Why It's Bad to Be a Large Brand: Opportunity Abounds for Small Business

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The March, 2008 issue of the Harvard Business Review has a very interesting article entitled "When Growth Stalls," by Matthew S. Olson, Derek van Bever, and Seth Verry.

The article’s research focuses on top organizations, which they refer to as “premium position” companies.  Premium position companies hold leadership positions in their markets, records of past success, etc.  But the fact that they have held these premium positions is what attributed to their downfall, or plain old revenue drop.  Examples included are Levi Strauss, Kodak and Caterpillar.

While the concepts do not specifically refer to marketing and communications, the reasons for decline that they discuss could easily be applied to marketing concepts.

Below are some interesting quotes with commentary:

"Premium position captivity is the inability of a firm to respond effectively to new, low-cost competitive challenges or to a significant shift in customer valuation of product feature."

This should sound eerily familiar to CMOs in large organizations. It is the successful, large businesses that are having difficulty grasping new media formats. As it relates to this article, premium position companies have a long track record of success, so it is inherently more challenging to divert from what previously worked. Advantage: small and mid-sized companies.

"We use the term 'captivity' because it suggests how management teams can be hemmed in by a long history of success.  A company that solidly occupies a premium market position remains insulated longer than its competitors against evolution in the external environment.  It has less reason to doubt its business model, which has historically provided a competitive advantage…..when the towering strengths of a firm are transformed into towering weaknesses, it’s a cruel reversal." 

Translation: "We're really smart so don't try to tell us how to do it." Arrogance, with a dash of bureaucracy, will hamper, or even destroy, the longest running, most dependable brands over the next five years.   

"We saw a cycle of disdain, denial, and rationalization that kept many management teams from responding meaningfully to market changes." 

Have you ever had a conversation with a marketing executive from a large company about the new rules of media and marketing? For the most part, those people are relying on a set of believes and practices that may not apply in the future (In doubt? Read IBM's "The End of Advertising as We Know It.").

"Organizations simply don’t recognize the importance of an emerging behavior or customer preference in their core markets.  They continue to place their bets on product or service attributes that are in decline, while disruptive entrants emphasizing different, under recognized features gain ground."

Companies need to be particularly attuned to the new forms of communications demanded by the customer, and recognize the many options consumers now have to seek out information on their terms. A great example of this is in traditional media. The great media companies in the world grew to powerhouses as the distributors of content throughout the world. Why? Because they (and only they) had the ability to connect customers with valuable information. Today, anyone can do that. The business model that was once so profitable, is today obsolete.

"Levi Strauss…illustrates how difficult it is to respond to a threat in the absence of a burning platform.  If your sales are continuing to rise, how do you focus concern?"

Think about this one. Many firms don’t realize the bridge they are standing on is burning down, and by the time they find out, it may be too late.

One of the things that strikes me about these concepts is how they apply to communications.  If companies have been very successful in the past with dominating their markets, they probably assume that the forms of communications they use will continue to serve them well in the future. 

Communications get blind sided along with rest of firm’s strategies.

As we have discussed many times, disruptive technology in communications is the ability of smaller, less well-funded firms to develop great communications at a fraction of past costs.  They can now compete toe-to-toe in the communications arena, making decisions faster and being inherently more flexible due to the lack of management layers. That is why companies who are only a decade old like Google can become the most dominant brand in the world.

I wonder what will happen in the next 10 years?

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Comments

[Andrew Bruce Smith]

I guess in some ways this has always been the case - namely, getting to the top is one thing - and staying there is another. The marketing challenges for contenders and market leaders have always been different. However, in the past, market leaders tended to stay entrenched for years if not decades - today you can rise to the top quickly - and just as swiftly fall.

Not only has Google become the dominant brand in 10 years - the brand category itself didn't exist until 12 - 13 years ago.

So yes, there is great opportunity for small/medium size firms to outsmart the big guys - then again, those successful small firms will presumably grow into bigger organisations - and then they'll face the same challenges as the big boys now - will be interesting to see whether they can maintain that flexibility and nimbleness in the face of rapid growth.

[Rachel Phillips]

I really enjoyed the combination of Harvard-based research and industry knowledge in this article. It's always intriguing to me to see how our strengths can sometimes be our weaknesses.

[Joe Pulizzi, Junta42]

@Andrew...Nice take on Google being in a new industry. It's clear we are going to see more of this in the future (shorter industry cycles to dominance, faster growing companies in those sectors)...and then they get big. Even though I believe in this article, being big is a good problem to have.

@Rachel...Thanks for taking the time. A key for large brands is to not give in to the arrogance that can happen when you are that successful. Google seems to do a good job with this...never underestimates the competition, always looks to what's new, and enables employees to constantly think outside of the box.