Amid the rise of e-commerce giants, and challenger brands that boast a direct relationship with consumers, big brands are being squeezed. The answer might just be to stay big, acquire small, and bring strengths from R&D and marketing into the equation.
This is according to a new essay in the Harvard Business Review, from Howard Yu, an author and business professor at the IMD Business School in Switzerland. It takes inspiration from P&G activist investor, Nelson Peltz, who joined the board of the FMCG company in 2018. He argues that the company “must acknowledge that others will inevitably come up with new ideas, new opportunities for growth, and new products that are on trend with consumers.”
To this end, he adds, “P&G must be proficient at acquiring small, mid-size, and local brands and using its R&D and marketing clout to take them to the next level.” This turns out to be a strategy that the Chinese tech company Xiaomi is already doing.
The Xiaomi model is one in which startups – the firm has already invested in 55, with 29 incubated from the beginning – engage with the parent company through a combination of funding and incubation. At the centre of the method, says Liu De, Xiaomi’s co-founder and vice president, is the purchase of non-controlling shares, “leaving maximum interests to the startups”. Because of this “they are much more incentivized and willing to fight on the front line”.
What startups receive from Xiaomi is a place within the brand and access to its considerable distribution network both on and offline.
The HBR essay argues that P&G would do well to follow this model, becoming more than an industrial corporation with a bit of technology, but instead become a house of startup brands that can do the activity that small companies find difficult to scale, while leaving dynamic brands to do their best. This would mean centralising those marketing and distribution capabilities to give its stable of brands an edge.
Sourced from Harvard Business Review; additional content by WARC staff