Corporate Voodoo: Extract 4 - winners and losers

Voodoo is not: product-obsessed

The second issue in Slow businesses is fixation with product.

The 1970s and 1980s saw the massive advent of brands. Corporations were branding and re-branding on a phenomenal level, with some fantastic successes.

The rather lazy shopping habits of the consumer meant we bought what we understood and recognised. Many consumers were happy to pay a premium for brands that were trusted to deliver what was promised.

Pepsi knew how trusting this consumer really was. The contents of a can of Pepsi-Cola hardly cost one penny, yet the brand building and associated marketing spend was quite phenomenal. Pepsi seriously knew how to market, and their customers never baulked at the premiums they were asked to pay. This was not just a soft drink to quench your thirst; this said something about your lifestyle. Pepsi drinkers were young at heart; they were seriously hip and fun. They wanted to be seen with their Pepsi.

This strategy worked brilliantly for a number of brands and their owner organisations for a very long time, and many of them are still trading successfully under these auspices today. However, the advent of the New Economy entrants into marketplaces dominated by the traditional businesses has created massive flux. The new entrants tend to have little baggage and no sacred cows. They are aggressive and prepared to take risks; this means they are prepared to make mistakes on a scale that has not been seen before by the management of their traditional adversaries. Simply speaking, the incumbent management in traditional organisations do not know how to cope with these upstarts who do not have years of brand identity to protect. The strong sage view of the traditional stalwarts was initially to ignore these fly-by-night companies - how could they possibly challenge their market dominance?

Over the past few years we have seen the birth and explosive growth of:

BSkyB
Next
Matalan
Virgin Atlantic
Egg
Vodafone
Tesco.com.

They have built brands that are now extremely well known, perhaps even household names. They all have reputations for being very close to their customer base, and most have set new standards for service in their industries. They have the perception of being still new and young. They have made many mistakes and have achieved many startling successes. These are the new Voodoo captains of industry.

What was not quite understood was the impact they would have on the consumer. This impact would totally transform the marketplace. These insurgents were prepared to win by any means necessary. They would compete on price, service, experience, quality, anything. They were desperate for the customer. Many of these new entrants competed online, but not all of them. They were new, they were courageous, but most of all they were fast. The discount clothing retailers, like Matalan, were new and ferocious foes. They could move extremely quickly. They made mistakes, but learnt rapidly and secured sustainable positions in just a couple of years.

The real lesson learnt (for those who could learn), was that customers have choice. They were no longer just consumers, they needed to be treated like discerning customers who perhaps did not always know exactly what they wanted, but they were prepared to try different products and, importantly, from a wave of brands that were new, but exciting. These new experiences started to educate the customers about what they did not want. However, the only organisations that benefited from this feedback were those who were taking the time to listen. The New Age companies were so focused on the customer that they picked up this growing promiscuity long before the relatively out-of-touch traditional businesses.

John Lewis is a sad example of where a strong traditional business has clearly lost touch with its loyal customer base. The credit card is not a recent innovation, and many adults and teenagers are far more comfortable carrying credit cards rather than large amounts of cash. It is quite breathtaking that John Lewis only introduced the mainstream credit cards into their stores in the year 2000. What was it that led them to believe that they were meeting their customers' needs by not allowing them to pay for goods in the manner that they felt most comfortable with? Stunningly, they announced their decision to at long last accept credit cards as one of their innovations! Perhaps they should have apologised for years of what could be seen as contempt for their customers. Even then the change to cards was poorly thought through, and it was clearly a response to falling sales. They had no means of dealing with this innovation electronically; consequently they installed the manual carbon paper-based devices, which in the main had disappeared from the high street years before.

The parallels between John Lewis and M&S are clear. They appeared to act as if as long as products carried the John Lewis logo, customers would flock to the stores and buy them in heaps. They had forgotten many years ago how to engage their customers, and certainly never appeared to listen to them. The John Lewis brand when compared with fast-moving, hungry new entrants, looked decidedly old and stuffy. They continued to sell the same things in the traditional colours. They persisted with the same methods of selling - or rather, said one insider, "We stocked the goods which were to be purchased in our stores". Customers bought. John Lewis would never want to be seen to be 'selling'!

Customers outside in the real world (and on the real high street) were beginning to encounter two alternative experiences. One was great customer service with new entrants (e.g. Gap) or same old mediocre customer service but at lower prices which better explained the lack of a premium service (e.g. Kwiksave, kids' clothes in Asda).

This inability to perceive that customers have choice is a major symptom of what we call Slow businesses.

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