Brand Autopsy

Following the recent Starbucks news of more store closures, more layoffs, and more meandering into convoluted sales initiatives, Kevin Coupe says Howard Schultz must go. His argument breaks down the issues with Howard’s near-sighted business vision. It’s provocative and worthy of reading. Here's a snippet...

"It is my sense that Starbucks has lost its way, and that blaming the economic downturn misses the point. After all, great brands and great thought leaders find ways to transcend these kinds of challenges, profound as they may be. They find ways to reinforce the differential advantages of the brand, and to see the challenges and opportunities for strategic innovation.

Since Schultz took back the reins of the company a year ago, it has seemed like management has embarked on a series of tactical decisions designed for short-term fixes rather than long-term growth

This is not a diatribe against Howard Schultz. He should be lauded for his vision and service to the company. He should be praised for the fact that he was willing to give up his million-dollar-plus salary and work for a dollar a year while getting the company back on track. But it is time for a change, to someone who can think and act strategically rather than tactically." ***READ MORE***

[hat tip to Paul Williams]

No matter how you look at it, these are tough times for retailers. High-priced and low-priced retailers have been thrown off-balance from the intense category five strength winds of this economic downturn.

It has been reported nearly 150,000 retail stores ceased operations in 2008. Projections say 78,000 retail stores will be shuttered in the first-half of 2009. Yikes.

To withstand these torrential winds, retailers are cutting costs by laying off employees, closing locations, and pruning any expense not directly related to sustaining business life.

Many retailers are on life-support, hoping for a swift uptick in consumer confidence to revive the health of their company. Some brands will not survive and some brands that will survive, may look and act totally different from what they once were. Unfortunately, some brands have already been declared dead.

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All of these brands have either disappeared, or are in the process of disappearing from today’s retail landscape.

To help bring understanding to this mess, I'm reminded of business wisdom from Peter Drucker …

A Business that Fails to Lead Will Become Marginalized

Genuine market leaders, according to Drucker, must achieve their leadership results in an area that is meaningful to a customer or market. Such as, leadership in product development, leadership in customer service, leadership in distribution, or leadership in bringing ideas to market faster.

Achieving a leadership position is imperative for a business to stave off becoming marginalized or commoditized.

Drucker argues a business “… may seem to be a leader, may supply a large share of the market, may have the full weight of momentum, history, and tradition behind it. But the marginal is incapable of survival in the long run, let alone of producing profits. It lives on borrowed time. It exists on sufferance and through the inertia of others. Sooner or later, whenever boom conditions abate, it will be squeezed out.”

I love this thinking: Marginalized companies live on borrowed time and live through the inertia of others. When the economic winds change, the marginalized will be squeezed out.

The brands featured above share something in common, they all became marginalized in the marketplace and as a result, have been squeezed out.

The warning signs of becoming marginalized are clear:

When a business becomes an afterthought, not a forethought … it becomes marginalized.

When a business fails to be included in a consumer’s consideration set … it becomes marginalized.

When a business is viewed as dispensable, not indispensable … it becomes marginalized.

When a business loses its uniqueness … it becomes marginalized.

When a business no longer matters … it becomes marginalized.

When you, as a customer, would not miss the brand if it went out-of-business … it becomes marginalized.

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The takeaway from all this is complicated: If a business cannot claim a leadership position, then it is either too small to meaningfully compete or too big to effectively compete. Failing to lead results in becoming marginalized. A marginalized company lives on borrowed time.

And time has run out for marginalized retailers like Circuit City, CompUSA, Mervyns, Bombay Company, etc.

This is the last in a series of posts sharing business lessons learned from the movie, AMERICAN GANGSTER.

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Setting the Scene:
Thanks to a misstep by Frank Lucas, who wore a “clown suit” Chinchilla Mink coat to the Ali/Fraizer III fight, the police became aware of Lucas’ success. The “Blue Magic” distribution arrangement with drug lords and mafia families resulted in an assassination attempt on Frank’s wife. And, the unique supply chain operations deal between the Vietnam-based heroin supplier and United States Army personnel was crumbling due to the American pullout from the Vietnam War.

Despite these major setbacks, Frank was recklessly determined to continue growing his “Blue Magic” business.

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Winners Can Quit
No business is destined to live forever. Sustained success is difficult to achieve. Decades-long success is attainable. However, century-long success is nearly impossible to realize.

The average life span of a Fortune 500 company is less than 50 years. 33% of companies listed in the Fortune 500 in 1970 were gone by 1983. These businesses either died, merged, or were sold off as smaller business units. [SOURCE]

What goes up, will go down. We know this to be true from a basic understanding of both physics and business.

Lucchesse family Mob boss, Dominic Cattano, once warned Frank Lucas that, “Success has enemies.” It doesn’t matter if we’re talking mob/drug business or legitimate business, the more successful a business becomes, the more competition (or enemies) it will attract. And the more competition (or enemies) a business faces, the more difficult it is for that business to find sustained success.

A business is a means to an end. Nothing more, nothing less. The business owner(s) defines what the end is. This end could be about money, security, accomplishment, legacy, nearly whatever.

Frank Lucas defined his end as never-ending power and wealth.

By the time his supply-chain operations were crumbling due to the impending American pullout from Vietnam, Frank was a powerful and wealthy man. He was winning at the business game he defined. But winning wasn’t enough for him, he wanted to continue growing his “Blue Heroin” business by any means necessary.

Frank made a final visit to his heroin supplier in Vietnam. A rogue General in the Chinese Kuomintang army presided over the poppy farm where Frank purchased his heroin. Like Frank, this General was a wealthy and powerful man. Unlike Frank, this General understood business is a means to an end … and an end is inevitable.

During their last visit together, the General gave Frank Lucas brilliant business advice…

Now that’s a line worthy of contemplation … “Quitting while you are ahead is not the same as quitting.”

In the must-read business book, “THE KNACK,” Norm Brodsky spends a chapter talking about the decisions entrepreneurs face when growing their business. He says, “Growing a business is a matter of choice, before deciding to grow, make sure you know why you are doing it.”

Norm continues, “Business is just a means to an end. The question is, what’s the end? Where do you want to go in your life? Where do you want to be in five years from a family standpoint? What do you want to earn? How much time do you want to take off?”

When you know why you’re growing a business, then it’s easier to know when to quit and totally reasonable to quit.

However, if you, like Frank Lucas, are growing a business for never-ending power and wealth, then you’ll never know when to quit. And thus, you will eventually lose in the game of business.

Frank didn’t know when to quit and he was eventually arrested. He was convicted of conspiracy to distribute narcotics and sentenced to 70 years in prison. Because Frank cooperated with government authorities leading to the arrest and indictment of crooked police and drug dealers, he served 15 years in prison.

This is the fifth in a series of posts sharing business lessons learned from the movie, AMERICAN GANGSTER.

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Setting the Scene:
The big city street life was new to Frank Lucas’ brothers and cousins. They were used to country life in the backwoods of North Carolina before being recruited into Lucas’ drug empire. Once in the game, these young men had instant status and inordinate wealth thrust upon them. It’s hard to stay humble when fame and fortune comes so easily.

Huey Lucas, Frank’s oldest brother, became friends with the flamboyant and always dapper Nicky Barnes. Soon after their friendship was formed, Huey began to dress less like his conservative brother and more in the superfly style of Nicky Barnes.

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The Loudest is the Weakest
Much of Frank’s success as a drug lord can be attributed to his conservative and sophisticated outward appearance. He dressed like a CEO of a Fortune 500 company. Tailored suits. Crisp shirts. Sharp ties. Classy, without being attention-hungry.

The one quality, above all, Frank wanted to instill with his brothers and cousins was to stay humble in appearance so that one’s actions would always speak louder than one’s clothes.

When Huey Lucas flaunted his Nicky Barnes-like superfly outfit at a nightclub, Frank stepped in and dressed down his dressed-out brother. Frank told his brother he was “making too much noise” by wearing a “clown suit” that acted as a billboard to the police advertising, “Arrest me.”

“Listen to me,” Frank said to Huey. “The loudest one in the room is the weakest one in the room.”

Wow! Great line and so applicable to marketing where the loudest advertiser in the room, probably has the weakest product in the room.

It’s reasonable to assume weak and unremarkable products/services need the loudest advertising because it’s the only way they will get remarked about.

We’ll be seeing lots of “loudest in the room” advertising during the 2009 Super Bowl.

Most Super Bowl advertisers make lots of noise showcasing their “clown suit” gimmicky advertising with the hopes of grabbing our attention. The louder these companies talk, the weaker we can assume their product/service is.

Perennial “loudest in the room” advertisers are the major beer companies. The only thing worth talking about Bud Light, Miller Lite, and Coors Light is their loud advertising, certainly not their boring beer.

A recent example of “loudest in the room advertising” comes from Toyota. Their “Saved by Zero” campaign played incessantly during October and November of 2008. No one I knew was talking about how great the Toyota Tundra is or how unique the Toyota Camry is. Everyone was talking about how obnoxiously loud the “Saved by Zero” campaign was.

Think about this … when people talk about your brand, do they talk about the products/services your company does? Or, do they talk about the advertising it did? If people are only talking about the advertising your company does, then your “loud” advertising is potentially hiding a weak product.

Like Seth Godin, Frank Lucas believes in spending money to make products stronger and more remarkable rather than spending those same dollars to make the “loudest in the room” advertising messages.

For Frank, as we learned in an earlier lesson, this meant spending time, money, and action to make his brand of heroin, Blue Magic, more remarkable.

The marketing adage of Actions Speak Louder than Advertising fits right in with the Frank Lucas way of doing business.

This is the fourth in a series of posts sharing business lessons learned from the movie, AMERICAN GANGSTER.

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Setting the Scene:
“Blue Magic” has transformed Frank Lucas from a nobody to a somebody. Business is booming and Frank needs people he can trust to run his daily operation. For years Frank was estranged from his large extended family in Greensboro, North Carolina. However, family is family and he trusts his brothers and cousins to help him expand his heroin business. The Lucas family is uprooted from Greensboro to live and work in the new family business of “Blue Magic” heroin.

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Leadership Qualities
Frank’s brothers, Melvin, Huey, Dexter, Turner, and Terrance, were new to the drug business and to the informal social rules of street life. They needed mentoring, just as Bumpy Johnson once mentored Frank.

Frank spent quality time with his brothers teaching them everything he learned about growing a business, earning respect, and being honest. His brothers were in total sponge mode, soaking up every last drop of streetwise wisdom from their older brother.

In this pivotal scene, Frank Lucas shared the core necessities his brothers need to become successful businessmen:

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Frank’s core business leader necessities include: Honesty. Integrity. Hard work. Family. Never Forgetting your Roots.

Plus, as evident in that scene, a business leader needs to make Bold, Audacious Moves in order to become a somebody.

My endless research for a long-overdue project led me to revisiting Scott Berkun's THE MYTHS OF INNOVATIONS. This book has oodles of chewy quotes and insights about the ins/outs of nearly everything related to innovation.

It was about a year ago when I shared some money quotes from Scott's book. The quotes are just as tasty today as they were yesterday. Enjoy.

| View | Upload your own

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RSS Readers … click here to view the presentation.

This is the third installment in a series of posts sharing business lessons learned from the movie, AMERICAN GANGSTER.

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Setting the Scene:
Frank Lucas’ “Blue Magic” heroin became the market leader in New York City. Rivals said he had “upended the natural order of things” by selling heroin that is twice as good for half as much. Competitors left the heroin market because “nobody wants to compete with a monopoly.”

To accelerate growth of the “Blue Magic” business, Frank arranged wholesale distribution agreements with other drug lords and mafia families. This shift in business strategy made competitors part of the “Blue Magic” family, with Frank Lucas as the all-powerful CEO and Chairman of the Board.

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Never Dilute a Brand
Nicky Barnes competed with Frank Lucas and the success of “Blue Magic” hurt the financial viability of Nicky’s operation. Grudgingly, Nicky signed on as distributor of “Blue Magic.”

In an effort to increase profits of his “Blue Magic” sales, Nicky began diluting the purity of the heroin to increase his inventory and his margins. He sold the diluted heroin as “Blue Magic.” Frank Lucas wasn’t pleased and addressed his concerns just like a top-notch Chief Marketing Officer would to any rogue field marketing manager, maverick product manager, or renegade franchisee.

Follow the encounter from this modified script snippet...

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Businesses “chop down” their products all the time. In the quest to maintain profits or possibly, grow profits, businesses make strategic decisions to dilute their offerings. And if done inconspicuously enough, customers will hopefully never notice.

Frito-Lay chopped down its 12-oz bag of chips to 10-oz. bags. Price remained the same.

Hellmann’s chopped down its 32-oz. jar of mayonnaise to 30-oz. Price remained the same.

Dial chopped down its soap bars from 4.5-oz to a 4.0-oz size. Price remained the same.

Bounty chopped down the number of towel sheets per roll from 60 to 52. Price remained the same.

Kellogg’s chopped down its Fruit Loops cereal package size from 19.7-oz. to 17.0-oz. Price remained the same.

Iams chopped down its 6-oz. package of cat food to a 5.5-oz package. Price remained the same. [SOURCES: USA Today ; New York Times]

However, customers have noticed all this chopping down. According to a Consumer Reports study, 75% of shoppers surveyed said they have noticed smaller package sizes from their favorite brands. And, 71% of shoppers believe the package downsizing is a clear attempt by brands to hide price increases. It's interesting to note, 50% of shoppers prefer brands stop chopping down their products and instead, keep their old package size and simply raise the price. [SOURCE: Consumer Reports]

The takeaway lesson is simple … when a business decides to dilute its products, it runs the risk of drawing ire from customers.

The action step is also simple … if you find yourself saying or thinking, “A customer will never notice that.” Chances are, they will. Be prepared to deal with their reaction.

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That's just one angle to this "Brand Dilution" lesson from Frank Lucas. I'm sure you can think of other lessons. Share them in the comments.

This is the second in a series of posts sharing business lessons learned from the movie, AMERICAN GANGSTER.

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Setting the Scene:
In the early 70s, heroin was widely available in the streets of New York City. Common practice was to dilute the heroin with sugars, chalk, flour, or powdered milk. By diluting the heroin, dealers were able to significantly stretch their product inventory and maintain their high prices without upsetting their customer base. Customers had come to expect lower potency heroin as the only choice despite a growing number of dealers.

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Launching a Remarkable Product
Frank Lucas understood heroin customers would appreciate a richer, more potent product at a lower price.

To create such a remarkable product, Lucas had to go outside the established heroin supply chain. He cut out the middleman wholesale supplier and went straight to the source by forging a direct business relationship with a heroin producer in Saigon, Vietnam. He procured 100% pure heroin product and smuggled it into New York City using the US Army as the transportation channel.

And, instead of following the standard drug dealing practice of diluting heroin with adjuncts, Lucas made the strategic decision to differentiate his product by selling 100% pure heroin.

Plus, Lucas smartly packaged his heroin in small blue baggies and stamped each bag with the brand name, BLUE MAGIC. (“Blue Magic” references the purity of the product. When tested with chemicals, pure heroin turns blue.)

Frank Lucas simply followed the Purple Cow approach and the ZAG approach to creating a remarkable product.

Out-of-the-box thinking all-the-way. Just like other “Blue Magic” products and businesses … iPod … Starbucks Coffee … Method soap … Whole Foods Market … In-N-Out Burger … Amazon.com … and the list could go on and on.

This is the first in a series of posts sharing business lessons learned from the movie, AMERICAN GANGSTER.

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Setting the Scene:
Bumpy Johnson was an organized crime kingpin in Harlem. His considerable wealth, street smarts education, penchant for violence, and charitable community efforts made him a larger-than-life figure. For over 15 years, Frank Lucas served as Bumpy’s driver, bodyguard, and collector. Everything Frank learned, he learned from Bumpy. So when Bumpy suffered a heart attack, Frank vowed to continue what his mentor started.

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Frank Lucas on Bumpy Johnson
“He was my boss. My teacher. He taught me a lot of things. He taught me how to take my time, Taught me that if I was going to so something to do it with care, with love. Taught me to be a gentleman.”

Mentors Matter
The benefits of having a mentor cannot be understated. Developing a one-on-one relationship with someone you respect for their know-how and daily demeanor is a critical factor for many successful businesspeople. Mentors offer guidance, connections, criticisms, and support that can only help someone reach their professional goals.

Lisa Denny Compton was my mentor. She was also my boss. Without her patient counseling and marketing coaching, I shudder to think where my business life would be.

A mentor doesn’t have to be your boss. Mentors can came from anywhere … your co-worker, your neighbor, your pastor, your aunt, anyone. If you respect someone for what they have done/are doing, they can be your mentor. You just have to watch, listen, and apply the lessons they teach you.

We’ve all become familiar with the $50-billion Bernard Madoff investment ponzi scheme. Through a mix of deft misdirection and communication savviness, Madoff was able to convince discerning clients his investment strategies consistently delivered high-returns. It was all a fraud.

The design of Madoff’s fraudulent plan was simple: he used new investments to pay existing investors. It was only when he couldn’t find new investors to pay off existing investors that his Ponzi scheme collapsed.

Reading Paul Williams’ post about Measuring Your Comparable Job Performance triggered an odd, but related, thought. There’s a different type of ponzi scheme that happens at large companies. It’s called the Career Ponzi Scheme. I’ve seen it happen, maybe you have too.

Do you work with someone who transitions into a different role within the company every year? Is this someone asked to lead high-profile projects, yet leaves the project before it’s implemented? And is this someone you’ve often wondered how they continue to have favorable sway with upper-management?

Chances are you’ve worked with someone like this.

This someone is using a Career Ponzi Scheme to advance their position within a company. These “Ponzi People” are savvy communicators, masterful at misdirection, and selectively connected.

Savvy communicators know what to say, when to say it, and whom to say it to. This talent works well in politically-charged and bureaucratic-heavy organizations.

Their misdirection mastery comes into play when something goes wrong with a project they are managing. To avoid scrutiny, “Ponzi People” deftly divert attention away from their mismanaged project to another person’s mismanaged project. They know exactly what to say, when to say it, and whom to say it to for corporate firefighters to swarm in and rescue someone else’s project. Misdirection complete. That is, until the next time they need to misdirect attention away from their poorly managed project.

“Ponzi People” are not the most well-connected. However, they are the most selectively connected people within an organization. Meaning, they purposely buddy-up to only those who are well-connected and on a career trajectory to the top of the org chart. They seek to have sway with only those who have sway. Dig?

Because they nurture their tight network of company influentials, “Ponzi People” are made aware of job opportunities in adjacent departments before anyone else. Through their savvy communication skills, “Ponzi People” position themselves as the best option for the open position.

People who use Career Ponzi Scheme tactics receive pay raises from frequent promotions and they receive the priceless veil of being a vital ingredient in the company’s success recipe.

However, they never benefit from measuring their comparable job performance because they never stay in the same role for more than a year. They laterally bounce from position to position too often to measure their year-over-year contribution to the company.

Eventually, “Ponzi People” get caught. Their Career Ponzi Scheme collapses when they fail to find new admirers with corporate sway to replace those old admirers who have caught on to their misdirection, smooth talking, and networking games. When this happens, their fraud is uncovered and their career freefalls.

The moral of this story is a warning … DO NOT GET CAUGHT IN A CAREER PONZI SCHEME. You are cheating yourself if you use ponzi schemes to advance your career. And if you are someone who enables a ponzi scheme to continue, then you are just cheating your company. Don’t do it.

Over the Holidays I watched AMERICAN GANGSTER again. Great movie. Great story, Great acting. Great cinematography. Great business wisdom.

Yes. Great business wisdom.

I know what you’re thinking … AMERICAN GANGSTER is a film about a drug dealer (portrayed by Denzel Washington) and the New York City cop (portrayed by Russell Crowe) who busted a big-time heroin ring. Business lessons to be learned?

Oh, yeah. Lots of business lessons to be learned, including: Mentors Matter, Launching New Products, Brand Dilution, Leadership Qualities, The Weakest Talk the Loudest, and Winners Can Quit.

[FYI … Long-time Brand Autopsy readers will recall a series of posts from February of 2004 highlighting STREET CORNER SELLING LESSONS from a book called Dealing Crack (Bruce Jacobs). So this isn’t new territory for Brand Autopsy.]

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American Gangster synopsis:
Following the death of his employer and mentor, Bumpy Johnson, Frank Lucas establishes himself as the number one importer of heroin in the Harlem district of Manhattan. He does so by buying heroin directly from the source in South East Asia and he comes up with a unique way of importing the drugs into the United States. As a result, his product is superior to what is currently available on the street and his prices are lower. His alliance with the New York Mafia ensures his position. It is also the story of a dedicated and honest policeman, Richie Roberts, who heads up a joint narcotics task force with the Federal government. Based on a true story. [SOURCE]

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AMERICAN GANGSTER | BUSINESS LESSONS

LESSON ONE
Mentors Matter (Jan. 8)

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LESSON TWO
Launching New Products (Jan. 9)

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LESSON THREE
Brand Dilution (Jan. 12)

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LESSON FOUR
Leadership Qualities (Jan. 14)

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LESSON FIVE
The Loudest is the Weakest (Jan. 15)

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LESSON SIX
Winners Can Quit (Jan. 18)

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