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CEOs, CMOs: It’s Good to Be Bad

By Ryan Rieches

We have a saying at our B2B brand strategy consultancy that has guided us over many years in our work with leading brands: “The narrower the focus, the stronger the brand.” Lately I’ve been contemplating a corollary of sorts, and it basically boils down to this: “It’s good to be bad” — that is, bad at things customers don’t value.

Let me explain by way of example. After years of flat sales, a B2B marketer asked us to evaluate its brand. In customer interviews, we heard comments like, “They never met a sales opportunity they didn’t like” or “They have a little bit of everything, but I really don’t think of them for anything specific.” By trying to please everyone with a smorgasbord of middle-of-the-road offerings, they were, in fact, pleasing few.

Our research found that customers did find value in one specific product category, however. Taking a stand for their brand, leadership boldly discontinued 70% of the company’s products. Re-launching the brand, with renewed focus and distinction, resulted in a 50% sales increase the following year. Within two years, a prestigious international organization acquired the brand, its narrowed focus fitting strategically within the larger organization.

In this case, proactively divesting the bad was not an admission of failure, but rather an effective way for the client to drive its business forward. For in today’s crowded and relentlessly competitive marketplace, the only way to truly stand apart from the herd is to be extremely relevant to customers on what matters most to them. So, with the permission to be bad comes the requirement to be not just good, but really good.

And the fact is, you can’t be exceptionally great at everything — just ask Jack Welch. During his first four years as General Electric’s CEO, he jettisoned 117 business units, accounting for 20% of the company’s assets. So if you cannot clearly see your company gaining leadership in a particular market by allocating additional talent and resources, it’s probably time to have the courage to be bad — and make some hard choices.

Southwest Airlines is a well-known brand built upon, if you will, the courage to be bad. Over the past 40 years, the no-frills carrier has had the discipline to stay true to its mission and the creativity to remain relevant. Strategically, management has chosen to be best in class at a select number of things while effectively choosing to be bad at others. Best of class examples include low fares, a consistent on-time record, free checked bags, Wi-Fi access and fun-loving, irreverent employees. By consistently being great (and distinctly different) in areas customers find relevant, they’ve built a company that has financially outperformed every other airline. To do so, however, they had to accept being worst in class by other measures (i.e., no seating assignments, no food service, no first class and a relatively limited destination footprint).

Southwest customers know what to expect and accept both the benefits and limitations. But this doesn’t happen without relentless dedication to focus and consistency. Southwest’s model is based on delivering, with exceptional efficiency, what the majority of customers value the most. Employees know what to deliver. Customers know what to expect. No apologies needed for the lack of pampering, upgrades and other perks doled out to “elite” or “premiere” flyers on other airlines.

Southwest also stands as an admirable example of enrolling employees as brand ambassadors. In a sense, it’s because employees have been granted the license to be bad that they’re able to be so good at what they do.

Here’s what I mean. Our human nature instinctively guides us to do a good job. But the reality is that when people try to be great at every aspect of the business, mediocrity sets in. Clarity around corporate “values” only goes so far. Consistent communication is an absolute must, of course, but the most effective means of building a corporate culture is for it to be “lived” by the executive team.

While Southwest’s public tagline is, “You are now free to fly about the country,” its internal mantra, “Freedom begins with Me,” speaks to how management personifies the brand promise. In this regard, I heard a wonderful story about former CEO Herb Kelleher. Herb received countless customer letters and took pride in his handwritten replies. On one occasion, a woman — who did not appreciate the humorous chatter by the pilot and flight attendant over the intercom — posed the question: “Please let me know what you plan to do about it?” Herb’s reply: “We will miss you.”

This demonstration of support from the CEO quickly circulated throughout the company, communicating that each person had the freedom to deliver on the brand promise in their own unique way. Fact or fiction, this anecdote serves as an incredibly powerful example of granting employees the license to be bad — or, more importantly, the authority to be really, really good.

There is always tension between the need to focus on key attributes of inner “core competence” that provide unique value to customers and the need to look outward to glean new possibilities and anticipate what customers will value most in the future. Nokia once proclaimed “mobile device manufacturing” to be a “core competence,” only to be left in the dust by forward-thinking Apple and Samsung, both of which emphasized product design and differentiation.

IBM is a great example of a company that has not let past success based on leveraging core strengths get in the way of innovation. In 2005, under CEO Lou Gerstner, Big Blue shed a significant piece of its legacy as a computer hardware manufacturer. Selling its PC business to Lenovo, it pivoted to building up a portfolio of enterprise software and services — which, in the Internet era, enabled clients and independent developers to create their own applications to integrate the new Web technologies with existing IT systems.

Now Big Blue is rebranding itself as a global Cloud company based on a new “platform-as-a-service” business model. It’s not just porting existing services and applications into the Cloud and expanding its Cloud computing footprint (40 data centers on five continents by the end of 2014). It is offering a transformative modus operandi to customers — “placing information, insights and decision-making intelligence at people’s fingertips, any time and anywhere,” notes IBM Senior Vice President Erich Clementi in a post on IBM’s Smarter Planet blog. “Via the cloud, large multinational businesses can function seamlessly and smaller companies can become instantly global.”

In discussing cases of bold transformational success, I should mention a recent client of ours — MFour Mobile Research. This 20-year-old company offered a variety of traditional survey research under the name MFour Strategies. Working with us, management decided to focus exclusively on mobile research — which, through the use of pinpoint GPS technologies, allows surveys to be conducted in real time, at the “Point of Emotion” (i.e., when the audience is experiencing the brand). With the largest mobile-only panel in the United States — 425,000 “Survey on the Go” respondents, on the way to one million — MFour offers tailor-made products for theater owners, big box retailers, suppliers, restaurateurs, polling organizations and others looking to conduct field surveys faster and more efficiently than ever before.

Via MFour smartphone apps, respondents at specific locations receive push notifications about surveys. Features such as barcode scanning, picture taking, video recording and audio-clip playback are integrated into the apps, providing clients with almost instantaneous feedback and analytics about how their own actions affect the customer’s experience of the client and its products or services.

We found that the other companies moving into this space came from online backgrounds, and were still stuck in their ways. Untethered to web methods, and having completely reinvented itself as a “pure-play” mobile company, MFour is differentiating itself and benefiting from the significant shift to mobile everything.

All of which goes to show that in today’s technology-driven, fast-changing environment, fortune favors the “bad.”