What does Blue Ocean Strategy have to do with brand value?

In a recent HBR blog, Niraj Dawar, a colleague who used to be at INSEAD, wrote about the why a valuable brand is so important for successful innovation.  He says, every product and feature innovation is a potential story whose impact on the marketplace is a function of the brand that carries it". Innovation is not just about R&D efforts or new product and feature development. Without brands that consumers trust, the story of any innovation is incomplete. In other words, brands are just as critical to innovation success as are new product ideas. Strong brands do three things: They reduce the customers risk of trying new products , they position the innovation and give it meaning, and finally, brands provide credibility to upgrades.

Apple, now the most valuable company, is also the most valuable brand in the world.  When Steve Jobs and Jonathan Ive launched the eMac range, they changed their conversation around computers from power and other technical specs to "great looking" and "easy to use". These drivers have epitomized Apple products since then: first with the iPod, then the iPhone and iPad. In Early 2000 before the iPod took Apple out of just computers, the share price was $6 and by 2007 when Jobs  announced that henceforth they were Apple Inc., the share price went up to $97+. Currently it trades around $ 550. Apple owns the mindspace around Design and usability, so all competitors be it in computers, smartphones or tablets, have been reduced to attributes like the speed of chip, size of screen and number of megapixels of the camera.

Brands, though intangible, are obviously enormously valuable business assets.Over the last few years,  there has been increasing interest in brand value. One reason is that India is considering adopting the International Financial Reporting Standards (IFRS), which demands that companies recognise their intangible assets; even outside of this impending compliance, companies are realizing that this value, though intangible, can help them in attracting investors, raise money and monetize it in an M&A. However, for the vast majority of running companies, brand building is essentially Advertising and Sales promotion expenditures to help support product sales. Then there are some like Tata Sons that have a program to build and protect the brand. Companies in the group pay a royalty fee as recognition of the role that it plays in creating value for individual firms.Very few though, like Apple,  use brand drivers to both build Brand Value and growth by moving these drivers into new spaces.

The transformational exercise at TITAN watches was a good example of how firms can use their brands as powerful force multipliers; both for raising the bar on existing performance as well as occupying new space.

TITAN was incubated with TIDCO ( the Tamil Nadu development Corporation )based on the strength of the TATA pedigree. This gave them a great start under visionary leadership and achieved dominant market share in the watch market. However by 2003, in an increasingly stagnant market, the share price had fallen to Rs 40, with a D/E ratio of 7:1, because of indifferent growth in volumes and value. This is why the company decided to review the business in its entirety.

TITAN engaged EQUITOR, the niche brand advisory, that had brought INTERBRAND to India. An intrinsic valuation of the business established that two thirds of the value of the business was resident in the brand TITAN alone. They discovered, however, that the drivers of this brand value extended far beyond making a good watch. They were essentially around crafting functionality into personal expressions of style as the senior management had articulated in a two-day definition workshop.

Two important consequences emerged from that workshop: not only did the firm review completely as to how they ran their existing businesses, but found new opportunities that could leverage their brand drivers. One of them was Prescription Eyewear, where all the elements of their brand drivers were relevant. The share price climbed to Rs 309 within the year and climbed to 2100 over the next 3 years. Their five year plan provided a 3X multiple on the topline and 5.5 X on the bottom line. They achieved 97% of the revision over the plan period.

This idea of identifying new market spaces is in essence what we try to do in a Blue Ocean exercise. I have run many Value Innovation/Blue Ocean workshops over the last 12 years. These workshops were run all over the world, and for many well-known brands: AXA, Danone, Pfizer and Starwood among others. The ideas, tools and frameworks of Blue Ocean strategy invariably resulted in innovative projects that generated outstanding new thinking. However, I now feel that that anchoring the process with the brand drivers would actually help organizations choose and then implement the disruptive business ideas thrown up in these workshops.


The Bumblebee Vs. The Spelling bee

Two decades ago my existing notions of education were shaken by my 10 year old niece in the UK. I had the arrogance to believe that I knew what it took to succeed, and this little girl changed that notion in the space of 10 minutes.
One morning over a holiday, this little girl comes up to me and asks Uncle Ramesh, do you want to see my homework?  I said of course. So she shows me her notebook where she had written 8 questions. She then asked me so, did you like my homework?I said I see the questions but I do not see your homework. She gave me a strange look and walked away. Then it struck me, the questions were indeed the homework. The previous day in school, the teacher had read out a story, and as homework had asked the class to write down 8 questions that were pertinent to the story.
Since then I have had several occasions to ask myself whether education was about learning or asking.  In essence, is the orientation of education that we are given preparing us to be a spelling bee or a bumblebee?
A Spelling bee as you may know is someone who showcases their ability to the spell most difficult and uncommon words in the English dictionary. It is curious that in the past 15 years, 11 national US spelling bee championships have been won by students of Indian origin. And we are very proud of it. This is why Indians are usually very good at domain expertise such as finance, technology or sales. But with all that, making complex decisions does not come easily to us.
A bumblebee on the other is a curious creature. By the laws of aerodynamics the bumblebee is not meant to fly. But it continues to fly because no one told the poor bumblebee that is not supposed to. So would you rather be a spelling bee or a bumblebee? But what is the significance of being a bumblebee? To me it is the big heart of the bumblebee which will always win over the big mind of the spelling bee.
I was once asked a question by a colleague of mine, what is the greatest contribution of Thomas Alva Edison?I knew it was a trick question, so light bulb was not the right answer. She said his greatest contribution was that, he discovered 3000 ways how not to make a light bulb. J K Rowling in her famous speech in Harvard in 2008 said do we really teach our children the benefits of failure? The three primary elements of the big heart are empathy, imagination and courage. After empathy and imagination, you must have the courage to keep going in spite of setbacks.
I can't think of a better example of a modern day bumblebee than Dr. Muhammad Yunus who started the Grameen Bank in Bangladesh. Started with a $27 loan to a destitute woman, the bank today has almost 10 million borrowers all below the poverty line. It is interesting to note that 97% of the borrowers are women and only they suffer only 1% delinquency. Once the central bank of Bangladesh asked Dr. Yunus for an explanation as to why the bank had a bias for women. In Bangladesh it is politically correct to ask this. In reply, Dr. Yunus sent a letter back saying that he is happy to answer that question if the central bank could explain why 97% of other bank loans are given to men.
So what does the bumblebee teach us as parents, leaders and  colleagues. Is there any place for the different aspects of what a bumblebee does of with his big heart? Is there any place for empathy, imagination and courage in our education?
Will there be any merit in Introducing credit for failing?

What do you think? 


Bumblebee Vs. Spelling Bee

Last October a university I lectured at, had organised a TEDx. The question posed was whether any aspect of our formal education equipped us to be more imaginative. And what implications this had on entrepreneurship, wealth creation and economic growth.

My two bits are embedded in this video link.