July 20, 2010

59) Levi’s

危 wēi  danger

I have always been slightly skeptical of established US & European fashion brands’ ability to succeed in emerging markets, after all the average income per person in China is around $3,500 and in India it’s $1,000.  Counterfeiting is rife and unlike super-premium brands they seem particularly vulnerable to low end disruption.  The Indian jeans market is no exception – home-grown companies such as Arvind Mills have addressed the low end market with huge success.  The company, founded in 1931, grew to be the fourth largest producer of denim for wholesale over the course of the following 60 years. It realized that India’s poorest couldn’t afford jeans and launched its own label – Ruf n Tuf – in 1995 to address the opportunity.  Its approach was to focus on the Indian consumers at ‘the bottom of the pyramid’, completely redesigning its business model with an emphasis on value.  Arvind Mills succeeded by selling a jeans kit to local tailors for $6/pair – minimal kit variants kept manufacturing costs low and the local tailors quickly became an effective marketing channel.   Subsequently the company has continued to innovate, adopting a full franchisee system for the manufacture and distribution of Ruf and Tuf jeans in 1995.

Surely the established jeans companies of the developed world, including Levi’s (the inventor of jeans) will be unable to service the ‘bottom of the pyramid’ and will be unable to compete, perpetually being disrupted by companies like Arvind Mills and being undermined by counterfeiting?

机 jī opportunity

Although the 1994 entry of Levi’s in India received a tepid response its fortunes have improved recently – it banks heavily on celebrity endorsement, product innovation and a superior retail experience to drive growth.  Most recently it has adopted an innovative “pay as you wear” model in India – the company offers cash-strapped Indians the opportunity to buy their jeans in three interest-free installments.  “A monthly installment scheme makes it easier for people to build their wardrobe with a premium brand like ours” says Shumone Chatterjee, MD of Levi’s in India.  The approach is smart – it enables more of India’s fashion conscious consumers to wear the Levi’s brand without eroding its brand equity or dropping its price points – although Levi’s will never completely straddle the pyramid it might manage to straddle a few more levels…

How About…

  • Defending your market position from disruptors using creative pricing?
  • Examining straddling the pyramid in emerging markets?
  • Empowering another part of the value chain to finish your products and services?

–

March 2, 2010

41) Vodafone

危 wēi  danger

Fixed line and mobile telephone providers have been on a collision course for years, after all to consumers the way ‘communication’ is fulfilled is unimportant – differentiation has principally been around service experience and price.  The convergence has been particularly interesting in large businesses, where mobile phones have become the medium of choice for many executives even when sat at their desk, representing a valuable revenue stream for mobile telco’s such as Vodafone.  However, these revenues fell away quickly when new technologies emerged to route mobile calls made within offices through the local IP network, drastically reducing call costs.

机 jī opportunity

To arrest this loss of revenues Vodafone went back to basics and benchmarked its customer value proposition agaist its competitors.  It realised through customer research that the Achilles heel of these new technologies was the need to set up multiple accounts with service providers and the hugely complex bills that resulted. Vodafone responded by entering into partnerships with fixed-line operators (including BT in the UK) and service providers (including Central Telecom) to manage technology interfaces and provide a single solution to the customer.  Through these partnerships it was able to provide customers with a single bill and a single number per user – thereby gaining revenue from all aspects of the call routing (both fixed line and mobile) and recapturing the lost revenue of calls made on mobiles within offices.

How About…

  • Researching your customers’ experiences of your product/service and that of your broad competitive set?
  • Partnering with players from adjacent industries (who otherwise might be competitors) to offer single, simple solutions and derail disruptors?

—

(co-authored with Matt Lill, London-based strategy consultant and serial enthusiast – thanks Matt)

—

February 9, 2010

36) Lego

lego_logo1

危 wēi  danger

Lego, still a privately held Danish company, has been producing the plastic bricks that made it famous since 1949. The company name Lego was coined by the founder, Ole Kirk Christiansen from the Danish phrase leg godt, which means ‘play well’.  And the company is certainly helping many play well, with its colourful bricks sold in over 130 countries.  Everyone on earth has, on average, 52 Lego bricks.  However, at the end of the 1990’s the company was in sharp decline – computer games were eroding traditional toy sales, its range targeting girls had bombed and its theme parks were unprofitable.  On the face of it, Lego was likely to fade away.

机 jī opportunity

Lego’s leaders had different ideas.  They began their firm’s reinvention by talking to toy retailers who told them clearly not to mess with Lego’s brand or its core products.  Accordingly, the company’s staff were tasked with introducing new products targeted at its core customer, boys of 5 to 9 years and were given a performance-based pay scheme to align incentives.  This approach yielded a stream of highly successful new ranges, including movie sets, e.g. Star Wars and Harry Potter, Lego Factory and Mindstorms products.  Mindstorms Lego sets are robotic, fully programmable and can even be controlled with mobile phones, clearly positioning Lego as a complement to computer games.  Lego Factory enables users to design, share and purchase their own kits – the downloadable software makes it simple to create virtual 3-D models which are then automatically priced.  With more than 30,000 kits uploaded so far there is a burgeoning community of Lego fanatics sharing their creations.  Through these new ranges, Lego capitalized on emerging trends and ensured that it remains relevant to another generation of kids.  This has been reflected in its financial performance, even as the overall toy market declines Lego’s revenues and profits are climbing, up 19% and 30% respectively in 2008.

how about…

  • Beginning any process of change by clearly understanding your customers’ perceptions of your challenge?
  • Harnessing potential disruptions to make your offer more relevant, partnering where necessary?
  • Empowering your fanatical customers to develop your offer with, or even for you?

—

December 21, 2009

24) Google

google_maps_logo

危 wēi  danger

Google realized early that location-based services were of real value – the ‘maps’ tab seems to have been on its search page forever.  However, in order to offer complete mapping services Google was dependent on licensing key data from two duopolists that ruled the mapping business – Tele Atlas and NavTeq.  The two companies priced their licenses under strict terms, safe in the knowledge that the barrier to building a database of turn-by-turn directions was huge.  The companies’ positions were apparently so strong that their customers, Tom-Tom and Nokia, bought them for $2.7bn and $8.1bn respectively.

机 jī opportunity

But, the barrier to entry wasn’t too high for Google to surmount.  After spending years with thousands of cars on the road building its own database the company terminated its license with Tele Atlas earlier this year.  And then Google announced on October 29th that it would offer free navigation with its Android Operating System (OS) – Tele Atlas and NavTeq’s share prices each dropped c20% on the same day.  Google’s business model doesn’t depend on electronic product sales – it depends on advertising revenue.  If widely adopted, its mapping API will create a platform for a global geo-based advertising network.  In fact, Google is so keen for its OS and API to be adopted that it even offers an ad-split to the product and service companies that build with them. ‘Free’ pricing is widely touted as a great way to speed adoption, well Google are effectively offering ‘Less than Free’ (they’re paying).

how about…

  • Questioning barriers to entry that are perceived to be insurmountable?
  • Asking if changes in technology are likely to lower them?
  • Offering products or services for ‘free’ or even ‘less than free’ to speed adoption?

–

November 12, 2009

19) Cirque du Soleil

cirque-du-soleil-logo-blue

危 wēi  danger

Circus attendance had been on a steady decline since the Great Depression in the 1930’s – the industry has been continuously disrupted by new forms of entertainment, particularly cinema.  In addition, circuses haven’t innovated to compete, for example the bench seating in many remains uncomfortable and the ‘big tops’ are often shabby.  More recently circuses have also received bad press for their inhumane treatment of exotic animals.

机 jī opportunity

Circuses might be out of fashion, but Cirque du Soleil under the leadership of Canadian Guy Laliberté certainly isn’t.  Its results have been extraordinary, annual turnover is estimated to be in the region of $600m and 90m people have seen the show worldwide.  Laliberté’s success stems in part from recognizing the broader competitive set (entertainment rather than solely circuses) but also from looking to that broader set as a source of inspiration. For example, Laliberté borrowed much from the booming theatre industry – introducing storylines, music, a sensational set and comfortable seating to his ‘cirque nouveau’.  Cirque du Soleil also dropped many of the circus ‘staples’ that had damaged their appeal, not least the exotic animals.

how about…

  • looking at the broader competitive set or adjacent industries for inspiration
  • spending time focusing on what not to offer as well as what to offer
« Older Entries