Interview: Simon Knox and Stan Maklan
Competing on Value, Bridging the Gap between Brand and
Customer Value
SMC I am Steve Macaulay and this is a Cranfield School of Management
podcast. Brands and branding were once thought of as being all
powerful. However, over the last ten to fifteen years there seems to have
been a substantial shift. To explore the implications of this shift, I have
got Stan Macklan and Simon Knox here today. They are the authors of
Competing on Value, Bridging the Gap Between Brand and Customer
Value. So Simon, I would like to start off with understanding the basic
premise of this book.
SK
Both Stan and I have a background in brand management. We worked in
brand management some twenty plus years ago and over that twenty year
period we have noticed a very significant shift in change, in the way that
brands need to be managed and so we felt compelled to write a book
which effectively describes, or is a narrative of, the changes required in
managing brands to meet today’s modern day market place and what we
describe in the book is a shift away from managing products and services
brands, towards the need for the organisation or the company to manage
itself as a brand and within that the product brand portfolio that the
companies are marketing.
SMC Now, I understand from reading the book that you have put together a
strategic framework. The diagram looks a bit like a wiring diagram of
some wires encased in something and you call this the unique
organisation value proposition.
SK
Yes. Obviously managing a corporate brand is a complex process, Steve,
and what we wanted to do is to try to build a framework that enables
senior managers to look at their organisations and describe how, and form
a view about how, they could effectively develop a corporate brand and
we have within this unique organisation value proposition, four
components – the first of which is reputation management. The idea that
we need to more effectively manage our reputation, I think, is absolutely
critical as we have seen from recent examples of companies that haven’t.
Secondly, the notion of portfolio of management – that is the idea of not
only managing the range of service and product brands that we have, but
also aligning them more closely with the customer bases that we are
servicing. In other words, the notion of investing in a portfolio that is
appropriate to the segments of customers that we are actually serving, so
that is the second component. The third component is what we call
customer experience management – the idea that we have to develop a
much more external focus of how our company and how our processes
and mechanisms are perceived by our customers. In other words, how
can we more effectively manage the customer relationship, or the
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Interview: Simon Knox and Stan Maklan
customer pathway in dealing with us on a regular basis? And the final
area that we highlight as being critical to brand development is our ability
to build networks. Networks mean the bringing together of alliances
across third party companies that are able to add value to our offer and in
that way extend the value proposition that our businesses are capable of
creating for our customer base and I think it is becoming increasingly
important that we move our businesses from selling what Stan would call
point solutions, which is product and services, to customise total solutions
– in other words moving towards customised solutions which engage not
only at a product and service level, but perhaps at a capabilities level as
well, particularly in business to business relationships. So those four
elements of the framework give us some scope to debate how we choose
to invest in our businesses from a corporate brand perspective.
SM
Some of the things we noticed, as Simon was mentioning, when the world
of brand had been changing – if you look in the 1990s, aside from
globalisation, one of the most important management developments is the
whole area of a process view of an organisation, total quality
management, business process re-engineering – whatever you might
think of those three letter acronyms, no doubt they have a major impact
on how we run our businesses. The world of brand management
seemed to be disengaged from that process led revolution sweeping
businesses. What we have tried to do with competing on value is actually
integrate a process view of business with brand. Brand is a postage
stamp of a sort – an envelope over an undifferentiated and uncompetitive
set of business processes. Sort of compensating perhaps for a poor
business model didn’t seem to us the way forward and so we hope our
contribution here is to merge the worlds of process and brand together, so
that the brand actually does deliver the value that customers want.
SMC So in terms of, in a nutshell, what people would get out of the book, it is
saying how do people marry process and branding in a practical
environment.
SM
Bringing branding frankly up to date for the modern process based
organisation.
SK
And I think the framework, which we describe as unique organisation
value proposition, sets out a basis upon which the senior management
team across the board can agree upon what the components are that
really are going to differentiate our business, which then feeds back into
process investment because there are not many mechanisms for getting
an integrated view of which processes should have high priority for
investment and which are lower priority and we would argue that our
framework helps the board to understand what process investment needs
to take priority and which perhaps less priority, which in turn positions the
organisation both in terms of the customer it serves and the supply chain
through which it delivers the value to those customers. We would argue
that in today’s market place, companies don’t compete head to head as
products or services. They don’t even really compete head to head as
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businesses, but they compete head to head as supply chains. So, if you
are not clear about what you represent as a business, what your position
in the market place actually is, then how are your suppliers going to
know? How are you going to engage with your suppliers in a total
branding context unless you are clear about what you stand for and
therefore what your suppliers stand for as a result of that. And I think
increasingly we need this clarity through the supply chain. The corporate
brand for us is the mechanism. The framework provides that for that
discussion.
SMC You are not painting a very rosy picture really – you are looking, to me, at
something that says these things need addressing, the core processes,
tackling corporate branding issues – you are offering a way forward. Is
there much appetite to tackle these issues?
SK
Well, that is a good question – the challenges around corporate branding
are multiple. First of all who owns the corporate brand in an
organisation? It’s easy to say it is the CEO that owns the corporate
brand, but the problem is the CEO has so many other things to manage,
so unless there is ownership of the corporate brand and clear recognition
of the worth of investing in the corporate brand, it becomes pretty
problematical. The second point I would make is that if you view the
assets of the business, then as we move well into this millennium or this
decade, those assets are shifting to intangible. So like it or like it not,
primary amongst them is the brand that you represent in the market place
and getting to grips with managing that asset, I would see as a very strong
priority. It’s not easy. That is why most companies avoid the issue.
However, there are some examples that we can talk about, that show
absolutely the benefit of effective corporate brand management.
SMC So the clarion call here then is you’d better tackle these things. There are
some companies that have done so, look to them and see what lessons
you can learn from it.
SK
Yes. I don’t think in a market driven economy, that we now live in, that the
senior management team have much choice. In today’s market place
reputation management is critical, network management is critical,
effective portfolio management is critical, and customers are very
vociferous about what value means to them. So, if we don’t understand
the value that our customers want, I don’t think companies will continue to
exist in a profitable competitive environment.
SMC Stan, what have you got to add?
SM
Yes. You asked if there was an appetite to tackle some of the issues that
we have raised. I think that there is an appetite, but let me be provocative
and suggest that the appetite is more outside the traditional marketing
department than inside. I get a feeling – I have no research base to
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justify – but I get an intuitive feeling that a lot of, shall we say, more
traditional brand management trained people see the issue about
communication, always about the internet and media fragmentation, and
what we see as reputation and its integration of processes, capabilities,
networks in the value proposition is something that I see tackled very
effectively by people who don’t wear the title marketing – the Logistics
Director, sometimes the Finance Director, sometimes the Operations
Director. So we are seeing innovative models that effectively live this
prescription, not always being driven by the marketing department, so a
nice wrinkle or challenge is, for marketers, is not to be redundant or not to
be out of step with the more modern process led view of the business.
SMC So, let’s get down to some specifics Simon – you mentioned that there are
some good exemplars here. Let’s talk about them.
SK
Well, we have within the United Kingdom a retail company called Tesco’s,
which when I first started working had about three or four per cent market
share and currently has 32 per cent market share, more floor space
overseas than in its domestic company, and now generating profits of
over £2.5 billion. The Tesco value proposition is inextricably linked with
the corporate brand and the value created through Tesco’s isn’t just about
the products that they sell, it’s a very wide perspective on what value is –
so their rate of innovation is breathtaking, their ability to manage their
customer portfolio and offer products and services that are appropriate to
them is world class. They have the most profitably internet grocery
business in the world, so their ability to develop customer insight, both
with existing customers and new customers recently launched into the
US, is breathtaking in its abilities and that is linked very closely with the
essence of the business leaders linking their company with what the
brand represents and being able to move that vision and value through
the organisation. So it’s not just the marketing department that see what
the Tesco brand actually is, it’s everybody in the business from the
checkout lady through to the finance director, through to the CEO himself.
So it’s a fabulous example of a corporate brand that offers value across
different segments of customers and in different countries in a way that is
exemplary and world class in its approach.
SM
Yeah. I mean I can look at a business to business example – a well
known public example might be IBM which redefined its business from
products to service and in that change the brand IBM, whilst the name
stayed the same, what the brand stood for has changed and has been
effectively and actively managed as such. But look at the process
changes that IBM has undergone over an extensive period, to move from
product manufacturing to outsourcing and other high value IT services.
They have changed their business. They have changed their business
model. They have had organisational change. They changed how they
work with the network partners, as Simon mentioned before. So you can
see in the UOVP you could tick lots of the boxes and look at IBM as a
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good example of change. As a change for business reasons it was brand
led as well as business led as well as process led. There was no prime
mover there, but you see how all the elements of the piece have moved
together and if you did a pre and a post you could use the UOVP model
to describe that very effectively and provide a road map, of course, for
your own organisation should you wish to embark on a similar journey.
SMC Have you any other examples, Simon? I know that it is quite a difficult
process – the way you describe it. It seems to come together. There
feels a bit of magic about it, but it may be more hard work than magic.
SK
Well, I think it is also inspiration. Another example is, of course,
Starbucks where the CEO of the business had this vision of how the
company would simply produce and deliver better coffee in a more
appropriate and conducive environment for consumption. So on the one
hand Starbucks products certainly, up until today, have proved to be very
high quality, but what is so interesting about the business is how they
have been able to leverage in the experience of consumption into part of
the value proposition – they call Starbucks ‘the third place’, which is
between home and work, which focuses on the experience of
consumption and you look at the economics of their cost of service. The
actual biggest element of cost of serving centres around the experience
rather than the cost of the materials of the coffee and therefore the price
charged, which is a premium, is leveraged on the basis of the experience
customers have in drinking Starbucks and using the Starbucks
environment for a relaxing or a business experience. So the notion of
customer experience management is exemplified fully in the Starbucks
growth which has been phenomenal across the world.
SMC So, we have heard of the need to combine process and branding – it’s a
kind of branding plus really. We have seen some excellent examples. I
suppose I am now left with saying if you were to leave a message for
business leaders, what would it be?
SK
I think today our business leaders have to understand not only how
consumers make purchasing decisions and what choices they make, but
what value they get from consumption of the products or services that are
on offer and we call this value in use, as it were. And, without that insight
and without the ability to manage that insight of both the purchasing
process and the consumption process, then the alignment of the business
process is towards customers, through a corporate brand positioning, and
is somewhat limited. So there is a disconnect – without the corporate
brand serving both internally and externally, there is a disconnect between
customer processes and business organisation processes. In other
words, the corporate brand, if managed effectively, can serve to connect
those two components and that integration, particularly in business to
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business markets, is absolutely critical.
SMC Stan, anything to add?
SM
Yeah. I would perhaps build on Simon’s comments and direct them more
specifically at marketing leaders and urge them to think carefully about the
role of leadership in marketing and what does it mean to be a leader if you
are a marketer in an organisation today, and perhaps yesteryear, having a
superior insight in creating the four piece marketing mix for you, the
unique organisation proposition, you know the traditional elements of
brand marketing was sufficient. I would say that they perhaps, they have
to re-conceive that and extend around it and integrate more with the
business at large. So, I think it is a new conception of what it means to
be a leader. I think there are new capabilities needed with the marketing
team and the marketing leaders and there is a need for a bit more
development perhaps, a bit more integration with the rest of the business
and that sort of leadership, I think, is pushing at the open door. I think the
rest of the business wants it and wants to see some more of that.
SK
If I could just make a final comment, it seems to me that the development
of sustainable practices within your business is an issue that is just going
to get bigger and bigger and without the ability to manage corporately
sustainable developments, I think many companies are going to be
seriously disadvantaged. And, for me, sustainable development has
supply chain implications. It has reputational implications. It has
customer insight implications and that, therefore for me, sits within the role
of the corporate brand and therefore the corporate brand as a mechanism
for developing sustainable policies strikes me as pretty critical as going
forward as well.
SMC Simon, Stan, thank you very much. It’s been a very powerful insight.
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Cranfield School of Management
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