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?

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June 17, 2010

56) In-N-Out Burger

危 wēi  danger

In-N-Out burger is a chain of fast-food restaurants founded in 1948 in California.  The brand became famous for its limited menu and simple strategy that remains in use today: “Give customers the freshest, highest quality foods you can buy and provide them with friendly service in a sparkling clean environment.”  While scaling to 240 stores the company has stayed true to its vision – rejecting calls to franchise, leaving the simple menu unchanged and ensuring that it rewards its staff better than its competitors (it is one of the few fast food chains that pays more than state and federally-mandated minimum wage guidelines). And, to maintain freshness its locations are all within one day’s drive from its Baldwin Park distribution center. It’s great at what it does as evidenced by it consistently topping polls like this Zagat report. Given its rejection of growth through franchising and its inability to expand too far from its distribution center I have always thought its tiny menu might be its downfall. Surely its fans would become bored of the offer?

机 jī opportunity

My fears were allayed when traveling with a colleague recently.  On a road trip we visited In-N-Out, after choosing and ordering (very quickly given the lack of choice) I noticed that he ordered ‘off-menu’.  It turns out that In-N-Out has a ‘secret menu’ – this struck me as pretty smart because it allows its fans to make a wider choice and it drives word of mouth marketing.  I looked it up on the web and it turns out it’s not even that secret: when celebrity chef Gordon Ramsay appeared on The Hour, a Canadian TV talk show, he chose an animal style In-N-Out burger to be his “death-row” last meal.

How About…

  • Stripping your offer to its simplest version?
  • Developing a ‘secret’ offer for your best customers, making them feel privileged and deepening their affinity of your brand?

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and, just in case you’re interested (and out of the loop like me) here are some of the not-so-secret menu items:

May 11, 2010

51) Clover Food Lab

危 wēi  danger

Starting any business is scary.  Starting any restaurant business is very scary.  It’s expensive to set up, there’s legislative hoops to jump through, location and menu are critical (and it’s tough to do market research before making the leap) and quality standards have to be maintained.  Finally, consumers are fickle so even if it’s initially successful you can’t rest on your laurels.  Surely you can only start by jumping in head first at the deep end?

机 jī opportunity

To the contrary, my colleagues Ryan and Colin (thanks guys) told me about Boston-based Clover Food Labs, a startup that has cunningly overcome these challenges.  Instead of committing to a site and launching a concept blind Ayr Muir has taken a more creative approach.  He decided to keep location flexible and costs low by opening a food van.  Muir tries different locations and menus with the goal of homing in on the right restaurant format.  Everything that Clover Food Labs does is in Beta (hence Labs) – it has taken some clever design to be so flexible.  For example, the truck itself is a giant whiteboard enabling Muir to edit menus instantly (see the image below).  In addition, Clover is completely open with the public – publicizing the bad stuff (see Muir’s Great Sandwich Disaster post here) in addition to the good stuff.  The open experiment approach seems to be working, I read that the van sells out often and mistakes seem to be less frequent – maybe Muir’s homing in on his restaurant format – it will be interesting to see if he can give up on the flexibility his van yields…

How About…

  • Starting small to learn? And staying in Beta forever?
  • Questioning every sacred cow?
  • Being totally transparent (even the bad stuff) to shorten the feedback loop and create a real dialogue with your consumers?

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here’s a photo Colin took of the stall itself – with menu in progress…

March 8, 2010

43) Dr John’s Spinbrush

spinbrush logo

危 wēi  danger

John Osher is a serial entrepreneur.  After successfully selling his Spin Pop invention, a lollipop with a battery-operated handle that twirled in the eater’s mouth, he wondered where else he might apply the technology.  He hit on the idea of developing an affordable electric toothbrush. To succeed, the product had to cost only a few dollars more than a conventional toothbrush and had to have a long-lasting battery, to meet this target Osher set about designing up from 80 cents (while everybody else was trying to design down from $79). The finished design, the Spinbrush, was highly popular in early trials.  However, with no marketing budget and a product that was so different to anything else on the market would consumers actually give the product a go?

机 jī opportunity

In the book Diffusion of Innovations (1962), Everett Rogers defines several intrinsic characteristics of innovations that influence an individual’s decision to adopt or reject.

1)    relative advantage – how improved an innovation is over the alternatives (including any previous generations)

2)    compatibility – how easily the innovation is assimilated into an individual’s life

3)    complexity – how easy it is to use

4)    trialability – how easily an innovation may be experimented with as it is being adopted

5)    observability – how visible the innovation is to others

Osher’s experience had taught him that a great product alone wouldn’t guarantee adoption, he understood that trialability and observability were important too.  Accordingly, he launched the SpinBrush at $4.99 – $5.99 in 1999 with a patented “Try Me” feature that allowed consumers to turn the brush on in-store, stimulating fast in-store trial.  This low cost approach maximised ‘observability’, ‘trialability’ and demonstrated the low ‘complexity’ in the product thereby reducing the need for consumer advertising.  The strategy worked and within its first year SpinBrush accounted for 10% of toothbrush sales in the US.  Osher’s company was sold to P&G two years later for $475m and by 2002 the SpinBrush was the best-selling electric toothbrush in the US.  With P&G’s marketing and distribution muscle the product’s annual sales grew to more than $200 million in less than twenty-four months.

how about…

  • Designing for all of Rogers’ characteristics when launching new products and services – relative advantage, compatibility, complexity, trialability and observability ?

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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?

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