Sunday, May 31, 2009

Apple owns 3 of top 10 social brands, 2008

I don't know what a vitrue is, but they've done a Top 100 brands list of American Brands. 9 of the top 10 (except Starbucks) relate to media/entertainment/electronics. (Starbucks is about lifestyle/relaxation/socialisation.) Microsoft comes in with Xbox and it's own brand name at 5 and 11. Apple has 1, 3, 7 and 16. Note that Disney at #4 is to a large part due to Pixar which was Steve Jobs' baby too. The iPhone, iPod and Xbox brands are less than 10 years old and all appear in the top 10. Of course, the average age of people online tends to be the low to mid-20's, and hence the relative youthfulness of the brands too.


But the point also is that brands find it difficult to make the transition from one generation to the next. Further, it is possible to establish a whole new brand with a whole new generation (besides, a whole new market segment, as in the case of 'Google', 'Facebook', 'Amazon', 'Nokia'). But it's got to look authentic: people -- especiall young people -- can easily see through old brands trying to dance like they were young -- the brand begins to look pathetic and ridiculous.

A dual-branding strategy typically works well -- one for corporate, one for the product/service -- so that even if the corporate brand ages, the product/service brand can remain fresh and relevant for a specific generation. IBM, for instance, couldn't possibly succeed in the consumer market on the strength of its brand alone -- it's brand is perceived as corporate-conservative. Microsoft isn't perceived as 'cool' but 'Xbox' works fine; indeed, anything with an 'X' in it seems de riguer for perceived coolth.

Anyway, the point of my post is that Apple has been remarkably successful in creating and promoting brands; that requires a special kind of creativity. Sony is a highly innovative corporation -- yet, it is no longer able to maintain a 'cool'/'hip' perception in the marketplace; the times when the 'Walkman' was the epitome of cool are long gone. The iPod & iPhone today are what the Walkman used to be 25 years ago.

Apple -- in particular, Steve Jobs -- has done a lot to maintain the 'cool' perception in the market by relentlessly releasing new products annually, and in a highly dramatic fashion. Apple has a very limited range of products, and thereby avoids brand dilution. It's hard to tell what would happen if/when Steve Jobs passes on (given that he is very ill presently).

The Vitrue 100 of 2008

  1. iPhone
  2. CNN
  3. Apple
  4. Disney
  5. Xbox
  6. Starbucks
  7. iPod
  8. MTV
  9. Sony
  10. Dell
  11. Microsoft
  12. Ford
  13. Nintendo
  14. Target
  15. PlayStation
  16. Mac
  17. Turner
  18. Hewlett-Packard
  19. Fox News
  20. BlackBerry
  21. ABC
  22. Coke
  23. LG
  24. Best Buy
  25. Honda
  26. eBay
  27. Sharp
  28. Lincoln
  29. NBA
  30. Pepsi
  31. General Motors
  32. McDonald's
  33. General Electric
  34. Walmart
  35. NFL
  36. Mercedes
  37. BMW
  38. Samsung
  39. Nike
  40. Subway
  41. Dodge
  42. Pandora
  43. CBS
  44. Mercury
  45. NBC
  46. Disneyland
  47. last.fm
  48. Toyota
  49. Cadillac
  50. Chevy
  51. Jeep
  52. Netflix
  53. Nascar
  54. Suzuki
  55. Red Bull
  56. Wendy's
  57. Burger King
  58. Volkswagen
  59. REI
  60. Nissan
  61. T-Mobile
  62. Verizon
  63. Macy's
  64. AT&T
  65. Guess
  66. Victoria's Secret
  67. Walt Disney World
  68. Audi
  69. TBS
  70. Cartoon Network
  71. IKEA
  72. SEGA
  73. Kia
  74. Porsche
  75. Fox
  76. Intel
  77. IBM
  78. VH1
  79. MLB
  80. Cisco
  81. Oracle
  82. Saturn
  83. Sprite
  84. Subaru
  85. Adidas
  86. BP
  87. AMC
  88. Chili's
  89. The Gap
  90. Capital One
  91. Hyatt
  92. Costco
  93. KFC
  94. Adult Swim
  95. Jet Blue
  96. Taco Bell
  97. Converse
  98. Sirius
  99. Puma
  100. Sears

Free markets, innovation and culture

It is widely believed -- at least in the wake of liberalisation in India -- that a free market economy promotes innovation and better products and services -- which, it is taken as a given, is better for society. In my experience this is true to a large extent. When I was growing up, there were only three models of cars available -- Fiat 100, HM Ambassador, and Standard Herald. By 1970 or so, this shrank to just the first two. Then we had Lambretta and Bajaj 150 scooters, soon supplemented by the public sector Scooters India scooters licenced from Lambretta, Italy. So, at least in terms of variety, there were far fewer choices; and variety is at least one measure of innovation (though not the only, or most the most critical one). So for material goods and services, the free market economy has delivered far more, in a far many more ways, and mostly of higher, or much higher, quality.

On the other hand, in my experience -- which means, I'm not claiming that this is an absolute truth -- free markets do little, if anything, for innovation, and importantly, quality, of cultural artifacts. By cultural artifacts, I mean, music, poetry, literature, art, dance, spirituality, etc.: just about anything whose purpose is mainly to enrich our emotional lives, and thereby make life meaningful and worth living at all. When I left for the US over two decades ago, I was excited and looking forward to living in a world which offered choices and variety that I, as an Indian, could only dream of. Having grown up on American movies, magazines, music, books and so on, this was the Promised Land I was heading towards. And when I arrived there, it seemed to be everything that I had imagined it to be, and much more. It was exhilarating. It was heady.

The India that I had inhabited at that time provided about two or three radio channels, and just a few TV channels -- all run by Doordarshan. And the programs were mostly aimed at farmers. The USA delivered scores, hundreds of channels. What a bounty! But once the excitement faded, it became clear that the vast majority of channels delivered junk. I found myself listening to only two radio channels and watching two or three TV channels. Interestingly, the only radio channels worth listening to were Public Radio channels. And while I tuned occasionally to programs on other TV channels, over 80% of my TV watching was of the Public TV channel. The only programs of very high quality and which could appeal to people of any intelligence and taste were to be found on Public TV and Radio. So, the wealthiest and most educated demographic -- the market segment that most corporations would kill for -- hardly ever tuned in to commericial broadcasts.

So while mass markets help lower production costs and deliver high quality products, the same mass markets actually end up delivering low quality cultural products. High culture is inherently elitist -- and this is exactly the opposite of what mass markets mean. When we look to the past, the greatest literature, poetry, art, etc., came from highly talented individuals who did what they did for the love of it, not because of market demand. Vincent van Gogh, whose paintings have fetched over $50 million each, sold only one painting in his entire life (before he committed suicide). Any society that relies entirely on market feedback or support can never produce great art or literature. Great cultural artifacts, being elitist, need the support of wealthy connoisseurs and sponsors, individuals who understand what art and culture are about and are not driven by market sentiments. I recall some really wonderful Doordarshan TV as well as Akashvani radio programs from the early 1980s that were far superior to anything today on commercial TV or Radio (FM radio stinks, in my opinion); they were the products of efforts that were protected from market forces.

There's a lesson here even for free market products. There are some products or services that are imbued with a strong cultural and aesthetic component. The iPod comes to mind. These products were not developed through market research, although consumer testing was done. The design of the iPod (as with the design of the Apple Macintosh) was carried out by a combination of marketers and highly talented designers with very high aesthetic sensibilities. This is why Mac and iPod have ended up as displays in the New York Museum of Modern Art -- they can be appreciated as art objects, even if they served no other functional purpose; it is as if the products' functionality came as a bonus : "Oh wow, it even helps me accomplish some work! How cool is that!" Companies like Porsche, Ferrari, Four Season's Hotel, and some others understand this.

What's important is to try to achieve that balance between populism and elitism; human society needs both.

Speaking of high quality radio programs, one American radio program that I am a huge fan of is "This American Life". I used to listen to it while driving around, and sometimes I found I had reached home but the program was still not over. I would sit there in the parking spot, in rapt attention, until the program finished before I locked up and went home. Today, I download the program as a podcast via iTunes, put in on a flash drive and listen to it as I drive around in Bangalore. I highly recommend it: it is an unusual program where ordinary people speak of extraordinary things in their own lives, in their own voices. Their stories are hilarious, fascinating, poignant and moving, far more than any fictional program you can watch on TV. What you learn is that the life of ordinary human beings is far stranger and more interesting than any story that writers can make up. I highly recommend it to you; maybe one of you will decide to bring something similar, or even more interesting, to life in India. You can download the podcasts from here or here.

BTW, if you like a program, don't delete it from your hard drive after you've heard it; the free download lasts only one week, and then you need to pay a dollar to download it. Happy listening.

Saturday, May 30, 2009

Unsung according to whom?

In which I continue my thoughts on the latest BusinessWeek Top Innovators list. More evidence emerges of flaws in BusinessWeek's methodology. They've got a list of unsung innovators which they assembled by asking senior executives to name one innovator others wouldn't think of. I wonder who these *others* are. One among the list is IDEO -- yes the company that lives and dies by innovation; whose lifeblood is innovation; which will cease to exist the day it stops innovating; that teaches other companies to innovate. And this company didn't make it to the main list?! Sure, IDEO is a consultancy that innovates for other corporations rather than manufactures and sells its own innovations. IDEO isn't unsung even by BusinessWeek's own standards: the magazine's editors are held in thrall by IDEO's magicians as can be observed in practically every issue.


So it looks like the BusinessWeek survey is highly sensitive to opinions of the sample of persons included in the poll. There is probably no one single, easy, way to conduct this survey, and hence, there might be starkly different lists generated by different surveyors located in different nations and cultures.

Once again, this reinforces my feeling that the BusinessWeek survey is primarily for entertainment and reflection and should not be confused for an accurate portrayal of reality. Nevertheless, props to them for bothering to do such a survey at all. What would be sad is if the companies that appear on the list then go about waving it in people's faces like as if it were a badge of honor.

Microsoft twofer

Over the past week, Microsoft seems to have made public the major strides they have made in two product/market segments: search, and personal media players. During the 1980's and 1990's, Microsoft had become accustomed to routinely coming in from behind and then completely owning product/market segments created by others. It happened with operating systems, word processors, spreadsheets, DBMS, presentation software, internet browsers, application development languages and systems ... the list is long. Even with PDAs, Microsoft worked their way through about four versions until they finally came to dominate the market with the Windows CE and now Windows Mobile products. For Microsoft, victory was always just a matter of time and persistence.


But somehow that 'magic' has not worked in the areas of search and personal media players. Both Microsoft Live Search and Microsoft Zune have been dogs in their respective segments, with market shares below 10% (Google: 64% to MS LiveSearch 9.9% - Nielsen). But that *may* change with the introduction of the new Bing search service and the Zune HD player, both of which have received unusually favorable reviews (as compared with Google and the iPod, respectively) by a typically skeptical media. I don't know about Bing since it's not been made available to the rabble yet, but the Zune HD looks pretty sweet. And it plays even better, from the video that was posted at one of the above links.

Which brings to: is all this a sign of Microsoft's capacity for innovation? Microsoft has usually received a bad rap, usually for good reason. Despite having one of the best-stocked in-house R&D labs in the world, as a policy and strategy, it seems to fight shy of demonstrating leadership in the introduction of entirely new technology paradigms (with the occasional exception, such as Microsoft Surface, whose principal role seems to be to build and maintain a positive image for Microsoft rather than to actually transform the technology use landscape. Companies that are serious about innovation, such as Apple, typically bet-the-barn on their leading edge products, rather than flash and wave them at an adoring journalistic class in order to create buzz. The bulk of Microsoft's sales and profits appear to come from products and services that it did not pioneer, and in markets that it did not create. Perhaps it's because MS is not into innovation for its own sake, and maybe that is a good thing.

A lot of corporations -- and individuals -- look upon innovation for recreation as fluff: discretionary activity that does not add to the bottom line: there is work, and then, based on goals and objectives, there is innovation. But there is a problem here: in order for an organization to survive in a fast-changing environment, it needs to constantly innovate. And constant innovation occurs only in an organizational culture in which innovation institutionalized, and becomes the air that everybody breathes. In such a culture, innovation becomes a way of life, not an optional other activity that a group of designated innovators engages in for a predetermined purpose. When innovation becomes a way of life, it becomes hard to distinguish innovation for its own sake from innovation directed towards a purpose. It is hard to tell from where the Next Big Thing will come -- it might well emerge during the course of employees engaging in a playful interlude. Indeed, play is the way children learn, and play is an opportunity to look at issues from entirely new -- even heretical -- perspectives.

Perhaps whatever MS does works for them -- given their size, they must be doing something right. There is no guarantee that they will remain large and powerful, though. Corporations become large by refining a few successful things they do and repeating those actions relentlessly. But when the ground shifts under them, none of that helps, and they come crashing down to the ground. Perhaps MS ought to use its heft to go out there and actually build entirely new markets. And then they might deserve the label of true innovators.

Friday, May 29, 2009

Pass the envelopes, please

Businessweek's annual Innovation Tamasha is out on the newsstands. And for a second (third?) year in a row, there's a shiny fruit at the head of the pack (applause!). Once again, as a Mac fanboy, my faith in the company has been reinforced. I haven't read up on the methodology used in the survey and I am sure there will be much cause for most people to find fault with it. Lists like this are primarily for entertainment purposes because there is no way in which one can definitively judge an attribute as complex as 'innovativeness', besides ensuring that no organization has been left out of the survey.


But I am not unhappy with the list -- after all, Apple is one of my favorite organizations; certainly much more than 'one of'. Of the Top 10, 8 are information technology related, one automotive (Toyota) and one retail (Wal-mart). It appears that it's easier (and perhaps far more essential) to be innovative in the field of information technologies than in other areas. Information technology related companies are richly represented in the Top 50. Scanning the first 50, I don't see one corporation that is not heavily dependent on information and communication (as well as other) technologies either as its main product or service offerings, or in order to run more efficient and effective operations. This is, after all, the Age of High Technology.

There is, however, a danger here, of a conflation of innovation with technology: innovation and technology are not synonymous. Innovation is a human process, the product of human ingenuity -- thought -- and human efforts. Technology is itself a product of human ingenuity and also assists the process of innovation. In the case of innovative corporations whose business is not technology but who use technology to be effective and efficient, the mere use of technology, however advanced, cannot be considered advanced -- unless their use stands in stark contrast to the competition, and thereby suggesting that it was innovative thinking that led to the use of such technologies. Unfortunately, a lot of people do conflate technology (and its use) with innovation, because technology remains distinct from human society, even if it aids, and sometimes intrudes into the conduct of human affairs. Technology is familiar, but I doubt that its fundamental strangeness will go away, no matter how accustomed we become to them. Dogs have been human companions for thousands of years, and however much we pour affection on them, they remain dogs. The most caring and compassionate of dog owners will agree to euthanize their dogs if deemed necessary but rarely, if ever, consider doing the same with humans.

Methodology: Businessweek reports on the methodology used for generating their list:
BusinessWeek's 2009 ranking of the World's 25 Most Innovative Companies is based mostly on a Boston Consulting Group survey. In December 2008, BCG sent its 20-question poll to senior executives around the globe. The 2,700 respondents, who answered anonymously, were asked to name corporations that consistently offer inventive products, customer experiences, business models, or processes. The votes of executives who chose their own employers were disqualified.

BCG then factored in the financial performance of the top vote-getters. The final list weighted the survey results 80%, stock returns 10%, and three-year revenue and margin growth 5% each. In the case of privately held companies, BusinessWeek used metrics equal to industry performance to compare financial data.

Apple (AAPL) again tops the roster, as it has since BusinessWeek and BCG presented the first list in 2005, but there was plenty of movement below. There are six newcomers to the top 25—Samsung (No. 16), Volkswagen (No. 18), McDonald's (MCD) (No. 19), AT&T (T) (No. 23), Coca-Cola (KO) (No. 24), and Vodafone (VOD) (No. 25). They replaced General Motors (GM), Boeing (BA), Goldman Sachs (GS), 3M (MMM), Target (TGT), and Facebook.

The extended list of the top 50 includes new members from Asia and Europe as well, including India's Infosys (INFY) (No. 26), LG of South Korea (No. 27), Spain's Telefónica (No. 28), and Lenovo of China (No. 46).
Senior executives often are in a better position to see what's going on inside corporations that may not appear innovative to consumers but employ innovation in their internal processes. But to rely exclusively on the opinions of senior executives is problematic. In the end, a corporation's innovations ought to have tangible meaning for consumers and make a significant, if not dramatic difference from what prevailed before the innovations occurred.

I like the four criteria used to determine innovativeness:
  • products
  • customer experiences
  • business models
  • processes
although in some cases, the differences among these criteria may be blurred.

Three Indian corporations or conglomerates -- Tatas, Reliance, and Infosys -- show up in the Top 50. Interestingly, Tatas were ranked at 6 last year but have slipped to 13 this year. To me, this illustrates at least one fundamental flaw in the methodology. Almost certainly, it was Tata's announcement of the Nano car that propelled it to No. 6. That single, highly vivid event, caused 'senior executives' who probably had never heard of the Tata group earlier to rank it as high as that. With nothing to follow the Nano, the entire group -- not just Tata Motors -- drops down to 13.

While Apple is undoubtedly an innovative corporation, it is the highly visible and ubiquitous nature of the iPod line of products that keeps it at the top of the list. Microsoft has numerous innovative initiatives going on within the company, but its public image is of a sloppy giant that sells mediocre -- if slick and shiny -- products.

I know of Honda being very innovative but they only merit a position way down at 22 - a steep fall from 16 last year.

Google hasn't come out with anything remarkably different from what it has offered in the past, and yet it is ranked No. 2.

Target stores was at No. 24 last year and is at 42 this time. Target is a nice store to shop at, and it has been rated highly based on 'Customer Experience'. I haven't been able to detect a very significant difference between 'customer experience' at Target and other competing stores and so I fail to understand why it's 'Customer Experience' is considered innovative.

The Top 50:
Pt = Product; Ps = Process; CE = Customer Experience; BM = Business Model

2009

Rank

2008

Rank

Corporation

HQ

in

Known

for

1

1

APPLE

U.S.

Pt (47%)

2

2

GOOGLE

U.S.

CE (26%)

3

3

TOYOTA MOTOR

Japan

Ps (35%)

4

5

MICROSOFT

U.S.

Ps (26%)

5

7

NINTENDO

Japan

Pt (48%)

6

12

IBM

U.S.

Ps (31%)

7

15

HEWLETT-PACKARD

U.S.

Ps (39%)

8

13

RESEARCH IN MOTION

Canada

Pt (53%)

9

10

NOKIA

Finland

Pt (38%)

10

23

WAL-MART STORES

U.S.

Ps (49%)

11

11

AMAZON.COM

U.S.

CE (41%)

12

8

PROCTER & GAMBLE

U.S.

Ps (27%)

13

6

TATA GROUP

India

Pt (44%)

14

9

SONY

Japan

Pt (40%)

15

19

RELIANCE INDUSTRIES

India

BM (35%)

16

26

SAMSUNG ELECTRONICS

So. Korea

Pt (41%)

17

4

GENERAL ELECTRIC

U.S.

Ps (36%)

18

NR

VOLKSWAGEN

Germany

CE (38%)

19

30

MCDONALDS

U.S.

CE (55%)

20

14

BMW

Germany

CE (37%)

21

17

WALT DISNEY

U.S.

CE (68%)

22

16

HONDA MOTOR

Japan

Pt (47%)

23

27

AT&T

U.S.

Pt (33%)

24

NR

COCA-COLA

U.S.

CE (38%)

25

47

VODAFONE

Britain

Pt (25%)

26

NR

INFOSYS

India

Ps (40%)

27

NR

LG ELECTRONICS

So. Korea

Pt (46%)

28

NR

TELEFÓNICA

Spain

BM (40%)

29

31

DAIMLER

Germany

Pt (40%)

30

34

VERIZON COMM.

U.S.

CE (38%)

31

NR

FORD MOTOR

U.S.

Pt (36%)

32

35

CISCO SYSTEMS

U.S.

Ps (27%)

33

48

INTEL

U.S.

Ps (35%)

34

28

VIRGIN GROUP

Britain

CE (45%)

35

NR

ARCELORMITTAL

Lux.

BM (63%)

36

40

HSBC HOLDINGS

Britain

Ps (32%)

37

42

EXXONMOBIL

U.S.

Ps (47%)

38

NR

NESTLÉ

Switz.

Pt (47%)

39

NR

IBERDROLA

Spain

CE (40%)

40

25

FACEBOOK

U.S.

CE (51%)

41

22

3M

U.S.

Pt (44%)

42

NR

BANCO SANTANDER

Spain

BM (37%)

43

45

NIKE

U.S.

CE, Pt (36% ea)

44

NR

JOHNSON & JOHNSON

U.S.

CE (42%)

45

49

SOUTHWEST AIRLINES

U.S.

CE (45%)

46

NR

LENOVO

China

BM (35%)

47

NR

JPMORGAN CHASE

U.S.

Ps (62%)

48

NR

FIAT

Italy

Pt (30%)

49

24

TARGET

U.S.

CE (60%)

50

NR

ROYAL DUTCH SHELL

Neth'lnd

Ps (45%)


Whether or not one agrees with this list, at least one popular journal is giving importance to the matter of innovation. Reporting the fact that some corporations do consider it essential to innovate sends a strong messages to others that they need to pay attention to this aspect of organizing their businesses. And if that goal is achieved then it more than compensates for flawed survey methodologies.