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 As companies struggled to adapt to the fallout of the Covid-19 crisis, many turned to open innovation — a collaborative approach that plays to the strengths of all companies involved and can produce creative, unexpected solutions. It’s a kind of collaboration, the authors argue, that’s worth pursuing whether or not you’re in a crisis.

Making it work, however, requires that companies: momentarily put aside traditional concerns over IP to focus on other approaches to creating value; leverage their partners’ motivations effectively to maintain a productive working relationship; embrace new partners; and commit to the projects they pursue through open innovation to reap their benefits. This approach can be extremely fruitful, and not just in the middle of a crisis.
Amidst the gloom and doom of the early months of the Covid-19 crisis, something surprisingly uplifting started to happen: Companies began to come together to work openly at an unprecedented level, putting the ability to create value before the opportunity to make a buck. The German multinational Siemens, for instance, opened up its Additive Manufacturing Network to anyone who needs help in medical device design. Heavy truck maker Scania and the Karolinska University Hospital have partnered, too: Scania is not only converting trailers into mobile testing stations, but also directed some 20 highly skilled purchasing and logistics experts to locate, acquire, and deliver personal protective equipment to health care workers. Similarly, Ford is working together with the United Auto Workers, GE Healthcare, and 3M to build ventilators in Michigan using F-150 seat fans, portable battery packs, and 3D printed parts.

Collaboration can obviously save human lives, but it can also produce huge benefits for companies — even though it’s often overlooked in normal circumstances. For more than a decade, we’ve studied open innovation and have taught thousands of executives and students how to innovate in a more distributed, decentralized and participatory way. The classroom response is usually, “My company needs more of this!” But despite the enthusiasm, companies rarely follow through. We have also witnessed how companies have used hackathons and other forms of open innovation to generate heaps of creative ideas that never reach the point of implementation, leading to frustration among employees and partners. At many companies this kind of distributed, decentralized, and participatory way of innovating remains an ambition that hasn’t yet come true.


The recent burst of open innovation, however, reminds us of the massive potential that open innovation comes with — whether you’re in a crisis or not. Open innovation has the potential to widen the space for value creation: It allows for many more ways to create value, be it through new partners with complementary skills or by unlocking hidden potential in long-lasting relationships. In a crisis, open innovation can help organizations find new ways to solve pressing problems and at the same time build a positive reputation. Most importantly it can serve as a foundation for future collaboration — in line with sociological research demonstrating that trust develops when partners voluntarily go the extra mile, providing unexpected favors to each other.

While concerns over intellectual property, return on investments, and various unforeseen consequences of open innovation are all valid, what we are experiencing now is an opportunity to innovate through and beyond the crisis. We have discovered a number of lessons that can help companies to not only take advantage of open innovation during the Covid-19 crisis, but to embrace open innovation once the pandemic is over. Here’s how companies can overcome some well-known challenges in open innovation:


Forget about the IP for the moment.

Earlier research has found that many companies are extremely worried about value “leaking” from collaborations with outsiders. As a result, they often stick to their knitting and collaborate on a few peripheral tasks, but not on the most important business issues. For example, we are aware of several chemical companies in Europe and the U.S. that made it practically impossible for their open innovation partners to provide help and advice. How? They wouldn’t reveal what their most critical problems entailed, as that could endanger future patenting. Instead the innovation partnerships slipped into irrelevance.

These intellectual property concerns are of course real and important, but they risk blocking any open innovation initiative from gaining momentum. However, during the Covid-19 crisis it could be wise to focus more on creating value than capturing value.

Smart companies take a leap of faith, collaborating on important stuff, without risking negative exposure. For example, if heavy truck maker Scania — a company known for its world-class manufacturing system — sends some of its best manufacturing experts half an hour north to work at Stockholm-based Getinge to ramp up their ventilator production, it risks none of its core technological assets but by contributing to the effort to build medical capacity and combat the virus, hopefully it’s speeding up how quickly it own plant will be back up and running.


Leverage two-sided motivation.

As the initial open innovation enthusiasm has settled, companies often realize that they rely on voluntary and active participation of employees and partners to succeed — traditional means of command and control have little reach. Instead companies need to rely on a combination of hard and soft incentives to motivate internal and external collaborators. Companies need to identify — and respond to — their partners’ true motivation.

For example, our own research on open-source software development has demonstrated a diverse set of motivations among developers. Some developers are motivated to freely share their code because of labor market signaling. Other developers are driven by strong ethical concerns, vigorously opposing any move to develop software that cannot be inspected, modified, and openly shared. And some companies are motivated to donate time and resources because it is an effective means to access complementary skills and assets. Aligning all of these motivations with what companies wish to achieve takes effort, curiosity and a portion of humbleness. While this might be easy in the early stages of a collaboration that’s responding to the pandemic, companies should not expect collaboration beyond the pandemic to go as smooth. Instead, it’s worth putting the work in ahead of time to discover — and potentially nudge — partners’ motivation.


Embrace new partners.

A common challenge in open innovation is to take on new partners. New partners always entail costs in terms of search, validation, and compliance, as well as the forming of new social relationships between people. And we know that when it comes to big thorny problems like Covid-19, new partners are necessary to provide complementary skills and perspectives.

The massive scale of the Covid-19 crisis may have alleviated these challenges in at least two ways. First, top management has assumed a lot of the risk associated with new partners, by sending strong messages that open innovation is the way to go. For example, Jim Hackett, Ford’s president and CEO says he has empowered his engineers and designers to be “scrappy and creative” when collaborating with GE Healthcare to find solutions to the crisis.

Second, not only the spread of the virus has grown exponentially but the pool of potential partners as well. When companies across the globe are affected by the same crisis, and many are searching for new ways to conduct business, a combinatorial exercise suggests that there are many better partners available now than a month ago. A crisis can prompt companies to explore a greater number and even new kinds of partners. Preserving some of that open-minded attitude towards new partners after the crisis can help companies stay on top of innovation.


Urgency leads transformation.

The initial steps towards open innovation in “normal times” are relatively simple. For example, hire some consultants, set up an innovation tournament, wait for ideas to come in. The results though are usually quite meager. To fully reap the rewards from open innovation, companies need to recognize the transformational challenge ahead. These initiatives are often the tip of the iceberg, and successful open innovation often requires operational and structural changes to how business is done. Such changes are difficult for any one employee, team, or even business unit to undertake.

In a time of crisis, the necessary executive focus is suddenly there. Smart companies seize this opportunity to rethink their innovation infrastructure. Perhaps our own sector, higher education, could stand as a beacon of hope that open innovation can work on a truly grand scale — and that a conservative sector can change. Many of us were told that classes starting the day after had to be replaced by digital alternatives. Much was left for individual teachers to figure out, but university presidents sent reassuring messages endorsing experimentation and clearing bureaucratic hurdles. In the past few weeks, academics across the globe have been collaborating, sharing tips, tricks, teaching plans, and experiences to turn an often slow-moving colossus into an agile digital sprinter. It shows that often the biggest barrier to successful open innovation is simply the reticence to commit to it.


Looking ahead.

These are promising developments. But to what extent will these observations hold true in the future? As business will one day go back to normal, how many of the altered ways of innovating will stick inside companies? And how will we as a society face other grand challenges, such as global warming, that are no longer looming on the horizon but are already here? We hope that the world’s response to the novel coronavirus has taught us that a truly shared experience of a common enemy can unlock the speed, strength and creativity needed to address even the greatest challenges.

For managers, an important reflection is to think about what needs to be delivered after the crisis. A big crisis often alters the behavior of customers, employees, and partners. Perhaps you have reason to believe the customer preferences will stay the same, but often they do not. Having established new ways of doing open innovation during a crisis can then bring much-needed flexibility and, in the end, secure the company’s viability. Don’t waste those experiences by planning for how to get back to the old normal. Plan for a new normal.
 
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During a recession, when many companies face declining revenues and earnings, executives often conclude that innovation isn’t so important after all. According to the authors, that’s because it isn’t integral to the workings of most organizations, so the creativity that leads to game-changing ideas is missing or stifled. Rigby, Gruver, and Allen, all partners at Bain & Company, point to the fashion industry as a model. Every season, successful fashion companies must reinvent their product lines—and thus their brands—or face certain death. They manage this constant challenge by creating unusual partnerships at the top that consist of an imaginative, right-brain creative director and a commercially minded, left-brain brand CEO. The authors call these alliances “both-brain” teams.

Some famous examples exist outside the fashion industry: Steve Jobs and his COO at Apple, Tim Cook; the creative Bill Hewlett and the savvy David Packard; Bill Bowerman, the former track coach who developed Nike running shoes, and his business partner, Phil Knight. But fashion has gone the furthest to incorporate both-brain partnerships in its organizational model. Gucci Group and others have learned to establish and maintain effective partnerships between creative people and numbers-oriented people; to structure the business so that the partners can run it effectively and are clear about which decisions they own; and to foster left-brain–right-brain collaboration at every level in order to continue attracting talent.

What makes these partnerships work? The authors have identified seven characteristics of successful partners: They are aware of their own strengths and weaknesses, have complementary cognitive skills, trust each other, possess raw intelligence, bring relevant knowledge to the team, speak to each other frequently and directly, and are highly committed to the business and each other.
Innovation is a messy process—hard to measure and hard to manage. Most people recognize it only when it generates a surge in growth. When revenues and earnings decline during a recession, executives often conclude that their innovation efforts just aren’t worth it. Maybe innovation isn’t so important after all, they think. Maybe our teams have lost their touch. Better to focus on the tried and true than to waste money on untested ideas.

The contrary view, of course, is that innovation is both a vaccine against market slowdowns and an elixir that rejuvenates growth. Imagine how much better off General Motors might be today if the company had matched the pace of innovation set by Honda or Toyota. Imagine how much worse off Apple would be had it not created the iPod, iTunes, and the iPhone. But when times are hard, companies grow disillusioned with their innovation efforts for a reason: Those efforts weren’t very effective to begin with. Innovation isn’t integral to the workings of many organizations. The creativity that leads to game-changing ideas is missing or stifled. Why would any company gamble on a process that seems risky and unpredictable even in good times?

In talking with executives about innovation, we often point to the fashion industry as a model. Every successful fashion company essentially reinvents its product line and thus its brand every season. It repeatedly brings out products that consumers didn’t know they needed, often sparking such high demand that the previous year’s fashions are suddenly obsolete. A fashion company that fails to innovate at this pace faces certain death. Understanding that, fashion companies have refined an organizational model that ensures a constant stream of innovation whatever the state of the economy.

At the top of virtually every fashion brand is a distinctive kind of partnership. One partner, usually called the creative director, is an imaginative, right-brain individual who spins out new ideas every day and seems able to channel the future wants and needs of the company’s target customers. The other partner, the brand manager or brand CEO, is invariably left-brain and adept at business, someone comfortable with decisions based on hard-nosed analysis. In keeping with this right-brain–left-brain shorthand, we refer to such companies as “both-brain.” They successfully generate and commercialize creative new concepts year in and year out. (See the sidebar “Hemispheric Conditions.”) When nonfashion executives pause and reflect, they often realize that similar partnerships were behind many innovations in their own companies or industries.

The world’s most innovative companies often operate under some variation of a both-brain partnership. In technology the creative partner might be a brilliant engineer like Bill Hewlett and the business executive a savvy manager like David Packard. In the auto industry the team might be a “car guy” like Hal Sperlich—a major creative force behind both the original Ford Mustang and the first Chrysler minivan—and a management wizard like Lee Iacocca. The former track coach Bill Bowerman developed Nike’s running shoes; his partner, Phil Knight, handled manufacturing, finance, and sales. Howard Schultz conceived the iconic Starbucks coffeehouse format, and CEO Orin Smith oversaw the chain’s rapid growth. Apple may have the best-known both-brain partnership. CEO Steve Jobs has always acted as the creative director and has helped to shape everything from product design and user interfaces to the customer experience at Apple’s stores. COO Tim Cook has long handled the day-to-day running of the business. (It remains to be seen, of course, how Apple will fare given Jobs’s current leave of absence.)

No industry has gone further than fashion, however, to incorporate both-brain partnerships in its organizational model. Of course it makes no sense for other kinds of companies to copy the fashion template exactly. But Procter & Gamble, Pixar, and BMW are among those that have borrowed heavily from fashion’s approach and enjoyed remarkable results.


The Fashion Model

Fashion companies understand one fundamental truth about human beings, a truth overlooked by all the organizations that try to teach their left-brain accountants and analysts to be more creative: Creativity is a distinct personality trait. Many people have very little of it, accomplished though they may be in other areas, and they won’t learn it from corporate creativity programs. Other people are inordinately creative, both by nature and by long training. They are right-brain dominant. Innovation comes as naturally to them as music did to Mozart, and like Mozart, they have cultivated their skills over the years. The first lesson from fashion is this: If you don’t have highly creative people in positions of real authority, you won’t get innovation. Most companies in other industries ignore this lesson.

It isn’t just innovation in the usual sense of products and patents that fashion companies pursue. Their creative people typically imagine a whole picture and see every innovation as a part that has to fit that whole. They are less concerned with perfecting any one component than with creating a brand statement that enhances the entire customer experience. At Gucci Group, for example, creative directors concern themselves with anything that affects the customer—the look and feel of retail stores, the typography of ads, and the quality of postsale service as well as the design of new products. Not every facet of the brand has to meet the narrow profit-and-loss test that many nonfashion companies require of their innovations. Gucci may only break even on its latest runway apparel, but those designs generate excitement among shoppers, who feel that they are sharing in the glamour of high fashion when they buy a Gucci item. Similarly, Starbucks doesn’t maximize sales per square foot in its cafés (heresy to many competitors), because it allows—even encourages—customers to linger for hours over a cup or two of coffee. Yet that innovative, homelike environment is precisely what distinguishes the chain from other coffee shops in the eyes of the customer.

Conventional companies look at innovation differently, and wrongly. Without creative people in top positions, they typically focus on innovations that can be divided and conquered rather than those that must be integrated and harmonized. They break their innovations into smaller and smaller components and then pass them from function to function to be optimized in sequence. The logic is simple: Improving the most important pieces of the most important processes will create the best results. But breakthrough innovation doesn’t work that way. What if a movie studio hired the best actors, scriptwriters, cinematographers, and so on, but neglected to engage a director? The manufacturers of several portable music players tout technical specifications that are apparently superior to those of Apple’s iPod. Yet they continue to lose sales and profits to Apple, because the iPod offers an overall experience—including shopping, training, downloading, listening, and servicing—that the others have not yet matched. Little wonder that many companies may increase their patent portfolios yet grow disillusioned with their innovation efforts.

What is required to harness this kind of creativity and apply it to the needs of a business? Creative people can’t do it alone: They’re likely to fall in love with an idea and never know when to quit. But conventional businesspeople can’t do it alone either; they rarely even know where to start. And a true both-brain individual—a Leonardo da Vinci, say, who is equally adept at artistic and analytic pursuits—is exceedingly rare. So innovation requires teamwork. Fashion companies have learned to establish and maintain effective partnerships between creative people and numbers-oriented people. They structure the business so that the partners can run it effectively, and they ensure that each is clear about what decisions are his or hers to make. These companies have also learned to foster right-brain–left-brain collaboration at every level, and so continue to attract the kind of talent on which their survival depends.


People: building effective partnerships.

To anyone outside the fashion industry, it’s astonishing how commonly designers team up with talented business executives. Until 2003 Calvin Klein’s business alter ego was Barry Schwartz. The pair grew up together in the same New York City neighborhood and had been partners since the beginning of the Calvin Klein label. Marc Jacobs, the creative director of Louis Vuitton and Marc Jacobs International, relies on his longtime partner, Robert Duffy, to manage the business. “Marc Jacobs is not Marc Jacobs,” he told Fortune magazine. “Marc Jacobs is Marc Jacobs and Robert Duffy, or Robert Duffy and Marc Jacobs, whichever way you want to put it.” Yves Saint Laurent partnered with Pierre Bergé, Miuccia Prada with Patrizio Bertelli, Valentino Garavani with Giancarlo Giammetti.
Most of these well-known teams date back years. But a partnership may not work out, or one of the duo may move on, so creating new partnerships is among a leader’s chief tasks. Soon after the Unilever veteran Robert Polet became the chief executive of Gucci Group, in 2004, he replaced the CEO of the flagship brand and eliminated two of the three creative directorships attached to it. His new appointments were controversial. Mark Lee, who had been heading the money-losing Yves Saint Laurent brand, became the Gucci brand’s CEO. Frida Giannini, in her early thirties at the time, became its sole creative director. Innovation flourished, and the Gucci brand’s revenues grew by 46% during the four years of the partnership (Lee has since decided to leave Gucci).

Building a strong partnership isn’t simply a matter of throwing two individuals together, of course. “It’s truly like a marriage,” Polet told Time magazine in 2006. “It has ups and downs, and you have disagreement, [but] with a common purpose and within a common framework.” Polet may be understating the contentiousness that often characterizes these relationships. Some—like some marriages—don’t work at all. (Think of Steve Jobs and his earlier partner at Apple, John Sculley.) Many others are punctuated by shouting matches, temporary separations, and similar signs of intense discord. Marc Jacobs sometimes infuriated Robert Duffy. The Pixar director Brad Bird and the producer John Walker are “famous for fighting openly,” Bird has been quoted as saying, “because he’s got to get it done and I’ve got to make it as good as it can be before it gets done.”

Some of the tension between partners is productive. (“Our movies aren’t cheap, but the money gets on the screen because we’re open in our conflict,” says Bird, the Oscar-winning director of The Incredibles and Ratatouille.) And some of it is destructive, dooming the relationship. The executive who oversees a brand should have finely honed matchmaking skills—but should also be ready to order a divorce when required.

You can improve the chances that a partnership will work. Here’s how:


Define a partnership-friendly structure.

What should the partners be in charge of? The scale and scope of an innovation unit depend on both the company and the industry. Robert Polet’s arrival at Gucci Group followed the departure of the famously successful designer-executive team of Tom Ford and Domenico De Sole. Ford had served as creative director for all the group’s brands, including Yves Saint Laurent and Bottega Veneta. Polet thought this centralized structure stretched Ford’s creative genius too thin. “The business model—I call it one size fits all—hasn’t worked for all the brands,” he said in 2004. “They have the same target consumer, the same retail strategy, and a central creative direction I’m not sure has worked well for all.” Polet made each brand a unit of innovation, established a creative-commercial partnership at the top of it, and asked the partners to focus on the needs of a distinct group of consumers.
Such decentralization usually deepens insights into customer opportunities and competitor vulnerabilities and allows greater creative freedom. It’s vital, however, to have an organizational structure that balances the benefits of decentralization with the efficiency of centralization. Otherwise a company will go through repeated cycles of spawning lots of local innovations to keep growing revenues in good times and then reversing course to achieve efficiencies in downturns. Danone’s dairy division found that balance recently by shifting more innovation responsibilities from regional offices to a centralized team made up of both creative and commercial people. The regional groups had developed several great products, including the popular “probiotic” drink Actimel. But Danone’s new-product portfolio came to contain too many regional products with limited scale and poor financial returns. The centralized team conducted global research to assess opportunities and make the necessary trade-offs. It was able to invest enough marketing dollars to turn Actimel into one of the company’s fastest-growing global brands.

Executives at conventional companies often hamper innovation by failing to distinguish between innovation units and capability platforms. Innovation units are profit centers—similar to business units. They may be defined by brands, product lines, customer segments, geographic regions, or other boundaries. Their work involves choosing which customers to serve, which products and services to offer, which competitors to challenge, and which capabilities to draw upon. What they have in common is that the innovation buck stops there. The units’ leaders have to balance creative aspirations with commercial realities, which is why a partnership at this level is so important.

Capability platforms, on the other hand, are cost centers. They build competencies that innovation units can share. Shared platforms create economies of scale, allowing a company to make investments that individual businesses could not afford and to take risks that smaller units could not tolerate. Like innovation units, capability platforms should also be sources of competitive advantage. In a fashion house they might include distribution and logistics facilities, color and fabric libraries, and advertising-media purchasing services. A company should create capability platforms only when its innovation units will choose to “buy” from them rather than to develop the capabilities independently or acquire them from outsiders. Innovation units own their final results, so they must also own as many capability-sourcing decisions as possible. Protectionist policies that force them to use substandard corporate resources hamper innovation.


Establish roles and decision rights.

Some years ago two psychologists at Cornell University wrote an article titled “Unskilled and Unaware of It: How Difficulties in Recognizing One’s Own Incompetence Lead to Inflated Self-Assessments.” The title alone captures a pitfall for left-brainers: Unskilled at coming up with breakthrough innovations, they may nevertheless believe they are good at evaluating them. They are usually wrong. Joseph Stalin allegedly denounced a Dmitri Shostakovich composition as “chaos instead of music,” banning for almost 30 years a work by the man many music critics have called the most talented Soviet composer of his generation.
Many companies nevertheless give left-brain analytic types an opportunity to approve ideas at various stages of the innovation process. This is a cardinal error. Uncreative people have an annoying tendency to kill good ideas, encourage bad ones, and—if they don’t see something they like—demand multiple rounds of “improvements.” They add time, cost, and frustration to the innovation process even in a boom. In a downturn the effect is magnified. Financial analysts are sent in to prune the new-product portfolio. Charged with reducing costs, they often clumsily break up whatever partnerships exist and get rid of the creative people who were essential to them.

Many companies allow left-brain analytic types to approve ideas at various stages of the innovation process. This is a cardinal error.

A better approach, in any economic environment, is what Polet has called “freedom within the framework”—a well-defined division of responsibility that plays to both partners’ strengths. At Gucci the CEO and creative director of each of the group’s 10 businesses work together to craft a sentence that captures the essence of the brand. Then each brand’s CEO establishes the framework within which creative decisions will be made: objectives, methods for accomplishing them, budget constraints, and so on. He or she maps out a three-year plan showing the brand’s strategic direction and projected financial performance. During tough times the financial resources may be limited, but the CEO and the creative director decide together how to deal with those constraints.

Uncreative people have an annoying tendency to kill good ideas, encourage bad ones, and demand multiple rounds of “improvements.”

Product development occurs within this context. Merchandisers working under the brand’s chief executive develop market grids showing customer segments, competitive products, and price ranges. If there’s an opening on the grid, it becomes the target for a new product: a handbag, say, for a specific niche, with a particular price point and a particular margin. Product specialists offer options for materials and manufacturing processes. The creative director then takes over, with full freedom to create a product that meets those specifications. If trade-offs have to be made, the creative director calls the shots, so long as the specs aren’t violated. The ultimate judge of the innovation is the marketplace, not a higher-ranking individual or committee within the organization.


Foster talent and nurture collaboration.

The partnerships at the top of fashion companies are the most visible. But both-brain organizations like Gucci understand the importance of replicating these partnerships at all levels of the company. They hire both right-brain and left-brain people. They make sure that both types have strong mentors and career paths that suit their aspirations. They seek to extend and capitalize on individuals’ distinctive strengths rather than constantly struggling against deeply ingrained cognitive preferences. When the organizations find partnerships that work well, they create opportunities for those people to work together as frequently as possible.

The particulars, of course, will vary from one company to another. At Gucci the creative directors are responsible for hiring other creative people who, the directors believe, will live and breathe the values of a particular brand. Gucci’s human resources director, Karen Lombardo, says she looks for competencies and personality traits that foster teamwork. Are job candidates comfortable with ambiguity? Can they accept the fact that they don’t have control over the final product? Can they function well in an environment without detailed job descriptions? Gucci also runs a program to develop leaders on the commercial side. One of its goals is to make leaders more aware of different styles of thinking and communicating, including their own.

Chris Bangle, until 2009 the design head and de facto creative director at BMW, described his job as “balancing art and commerce”—which, he said, required that he “protect the creative team” and “safeguard the artistic process.” That meant knowing his designers well enough to let them wrestle with the fuzzy front end in ways that improved ideas rather than killing them prematurely. It also meant knowing the right moment to intercede and shift the focus of product development from design to engineering, so that designers didn’t “tweak and tinker forever.” Bangle made a point of fighting to preserve the integrity of designers’ creations, thus gaining their trust, even though he might eventually decide to kill a particular concept. (See “The Ultimate Creativity Machine: How BMW Turns Art into Profit,” HBR, January 2001).


Transferring the Model to Other Industries

Maintaining the balance in a creative-commercial partnership is always difficult. When Polet joined Gucci, he found a company with a strong design culture. What its people needed, he believed, was an equally powerful appreciation for the commercial aspects of the business.

He started the rebalancing process by setting ambitious targets for sales and earnings growth: The Gucci brand, which accounted for 60% of revenues and most of the group’s operating profits, would double sales within seven years, and almost all the money-losing brands would turn profitable within three years. To reach these objectives, Polet moved the organization’s focus away from personalities and toward the brands themselves. Its advertising messages abandoned heady runway fashions in favor of products that core customers actually bought. He spoke frequently about making the brand, not the talent, the star. He selected creative directors who shared his philosophy and were more passionate about the product than about potential celebrity. He stressed teamwork over one-man or one-woman shows, encouraging a “culture of interchange” among brands, geographies, and management levels. He established quarterly management committee meetings, annual leadership conferences for the top 200 managers, and a variety of experience-sharing meetings for other functional experts.

Polet also challenged the conventional wisdom that customer research was irrelevant to luxury goods; he commissioned an international focus group of 600 Gucci customers along with regular reviews of the customer feedback by Gucci executives. He encouraged his managers to learn from successful competitors—among them Zara, a Spanish apparel retailer that produces inexpensive interpretations of designer goods in cycles as short as two weeks rather than the traditional six to eight months. (The suggestion that an eight-month production cycle was unnecessarily long reportedly so angered one senior executive that he stormed out of the meeting.)

Though Polet’s changes were often controversial, they worked. All but one of the brands met their three-year plans, several ahead of schedule. Results were so impressive that Fortune named Robert Polet Europe Businessman of the Year for 2007.

Can the rebalancing process work in the opposite direction—that is, can nonfashion companies boost their right-brain potential by learning fashion’s lessons? The experience of Procter & Gamble under A.G. Lafley suggests that they can. Lafley became CEO of P&G in June 2000. From the beginning he believed that creativity was a missing ingredient in the company’s innovation strategy. P&G’s technical innovations lacked the design elements that create holistic, emotional experiences for consumers and build their passion for brands. Believing that design could become a game changer for the company, Lafley set out to shake up the culture by increasing the flow of creativity. He proclaimed, “P&G’s ambition is to become a top design company as part of becoming the innovation leader in its industry.”

In 2001 Lafley tapped Claudia Kotchka from the package design department to create P&G’s first global design division. Kotchka reported directly to him, which sent a strong signal to the organization. The company hired about 150 midcareer designers over five years—another powerful signal. Lafley established a design advisory board, bringing in outside experts at least three times a year to examine and shape innovations. Kotchka and Lafley also launched Design Thinking, an initiative to teach new ways of listening, learning, visualizing, and prototyping. They redesigned corporate offices and other venues to open up work spaces and encourage collaboration. They built innovation centers around the world, replicating home and shopping environments to encourage cocreation insights with consumers and retail partners. Realizing that designers tend to “listen with their eyes,” Lafley encouraged research that focused less on what customers said than on what drove their emotions, beliefs, and behaviors.

Inside a converted brewery on Cincinnati’s Clay Street, P&G built an innovation design studio. Conference rooms there are filled with whiteboards, chalkboards, toys, and crayons. When a significant opportunity or challenge surfaces at P&G, team members from a variety of functions are released from their regular responsibilities for several weeks to immerse themselves in creative problem solving at Clay Street. Skilled facilitators train and guide the group. Experts from both inside and outside P&G are called in to provide opinions. The studio seeks to create “Eureka!” moments, and Lafley claims that every team that has gone to Clay Street has had one.

Under Lafley, P&G’s organic growth has averaged 6%—twice the average for the categories in which it competes—and its stock reached record highs before the current downturn. Its cultural transformation has produced such positive results that Chief Executive magazine named Lafley CEO of the Year in 2006.

Both Polet and Lafley launched their transformation programs as new CEOs (Polet came from outside Gucci; Lafley had spent 23 years at P&G). They both set compelling and credible objectives, making it clear that the goal was to accelerate profitable growth as well as to increase creativity. Both focused on the need for greater collaboration and teamwork, increasing respect for the unique talents of all cognitive styles in the organization and emphasizing simultaneous cooperation rather than development processes that passed innovation decisions from one function to another. Both also strengthened mechanisms for listening to customers, though in somewhat different ways. And both started by building on legendary cultural strengths—Gucci’s design talents and P&G’s brand-management skills. The difference, of course, lay in the starting points of their organizations and, therefore, in the priorities and specific techniques each relied on. They used hiring, development, and talent management programs to rebalance their cultures—more left brain here, more right brain there.• • •

Any executive with half a brain knows that innovation is essential to success. The problem is that it takes both halves of a brain to make it happen—the imaginative, holistic right brain and the rational, analytic left brain.

Consider the wide range of activities that might be necessary to improve innovation significantly. Management might need better visioning skills to foster a culture of curiosity and greater risk taking—primarily right-brain activities. Left-brain analytic tools might be needed to steer innovation investments toward the most promising areas. The business might need more creativity to generate ideas, but also analytics to constrain unprofitable projects. The right-brain design process might not be strong enough to transform intriguing ideas into practical products. Or the analytic left brains might need to fund the product pipeline to favor a different mix of large and small bets. Sometimes the products are fine but marketing needs to create stronger, more emotional bonds with customers, or engineers need to boost efficiency and profitability through improvements in cost or quality.

Both-brain organizations recognize that such changes won’t necessarily happen all at once. They put together people with the necessary brain orientation in the right places and at the right times. Indeed, we frequently find both-brain principles flourishing and innovation thriving in some parts of an organization even as other parts languish. Many executives have struggled to recognize and replicate the patterns of success—a decidedly right-brain task. But with both-brain hypotheses firmly in mind, you can apply left-brain scientific testing methods. One way to get started is to pick two or three business areas in which substantial innovations feel important and achievable, despite today’s sluggish economy. Build creative-commercial partnerships with exceptional leaders, even if that means moving key team members around. Give them bold challenges and freedom within a framework. Create a strong capability platform or two. Then track the results, including innovation levels, customer behaviors, financial performance, and cultural health.

We suspect you’ll say what Robert Polet told us: “I could never go back to the conventional way of doing business.”
 
innovationbusiness designbranding strategybusiness strategyexperience designglobal trendscompany culturebusinessengagementperformanceBusiness Model InnovationOrganisational Culture
When every brand is making noise, how do you break through? As this past year makes as clear as any, the brands that truly understand themselves have almost limitless possibilities to bring expression to that in a way that resonates with consumers. The brands we honor are varied in their businesses, but united in having figured out their core identity and having fun from there.
1. WHITE CLAW
For riding the wave of hard seltzer’s rise by appealing to men, women, and memes

The overall hard-seltzer market exploded last year, with a 202% sales boost over 2018 and hitting $1.3 billion. And it was Mark Anthony Brands’ White Claw that led the way. It rode the wave of this rise with both a design and marketing approach that was appealing to men, women, and memes, making the most of events like the Kentucky Derby and Coachella, while embracing influencers and even unauthorized parodies.


2. AVIATION GIN
For hilariously using meta advertising, pop culture, and Peloton’s misfortune to stand out in a crowded market

Over the course of the past year, Ryan Reynolds has managed to raise the profile of Aviation Gin among drinkers while also placing the brand comfortably in pop culture. Part of that is sheer celebrity, but the work itself has also been the envy of every marketer and ad agency. Using meta-advertising to pitch Aviation, Samsung, and a Netflix film—all at once—was impressive, but it was how the brand managed to find and hire the Peloton Wife for an ad while the viral flames around the exercise brand were still burning that really had everyone buzzing.


3. POPEYES
For cooking a new spicy chicken sandwich into a social media phenomenon

Although it’s been accustomed to being the third wheel of fried chicken (after KFC and Chick-fil-A), Popeyes upended all the rules when it introduced its new chicken sandwich last summer. In the process, it somehow managed to become a piece of pop culture. A huge part of that was thanks to the discourse on Black Twitter, which started hilarious memes and stoked the conversation. From there, Popeye’s new marketing team—stocked with vets from fellow Restaurant Brands International sibling Burger King—managed to use a witty social voice and the existing cultural hype to turn a sandwich into a situation where if we say The Great Chicken Sandwich War of 2019, you know exactly what we’re talking about.


4. MOUNTAIN DEW
For turning an apology to the Upper Peninsula of Michigan into a golden opportunity

The soda that gave us Puppy Monkey Baby had another successful Super Bowl blockbuster by inexplicably combining Bryan Cranston, Tracee Ellis Ross, and The Shining, but it was a lower-profile effort that really showed off its marketing chops. When a map that was part of the brand’s “Dewnited States” campaign launched in June, it mistakenly put Michigan’s Upper Peninsula in Wisconsin. As expected, it was roundly called out on social media. But instead of ducking and hiding, the Dew decided to double down on an apology and give the UP its own special-edition bottle labels, then set up camp at the Upper Peninsula State Fair to atone for its geographical sins by giving attendees the chance to plop Dew employees in a dunk tank, all while giving away thousands of free products and swag.


5. FNDR
For helping brands like Glossier, Snap, Farfetch, and Daily Harvest find their voice

This was the year Fndr cemented itself as a go-to adviser for an elite cadre of entrepreneurs. The secret sauce is how they help startups hone their stories by putting founders through a series of meetings designed to tease out their values and beliefs, challenging them to think about the human impact of technology and the social contract between their companies and the communities in which they operate.


6. PATAGONIA
For empowering teen activists to challenge government climate change deniers

The outdoors brand has been making compelling content and lobbying for years, and this last one was no exception. To raise awareness for Climate Week back in September 2019, the brand created a new campaign featuring teen activists from around America and the world, telling Congress and other leaders that there is no room in government for climate change deniers. By early 2020, the brand had released two new films, the first a feature documentary called Public Trust, about America’s system of public lands and the fight to protect them. The second was a compelling short called District 15, outlining the fight by young activists in the L.A. neighborhood of Wilmington to establish a 2,500-foot distance between oil drilling operations and the community’s schools, hospitals, and churches.


7. NETFLIX
For getting Burger King, Coca-Cola, Nike, and Baskin-Robbins to hype Stranger Things

The third season of Stranger Things was a massive event for Netflix, and even though the streamer has no advertising on its platform, it turned the occasion into a blockbuster movie-style brandfest. The best part about it—across partners like Coke, Nike, Baskin-Robbins, Lego, and many more—was that each execution fit the tone, personality, and content of the show. The crown jewel? Convincing Coca-Cola to relive its New Coke disaster and turn it into a marketing masterstroke.


8. IKEA
For embracing weirdness, from its catalog of TV-show living rooms to its grime diss track Christmas ad

Always a strong contender, the Swedish retailer continued its years-long run of prolific and fun marketing from around the globe, turning the TV living rooms from Friends, The Simpsons, and Stranger Things into a cheeky furniture catalog, and making a UK Christmas ad into a grime diss track rapped by house trinkets.


9. PROCTER & GAMBLE
For deploying its massive budget to provoke with The Look and the docuseries Activate

As one of the world’s largest advertisers, it’d be easy to blow off P&G as the opposite of risk-taking. But over the past year, the company has used its size and influence to push the boundaries of what high-quality brand content could—and should—be. In mid-2019, it announced Activate, a six-part documentary series on National Geographic Channel, featuring celebrities such as music producer Pharrell Williams, rapper Common, and actors Darren Criss and Uzo Aduba, on issues like the work of grassroots activists ending cash bail, eradicating plastic pollution, and more. Then in November 2019, building on the momentum from award-winning short film work like 2017’s “The Talk” and 2018’s “The Look,” the company teamed with Spotify for a four-part branded podcast called Harmonize, on racial bias starring John Legend and Pusha T, along with cultural commentator Cory Townes, and hosted by writer Jamilah Lemieux.


10. ADIDAS
For converting social influencers into sneaker salespeople with its e-commerce app

The sports giant has a rabid fan base, and in mid-2019, it decided to experiment in incorporating them into the company’s sales funnel with a new partnership with the social commerce app Storr. The arrangement gives people the ability to open their own sneaker store from their phone in just three clicks. First opened up to the brand’s 10,000 Creators Club members, who could earn a 6% commission from every sale (or have the option to donate to Girls on the Run), the plan was then to expand social selling into the brand’s higher-end women’s products.
innovationbrandingbranding strategybusiness strategycustomer experience
As we look ahead to 2021, Marketing Week has identified the key opportunities and challenges that will shape marketers’ working world. First up, the need to adopt a dual-speed strategy and the value of failure.
Our coverage of the ‘trends’ for the year ahead is slightly different this year.

Yes, we are flagging what we think you should be spending your time and money on, and why, but equally it is a commitment from us to focus on these topics in 2021 to help you better navigate the year ahead.

There’s little point flagging these challenges as important without going the extra mile and offering analysis and insight into how to tackle them.

It’s part prediction, part rallying call, part contents for 2021.


Adopting a two-speed strategy

If this year has taught us anything, it is that even the best laid plans still run the risk of being thrown out as the outside environment changes.

Yes Covid-19 is an extreme example of that, but uncertainty looks set to become an economic reality. From geopolitical events such as Brexit or the US election, to the environment crisis and the impact of digital, it seems best to assume uncertainty is the new normal.

With that in mind, it is key to take a two-speed approach to business strategy. Businesses still need to take a long-term view, to have a goal to aim for or a purpose to strive for.

That should influence innovation pipelines, how they think about customer experience and communicate with customers.

But within that long-term plan there must be room to allow for short-term disruptions and to adapt on the fly. We have seen this year that even the biggest businesses can be agile and quickly adjust course. That spirit of short-termism while keeping an eye on the bigger picture will remain key next year.

So too will an understanding of customers, and what drives and motivates them both over the next few months and the next few years. Much has been written about how Covid-19 will change everything. It won’t. But there will be shifts in behaviour. As much as there is no new normal, there is no old normal either.

The challenge is to weed out what is driven by circumstance from what is deep-seated behaviour change. Long-term are we all going to work from home all the time? Unlikely. But is work going to become more flexible and remote? Probably.

What impact does that have and what does your business need to be investing in to be ready for those changes? SV

Embracing failure

For too long failure has been considered the worst thing that can happen in business. This mentality is symptomatic of a working culture where new innovations, campaigns and services are the product of months, if not years, of planning. The stakes are so high that anything less than perfection is considered a serious problem.

In 2020 this mindset ground to a halt. All the best laid plans were shelved as businesses worked on their response to surviving the next few days, never mind the next few months. As brands started to move at greater speed and tear down some of the red tape, they realised their response to the crisis did not have to be perfect, they simply needed to be present.

Deciding not to become fixated on perfection will be important for marketers in 2021. If brands want to move at speed they have to embrace the fact failure comes with the territory and any mistake is an opportunity to learn.

Mars Petcare has focused on being ‘good enough’, for example, rather than having a preoccupation with perfection. Learning from previous mistakes helped the business launch a direct-to-consumer website for its natural dog and cat food brand James Wellbeloved during the spring lockdown. While the technology was simple the website has worked well and is now reviewed by on a monthly basis to make improvements.

The fact more brands are embracing agile forms of working, means marketers will have to get used to regular retrospectives to assess progress. The success of these ‘post-mortems’ comes from looking at failure in a positive way, because, as Mars Petcare marketing portfolio director Arthur Renault explains, if you frame the retrospective from a “punishment angle” people will shy away from taking a risk.

A similar approach has already been adopted at ride-hailing giant Uber. Speaking at the Festival of Marketing in October, global director of brand and product marketing, Meg Donovan, insisted that a marketer’s job is never really done, as there is always an opportunity to “make a better product or build a better brand”.
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COVID-19 brought with it an imminent economic crisis, review the characteristics of the brands that stood firm in the face of uncertainty.
Airbnb

The technology company has been able to recover in record time from the fall in tourism, and that the crisis could not have come at a worse time, since in January they were planning to go public.


Tesla

“Restrictions on mobility during the spring caused a radical drop in bookings on its website. Airbnb's greatest success has been to adapt quickly to the new habits of its regular consumers, focusing on offering stays close to the visitor's place of residence and disinvesting in non-strategic areas ”, highlights the consultancy.

Elon Musk's company has skyrocketed in stock market value 330% in the past year, surpassing Toyota and becoming the world's highest-valued auto manufacturer . The main factor for its success has been the very high productivity rate it has managed to achieve, to the point of being close to the annual production target of half a million vehicles. But what's really amazing is that Tesla makes a 23.5% gross profit on every car made.

The company continues with its plans to geographically diversify its production in China and Germany, something that has benefited them this year, mitigating the impact of COVID-19.


Amazon

The e-commerce giant started the year with many problems. As its demand grew meteorically, the news of imbalances in its logistics chain multiplied. Product shortages, shipping delays, strikes in logistics centers ...

But in just two months he turned the situation around. Jeff Bezos implemented a crash plan to overcome internal problems: general salary increases, training plans and many other concessions related to flexible hours. Since then, its profits have doubled and Amazon's stock market value has risen 40 percent.


Nestle

It is the company that has best known how to amortize the value of its food brands. When the pandemic altered consumer habits and the popularity of products such as soluble coffee or convenience foods increased.

It has also launched numerous innovations in line with new habits and has even bet on the health sciences business with the acquisition of a company dedicated to the development of food for allergy sufferers.


Ericsson

The Swedish company has achieved in 2020 one of its best historical years. Its gross margins have returned to 15 years ago and the forecasts could not be more positive in China, the United States and Europe.

The reason has its own name: 5G technology . Thanks to his clever moves in the midst of the trade war between the United States and China, he has established a leadership position in both the West and Asia.


Uniqlo

It has been one of the few companies that not only has not closed physical stores this year, but has increased their number, including with a huge interactive space, a mix of store and museum, in the center of Tokyo.

During the pandemic, they developed a mask adapting their breathable AIRsm fabric, which served as a hook product to increase the influx to their stores.
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The pandemic introduced a new kind of disruption, but in many ways, it is simply accelerating changes that were already well under way. Here's how to plan for the future you cannot see.
The coronavirus has introduced a significant amount of uncertainty into the lives of most CEOs, both on the professional and personal levels. The immediate future has never had as many questions attached to it. How long will it take to feel like the health issues are under control? How will this impact the economy and the way that business operates?

But, in many ways, this recent burst of the unknown is simply accelerating a number of macro forces of change that were already hiding in plain sight.

•  The shift to remote, digital work simply continues the disruption that digital technology and data are having more generally across all sectors (the poster child Uber’s upending of transportation sector).

•  The closing of national borders and challenge to globally-situated supply chains had already been signaled by the rise in protectionism and slow down of labor migration in historically open markets such as the U.S. and the U.K.

•  Spiking unemployment and disproportionate health and morbidity are the exclamation mark at the end of a long cycle of an increasing wealth gap (one that had led to the surprisingly fast growth of low-end discount retailers such as Dollar General and Dollar Store)

•  Regional differences in how the COVID-19 epidemic has impacted local economies is an analog to how heightened climate change risks may appear rapidly and unevenly—such as how vulnerable locales such as Miami, Hong Kong, and Singapore are finding disproportionately downgraded real estate values and insurance cost increases.


Business is in flux in a way most leaders have never experienced it before. But it was already changing faster than ever—often due to forces outside organizations’ control.
In a world of uncertainty and change, today and into the future, strategy remains key to business success, whether to ride out current storms or thrive in whatever “new normal” appears in the next few years.

It’s increasingly difficult to anticipate the trajectory of change—much less have confidence that you’re doing what you need to do to compete. But strategists can’t just throw up their hands in defeat, or propose an ad-hoc “peanut butter” approach—where every perceived “silver bullet” across the business gets a little bit of investment.

CEOs and boards of directors want to know: How should we respond to emerging threats and new types of competitors? Where do we grow next? In a rapidly changing business environment, these questions have no “correct” answer—and it’s no longer possible to answer them using traditional tools like straightforward market analysis.
Strategy remains as important as ever to ensuring that you’re leveraging core competitive advantages, your entire organization is aligned, and operational focus isn’t spread too thin. But it has to be a strategy that reflects the uncertainty of the times.


The Problem With Traditional Approaches to Strategy

Today, we’re seeing the convergence of traditionally unrelated industries. Businesses are increasingly faced with fundamentally new types of competitors. New regulatory regimes are undermining old advantages. In this environment, those able to react quickly to new threats and opportunities will win— and those who don’t will lose.

Consider the taxi industry. For years, it viewed Lyft and Uber as traditional competitors—as just another couple of cab companies, albeit with cool mobile apps. The conventional wisdom was that competing necessitated owning and maintaining fleets of cars and having good relationships with regulators.

Meanwhile, what was actually happening was complete industry disruption. By embracing innovative business models, as well as aggressively leveraging scalable technology and building strong consumer brands— neither of which is a strength of traditional cab companies—Uber and Lyft have changed what success in the industry looks like.

Today, your strategy needs to be ready to respond to that kind of disruption. But traditional approaches like SWOT analysis or Porter’s Five Forces assume that business conditions will remain relatively stable over time. They make recommendations based on historical industry definitions, market conditions, and “mental models” of the business. This focuses management attention on widely known trends, existing competitors, and foreseeable impacts to current business models, and aims at strengthening existing advantages.

By contrast, effective strategy today requires constantly challenging core assumptions, not just one-off projects designed to drive understanding of and responsiveness to customers and leverage technology to change how business works. Strategy must look deeper and more broadly into the future, and be prepared to change direction based on changing circumstances—sometimes in sudden, dramatic ways.


Developing Strategy in Disruptive Times

In an era of big, rapid changes, taking a wait-and-see approach to the future is simply not an option. You need an approach to developing strategy that enables new levels of responsiveness and flexibility—one that is:

Speculative. Strategy used to be about predicting the future, then planning for that future. Now it requires considering a range of possible future industry conditions.

Adaptive. Strategy can no longer be etched in stone. It must be ready to evolve quickly as conditions change, and enable your organization to be vigilant and dynamic.

Portfolio-based. Rather than being about picking a single strategic direction, now a good strategy involves a core strategic emphasis surrounded by a number of side bets designed to give you strategic options in the event of business surprises.

Such an approach helps stakeholders from employees to the C-suite understand how and where the business might create value in the future, and how to prioritize investments in new capabilities versus optimizing business as usual—so your organization will be able to respond strategically, whatever the future brings.


Navigating Uncertainty With a Portfolio Approach to Strategy

Asset management is a good analog for this approach to thinking about strategy: as a portfolio of bets placed against the future, combined with a process for continually updating the portfolio as new information is obtained or new opportunities emerge.

While investment may be weighted heavily towards a particular part of the portfolio—the strategy built for the current most probable future for your business—smaller hedges in other directions (e.g., entering joint ventures or strategic alliances, acquiring new capabilities, experimenting in new markets or with new models, etc.) provide a strategic footprint for evolving the business over time or, if need be, pivoting more dramatically on a shorter timeline.

The future may be harder than ever to predict, but that doesn’t mean you shouldn’t bother planning for it. You just need to get better insight into what it may hold, identify a portfolio of strategic options to enable you to respond to different possible scenarios, and then build relevant contingencies and points of adaptiveness into your strategic roadmap to help rebalance your portfolio as the future unfolds.

To evolve your approach to strategy in this way, you’ll need new tools, processes and perspectives. Methodologies might include: scenario planning, foresight research, and ongoing customer ethnography. Organizations can also benefit from new forms of collaboration across their business ecosystem. And whatever tools you use, to develop and execute more dynamic strategy for a disruptive environment, a more flexible leadership mindset and a greater tolerance for change across your organization are imperative.
customer experienceexperience designcustomer serviceconsumer brandsservice designcompany culturebusinessengagementperformancestrategy
Along with the severe health and humanitarian crisis caused by the coronavirus pandemic, executives around the world face enormous business challenges: the collapse of customer demand, significant regulatory modifications, supply chain interruptions, unemployment, economic recession, and increased uncertainty. And like the health and humanitarian sides of the crisis, the business side needs ways to recover. Ad hoc responses won’t work; organizations must lay the groundwork for their recoveries now.

The management theorist Henry Mintzberg famously defined strategy as 5 Ps: plan, ploy, pattern, position, and perspective. We have adapted his framework to propose our own 5 Ps: position, plan, perspective, projects, and preparedness. The following questions can guide you as you work to bounce back from the crisis.


1. What position can you attain during and after the pandemic?

To make smart strategic decisions, you must understand your organization’s position in your environment. Who are you in your market, what role do you play in your ecosystem, and who are your main competitors? You must also understand where you are headed. Can you shut down your operations and reopen unchanged after the pandemic? Can you regain lost ground? Will you be bankrupt, or can you emerge as a market leader fueled by developments during the lockdown?

We hear of many firms that are questioning their viability post-pandemic, including those in the travel, hospitality, and events industries. We also hear of firms accelerating their growth because their value propositions are in high demand; think of home office equipment, internet-enabled communication and collaboration tools, and home delivery services. Because of such factors, firms will differ in their resilience. You should take steps now to map your probable position when the pandemic eases.

2. What is your plan for bouncing back?

A plan is a course of action pointing the way to the position you hope to attain. It should explicate what you need to do today to achieve your objectives tomorrow. In the current context, the question is what you must do to get through the crisis and go back to business when it ends.

The lack of a plan only exacerbates disorientation in an already confusing situation. When drawing up the steps you intend to take, think broadly and deeply, and take a long view.


3. How will your culture and identity change?

Perspective means the way an organization sees the world and itself. In all likelihood, your culture and identity will change as a result of the pandemic. A crisis can bring people together and facilitate a collective spirit of endurance — but it can also push people apart, with individuals distrusting one another and predominantly looking after themselves. It’s crucial to consider how your perspective might evolve. How prepared was your organization culturally to deal with the crisis? Will the ongoing situation bring your employees together or drive them apart? Will they see the organization differently when this is over? Your answers will inform what you can achieve when the pandemic ends.


4. What new projects do you need to launch, run, and coordinate?

Your answers to the questions above should point you to a set of projects for tackling your coronavirus-related problems. The challenge is to prioritize and coordinate initiatives that will future-proof the organization. Beware of starting numerous projects that all depend on the same critical resources, which might be specific individuals, such as top managers, or specific departments, such as IT. With too many new initiatives, you could end up with a war over resources that delays or derails your strategic response.


5. How prepared are you to execute your plans and projects?

Finally, you need to assess your organization’s preparedness. Are you ready and able to accomplish the projects you’ve outlined, particularly if much of your organization has shifted to remote work? We see big differences in preparedness at the individual, team, organization, and national levels. The resources at hand, along with the speed and quality of decision-making processes, vary greatly, and the differences will determine who achieves and who falls short of success.

We have created a worksheet around the five strategic questions. It can help you plot your current and future moves. Be aware that consumers will remember how you reacted during the crisis. Raising prices during a shortage, for example, could have a significant effect on your customer relationships going forward.

The coronavirus has had unprecedented impacts on the world — and the worst is yet to come. Companies must act today if they are to bounce back in the future. Doing so will help the world as a whole recover — and, we hope, become more resilient in the process.

 

 

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The reality of how companies are dealing with the crisis and preparing for the recovery tells a very different story, one of pivoting to business models conducive to short-term survival along with long-term resilience and growth. Pivoting is a lateral move that creates enough value for the customer and the firm to share. 
Consider Spotify, the global leader in music streaming. In principle, this type of platform has all the ingredients for success in the lockdown economy: customers trapped in their homes who would like to escape from a depressing reality by listening to songs seamlessly streamed to a playback device without any need for physical distribution.

And yet the Swedish company struggled to find a pivot that would enable it to overcome a basic issue: Unlike Apple Music, Spotify disproportionately relies on free users who must listen to advertisements. Before the pandemic, the company figured that advertising revenue would grow even faster than the free user base, thus making a key contribution to the bottom line. Although the model was already showing some signs of maturity, its limitations did not become readily apparent until the pandemic hit and advertisers cut their budgets.

One pivot Spotify made in response was to offer original content, in the form of podcasts. The platform saw artists and users upload more than 150,000 podcasts in just one month, and it has signed exclusive podcast deals with celebrities and started to curate playlists. The shift in strategy means that Spotify could become more of a tastemaker. At long last, the company is doubling down on Netflix’s not-so-secret recipe for success in a business in which copyright owners enjoy healthy margins while pure-play streamers struggle to become profitable.

Pivoting definitely works for digital platforms, but does it help traditional businesses? Let’s examine the world of restaurants. They have been battered by the lockdown, with many owners pondering whether to close for good. The usual way to think about restaurants includes envisioning a seating area next to a kitchen. However, restaurants are kitchens whose output can be delivered to customers in a number of ways and using various kinds of business models. Eat-in, take-out, delivery, and catering are just the tip of the iceberg.

One pivot would be to offer a flat rate for a set number of meals per week or per month, with limited menu choices. Restaurants could increase their margins as they learned how to manage captive demand. Another pivot would be to offer a combination of precooked dishes with sides or additions that could be prepared at home using ingredients supplied by the restaurant. The restaurant could send a link to a video that walks the customer through preparation, thus incorporating an experiential and learning element. Deliveries could be in amounts large enough for several meals in a given week. Both pivots would lead to a greater variety of business models, which could become a permanent feature of the restaurant landscape, especially if the trend toward remote work from home consolidates over the long run.

The crisis has also led to broken supply chains, as reflected in the ominous images of empty supermarket shelves — a void that presented small farmers with a unique opening. After seeing their sales to restaurants and specialty stores plummet during the lockdown, many small-scale farms have set their sights on the needs of the homebound consumer. This pivot requires investments in information technology, marketing, and logistics that could prove profitable over the long run if the trend toward shorter supply chains gains momentum. Alternatively, some farmers and local stores are flocking to Shopify, the Canadian e-commerce platform, which has seen a boom in e-commerce activity at distances of less than 15 miles between sellers and buyers — a segment of the online market that behemoths like Amazon have traditionally neglected. Shopify’s key pivot has been to offer a comprehensive cloud-based bundle of services that help vendors manage expenses, pay bills, anticipate cash-flow problems, and optimize deliveries.

We’ve also seen large incumbent companies pivot during the crisis. As demand has soared for essential products, consumer-goods powerhouse Unilever has pivoted to prioritize its packaged food, surface cleaners, and personal hygiene product brands over other products, such as skin care, where demand has fallen. The company does not yet know which changes might become permanent. If the upswing in remote work endures, Unilever might find that some of its pivots will remain in place. In fact, the move toward in-home consumption might require a repositioning of not only food brands but also personal care offerings.

An even bigger threat to established brands is consumers’ increased willingness to experiment with different offerings during the crisis. Consumers are holding brands and companies to a higher standard than previously, favoring those perceived as doing more for society. Companies like Unilever and Procter & Gamble, whose portfolios include hundreds of brands, have no choice but to pivot in response. Brand loyalty can no longer be taken for granted, and brand repositioning may be necessary in many cases. But brand purpose and messaging will need to be laterally tweaked, not overhauled, because consumers are becoming more interested in safety, experience, and comfort as a result of the pandemic.

Not all pivots result in good business performance. Three conditions are necessary for such lateral moves to work. First, a pivot must align the firm with one or more of the long-term trends created or intensified by the pandemic, including remote work, shorter supply chains, social distancing, consumer introspection, and enhanced use of technology. For instance, if social distancing remains the rule for the near future, the casual dating platform Tinder will need to follow competitors Bumble and Facebook Dating in offering video dating.

Second, a pivot must be a lateral extension of the firm’s existing capabilities, cementing — not undermining — its strategic intent. Faced by the sudden collapse in travel, Airbnb moved swiftly to help hosts financially and connect them with potential guests. Hosts can now offer online events focused on cooking, meditation, art therapy, magic, songwriting, virtual tours, and many other activities, with users joining for a modest fee. This pivot represents one more step in Airbnb’s evolving approach from its traditional business model of facilitating matches between hosts and guests to its move to become a full-range lifestyle platform. In the future, online experiences could help travelers discover new destinations and on-site activities and help hosts offer better service. Airbnb could become a platform that people use not just to arrange their next vacation but to develop a cosmopolitan mindset throughout the year, learning about other cultures from a distance and celebrating the diversity of the world on a daily basis.

Third, pivots must offer a sustainable path to profitability, one that preserves and enhances brand value in the minds of consumers. The economic crisis triggered by the pandemic does not necessarily spell the end of entire industries or companies. It does weed out business models that fail to pivot toward the new reality characterized by shorter value chains, remote work, social distancing, consumer introspection, and enhanced technology use.
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The new business as usual is adaptability. Here are 5 examples of how business are pivoting to survive Covid 19.
Everything has gone out of the window – major spending holidays, seasonal planning, store expansions and so on. Physical stores are closed. E-commerce operations are struggling with demand or on pause. Factor in that we don’t yet know when this all might end, and it can all feel a bit paralyzing. Inaction isn’t going to help though. What retailers need is to pivot and adapt their business to the new situation – and to keep an eye on what is happening so they can keep adapting as things change.

Not sure how to do that? Here are five great examples of how businesses are pivoting to survive Covid-19.


Grocery brands turning stores into dark stores

Retailers with physical stores are seeing an interesting challenge right now. They’ve got all these brick and mortar assets that they can’t make use of because of social distancing restrictions.

Some are now pivoting though to turn those shut spaces into dark stores. This means they can use them to fulfil online orders instead.

The trend is strongest in the grocery sector, which makes sense given the huge demand for online food shopping right now. Equally though, grocery is one category where physical stores are still open and operational because of their essential nature. As such, you could question the decision to shut off those spaces in favour of operating them as dark stores.

It’s happening though. Whole Foods has closed its Manhattan Bryant Park store in NYC and Woodland Hills in California to make them dark stores. Sainsbury’s is doing the same thing in the UK with certain spaces in London.

The thing is these store pivots are carefully considered. City centre locations are favoured because they tend to be more densely populated which means greater demand for online services. By turning the local store into the online fulfilment centre you can serve more people faster because the distance from where the order is picked and packed and where it needs to go is way shorter.

In addition, these spaces can serve more customers overall as dark stores than if they continued to operate conventionally. This is because they can deliver to a wider area compared to their normal catchment of people living in walking distance of the store.


Uber starting on-demand retail delivery

Uber is a hugely successful business. It also relies on the movement of people.

So, at a time when people aren’t able to move around and social distancing is the order of the day, it makes sense for the company to pivot its model to transport other things rather than leave its drivers without any work. Those things now include ecommerce orders.

There are two strands to the new offering. Uber Direct offers retailers an on-demand delivery service to quickly get orders to customers at home. So far, products being carried range from pet food to medicine and even postal surplus.

Uber Connect is aimed at the individual customer letting them send items to another address in their city. For example, it might be food or care packages being sent to relatives, or even items sold online via local marketplaces. The service is being tested in 25 cities in the US, Mexico and Australia.

What’s interesting about this pivot is that Uber is looking to capture as much of the market as possible.

It’s not just going for the ecommerce retailers, which would make sense given that ecommerce’s biggest challenge right now is keeping up with demand. It certainly seems like the most profitable option for the business.

Instead, Uber is considering its true audience – human beings looking for convenience. By offering a service to move things on their behalf, Uber is ensuring that its customers don’t forget about it when travel is the furthest thing from their minds.


John Lewis adapting in-store advice services to be online

It’s one thing to pivot your business to sell online, but it’s another to take other in-person interactions and make them digital.

John Lewis offers a wide array of in-store advice and support services in its stores. With customers unable to visit it currently, the brand is pivoting to make these same services available online via video.

The appointments are free, and customers can talk to experts from different departments about things like home design, personal styling and setting up a nursery. After the appointment the customer is emailed further advice, mood boards and a personal shopping list – depending on the service used.

John Lewis is also leaning into the strengths of different communication channels. For example, the personal stylist appointments are booked via its Instagram page where stylists are also sharing tips and answering questions.

We love how personal the experience still feels. By using video, rather than audio only calls or a chatbot, customers can build a real connection with the expert – and therefore John Lewis. The virtual offering is also a great pivot given that – despite current global circumstances – some customers will still be experiencing major milestones, such as having a baby, and need expert advice.

Likewise, other customers may have extra time at the moment to tackle projects around the home or to clear out their wardrobe. Again, John Lewis is making sure that it is a port of call for them. Customers may not be able to visit its stores, but the brand is staying front of mind through virtual connections.


Secret Cinema at home

Secret Cinema is globally known for its go-all-out immersive cinema experiences where participants get to live and breathe the world of the film they’re going to see.

As such, social distancing and new rules preventing mass gatherings have put the brakes on the company’s business.

But instead Secret Cinema has pivoted to bring some of its magic to people at home via Secret Sofa. A different film is the focus of each week with participants signing up to the Secret Sofa newsletter to be part of the fun.

As well as finding out what the film chosen is (with info on which streaming platforms carry it), the email provides the usual Secret Cinema suggestions of costumes and characters to make viewers to feel part of that world. There are also playlists, food recommendations and more, and a different flavour of Haagen-Dazs can be ordered each week from Amazon Prime.

Look, this isn’t the same as a full-on Secret Cinema experience. But we have to applaud the brand for finding new ways to engage with their audience when they’re unable to leave the house.

Secret Sofa retains a social element as everyone starts watching the film at the same time on the same day. There is also a private Facebook group which invites people to chat before, during and after the film. This helps to get people into the spirit and to make the effort to participate fully rather than just watching the film in their pyjamas.


Restaurants becoming wine shops and takeaways

All around the world restaurants are having to close doors. While the need is understandable in helping prevent the spread of Covid-19, there’s no doubt that for many there’s a question of whether they’ll be able to reopen again.

Some, however, are pivoting to find new ways of serving customers at home. The Alinea Group has turned all five of its restaurants into takeout spaces. What’s more though, it has deliberately scaled down and changed the menu to make it simpler and more affordable recognising that most people won’t be dropping a few hundred dollars on one meal right now.

It’s not the only one doing the same thing. What sets Alinea apart though is that it also operates a restaurant reservation app called Tock. It has now pivoted this into Tock to Go allowing restaurants to take orders for collection or delivery.

Meanwhile, in NYC top restaurants are using their expertise and impressive wine collections into wine clubs and bottle shops. Their websites have now become wine shops with good quality wines being sold for a lower price than normal, but still a decent price compared to a convenience store ($20-40 on average).

Others are selling high-end and rare bottles to those with more money to spend as a way of adding a little luxury to quarantine life. Curated wine packages of multiple bottles are also being offered in the style of online wine clubs.

There are some hoops – licensing laws mean that food and snacks have to be sold with the alcohol – but it’s a great example of how businesses can pivot their model to make use of the valuable assets and knowledge they already possess.


 
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​There is no doubt that the Covid-19 pandemic took the whole world by surprise. Besides Bill Gates and very few futurists, not a single government have predicted such scenario where millions of people will be hit and consequently a global economic meltdown will bring businesses down and unemployment up. While this crisis will have to end better sooner than later, it will leave its marks and some deep scars on the society namely how we work, socialize, trade and entertain.
Focusing on the economic and business side of the equation, would we say that all sectors are being equally affected? Obviously not. Restaurants, hotels, fashion retail and movie theaters are hit hardest. Meanwhile, F&B, Pharmacies, movie streaming (Netflix), online communication platforms (Zoom, MSMeet,..) and last mile delivery to name a few are flourishing. Taking a closer granular look on this thriving segment, we realize that in reality, only brands and companies who built a multi-channel strategy (store, online, click-&-collect, mobile, call center,..) early-on with efficient logistic and seamless delivery process, are the true share winners (growing bigger that their industry average). More interesting is that most of those locals are nimble & relatively small-size companies like totters, Yala grocery stores and other new fast mushrooming players.

The question that comes to mind is: "Why for instance major retailers the like of BHV, ABC, or Aishti to name few, who all basically have the scale & resources to build multi-channel offerings have missed the train? with dire consequences on their revenues, financial health, staff moral, salaries cut, lay-offs and so on.

The answer can very complex like the well-known 'innovator's dilemma' principle that states: Under normal or growth conditions, moving resources to build new uncertain offering will take away from generating more revenues in existing ones. Thus by refraining to invest in emerging products, they left the entire floor open for new players to fill the gap and gradually take on their customers,

But in Lebanon, the most likely answer is yet simpler. They all adopted the old-time famous business inertia:"If it ain't broken, don't fix it."

In other words, why bother to invest in new channels as long as they can have customers coming to them? why canibalize brick-&-mortar revenues by selling online? Their baseline assumption is that customers are a uniform and static entity with minor deviations and overall stable & predictable needs & behavior! We call this having a 'Fixed mindset' or a mental frame of mind that beleive that things are set and no effort can change them.

But then why elsewhere retailers and even the same brands they carry have all provided customers with multi-channel options in most markets despite their widespread geographical stores footprint? Again we often hear the conveniently simplistic answers: Lebanon has a small geography and people can easily commute to their stores. Or there is not enough demand to support alternative channels profitably.

To check, let's put some (pre-Covid-19) facts on the table :
  • According to the last available data, e-commerce generated US$ 341 million in sales in 2016, representing a 9.8% growth from 2015 (US$ 310 million).
  • The market is characterised by a general interest in cross-border trade - for both Pan-Arab and international websites - and the lack of a local general retailer giant. Ali express is one of the leading e-commerce sites in Lebanon, while Amazon only offers limited delivery, mostly of books.
  • 2.3 million people shopped online in 2016, compared to 2.1 million in 2015, which represents an annual growth rate of 9.5% (State of Payments, PayFort 2017). Younger age groups (below 30) are the most active online users (50% of internet users). Regarding income levels, mid-income category (US$ 533 to US$ 1,065) had the most active online shoppers. The top shopping categories were clothing (44% of online shoppers) and travel services (42% of online shoppers) while electronic equipment (tablet, TV) were among the least bought products (PayFort). Lebanese people tend to shop online mainly for three reasons: competitive prices, group offers and exclusive products.

In other words, Lebanese consumers have spent abroad multi-millions $ amounts for things & reasons that could have been easily provided by any enlightened retailer or company. That would also have limited the foreign trade balance deficit at times where hard currency is literally hard to find. We call it having a 'Growth mindset' meaning having the willingness to change status-quo by exploring and opening up to new realities

Back to today with Covid-19 putting its toll on personal revenues, the conventional wisdom might say: "who wants to buy clothes or not-a-necessity items in time of crisis with purchasing power dwindling?" Here again the answer might sound simplistic: No one. Looking closer and according to 'RedPoint' a global IP protection firm recent research on impact of Covid-19 on e-commerce sales reveals different realities:
  • 58% of customers are buying more online than usual
  • 73% of respondents will further increase their online shopping compared to in-store if COVID-19 outbreak continues
  • 59% of U.S. shoppers are making more snap purchasing decisions in light of the pandemic
  • 60% would increase online shopping if they were worried about catching the virus in stores

Here's what it means in terms of some emerging opportunities:
  • The internet is quickly becoming the only place for shoppers to get what they need, whether basic necessities or gadgets to pass the time. Also in a similar category would be board games, puzzles, journals, and musical instruments.
  • Demand for office supplies has grown as more people are trying to work from home, and the same is happening with homeschooling materials.
  • Personal care products, household products, and packaged goods are at the top of the list. This makes sense, as people want to stock up on items that they regularly use or consume in daily life.
  • With more time inside, people can treat themselves to at-home spa days. Home exercise equipment may also see an increase in demand so people can stay in shape while avoiding the gym.

The big question is whether this short-term increase in online shopping will translate into long- term change. If people who are new to online shopping have positive experiences, they may continue to incorporate more ecommerce purchases into their spending habits. More so, brands need to establish a continuous insights-generating mechanism to gauge consumers sentiments, identify the 'over-served or under-served' segments of customers who can represents early wins opportunities and build a proper channel-market fit i.e. matching customers with their preferred channel. Without insight into future growth, companies will drag behind the growth trend rather than ride it from the start.

When combining Covid-19 with a structural weak economy in a downturn, moving may be the last thing on CEO's minds. As revenues slow and margins are squeezed, management switches its focus to cutting costs to maintain earnings. This being legit as survival becomes the #1 priority. Nevertheless smart re-allocation of resources and small scale agile foray into promising new adjacent offerings, prototyping of innovative business models and multi-channels delivery to meet the customer where he is right now (in home) may be an equally important salvation act by generating new revenue streams for the company. Worth mentioning that it will also allow them to re-allocate their idle or unemployed human capital into fulfilling new functions mandated by new model and re-skilling them towrads future business needs and standards.

What should not be an option is inertia which can quickly deplete value for shareholders and even bring the company to a near-death experience ( remember Kodak, Nokia,..). Here lies an important difference between winners and losers. While big gains require big choices (most of share-gain winners had a distinctive business-model with multi-channel advantage), you don’t have to do much to qualify as a loser. Adopting a passive posture may well be enough and the market and everybody will notice it soon enough.

In summary, the Corona crisis just confirmed the famous Darwinian 'Survival of the fittest' theory. Brands that invested in multi-channel delivery & logistic are reaping the greatest rewards while those who adopted a 'Build it & they will come' or a 'wait & see' old fashioned approach have simply ceased to engage with their customers and are completely shut-down proving that nowadays either you are multi-channel or you simply are not existent.


Should you want to have a conversation about this topic & more, do email me at joe.ayoub@brand-cell.com.
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