Tag: innovation

Competitive strategy in Emerging Markets

As the BBC rapidly runs out of content to show due to the pandemic shutdown, it has been showing repeats of Dragon’s Den. One common feature of that programme is entrepreneurs trying to launch a new product or solution in an existing market.  All too often, these pitches end with the Dragon’s rejecting the invitation to invest in the product with the refrain of ‘I’m out’ or ‘there isn’t a market for your product’.

Trying to launch a new solution to an old problem is probably the hardest thing to do in business.  Why invent a new product to dig a hole when solutions like spades and mattocks already exist.  The new product needs to be better than the existing solution. In fact it probably needs to be better over a range of criteria; ergonomics, price, availability, value for money, durability, etc.

That doesn’t mean there aren’t new markets and a space in the world for new product solutions.  New markets emerge all the time.  In the 1960’s no one foresaw the home computer; when apple launched the iPad, they were derided for launching a product no one wanted or needed.

So what is an emerging market?

Generally, emerging markets are defined as newly-formed or re-formed industries driven by technological innovation, shifts in cost relationships, the emergence of new consumer needs or other changes in the economy or society.

A factor of emerging markets is that there tends to be few ‘rules of the game’. How the market is expected operate hasn’t been established.

There are common structural factors which characterise emerging industries.  these relate to the absence of established bases of competition and the initial small size of the industry.

  1.  Technological uncertainty:  What is the best technical configuration of the new product category.  For example which is better, a lithium battery car or one powered by a hydrogen fuel cell.
  2. Strategic Uncertainty:  There appears to be ‘no right’ strategy.  Different market players approach the market in different ways e.g. positioning, supply chains, distribution, customer service, etc. Products are configured differently or different production technologies.  For example, the common layout of the pedals in a car took many years to become established.  Different models of car used to have different layouts of accelerator, brake and clutch. Strategy can also be uncertain due to a lack of information about prospective consumer groups and the actions of competitors.
  3. High Initial Costs but Steep Cost Reductions:  New products in emerging markets tend to begin with small production volumes.  There is a lack of experience in producing the new product so manufacture takes longer and there can be increased wastage.  However, the production learning curve can lessen rapidly and as workers become more experienced in its production. Firms develop better, more efficient processes and procedures.  Productivity can rise rapidly as sales increase.
  4. Prevalence of Embryonic Companies and Spin-offs: New technologies see a lot of new market entrants.
  5. Consumers tend to be first time buyers:  Marketing is focused on product take up or getting consumers to switch to your new offer.
  6. Planning for a short-time horizon:  the pressure in the market may be to meet rising demand for the new technology.  market players suffer production bottlenecks and a lack of production capacity.  The focus in the business is on the now: firefighting current problems; not looking to the long-term future.  For Example, when Tesla launched its 3 model electric car, it lacked the production capacity to meet demand and customers faced long delays in obtaining their vehicle.
  7. Subsidy:  There may be government subsidy of new market entrants particularly in areas of societal concern.  For example, the UK government subsidised the insulating of people’s homes and the installation of solar panels.  Currently the UK government is subsidising the search for a Covid-19 vaccine.  The UK government is also interested in creating ‘gigacities’ large battery farms to store electricity generated through wind and solar.  But beware, subsidy can skew a market and make the market dependent on political decisions.

Emerging markets can experience early mobility barriers.  New markets often rely on proprietary technology and manufacturers may have significant control over supply and distribution channels.  They may hoard access to raw materials e.g. the UK is looking to build factories to produce the batteries for gigacities but lithium, the metal used in the batteries is extremely rare and difficult to obtain.  there may be a lack of skilled labour to produce the new technology and the market may lack cost advantages of experienced workers.  This lack of cost advantages can be made more significant through the newness of the technology needed to produce the product and through competitive uncertainties.  Likely there will be significant risk in the sector and thus the opportunity cost of capital can be high.

The nature of entry barriers in emerging markets is a key factor.  Often success in these markets is less from the need to command massive resources and more from the ability to bear risk.

So what are your strategy options in an emerging market:

  1.  You act to shape the industry structure:  You get to set the rules of the game through your product configuration, your pricing strategy and your marketing approach.
  2. There are externalities in industry development:  there is a balance to achieve between industry advocacy and the self interest as to your market position.  You may have to ensure that industry players are, in some way, interdependent on each other. this can be through setting industry standards, setting up trade bodies and establishing industry codes of practice.  The big supermarket chains are all members of the British retail Consortium which sets standards as to product quality and supply.  Those firms that do not comply with these industry standards can be forced to disappear if they refuse to accept industry norms.
  3. You can change the role of suppliers and channels:  you may be able to shift the orientation of suppliers and distributors by getting them to accept your procedures and standards.

You have to make big decisions when entering an emerging market.  Do you pioneer in the market or do you act as a market follower. Being fist in can be a benefit but it can also be risky.  Sega were first in to the computer game console market but suffered as Microsoft and Sony undercut their pricing structure. This is also an example of existing firms seeing your emerging market as an opportunity and using their existing scale and resources to drive you out.

Pioneering in an emerging market can be high risk.

Entry into a market is appropriate when:

  • The image and reputation of your firm is important to the buyer e.g. Nike entering the golf club market
  • Early entry is to initiate the learning process i.e. get ahead of the learning and experience curves. Experience is difficult to imitate.
  • Customer loyalty offers great benefits and those benefits lie with the first on the market.
  • Absolute cost advantages can accrue through securing the purchase of raw materials.

The following tactical moves:

  • Commit to the suppliers of raw materials – become their favoured customer
  • Finance ahead of actual need.
  • Entry to the market MUST be as a result of careful strategic analysis.

Time and Technology

We live in a world where technology and science progress at an ever increasing rate.  It was probably millennia before man progressed to create the wheel. Life in the middle ages was not too different to life in Roman times. Yet today rarely a day goes by without a what once would have been considered a major scientific discovery.  Accelerating technological advancement has become the norm.  Progress affects commerce.  progress affect your business. So you have to be aware and plan for technological change.

There are plenty of examples of businesses ignoring technological change.  The big music retail chains ignored music streaming.  VHS rental became a thing of the past.  Kodak invented the digital camera sensor but then allowed others to develop the digital camera as they focused on film rolls.

Time affects many business resources: manpower, finance, raw materials, knowledge.  The trio of money, quality and time dominate.  To implement the quality demanded by those in the marketplace is often a factor of money and time.

Quality often relies on the available time to market and the technology needed to deliver that quality.  Technology includes the actual features of a product but the support functions used to produce that product.

You also have to consider the lifecycle of a market.  Over time markets develop, they often enter a technological stage.  This affects the consumers perception of the state of the market and your businesses position in that market.  Is your business seen as cutting edge or as old-fashioned?

However in some circumstances appearing old-fashioned can be seen as a benefit.  Take Fender guitars, they sell a lot of instruments which are still made on machines installed in the 1950s and which contain features like neck profiles and electronics which are all but identical to those of 50 years ago.  Many players of the electric guitar still prefer amplifiers which contain valve technology little changed since the early 20th century.

Technology also affects the level of automated support in the marketplace.  This isn’t just production line technology but secondary process technology such as raw material delivery technology, automated aftersales support technology and even automated marketing technology.

It can be industrial technology, like the creation of long-life egg powder for bulk bakers or 5 gigabyte memory cards for digital cameras. It can be workplace technology such as customer databases or production line automation.

There are four aspects to workplace technology:

  1.  Improving the speed of an activity
  2. Improving the precision of an activity
  3. Technology overcoming production limitations
  4. technology reducing costs and wastage

Time is important as it allows faster delivery of best value but it also creates pressures.  You need to be able to strategize faster, implement faster whilst meeting customer expectations faster.

That latter aspect requires careful market monitoring.  Consumer attitudes change over time.  Changing perceptions is fundamental to marketing.

Time can also be a competitive advantage.  Being first into a market, being ‘first there and best dressed’ has long been seen as an advantageous position with sustained market share.  However this view is dependent on a market being ready for the innovation and being both willing and able to assimilate it.

Reducing time required to complete a function can provide market flexibility.  Who hasn’t spent hours pouring over Gantt charts and production networks trying to match available resources to production deadlines?

There are four aspects to new product taxonomy:

  1.  Product renovation:  altering old products which are already in the market place, new designs, new features
  2. Creating copycat products: Products which use technology which exists in the marketplace but which is new to your business
  3. Commercialisation of in-house products – products which exist within your business (for business purposes) which are then marketed to the consumer market.
  4. True innovation: New products created from new emerging technologies.

Innovation implies increased complexity and thus increased risk.  You need to apply marketing functions to educate the market as to the benefits of the new technology

Time affects workplace technology.  You need to pace your time resource to meet market readiness.  You need to exploit technology to introduce innovation over complexity.  The technology may be complex but it needs to make things easier for the consumer.

In terms of marketing, time and technology need to be considered in both strategic and operational terms.

Strategically, time and technology need to be applied to sustain competitive advantage.  Operationally, time and technology need to be leveraged so as to enable first to market, to reduce costs, to develop better systems, etc.

In applying time and technology to your business, you need to be aware of the strategic advantage cycle:

  1. Observe your environment.
  2. Orientate your organisation to that environment
  3. Decide what you need to do to make that environment favourable to your organisation
  4. Act to implement your decision.

Your decision needs to advance and sustain a competitive advantage over your competitors.

Time and Technology

The hype relating to market disruptors is now somewhat reduced as compared to a couple of years ago but it is still the case that market disruption is a major component of many new businesses.

So what is meant by ‘disruptors’?

Disruptors are entrepreneurs who aim to enter existing markets through leveraging the benefits of new technologies on that market.  So if you have a plan to deliver Pizza via an app, or to sell Books through a website, or to distribute music by digital download, then you are a disruptor.  Some of the biggest businesses in the world could be classed as market disruptors, Amazon, Deliveroo, Uber, AirB&B, Tesla, etc.

There are two aspects to market disruption:

  1. The technology
  2. Time.

In fact there is a triad of components to technological disruption; money, quality and time. The implementation of technology in the marketplace has to be a set quality (that demanded by target customers).  It takes money to ensure that quality; and it also takes time to develop that quality.

Recently, Dyson abandoned their project to develop an electric car.  The proposed vehicle was a disruption product.  It was reliant on experimental solid state battery technology. In announcing the project, James Dyson stated his plan to launch the new car in 2021. Many in the automotive sector believed that such a deadline was overly ambitious and that solid state rechargeable batteries would not be commercially ready until the middle of the next decade, at the earliest. Dyson’s 2021 deadline was clearly a rush to market, and that rush risked the product not meeting the expected quality.

This tale mirrors the Sinclair C5, the 1980’s electric recumbent tricycle.  People expected Clive Sinclair, the home computer pioneer, to produce a quality, useable transport solution. Instead they got a pedal car with low power and limited range.  One of the primary reasons for the C5’s failure was the new, experimental batteries designed by Sinclair, were not ready at the time of the C5’s launch.

Technology does not just mean product technology.  There is the technology needed to produce new products (e.g. new machinery such as 3D printers) and then there is technology for support functions – e.g. Artificial Intelligence being used for support calls.

Time to market is clearly a factor on the ability of a firm to have a hold on the development of a market.  The recent rise in the Tesla share price; the firm is now worth more than Volkswagen; signifies that, at least in the minds of city traders, that Elon Musk’s car firm has a technological lead.

Technology is also a measure of customers perception of your status in the market.  Often firms with the best technology are seen as market leaders (whether or not that perception is true).

When discussing time, there is time to market, but there is also the timing of market entry.  Often being first to market is a primary incentive, especially when intellectual property; such as patents and designs; is prominent.

Disruption through technology isn’t just the creation of software apps.

There is industrial technologies, such as the creation of long-life egg powder for cake mixes; or the creation of lightweight but toughened plastics for football boots; or the creation of high capacity memory chips for USB memory sticks and memory cards.

There is workplace technology.  This doesn’t just mean robots on the production line.  It is the application of scientific principles to marketing. For example, the development of graphene for flexible mobile phone screens.

There are four roles for workplace technology:

  1. Improving the speed of an activity;
  2. Improving the precision of an activity;
  3. Overcoming limitations
  4. Reducing Costs

All of these feed in to improving productivity.

Time is important because it is, in today’s world:

  • You need to meet customer expectations faster;
  • People expect ‘best value’ to be delivered faster.

it is a question of relative time, to absolute time.  Dyson’s 2021 deadline was an issue of absolute time.  he may have been better concentrating on relative time.  rather than setting an arbitrary deadline for his batteries to perform, he may have been better concentrating on ensuring his batteries were the most effective and efficient before those of competitors met those criteria.

Consumers attitudes also change over time; and changing consumer perceptions and attitudes is fundamental to marketing.

Rushing to market can be a big mistake.  Take Betamax video tapes as an example. Betamax format was first to market in the home video recorder market but VCR tapes became the market standard.

Being too late to market can also be an issue.  An example is Sony minidisc. This format was the first for digital downloading of music, and it was a better portable offer than compact disc as it was less prone to jumping.  However, Minidisc was launched just as MP3 players hit the market, which used memory chips which made the ‘disc’ bit of the technology redundant.

In 2003, Stalk and Hout wrote that time is the next competitive advantage.  This led to a humorous comment that marketing success was like going to a dance where success in getting a partner relied on being first there and being best dressed.

The best approach is to consider how relative time gives you a competitive advantage.

Rush to market and your technology may not be of the quality demanded by consumers.  It may not be perfected.  Alternatively, if you are a technological laggard, your competitors may beat you to the punch.

Is Your Brand Coherent?

There are two types of brand; generalist brands which are aimed at multiple market segments; and specialist brands; which are often targeted on a single market segment.

Generalist brands often have products which are sub brands.  For example, Heinz is famous for its 57 varieties (in fact there has always been far more than 57 Heinz product lines). Heinz Tomato ketchup is a sub-brand which has a number of product variants e.g. reduced sugar content and organic ketchup.  Generalist brands demand a differentiated marketing strategy.

Specialist brands have products which are variants. Morgan is a specialist sports car brand aimed at vintage motoring enthusiasts. The brands products are variants of the vintage sports car design (including the three wheel tricycle). Jim Dunlop is the go to brand for guitar plectrums and a wide variety of plectrums is produced using different materials to give distinct tones.  Specialist brands require a niche marketing strategy.

There are commonalities between generalist and specialist brands.  Both have physical and intangible attributes.  Both have core and peripheral facets. To be successful and to grow brands, these attributes and facets have to be coherent.

Commonly, brands grow through multiplication.  growth through the introduction of product variants.  In this way specialist brands can grow to become a generalist brand and market expansion occurs.  There is a gradual shift from a niche strategy to a differentiated strategy.

Often growth requires adaptation of a brand’s products as the initial market is expanded and growth may also require the adoption of new distribution channels.  The marketing mix may need to be adapted to suit the requirements of these new distribution channels. Care needs to be taken to deal with potential channel conflicts e.g. pricing disparities.

Often market expansion to grow a brand means going international. In such circumstances brands may need to be adapted to suit different cultural and social norms.  The use of local agents and distributors may mean that there is local reinterpretation of brands.

What is certain is that growing a brand introduces diversity.  So how do you grow a brand without losing the necessary facets and attributes of the brand identity?

The answer is the creation of brand coherence.  Growth of a brand should not be seen purely in terms of increases in sales and profits. You also need to grow the brand’s reputation, identity and its defences against competition.

This means that brand growth requires your business to be coherent in everything it does.

Brands are constructed in stages; from top to bottom.  Senior managers will create a brand platform, the core of a brand; its identity.  Functional management will then create products services and experiences which fit that brand identity.

Consumers however view brands in the opposite way. They see the products, services and experiences first.  Consumers assess the essence of a brand through their expenditure and the processes they have to go through to access and use the brand. The brand identity is perceived through repetition of this process.

A consumers first contact with a brand is the beginning of a journey to the understanding of a brand’s identity.

So managers across an organisation from Marketing to HR, Finance to Operations, need to know the perception an organisation is trying to create in the minds of consumers with respect to the brand.  They must be sure to eliminate that which does not conform to the required brand perception.  So a successful brand, to be coherent external to the organisation, needs strong internal policing of brand activities.

You need to build a brand through specific brand values, its exclusiveness and by the creation of motivational added value.

You need to teach and repeat brand coherence over time.

However, repetition of brand attributes to build coherence does not mean uniformity. Repeating an identical message over and over again is boring. To drill your brand coherence into the minds of consumers, you need surprise.  However if you overdo the variety in your message, your brand identity will turn out fuzzy and incoherent.

Brands need family resemblance, but everything should not be cloned. There and be difference but within a family resemblance.  The Kardashians are a family brand but each member of the family is different.  However each Kardashian shares family traits.

So when growing a brand you need to retain core family attributes and the core identity whilst carefully introducing variety and surprise.

A brand name is a point of reference and an indicator of added value. If you put a product under a brand name, you are attaching that brand identity to it.  If the product does bot conform to expected brand attributes, it is incoherent, and can risk the brand as a whole. Consumers must be able to visualise the family identity in the product.  Critical in this are product packaging, labelling and other physical elements of the brand.

If extending a brand, the introduction of big changes can weaken family identity.  Family identity cannot be reduced solely to physical appearance. You need to create and sustain the brand halo.

Brand coherence is not brand uniformity. An excess of uniformity kills consumer desire. Coherence involves little surprises but the maintenance of core brand values.

Brand coherence is a see-saw balance between those surprises and brand specifics.

Blue or Red Ocean

An important element in the management of a brand is innovation.  Successful brands are constantly innovating; developing new products and services, developing how those goods and services are delivered and developing new promotional channels.

As products move through their life cycle, they are continually innovated, packaging is redesigned, new features and functionality are added.  Take Listerine: It is currently sold as a mouthwash for bad breath but it started life as a household cleaning detergent.  Take Canon cameras: they launch a new model every six to twelve months and each time there is product adaption such as GPS, internet connectivity and ever higher pixel counts on the cameras sensor.

When looking for new products there are three possibilities:

  1.  An existing product class to meet an existing consumer need.
  2.  A new product class to meet an existing consumer need
  3. A new product class to meet a new consumer need (possibly a need the consumer is yet to realise they have).

An example is Apple.  When Apple launch a new iPhone, it is launching an existing product class to meet an existing product need, the mobile phone.  When it launched the iPod, it was launching a new product class, the digital music player for an existing consumer need, a portable music device.  Apple’s original product, the desk top computer was a new product class, the home computer, for a new consumer need, having a computer in the home instead of in the office or laboratory.

When computers were developed after the World War Two, they were seen as tools for science and mass computation.  In the mid-1970s following the invention of the silicon microchip, computers could be put on a desk but no one considered them a product for the home, they were business tools for accountancy and word processing.  It was innovators such as Sir Clive Sinclair and Steve Jobs who saw the possibility of a computer for the home and with the ZX 80, Sinclair was the first to put his to into that, Blue Ocean.

A word which is in common parlance currently is ‘Disruptor’.  Many business leaders, such as Sir Richard Branson, have disruptor programmes.  Disruptors sit neatly in the second of the three categories.  They are individuals who aim to create new product or service classes to meet disrupt existing market expectations.  These are businesses looking to do things differently and to present a radical marketing mix.  This is was is often termed as Blue Ocean Marketing.

In recent years, many researchers have focused on Blue Ocean Marketing and they have highlighted prominent successes such as Ryan Air, Amazon and Ocado.  Another example of blue ocean marketing is the estate agency business where companies such as Sarah Beeney and HouseSimple are breaking down the value expectations of the traditional estate agency market.

It is generally accepted that markets grow by the reduction of unit prices.  The home computer market is one such example where the cost of a PC has fallen dramatically in real terms.  Unit price falls and sales volumes increase.

However, when a market becomes mature the goal is not to increase sales volumes through expansive growth but to obtain the market share of your competitors.  Often it is not a case of increasing sales volumes but increasing sales value.

No one considers brushing their teeth six times a day.  Most people stick to brushing twice a day, or three times at most.  Our usage of toothpaste doesn’t change so we are unlikely to buy more toothpaste.  However, we may be persuaded to change to a different brand or to buy a more expensive version of toothpaste because it promises to whiten our teeth, kill bacteria or cure bad breath.

Businesses in mature markets aim not to sell more but to get consumers to pay more.  It is not an accident that Dyson vacuum cleaners are amongst the most expensive on the market.

To allow premium pricing, many brands aim to find value innovations, a more for more strategy.  This involves building an unprecedented bundle of marketing mix attributes.

Blue Ocean disruptors often aim to break this model.  They suppress certain value innovations and promote themselves on a single value attribute.

Take as an example Premier Inns.  They broke the accepted rules of the hotel.  They realised that there were huge numbers of consumers who didn’t use hotels.  Hotels were for the wealthy or paid for by your employer.  Students, OAPs and Other demographic groups tended to use B&Bs or to stay with friends rather than the premium prices of hotel chains.

So Premier Inns and the likes of Travelodge removed some of the value innovations of traditional hotels.  There is no room service.  Room decor is basic.  There is no mini bar of satellite TV service.  Breakfast is either from a vending machine or it is a self-service buffet.  These companies offer a value innovation of a hotel bed at a discount price but to enable that price they removed many of the traditional attributes of a hotel stay.

A critical element in blue ocean marketing is ‘identifying your oilfield’; the bundle off value attributes which are not offered by other providers.  Often this can be through identifying an area of market growth not utilised by others.  This can even be areas which others in the market see as unprofitable.

Blue ocean marketing is often a high risk strategy.  For every blue ocean success, there are thousands of failures.  Take Bic as an example.  Bic was an early blue ocean pioneer.  It applied blue ocean strategies to the pen market.  Until Bic invented the disposable ballpoint pen, writing implements were seen as premium products.  People would buy expensive fountain pens which would last a lifetime.

Bic then applied the disposable pen model to the cigarette lighter market.  Again smokers would buy a refillable lighter which would last many years.  Bic soon became the market leader in the lighter market.  Bic applied blue ocean marketing principles again, taking on the likes of Gillette in the razor market.  Again success.

However, Bic then tried to enter the mobile phone market competing with the likes of Ericsson and Nokia.  Bic produced a phone which was able of making calls but which didn’t have the accessories offered by their competitors such as games, internet access and a camera.  The Bic mobile phone was an utter disaster.

Other blue ocean firms, such as the Easy group, best known for the value airline EasyJet, have also had mixed fortunes in applying blue ocean strategies outside their original markets.

Blue Ocean innovations are risky.  The television programme Dragon’s Den is replete with failed blue ocean pitches.  Only a small minority of blue ocean innovations succeed.  So is it worth considering only blue ocean marketing?  Is it always advisable to ditch traditional incremental product innovation and to offer a radical alternative offer.  Is the concept of making a superior product to your competitors dead and is  modern marketing solely the strategy off meeting consumer needs in a different way?

Traditionally product innovation was all about creating a superior offer.  However, some marketing academics dismiss this approach as ‘Red Ocean’.  A blood filled sea of cutthroat competition where sharks fight to consume a shoal of tuna.

These academics argue that market disruption is the concept of our times.  To succeed you must think in a  radically different way and blue ocean marketing is the methodology.  To succeed you must think differently and offer distinct value propositions.  You must look at existing market beliefs and challenge them.  You must suppress some traditional product or service attributes and enhance those which promote difference.

However, these studies often concentrate solely on blue ocean success stories ignoring the many failures such as the Bic mobile phone.

There are also lessons to be learnt from Blue ocean failures:

  1.  Value innovations are not the only way to create new brands
  2. Value innovation – suppressing an attribute seen as necessary by existing market players – is no guarantee of success if there is insufficient demand for that innovation.
  3. Value innovation can lead to no innovation at all.

Some of the most successful products and brands in today’s market rely on traditional ‘red ocean’ innovation.  The iPhone is one such example.  It’s success is through the constant innovation of an existing product by adding better or additional functionality.

So if you are considering a new product or entering a mature market, do not only think of blue ocean innovation or a radical marketing mix.  Sometimes the answer is just to provide a superior product to your competitors.

 

 

Tips for managing a portfolio of brands

In previous blog entries I have discussed the concepts of a branded house and a house of brands.

A branded house is where one brand name is spread across a wide product portfolio.  A house of brands is where different brand identities are used in different market segments and for different product categories.

The firm I used use as an example of a branded house was Heinz.  But circumstances have changed.  Last year, Heinz merged with the American food conglomerate, Kraft Foods.  Heinz has gone from a position as a branded house and has become part of a house of brands.  Heinz has become part of a brand family which includes Philadelphia, Oscar Meyer, Cadbury, Planter’s Peanuts and Maxwell House coffee.  Heinz is now part of a multi-brand portfolio.

So what principles must you apply when managing a multi-brand portfolio?

Brand portfolios require strong management above brand level.  You do not want brands within a portfolio to duplicate their product offers.  You can end up competing against yourself.  Each brand may duplicate innovations doubling research and development costs.

To manage a multi-brand portfolio, you need a brand coordinator or a brand committee to avoid the duplication of effort and cost.

In some sectors, such as pharmaceuticals, independent duplication of effort may be necessary.  Scientific peer review may be required so teams independent of each other may have to carry out the same experimental work simultaneously.  There is only a single particle accelerator loop at CERN and the cost of building a second is prohibitive, so two teams of scientists carry out the same work to maximise the efficiency of the accelerator and to provide peer review evidence of each others work.

It is also true that a bit of organised competition may accelerate product development and innovation. But note the word organised.

Innovations should be allocated to brands according to their market position.  Innovation is the lifeblood of brands which grow through extensions and product renewal.   These maintain brand relevance as the market changes and allow brands to differentiate themselves from their competitors.

You must develop clear brand charters which describe the brands identity and which clarify the main lines of development and innovation for the brand.

This allows innovations to be allocated according to a brand’s values and not under pressure from sales departments who want every brand to have the same advantages.

It is important to differentiate between innovations which are to be offered exclusively for one brand and those which are to be phased-in over the whole portfolio.  It is no accident that car firms apply innovations to their luxury models first before applying them in stages down to their base models.  If you are to phase in innovations throughout your brand portfolio, you must clearly establish the order in which innovations are to be allocated

In certain circumstances, innovations may have to be introduced across a portfolio simultaneously.  It may be more cost-effective to spread the cost of an innovation across a brand portfolio, e.g. battery technology for electric cars or for manufacturing innovations.

In managing a brand portfolio, you shouldn’t ‘rob Peter to pay Paul’.  You want a portfolio of strong brands.  You don’t want a few stellar performers and other brands which struggle, sucking up hard-fought income.  Mars recently took steps to streamline its portfolio focusing on those brands which it considered market leaders.

It is standard practice to position brands so that they don’t compete with one another.  Brands must be designed to fit particular market segments.  Thus, each brand in a portfolio should be able to grow strong. Citroen Peugeot has to mass brands and innovation is key to both.  To focus innovation budgets on one brand would destroy the other.  There are no non-innovative brands in the car market.

A brand portfolio should not represent a history of product development and acquisition.  They represent a strategy of global market domination.  Why did Coca Cola pay a billion dollars for the Orangina brand; a geographically local brand.  It wasn’t because Coke lacked an orange soft drink (they own the Fanta brand).  Coke bought Orangina because Pepsi didn’t have an orange soft drink in their brand portfolio and to cover this gap relied upon a distribution deal with………….Orangina.  Coca Cola’s purchase of Orangina denied Pepsi a foothold in the Orange-flavoured soft drink segment.

Your brand portfolio is like pieces on a chessboard and it should be used strategically to defend your market position and to attack your competitors.  Each brand should stick to its defined strategic role.  Fighter brands are like pawns defending your king; your star brand.

Some brands will have a financial role providing income for other marketing activities.  Others will be banner brands which are closely related to, and bear the name of the brand owner.

Flanker brands, your knights and rooks prevent your opponents attacking your star brand indirectly.

Some brands will be attack brands taking on your competitors. On the chessboard of competition these are your Queen and Bishops.

Some firms design their portfolios as parent and child brands.  Each child brand has a specialised role.  Nivea have their traditional face cream but they also have thirteen child brands each with its own strategic intent.  It can be disastrous to purchase a parent brand and not to purchase its children.

All brands have a tendency to duplicate innovations and strategies. This can erode brand identity as effort is applied to create economies of scale.  This tendency must be avoided. Brands are designed to target particular customer segments within a market. If brands become indistinguishable from one another, that targeted appeal may be lost.

For firms such as Volkswagen Group.  Volkswagen, Audi, Skoda and Seat vehicles all come off the same production lines and share the same platforms.  Seat and Skoda have been pushed up market.  To ensure that each of these brands retains its individuality visual attributes have to retain distinct difference.  Design is playing an increasingly important role in brand management.

Managing a brand portfolio is a game of three-dimensional chess.  It takes continuous supervision and strategic control to ensure and maintain success.