands, several soap and washing products brands, etc.
  • Endorsed Approach:  This is where both the company brand and the product brand are used. The product brand usually dominates.  Unilever has begun to use this approach where the Unilever logo appears on the back of packs.  Probably the longest use of this strategy is Kellogg’s,  Where the Kellogg’s name sits above well known brands such as Fruit and Fibre, Frosties, Coco Pops and Rice Krispies.  This approach allows products under a descriptive brand to create a strong and linked identity whilst there is a reassurance created by the reputation of the corporate brand.  This can be very useful for new product development.  However, unlike the corporate brand used by Heinz the corporate brand is a secondary mark.  It is possible for the use of the corporate brand to vary in prominence using this approach e.g. Kellogg’s is more prominent on Corn Flakes (a ‘bland’ brand) than on Coco Pops (a youthful and vibrant brand). You buy Corn Flakes because they are made by Kellogg’s, you buy Frosties because the kids focus on Tony the Tiger.
  • Range Branding:  Here you have different brands for different product ranges.  You create a family of brands.  So Volkswagen/Audi Group have a range of brands aimed at different markets e.g. Volkswagen Saloons and family cars, Audi executive saloons, Seat, mid-market cars, Skoda for the value car market and Bugati for the luxury sports car market.  Toyota adopted such an approach when it was felt that the corporate brand did not sit well in the Executive and Premium segments of the automotive market.  Toyota therefore created the Lexus brand.
  • Private Branding:  This is a strategy used by buying groups and distribution chains.  The most prominent example in the UK is probably Spar.  Here independent businesses share a brand that represents their buying group.  Spar is such an example where independent traders combine to use a single brand and create economies of scale.
  • Generic Branding:  This is where there is no brand name and goods are sold solely on the basis of a product descriptor.  This is the North Korean communist approach to branding.  It is the strategy for dog products or commodities where the only mix factor is price. It is not a strategy commonly seen in mature markets.

Each of these strategies has strengths and weaknesses:

  • A corporate brand creates strength across product ranges and creates a unified identity.  It allows economies of scale as marketing costs can be spread across product groups.  However product failure can infect other products and damage the corporate brand (e.g. New Recipe Coca Cola).
  • Multi-branding allows for individual differentiation across brands and allows for the development of specific brands for separate market segments.  This allows brands to build a firewall against the spread of reputational damage if another brand fails.  However, this approach is expensive and separate promotional budgets are required for each range.  Each market segment must be able to support its own brand.  It is hard to reposition products from declining markets.
  • An endorsed brand approach allows products to be supported by the corporate reputation.  It also allows different products to create their own identity.  However, new product failure can impact your corporate brand (e.g. Sinclair computers and the C5 electric vehicle) and the corporate brand can limit the image (and price) of a product brand).
  • A range brand can allow a strength to be conveyed across products or services.  Promotional costs can be spread across a product range whilst creating separate range identities. But product failure can impact a range of products and the positioning of ranges in the market can create quality and price ceilings (and floors).  No one would pay £1000 for a Squier electric guitar and you wouldn’t see a Fender electric guitar for £200.  The £1000 Squier would bite into Fender’s  market position and if you could get a Fender for £200, the Squier brand would be unnecessary.
  • Private brands often mean little promotional spend by the retailer and this can limit the ability of the retailer to create an identity different to that of the private brand. Sellers are constrained by the rules of the buying group.  Marketing decisions are controlled by the distributor.  However it can create cost efficiency as marketing costs are shared.
  • Generic brands have little or no marketing spend and packaging costs are minimal.  However, it is a perfect competition model where price is all.

 

Identifying Competitive Advantage is Critical to Successful Marketing Planning

In The Origin of Species by Natural Selection, Charles Darwin wrote:

“The most successful species are those which adapt best to a changing environment.  The most successful individuals are those with the greatest competitive advantage over others”.

 The same principle applies in business.  The most successful companies are those which adapt best to changing markets by having greater competitive advantages than their competitors.

In defining his three generic marketing strategies, the Harvard academic Michael Porter stated that competitive advantage grows out of the value that a firm creates and draws out from its customers. This value must exceed the cost of its creation. Value will depend on what consumers are willing to pay to obtain the perceived competitive advantage.

That value could be the achievement of value at a lower cost than that of competitors, a cost focus strategy.  It could be offering additional benefits for an equivalent price, a best value strategy. It could be providing unique benefits for a higher price, a cost leadership through differentiation strategy.

These strategies match two of Porter’s three generic marketing strategies, Cost Focus and Differentiation.

Of course, Porter describes a third generic marketing strategy, Niche.  This is offering specialist targeted products and services, often achieving a price premium, to specific groups of consumers.  So with this strategy your competitive advantage will often be driven by specialist knowledge or products to meet specific specialist needs.

Porter suggests that competitive advantages can be achieved through value chain analysis.  Identifying areas where targeted consumers perceive value and investing in those value activities.

Value chain analysis looks into business processes in two areas; primary activities, the process of production; and support activities, tasks which assist the production process.

Primary activities include:

  • Bringing raw materials into the production process
  • Modifying raw materials to create finished products
  • Distributing finished products to market
  • The marketing of finished products
  • Provision of after sales service

Support activities include:

  • Procurement of components and raw materials
  • Technological development (R&D, process improvement, quality assurance)
  • Human Resource Management
  • Infrastructure development (e.g. automation of processes, IT improvements)

Porter suggests businesses need to continually look for areas of improvement along the value chain.  This suggestion lends itself to concepts such as Kaizen, Six Sigma and total quality management.  He also suggests that businesses need to be aware of the value chains of competitors and others in their production chain such as suppliers, distributors and retailers.

Another quote often cited, from an anonymous source is:

“The only true competitive advantage comes from out innovating the competition”.

You cannot out innovate your competitors if you do not know their market offer as well as their strengths and weaknesses.

For many businesses, the issue is not obtaining a competitive advantage.  Most successful new entrants to a market do so on the basis of an identified competitive advantage. The issue is maintaining that competitive advantage.  Some competitive advantages can be protected, through intellectual property laws such as copyright, patents and trade marks. Copyright laws in the UK include the ability to protect designs.  Other protections include secret recipes and trade secrecy clauses in employment contracts.

Breaches of such contract terms can often lead to long and costly legal actions.  A notable example is the long-running legal battle between Mattel, the maker of the Barbie Doll, and an ex-employee who moved to a competitor and created the Brats doll.

Cravens (1996) identified the following sources of competitive advantage:

  • Superior skills
  • Superior resources
  • Superior control processes
  • Country of Origin
  • Brand reputation and image
  • The ability to produce higher profitability (e.g. economies of scale or process experience)

Cravens also identified positional advantages:

  • Superior customer value
  • A lower cost base
  • Differentiated product offerings

These positional advantages should lead to improved performance outcomes:

  • Customer satisfaction
  • Better customer retention and increased loyalty
  • Market share growth
  • Better distribution networks

To maintain these advantages, profits must be re-invested.

Often the primary competitive advantage is doing things better than your competitors.  This could be through combining small advantages to create a greater whole and a single advantage which can be exploited.

However, to create a winning business strategy, more than one competitive advantage may be required.

Here is a list of ten competitive advantages:

  1. Superior product or service benefit
  2. A perceived advantage or superiority amongst target consumers (e.g. Fender guitars, Titleist golf balls, BMW saloon cars)
  3. Low-cost operations (note not necessarily resulting on low cost products; this is about bigger profit margins).
  4. Global experience, skills and reach
  5. Legal advantages
  6. Superior industry contacts and relationships
  7. Economies and advantages of scale
  8. Competitive toughness and a determination to win
  9. Superior competences (e.g. a luthier who has been making instruments for 20 years compared to an unskilled Chinese production line worker)
  10. Greater assets (e.g. Amazon can apply greater resources to search engine optimisation than a small trader, and Amazon can also rely on Zipf’s law to dominate click responses).

Other advantages can be added to this list:

  • Intellectual capital
  • Attitude to creativity and innovation – accepting you will often fail
  • Service support sophistication
  • Better market knowledge
  • Superior technology
  • Using complex selling structure to tie customers in (e.g. petrol manufacturers selling franchises to service station operatives which include proprietary equipment such as petrol pump technologies and forecourt software.)
  • Better speed to market (although being first doesn’t always mean you win e.g. Betamax video cassettes and VCRs)
  • Brand Reputation
  • A focus on customer experience
  • Better supply chain management.

Why Businesses Co-brand

Co-branding is cooperation between two or more businesses, each of which has significant customer recognition and where both brand names are used on products and services.

We can all see co-branded products around us every day.  The lap-top on which I am writing this article is a Hewlett Packard machine but it is clearly marked with the logo of Bang and Olufsen, the hi-fi specialists, It contains microchips produced by Intel and it came with Microsoft 10 operating software.  Computers are excellent examples of the co-branding process in operation.

It is important that co-branded products offer added value to consumers.  The must offer something new, better and with additional capabilities than each of the constituent brands.

So Elixir guitar strings are co-branded with Goretex, the coating offering strings with a longer lifespan and greater resistance to corrosion.  Coca-Cola is co-branded with Bacardi rum to allow the production of ready mixed spirit drinks. Barr’s Iron Bru is similarly co-branded with Famous grouse whisky. Claridges co-brands with Gordon Ramsey in relation to fine dining restaurants.

In effect co-branding is a superior form of joint venture.

The following are types of co-branding categories by the level of shared value they create:

  1. Reach Awareness Co-branding: This offers the lowest level of shared value. It is where cooperation between brands allows the parties involved to increase brand awareness through exposing their brand identities to the existing customers of their co-branding partner. An example would be the direct marketing of credit cards alongside customers bank statements.  Especially if the credit card is promoted to high net worth individuals.
  2. Values’ Endorsement Co-branding:  The co-branding allows for endorsement messages which promote individual brand values and desired market position. So Tesco sponsor the Cancer Research Race for Life and Bank of America issue credit cards on behalf of the World Wildlife Fund (where a contribution to the fund is made each time the card is used). Tesco and Bank of America hope to co-opt the values of their co-brand charity.
  3. Ingredient Co-branding:  Branded components are included in products.  Like the speakers in this laptop. This allows the cross-promotion of different brand attributes.  So this computer offers better sound reproduction because of the quality engineering offered by a high quality, specialist audio manufacturer. This type of relationship needs a junior and senior brands e.g. Hewlett Packard being the senior brand and Bang and Olufsen the junior brand.  Such a relationship means that the number of potential co-branding partners can be small. The use of Lycra and Woolmark are similar junior co-brands. The aim is to reinforce your brand values by co-opting junior co-brands which highlight those values.
  4. Complimentary Co-branding:  Where brands combine to create a product greater than the sum of their individual parts.  These can be separately branded joint-venture products.  For example, Smart Cars are a co-branded joint-venture between Swatch, the designer watch manufacturer, and Mercedes.  Mercedes bring their engineering excellence and Swatch bring their design flair.  Similarly Lego co-brands with Star Wars and Marvel Comics. Lego’s co-branding brings the excitement and story-telling of their brand partners and Lego bring their market leadership in toys and model-building. However, with such complimentary co-branding it is important not to give away your brand.  On one occasion Lego refused a co-branding opportunity; to create a building block product for a high street chain; because the co-branded product reduced the individuality of the Lego block.

Co-branding can offer numerous benefits:

  •  new income streams through expanding your brand identity into new market segments
  • boosting the earning potential of existing products
  • creating credibility in sceptical markets.
  • additional brand exposure with lower risks
  • short-term tactical advantages over competitors
  • shared advertising costs through cross promotion (Sky broadband currently advertises it’s products alongside the promotion of family animation films like The Secret Life of Pets and The Incredibles).
  • Royalty income through the use of components in products produced by others e.g. for many years Nick Faldo, the major-winning golfer earned significant income by lending his name to clothing produced by Pringle.
  • boosting sales through the inclusion of additional product benefits
  • The use of joint tools by co-branding partners to allow entry into new markets and lowering the cost of such new market entry.

However there are significant risks to co-branding strategies, particularly in markets like fashion.  You have to carefully consider who your co-branding partners will be.  Your partner may be seeking a quick buck rather than a long term relationship. Financial greed has ruined many a co-branding relationship.

Co-branding partners must be compatible. If they operate in different markets, it may be important to seek a partner with a similar target customer profile.

Brand strategies need to be coordinated and co-branding deals can be ruined if a partner suddenly shifts their strategy to one that isn’t complimentary with your brand.

You need to avoid brand dilution; where the co-branding weakens your brand image and identity.

You also need to avoid error contagion, where an issue with an individual brand does not lead to errors with the co-branded product.  For example Ford had massive issues when manufacturing and design faults with Firestone tyres were discovered. These tyres had been fitted to thousands of Ford cars during manufacture.

The Saga of Dyson’s Electric Car

You may remember a entry I wrote in this blog about the announcement by James Dyson, better known for his cyclone vacuum cleaners, that he intended to develop an electric car.  It was my view that Dyson may have been biting off more than he could chew and that the development of an electric car could be his Sinclair C5 moment.

Well, this week Dyson announced he was scrapping his electric car project as it was commercially unviable.

The Sinclair C5 was the creation of Sir Clive Sinclair who had made millions developing the first generation of home computers.  Sinclair proudly stated that the C5 would be the mass transport solution of the future.  The announcement of the C5 caused significant excitement.  Sinclair was seen as an innovative genius and the success of his computers (although mostly used for gaming) led to a belief that when a mass transport solution was promised, something brilliant would be delivered.

The C5 was an utter disaster; an under-powered, single seat, plastic tricycle which was seen a potentially dangerous in traffic (The head height of the C5 driver was at the exhaust level of buses and HGVs). The C5 was one of the biggest commercial flops of the 1980s.

The similarity between Dyson and Sinclair was the level of hubris.  Both men appeared to believe that they could do no wrong.  Sinclair ignored warnings that he was over-promising as to the capabilities of the C5.  With Dyson it was his contempt for existing car manufacturers. Another similarity was the reliance on experimental battery technologies.

Sinclair had designed a new type of rechargeable battery for the C5; but his design was not ready by the time the C5 went into production.  Although the body of the C5 had been designed by Lotus, the British car manufacturer, Sinclair chose Hoover, the vacuum manufacturer to build it (a decision based on Hoover’s experience dealing with electric motors).

Dyson was pining his hopes on experimental solid state batteries which had never been used commercially.

Perhaps Dyson’s biggest error was his dismissal of existing manufacturers.  He went as far as insulting them at the launch of his electric car, saying he had repeatedly been turned away by car manufacturers who had rejected his ideas out of hand.

Several car manufacturers are also researching solid state batteries, which are smaller and more powerful than traditional lithium batteries.  These company’s already have production capacity and experience of automotive engineering, e.g. steering, suspension, tyres, and brakes.  In all these areas Dyson was starting from scratch in all these areas.

It can cost billions to develop a new car production line.  For existing car manufacturers installing electric motors and batteries is a product adaptation. Dyson’s project was a wholesale diversification from his cyclone vacuums. Dyson’s project was significantly riskier than that of the likes of Volkswagen and Toyota.

As I said in my initial article, Dyson’s best bet was to develop his battery technologies and then enter into a joint=venture with an existing car manufacturer. Trying to develop full production capacity from scratch in a mature market probably exceed his financial muscle.

I take no pleasure in being proven right, especially after Dyson accepted millions in funding from the UK government to develop the car at his Wiltshire design centre. At least 500 people have lost their jobs because of Singapore-based Dyson’s ego.

The Importance of Visioning

Who remembers Only Fools and Horses, the BBC sitcom in which the dodgy dealer and market trader Del Boy Trotter goes from one bungled venture to another? Del Boy’s regular catchphrase is, “This time next year, we’ll be millionaires”.

Of course, Del Boy is a dreamer. None of his business ventures, from cleaning chandeliers, to Peckham Spring Mineral Water (from a burst water pipe) or selling off second-hand sex dolls filled with hydrogen instead of compressed air, would ever get the millions he craved. When he did get the money, it was from the sale of an antique watch, which was hidden away in the back of his lock up. Even then Trotter lost his millions through bad investment.

Del Boy Trotter, like his ITV counterpart, Arthur Daly of Minder, are comic stereotypes. Like Walker the spiv in Dad’s Army, they are caricatures of a certain type of dodgy businessman.

However, all too often, I see real life examples of people who believe they can get rich quick; whether as, in my old role in Trading Standards, they are the victims (or even the perpetrators) of scams, or in my current role, they are ‘Dragons Den’ style entrepreneurs who believe they have developed a unique new product or service which is going to change the world.

I have often criticised such individuals in this blog, both real and fictional.  They are dreamers who lack SMART objectives; they are those who march on without doing the necessary market research; or they are people who assume every consumer will immediately share their individual beliefs attitudes and wants.

That said there is a place for aspiration and dreams in the world of commerce; but those aspirations must be properly channelled.

We have previously discussed the creation of mission statements and the setting of business objectives in this blog.  These are critical to the development of successful business and marketing plans.

Once you have created your business mission statement, it is critical that it is communicated to stakeholders including your employees. A mission statement is designed to provide a sense of vision and direction within your business over the longer-term.

A mission statement is of little value if your internal stakeholders are unaware of it. A mission statement should also be a living document capable of adaptation to matching external environmental change.

A mission statement should:

  •  Highlight core organisational values
  •  Be specific, not woolly or general
  •  Be realistic and not over-optimistic
  •  Rooted in organisational values so it properly reflects reality capabilities and competences

Otherwise the mission statement is just empty rhetoric.

The development of a mission statement leads to the concept of Visioning. Senior managers, heads of strategic business units and brand managers must think, in detail about what they are trying to create.  This means developing a vivid picture, a dream, of where the organisation should be in three to five years.

So a clear understanding is needed of how the trading environment might change and how organisational capabilities might change.

The visioning process should be detailed and not broad in scope. Managers must think carefully about:

  • The future size of the organisation
  • Corporate and brand values
  • The nature of your customer base and the segments you serve
  • How consumers should interact with the organisation and brand
  • How consumers should interact with the brand
  • The geographic scope of the organisation
  • Market position and corporate stance
  • Links with other organisations

Visioning does not just include a corporate of brand vision.  It can include visionary market insights and product concepts.

An organisational vision cannot be developed in isolation from the organisation’s trading environment.  It requires clarity of both insight and thinking. It must be constrained by corporate values.

The development of corporate visions has led to the growth of internal marketing; training motivation and communication designed to ensure the commitment of stakeholders to that mission.

A corporate vision is made up of ‘soft’ and ‘hard factors.

Hard factors include corporate objectives and strategies, systems of work, critical metrics, etc.

Soft factors include corporate values, priorities and styles of operating. It includes expected behaviours and attitudes.

These soft and hard factors drive performance.  the corporate vision should also inspire  the commitment to the organisation and leadership principles.

A corporate vision leads to value through innovation and develops five inspiring commitments:

  1. Market change represents opportunity
  2. Added value is competitive advantage
  3. Innovation in everything is the challenge
  4. Waste is the enemy
  5. A distinctive character is strength.

Leadership principles include:

  1. Realising the vision is a prime objective
  2. Improvement is an ambition
  3. Teamwork is the task
  4. Creativity is character
  5. The goal is to deliver results.

There are many examples of where a vison has been badly presented.

John Niven, the author and former record company A and R man, recalls one such instance.  When working for one of the UK’s larger independent record labels, he was approached by two entrepreneurs looking for investment in their firm.  the entrepreneurs pitched their belief that in future, people wouldn’t buy records. Rather than buying an LP with ten songs, consumers would buy music track by track. the entrepreneurs were laughed out of the office.  Their vision seemed as ludicrous as Del Boy’s ‘one day we’ll be millionaires’.  The entrepreneurs went on to create Spotify.