to put profit ambitions aside for now, or
rather, accept lower profit margins. They
believed that with the little profit they
made from the Supercab, they could
channel it back into the US business
and improve the quality of their bikes by
offering the same standard of motorbike
service as they did in Japan. This would
help build their much needed brand
equity and growth, which would create a
positive narrative about the brand.
Once they had gotten good at selling
the Supercabs, they started selling their
bigger motorbikes concurrently with the
Supercabs. Note they did not stop selling
the Supercab or try to phase it out for the
sake of “more profit”. Their growth focus
was on building the brand by addressing
a job that needed to be done, using the
Supercab. From there as they say, the rest
is history.
In essence, Honda made the conscious
choice, after realising their grave mistake,
to pick a struggle - are we going to chase
brand growth or are we going to chase
profits? They realised chasing both was
working against them and blinded them
to the opportunity that existed with the
Supercarb.
Failure is not a bad
thing in innovation
because you can learn
from it, dust yourself
and come back stron-
ger. But consistent
failures to innovate
correctly
usually
sends messages to
your core consumers
that you are not the
expert suited to help
them tackle the var-
ious jobs they want
to get done, and suc-
ceed in getting them
done.
When brands are insulated by success,
it is common for them to innovate with
the expectation of immediate success.
Heck, some brands even feel that they are
entitled to the success in both profits and
brand growth. Jim Collins, in his book
“How The Mighty Fall”, calls this Hubris
born of success, and describes it as the first
stage of five stages, in a brands path to
decline.
Nevertheless, being on the path to decline
does not mean you will decline. If you see
the signals early enough, and with some
good fortune as well, you will be able to
reverse the path before it is too late… like
Honda did.
The challenge for great brands that are
evolving and constantly innovating is to
not get blinded by their current state in
setting their priorities. Rather, they should
rely on the same patience and priority that
helped them achieve the lasting innovative
success. Innovation is needed for survival
but when all is said and done and your
innovation is built on a solid purpose, then
you need to decide what you will focus on
between brand growth and profits.
I am not saying that if you focus on brand
growth, you should make losses - not at
all and that would be stupid to offer such
advice. If brand growth is your target, then
the growth should not be dictated by large
profit margins but rather by other brand
metrics related to product adoption and
usage.
The profits will still be there (and should
be there), but you will be happy to accept
a lower profit margin than usual, with
the sole drive to convert existing users
of the category to your brand and gain
their trust. Trust is pivotal in long term
innovative success. Profits will not be the
focal point, but growing the brand will.
Profits will still come and at some point
they will become really significant.
Some brands will focus on the profits
and opt to exercise patience for growth,
which is also not a bad thing. The little
profits made can be used to make small
changes and novelty value adds that can
help enhance the product or service, which
inadvertently will influence, and increase
product adoption and usage. In this case,
you will be more worried about meeting
your costs and making a decent margin to
be able reinvest back into the brand.
I personally prefer building the brand
first, because it allows you to tap into
deep seated emotions, whilst addressing
the core functional needs. You are likely
to create a repository of positive emotions
that can sustain you even through
the tumultuous of times with such an
approach. You harness the best of both
worlds - functionality and emotion.
Focussing on the business is not bad,
but I have often seen that it can lead to
short-term gains as opposed to long-term
success. It can also send negative signals
to your consumers that it is all about you
and not about them.
We always have to remember that
consumers want to be the hero of their
story, not the brand. We often see brands
positioning themselves as the hero but
that is not what consumers want. The
brand is the guide or the expert that helps
the consumer become the hero. They are
the enabler, not the hero. Think Yodo,
from Star Wars or what Gandalf is to
Frodo in the Lord of the rings.
So, as you embark on the innovation
journey, I leave you with two questions
that I encourage you to ask yourself and
the rest of your team; Is our purpose for
this innovation clear? ( JTBD theory);
What is our single priority for the next
3-5 years? (Profits or brand growth)
And No this is not an “ideal philosophy”
of how to approach innovation. Many
brands have used this framework and it
has shown proven success. Try it.
The views and opinions shared herein
are for the author, and are in no way a
representation of any brand or company
that the author has, or currently works
for.
Andrew Riungu works for Safaricom
Limited, within the Research & Insights
department, where he is tasked with
helping the brand address the evolving
needs of the diverse consumers Safaricom
serves. You can commune with him on this
or related matters via email at: Andrewm.
[email protected]