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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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.  First, he took a job in Burger King solely to learn.  Once ready to go it alone, 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…

May 4, 2010

49) Cranium

危 wēi  danger

In 1998, after spending a weekend playing games with some friends Richard Tate, a rising star at Microsoft at the time, decided that there was a gap in the market for a board game that used multiple skills.  He was so confident of the opportunity he quit his job and convinced his coworker, Whit Alexander, to join him. Instead of focusing on a general market need the two founders decided to design their game around a “moment,” specifically the moment when players “appear smart and funny in front of family and friends.” Together they designed a novel board game called Cranium – billed as “The Game for Your Whole Brain.” Initial feedback from friends and family was so strong they decided to place an order for 27,000 units from China.  However, with the order delivery date looming the team failed to get their product into the American International Toy Fair and hadn’t managed to sign up a single toy retailer.

机 jī opportunity

While drowning their sorrows in cups of Starbucks the team wondered why they needed traditional toy retailers at all, it struck them that other channels might make more sense, not least Starbucks.  After some persuasion the coffee chain stocked Cranium, the first time they had ever sold such a product and it was an immediate success.  The game went on to be the first board game sold by many other retailers too, including Barnes & Noble and Amazon.com.  Cranium then developed a series of other products, making sure that they stayed true to their brand by remembering the acronym CHIFF (clever, high quality, innovative, friendly, and fun) as their guiding principle.  By developing great new products and selling them through new retail channels the company has sold over 22 million games – making it the third largest games company in the world.  Whit and Richard sold out to Hasbro in 2008 for $75m…

How About…

  • Optimising products or services around an important “moment”?
  • Distilling your brand down to its DNA to help choose brand extensions wisely (acronym optional)?
  • Questioning traditional channels, instead asking yourself where your target customers tend to congregate?

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