Advice for Business Failure? Part II

In The Ten Commandments for Business Failure the third commandment is: Isolate Yourself. Isolate yourself from your clients and/or your customers. One of the most important suggestions from Francis McInerney of North River Ventures is for a business or enterprise to create and maintain a “Thin” Proprietary Fabric between your business decision makers, and your customers in order to stay in close communication and then be flexible in order to respond to changes in the marketplace quickly:speed to market. In this way you are in close contact or as people say today “wired”. The greater the number of layers between the customers and the decision makers, the greater the isolation the longer the response time. Coke’s formula change occurred when in fact the product and the brand, just like the bottle and the product-became one and the same. The brand loyalty was far superior to the product. Coke, who did not control the POS, needed to be closer to the customer in order to have known the incredible brand loyalty they had created. That means there was too much distance-Isolation-and too many organizational layers between the people making the decisions and the consumers who were buying the soft drink. When a business builds brand superiority like Coke had done before they changed their formula, changing becomes undesirable and in Coca Cola’s case, almost impossible, even though people had not had a Coke in twenty years. Because the product and the brand had become indistinguishable, tampering with either one was sure to spell-“trouble”. The brand identification was embedded in the customer’s head not in the product.
Unlike the actual bottle or the formula-a value which is tangible, the Coca-Cola brand has an intangible value. How does anyone assess that value exchange? As anyone in business today knows, even though they may not admit it, determining book value let alone market value of intangibles is the biggest challenge to GAP and financial analysis.
If you really want to see one of the best examples of brand superiority in action today, walk into an Apple Store-opening somewhere near you while other retail outlets are closing-and witness with your own eyes the relationship/loyalty between the customer and the brand. Another brand that has such a loyal following is Harley-Davidson! No isolation here between decision makers and consumers loyal to the brand.

Advice for Business Failure? Part I

Charlie Rose interviewed Donald Keough last month on PBS. A former executive at Coca Cola, Mr. Keough’s book was released in July. “The Ten Commandments for Business Failure,” a rather provocative title. According to Mr. Keough, the ten things he list-reminds me of the Seven Deadly Sins (Mr. Keough is a Catholic and was on the board of directors of Norte Dame University)-fit right in with what I feel is the problem with the failure to recognize-even talk about-the transition from an industrial to a knowledge economy.

Here is the list: 1. Quit taking risk 2. Be inflexible 3. Isolate yourself 4. Assume infallibility 5. Play game close to foul line 6. Don't take time to think 7. Put faith in consultants 8. Love bureaucracy 9. Send mixed message 10. Be afraid of future 11. Lose passion for work & life. (OK, so he thought of one more at the end of the book.)

I find each and every one of these to be indicative of people with whom I speak-i.e. when they talk-about the transition to the knowledge economy and what that will take. Mr. Keough cites examples from his experience in business to explain the Commandments. He was almost saying; just know what not to do and you will have happiness and longevity in business. He despises the word Success! I suppose Carl Icahn could have written this book just as well.

The one example of failure while at Coca Cola he mentioned was the decision to create a New Coke. All the research and taste groups and years of considering the decision told them people would like the new taste. Wrong! Their revenue did not really suffer, it was the overwhelming opposition expressed by people. They had to hire extra people to handle the phone calls in protest to the change. They were lucky no social networks existed with bloggers at the time. Mr. Keough himself manned phones and took a call from a lady who said she wanted the Real Coke back. He asked her when was the last time she had a Coke and she said, “twenty years ago but that is not the point, you are messing with my childhood” My favorite however, is another example he mentioned to Charlie about going to an out of the way Italian restaurant in Monaco. When he and his party sat down to eat the owner walked over holding a wicker basket covered with a napkin, removed the napkin and told them “we have the real thing-the old Coke”
What a lesson about one of the key elements of the knowledge economy which is grossly ignored-brand superiority-which is really… Valuing Intangibles! (To be continued…)