Brand owners must adapt

03 June 2011

NEW YORK: Brand owners should follow the example of Apple, Google and Procter & Gamble, all of which have built "adaptive systems" capable of responding to rising competition and new technology.

"A cruel paradox of competition ... is that the efficiency and specialisation that enable a competitor to excel in one environment often inhibit successful adaptation when the environment changes," the Boston Consulting Group said in a new study.

One arena where this shift has been especially apparent is telecoms, given the increasing rivalry between companies like Apple and Google, putting pressure on established players such as Nokia.

BCG stated Apple's network of 200 suppliers and partners, alongside huge numbers of app developers, set a new industry template that Google modified with its open source strategy for Android.

Under chief executive Stephen Elop, Nokia has agreed an alliance with Microsoft as it seeks to reverse a decline in North American market share from over 30% in 2004.

"It's no longer a battle of devices; it is a war of ecosystems," Elop said. "Therefore, we are partnering with Microsoft to build that ecosystem and build those great devices."

BCG further suggested Apple's strength, as shown by the App Store and iTunes, lies in "aggregating diverse capabilities", a sentiment also held by Tim Cook, the electronics firm's chief operating officer.

"We continue to believe and even more and more everyday that iPhone's integrated approach is materially better than Android's fragmented approach," said Cook.

"I think the user appreciates that Apple can take full responsibility for their experience, whereas the fragmented approach turns the customer into a systems integrator, and few customers that I know want to be a systems integrator."

Such ideas are extendable to Google's AdSense contextual advertising tools and eBay's pioneering retail platform, according to BCG.

Among eBay's advantages is fostering confidence between participants by allowing members to upload pictures of available items and rate sellers, yielding a "visible form of trust."

A positive offshoot of this effect is vendors carrying high ratings boast a price realisation some 6% to 8% stronger than the norm, giving them a cachet only applicable on eBay.

EBay recently acquired digital marketing and ecommerce enterprise GSI, which has clients like Toys R Us and Ralph Lauren, adding to the existing strength of payment unit PayPal.

"What developers are telling us, and frankly, merchants are telling us, is … they want commerce, services," said John Donahoe, eBay's chief executive.

"They want more from the commerce services stack because they are finding that they need help competing in this multichannel world."

Automaker Toyota was an early adopter of rigorous procedures, with "kaizen", or ongoing "continuous improvement", and "kanban", a just-in-time ordering process first introduced in the 1950s.

Retail giant Wal-Mart leverages similar capabilities by sharing real-time sales data with suppliers, providing reduced transaction costs and fewer "stockouts", benefitting both sides.

Procter & Gamble, the parent of Tide and Pampers, was described by BCG as having followed an "exemplary holistic model" via a range of initiatives exploiting external expertise and insights.

Its Connect + Develop open innovation programme draws on technologies from third parties, and the YourEncore online community taps retired engineers and scientists to solve R&D problems.

The organisation's Vocalpoint hub also offers 600,000 mothers the chance to test new lines, and in combination such efforts have enhanced innovation productivity by 60%.

Filippo Passerini, P&G's chief information officer, has also outlined ambitious goals covering these areas.

"It is the ability to operate in real time ... trying to see what is happening now as we speak, and the ability to intervene immediately if we need to make an adjustment," he said.

Data sourced from Boston Consulting Group, AllThingsD, Wall Street Journal, Seeking Alpha; additional content by Warc staff