Think about how to increase efficiency in any of an organization’s fundamental areas, and consider what could be done to improve the process. You may use your

19

2 HEED THE RED FLAGS

In a way, hearing an old advertising tagline is like looking at a forgotten picture in the family photo album. It captures a specific place or mo- ment in time and evokes all sorts of associations and memories. Taglines also capture, in a few simple words, what the brand being advertised stood for—or wanted to stand for—at that moment in time. All good taglines express a brand’s point of differentiation, how it promises its offering is (relevantly) different from the competition. Avis always tried harder; United’s skies were friendly; and Coke was the real thing. A good tagline expresses what’s important to consumers, again, at a mo- ment in time.

Over the years, hundreds of taglines have come and gone. Some are remembered and repeated generation after generation, others have be- come part of the social vernacular (Wendy’s “Where’s the beef?,” Veri- zon’s “Can you hear me now?,” Nike’s “Just do it!,” and the United States Army’s “Be All You Can Be”).

Adamson, Allen, and Joel Steckel. Shift Ahead : How the Best Companies Stay Relevant in a Fast-Changing World, AMACOM, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=5092725. Created from ashford-ebooks on 2024-08-14 22:53:41.

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We’re sure you have your own favorites, as we do, or those you find most memorable. In any event, as we began to research companies and organizations that had successfully shifted ahead—along with those that didn’t—we talked about some of the most notable taglines and how each summed up, in a dramatic and compelling or aspirational way, the idea driving the organization at that certain point in time. This led us to ask the first and, to us, most obvious questions relative to organiza- tions that had missed the mark: Isn’t it obvious to organizations when a promise is becoming less meaningful to consumers? Isn’t it obvious that the world is changing, and that the products or services being offered are in danger of becoming obsolete? Couldn’t those organizations that did not successfully shift ahead see that consumers were losing interest? To paraphrase another tagline, couldn’t companies that did not move fast enough to catch the market recognize that they were in danger of becoming their father’s Oldsmobile?

For example, the Yellow Pages were identified with an implicit prom- ise to consumers: If you let your fingers do the walking through the Yellow Pages, you can find the phone number of any local business you need. Advertising Age named “Let your fingers do the walking” as one of the top ten slogans of the twentieth century. However, with the emer- gence of Internet and online search directories, fewer and fewer people are letting their fingers do the walking. Seventy percent of Americans did not use a printed phone book at all in 2011.1 Indeed, their fingers may still be doing the typing, but even that is likely to change with the increased penetration of voice recognition software like Apple’s Siri or Amazon’s Alexa. The slogan could morph into “Let your voice do the asking.” Because of declined usage of print and environmental con- cerns, phone book delivery is now opt-in in many locations.

Sure, on Monday morning, everyone’s a professional quarterback and can tell you which of Sunday’s football plays were foolish or made for the turning point in the game. Hindsight is always twenty-twenty. It’s foresight, seeing the red flags in advance of the risks, that makes the difference on the road to success. And so, before we get to anything else associated with the process of being able to shift ahead, we get to the red flags. What, exactly, are the signals that companies should be attentive

Adamson, Allen, and Joel Steckel. Shift Ahead : How the Best Companies Stay Relevant in a Fast-Changing World, AMACOM, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=5092725. Created from ashford-ebooks on 2024-08-14 22:53:41.

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HEED THE RED FLAGS 21

to, indicating that there is a need to course-correct? This was the first thing we looked for as we reviewed our more than 100 interviews, ex- amined our collateral research, and analyzed all the input on organiza- tions that did successfully shift ahead, those that didn’t, or those still in the process of doing so. In our compilation and parsing of facts, figures, and anecdotes, we established that there are two key categories of red flags. First, there are the hard business metrics that point to the fact that relevant differentiation is waning. And, then, there are those of a “softer” variety, the cultural dynamics that are inherent in a company and do not bode well for being able to pull off a successful shift in strategy. We’ll start with three types of hard metrics in the more straightforward of the two categories.

RED FLAG ONE: Basic Math

The most apparent red flags are performance-related numbers, the fi- nancial data that appears on any CFO’s spreadsheet. This basic math would seem to be pretty straightforward and would hopefully get the message across: Your sales are starting to drop; your revenue, quar- ter-over quarter, is decreasing; your margins are eroding; your expenses and overhead are spiraling upward. If you’re in the nonprofit sector, your donations or charitable gifts are waning year over year, as is your list of new or renewing contributors. Your hard-written grants are being overridden by those of other groups competing for the same pot of money.

Sales and revenue do not have to drop to indicate trouble. Plateaus are bad. If you aren’t growing, you are dying. As Shantanu Narayen, the CEO of Adobe, said: “If you believe that growth is a fundamental im- perative, and your business is not growing, and you are the market leader in a lot of spaces, you need to broaden the lens by which you look at opportunities.” 2

All organizations operate off fundamental mathematical metrics day-to-day. They have at their immediate disposal the facts that overtly

Adamson, Allen, and Joel Steckel. Shift Ahead : How the Best Companies Stay Relevant in a Fast-Changing World, AMACOM, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=5092725. Created from ashford-ebooks on 2024-08-14 22:53:41.

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reveal financially related early-warning signs of trouble ahead. We don’t need to expound on this. What we do need to do is admonish that these warnings not be ignored. When you see the red ink, look into the cause and act on it as soon as possible. Unfortunately, in the case of many of the organizations we studied that did not shift ahead in time, it was a matter of either ignoring the warnings that were clearly in sight or, equally troubling, rationalizing them that led to their problems. By the time they finally did see or acknowledge the red (ink or flag), it was usually too late to do anything about it. They’d run out of, well, run- way, in terms of time, money, and opportunity. In Chapter 3, we go into detail about specific organizations that bumped up against a finan- cial barrier. When the numbers start to slide and no one is willing to face the facts or take them literally at face value, chances of future success slide as well.

RED FLAG TWO: Competing on Price, Not Differentiation

In Chapter 1, we talked about one of the most valuable tools and tactics for determining a brand’s value and its standing in a category: Brand Asset Valuator, or BAV. Among the key takeaways from BAV studies is that commodity status is not a good thing. It indicates that your product or service, while it may be relevant currently, is undifferentiated and carries no inherent value beyond how much it costs. A key objective for all brands is to create a promise that customers value at a level signifi- cantly greater than a price that includes not only cost, but a reasonable margin as well. Products that create such value for their customers have the potential to dominate their category.

However, companies cannot deliver such value in perpetuity. Inno- vative competitors will derive ways to deliver similar or superior value to some market segments. As powerful as the New York Times has been for a long time, the Wall Street Journal delivers news more suited to the business community. Brands must react to these dynamics lest they whither in decline as Pan Am, Blockbuster, Woolworth’s, and Borders

Adamson, Allen, and Joel Steckel. Shift Ahead : How the Best Companies Stay Relevant in a Fast-Changing World, AMACOM, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=5092725. Created from ashford-ebooks on 2024-08-14 22:53:41.

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HEED THE RED FLAGS 23

have done. As one of the developers of the BAV model, John Gerzema, told us, “Branding and growth is a series of constant small risks in deci- sion making. You cannot get to the point where you have waited too long without taking any risks. You’ll basically have to throw a Hail Mary.”

If you don’t make significant shifts at some point, you will find that the only way to keep sales going strong is to adjust the price. If price becomes too important a competitive weapon, it’s likely that your brand’s point of relevant differentiation is diminishing in the minds of consumers. If they can’t see what makes your product or service any different or better, why would they pay more than they had to? Unfor- tunately, by the time the folks in the C-suites catch on to this idea, a Hail Mary pass might be too little, too late. What we found in our re- search was that if a company began to address the need to shift the minute there was a slight drop in relevant differentiation scores, they had a fair chance of successfully shifting. But the vast majority did not start to address the relevant differentiation issue before the runway ran out. In fact, many companies don’t even track their organization from a brand equity point of view. Not smart. Brand value matters a lot. Heed this red flag.

RED FLAG THREE: Big on Data, Short on Analysis

In the late 1800s, scientist John Haldane studied the rate of asphyxia in coal miners and recommended that they carry small animals, such as canaries, into the coal mines as carbon monoxide detectors. Given their size, these little birds would die from the toxic gases sooner than the miners and thus served as a warning when it was too dangerous to work. While this inhumane treatment of animals would never pass muster today, the phrase “canary in a coal mine” has come to indicate early-warning signs of major problems. Luckily, there are other inani- mate detectors of conditions available to organizations, specifically as they relate to consumer sentiment.

Adamson, Allen, and Joel Steckel. Shift Ahead : How the Best Companies Stay Relevant in a Fast-Changing World, AMACOM, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=5092725. Created from ashford-ebooks on 2024-08-14 22:53:41.

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As we know from our extensive work in the field of marketing, some- times consumers can tell you what they’re thinking and how they feel about your offering. More often though, they can’t. To paraphrase Ap- ple’s Steve Jobs, sometimes consumers don’t know what they want until you show it to them.3 Even with all the qualitative and quantitative re- search available, we know that consumers tend to be polite, or evasive, when formally surveyed. That’s where big data can fill in the gaps. Companies today are investing more and more in data collection, building sophisticated “dashboards” to track how consumers behave in real time. These dashboards can follow what people buy, where they buy, how often they buy, how often they share with others news of what they buy, and whether the news they share is good or bad. Dashboards monitor where people vacation, for how long, and how they arrived at their destination. They can keep tabs on whether someone bought the extended warranty for a product and whether they used it, or took a magazine subscription and whether they renewed it. Name a product, a service, a brand-related activity and there are data on who, what, where, when, and why. These technological dashboards provide a play- by-play of what’s going on in a given category. More robust than even just five years ago, big data continues to get even bigger as more sales and goings-on are conducted and tracked online.

The big concern, however, is that many organizations have not fig- ured out how to use all these data quickly enough or accurately enough to be of significant benefit. They can’t see the proverbial forest for the trees. They don’t always have the ability to detect what’s salient to the future of their business. They know they have to keep collecting the data, but don’t, or can’t, optimally analyze it or evaluate the implica- tions. While it’s becoming easier to see consumer behavior in real time, the red flag is in not having the tools or resources to leverage the infor- mation effectively—to translate it and apply it. It is essential to invest in a dashboard to collect and track data. It is equally critical to invest in the capability to decode and decipher what the data mean relative to being able to shift ahead in a timely and relevant way.

As early as 1967, in a landmark article called “Management Misin- formation Systems,” Russ Ackoff, one of the founding fathers of the field

Adamson, Allen, and Joel Steckel. Shift Ahead : How the Best Companies Stay Relevant in a Fast-Changing World, AMACOM, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=5092725. Created from ashford-ebooks on 2024-08-14 22:53:41.

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HEED THE RED FLAGS 25

of operations research, wrote that the biggest problem facing managers was not that they didn’t have enough data, but that they didn’t know how to use what they had.4 With the explosion of big data, management misinformation can only have gotten worse.

If your data are collecting dust, that is another red flag. (More disqui- eting yet is if your research and development budget has been cut, and if your company has stopped trying to anticipate the next best thing, then maybe it’s time to look for another job.)

In Chapter 5, we go into greater depth on the tactics organizations use to gather and analyze the hard business metrics to get a better read on the road ahead. For now, let’s go on to the “softer” red flags.

RED FLAG FOUR: Neglecting Table Stakes

At the global pizza chain Domino’s, the recipe for renewed success has been seven years in the making. Domino’s is ubiquitous around the world, with 12,500 locations in 80 countries, which in most cases is a marker of success. Indeed, Domino’s built its business on the slogan/ promise “You got thirty minutes?” However, within the last decade, it experienced falling profits and had a product that was often maligned. In 2009, it needed to take an objective look at what was going on and found that it hadn’t been paying attention to what consumers were say- ing about the product and the brand. The product was perceived as inferior. As Russell Weiner, president of Domino’s Pizza USA, told a CBS reporter, “It was a question of taste. People just felt there were better pizzas.”5

While Domino’s was working on making its thirty-minute promise efficient (and safe for deliverers), competitors were improving the taste of their products. Just because a firm exceeds expectations on one im- portant customer attribute does not allow it to fall too far behind com- petitors on other important attributes. Points of difference can be both positive and negative. In Domino’s case, there were both points of su- periority (delivery time) and points of inferiority (taste), and they were

Adamson, Allen, and Joel Steckel. Shift Ahead : How the Best Companies Stay Relevant in a Fast-Changing World, AMACOM, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=5092725. Created from ashford-ebooks on 2024-08-14 22:53:41.

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canceling each other out. In poker and other gambling games, table stakes refer to an amount that is required to be able to sit down and play. In pizza delivery, table stakes were going up in taste and Domino’s bank ran dry. Its neglect of the product’s taste was forcing Domino’s to eat its own profits for lunch.

Domino’s readjusted its company culture to increase focus on the customer. It required that every employee, from the CEO down, master the skill of making the pizza and do it in-store. These rules were put into place by current CEO Patrick Doyle when he took over in 2010, and they remain in place. All of a sudden, customers had a voice. Ac- cording to Weiner, the company did the unthinkable. It dumped its marketing campaign, which was based on speedy delivery, and shot a series of commercials that focused on taste.

The turnaround efforts were a success, and Domino’s business today is very good. So good, in fact, that in the last seven years the company has outperformed Amazon, Apple, Facebook, and Google, with its stock going from $9 a share to over $180 a share in early 2017. That pizza just generally outsells burgers, tacos, and other fast food is a big advantage for Domino’s, as is the fact that pizza literally delivers well. But there is no denying that the company’s gain in market share is due to its own motivation and determination. And its recognition that there was a red flag waving. Management saw the red flag and addressed the warning signal. Because of that, Domino’s is able to make steady investments in product and technology improvements and make sure it has sufficient table stakes.

RED FLAG FIVE: Pride Often Does Go Before a Fall

While misquoted enough to have become the more commonly used expression, “Pride goeth before a fall” can apply to businesses just as much as it can apply to people. (The biblical proverb is actually, “Pride goes before destruction, a haughty spirit before a fall.”) Whatever the verbiage, the point is that arrogance is a less than appealing trait and

Adamson, Allen, and Joel Steckel. Shift Ahead : How the Best Companies Stay Relevant in a Fast-Changing World, AMACOM, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=5092725. Created from ashford-ebooks on 2024-08-14 22:53:41.

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HEED THE RED FLAGS 27

exhibitions of said trait will likely end in a less than positive way. A company arrogant and in love with its own success and way of doing things brandishes a big red flag on its ability to shift ahead.

In our research and conversations with senior people from a variety of industries, arrogance was often cited as a reason for an organization’s failure to stay ahead of the market. Such was the case with Nokia, the Finnish technology company and maker of the first cellular phone. Nokia was the world leader in this technology in 1998, selling over 41 million units and surpassing Motorola as the top producer and seller of cell phones. In 2001, Nokia became the first company to launch a phone with a camera and seemed destined to continue its ascent in the industry. That is until 2007, when Apple entered the picture with its iPhone. By 2009, Nokia had laid off over 1,700 employees, and in 2010, Stephen Elop, who had been head of Microsoft’s Business Software Division, was brought in as CEO. But it was too late. The company, grounded in a culture of arrogance and complacency, had by then missed by a mile the rapidly evolving smartphone market. The compa- ny’s unwillingness to embrace drastic change when it was required the most was the biggest reason for its failure to shift ahead.

We had the opportunity to talk about this with Jerry Howard, a part- ner in Strategy First, a brand consulting firm, who has provided brand and marketing strategies for a number of Fortune 500 companies, in- cluding Procter & Gamble, Xbox, MetLife, and Coca-Cola. His firm worked with Nokia in the early 2000s. “It was a matter of their insularity, and their arrogance,” he told us in response to our questions on the topic. “The top people didn’t respect Apple and refused to believe that Apple was a viable competitor. A company becomes successful, in part, because its leaders know how to read the market. They know how to take advantage of trends, what to buy and what to sell. The problem enters when they assume that because they cracked the code on how to read the market, they can sit back and relax and just use the same ap- proach over and over again. To be fair, some markets are slow moving, but that’s becoming increasingly rare. Today, more and more markets are being disrupted by new technologies. An organization must be nim- ble and agile to keep up. And, even if you are in a slow-moving market,

Adamson, Allen, and Joel Steckel. Shift Ahead : How the Best Companies Stay Relevant in a Fast-Changing World, AMACOM, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=5092725. Created from ashford-ebooks on 2024-08-14 22:53:41.

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you’ve got to be paranoid and assume it’s only a temporary phase. Even- tually someone will disrupt it. If it hasn’t come yet, it will.

“You know the old saying,” Howard continued. “Culture eats strategy for lunch. There were many smart people at Nokia. They saw what was happening and yet somehow the organization was powerless. It couldn’t change. Its very culture kept it from changing. By the time a company realizes that its strategy is subpar, it’s often too late to shift.”

RED FLAG SIX: Being Too Deep in Your Comfort Zone

As human beings, it’s just natural to want to hang onto things in our comfort zone. Things and ways of doing things that are familiar make us feel safe, especially in a world that is spinning too fast. The faster it spins, the more we want to cling onto something recognizable. Old habits die hard. You know where we’re going with this. If your organiza- tion’s culture is stuck in the mud, if you find it hard to let go of the past even knowing it’s detrimental to future pursuits, count that as a red flag.

To illustrate this point, let’s go back to another one of those old ad- vertising taglines: “Mm! Mm! Good!” We’re dating ourselves, but when we were growing up, you couldn’t say “tomato soup” without thinking about Campbell’s and its red and white cans. It became one of the country’s most iconic brands, and with good reason. In 1897, Dr. John Dorrance, the nephew of the company’s founder, invented a formula for five ready-to-eat condensed soups. The product immediately took off with consumers who wanted meals that were inexpensive and conve- nient. For years and years, Campbell’s was the soup you turned to in the grocery aisle; tomato soup paired with grilled cheese sandwiches on a snowy day, and cream of mushroom became a staple in millions of American pantries for making your aunt’s famous string bean casserole.

Notice the emphasis on calling Campbell’s “the soup.” There is no doubt that Campbell’s brand has incredible awareness in the canned soup category. And therein is a good part of the challenge the company has bumped up against in its efforts to shift ahead. The company has

Adamson, Allen, and Joel Steckel. Shift Ahead : How the Best Companies Stay Relevant in a Fast-Changing World, AMACOM, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/ashford-ebooks/detail.action?docID=5092725. Created from ashford-ebooks on 2024-08-14 22:53:41.

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HEED THE RED FLAGS 29

been afraid of leaving its comfort zone and risking any damage to its “Mm! Mm! Good!” name, despite the fact that for the past thirty years the data have indicated that consumer tastes and habits dictate the com- pany should be making some big changes in strategy.

In tracking the data, the reasons that the sales of canned soup have been on a steady decline for thirty years are clear to see. Health con- cerns about too much sodium and increasing consumer preferences for fresh ingredients, no preservatives, and artisanal offerings have been at the core of this decline, along with ongoing changes in demographics and lifestyles. Moms are more likely to be at work than waiting at the back door on a snowy day ready to offer up soup and a sandwich. There’s also the matter of millennials who do not purchase food packaged in cans. For years, the management at Campbell’s knew they had to change, they talked about change, but as the basic math indicated, they couldn’t get out of their own way. Year-over-year sales continued to de- cline. Management was too locked onto protecting the Campbell’s soup name. They felt that the strongest thing they had was their brand equity and they didn’t want to mess with the recipe. You can’t teach an old dog new tricks. Campbell’s simply didn’t want to change.

As a first attempt at taking a step in a new direction, in 2013, Camp- bell’s brought in Darren Serrao as senior vice president, chief marketing and commercial officer, who oversaw everything from soup to the com- pany’s V8 unit. (He has since moved on, becoming chief growth officer for ConAgra in 2015.) The hope was that, as an outsider, he’d help mitigate the cultural risk aversion and inject a new attitude.

As an agent of change, the first thing Serrao did was to get manage- ment to take a more honest look at the data. What he got them to see in terms of numbers was that, while dollar sales were sometimes decent, unit sales had been declining for years. The company was