Innovation, Disruption and New Consumer

A product is valued for its problem solving ability. For instance a watch measures time and camera captures images. This distinction becomes the basis of industry classification which gives rise to structure and strategy dynamics. Industry structure within which firms compete is defined by factors like seller and buyer concentration, product differentiation, barriers to entry and exit, degree of vertical integration and growth rate of demand.  The product based conception of structure accordingly etches boundary that divides one industry from the other. Firms ‘conduct’ (strategy) in a structure and produce performance outcomes. Hence a camera company like Nikon directly competes with another camera producer Nikon or a computer brand like Lenovo wrestles with HP. This view of competition is direct. Firms evolve strategy and develop success blueprint based on an idea of their competitors and their competitive behaviors.

 In a way industry conceptualization allows managers to identify which competitive space they belong and ‘not-belong’ to. Accordingly it lends ease in identifying competitors and their behaviors. Thus a car maker like Ford should fight with others in the car marketing space like GM, WV or Toyota. This is one of the ways to conceptualize competition known as direct competition. But a need can be satisfied by a different product. For instance transportation can be taken care of by a whole range of non-car products like cycle, scooters, airplane, and railways. That is a firm may face competition indirectly from products that ‘do not belong’ to a given industry. Managers often fall into a myopic strategy trap when they fail to factor in the implication of these indirect competitors. In this regard Ted Levitt had cautioned managers to answer the question, ‘what business we are in?’  It may be myopic to think of an industry in product or technology terms.       Sony Accy MN2 Smart Watch

 The competition indirectly can come from anywhere. The new emergent business environment is rendering the industry boundaries totally fluid and permeable. This is both a threat and opportunity. It all depends upon how far the vision of a manger can go.

Mobile phones are embedded with time keeping utility. Is it wise to consider that Nokia or Apple is not a threat to brands like Nikon or Olympus? Is a computer is computing or entertainment devise? Wrist watch is now being increasingly conceptualized as a ‘device’ with fluid functional boundaries. Many companies like Apple, Sony and Nike are eying wrist for potential business opportunities. Burg has already launched a device for the wrist which combines the watch and mobile phone space into one. This is a watch phone. Burg calls it ‘new smart watch’. Consider the following:

  •  Sony’s Smartwatch has two inches screen and can show emails and twitter posts which it can extract from Android phone.
  • Nike’s Fuel can feed a lot of data about your daily body statistics like calories burnt to a smart phone.
  • Pebble can play music and display text indicating needed information
  • Nokia and other mobile phone brands are building higher imaging capabilities.

 The linearity of thinking causes managers to seek incremental innovation. The accent is placed on betterment of existing value for instance, increasing the accuracy of a watch or refinement of reception of a television panel. But now the character defining core functionality which sat at the center is being decentered in many cases. A radically different perception is needed to view everyday objects. This depends upon an understanding of what makes sense to new emergent customer. It may be wrong to assume that the new generation is a linear extension of the previous one.

 Is computer something to ‘computing’ with or something to ‘accessorize’ with?


‘Only Vimal’, Backward Integration and Business Strategy

In the month of June an announcement came from Reliance Industries about company’s intention to sell its textile business along with ‘Only Vimal’ brand. The transaction is likely to be materialized in a year’s time.
The textile business’s contribution to Reliance is less than Rs 2000 crores, marginally over 2%. The group’s turnover figure stands at massive Rs 85000 crores. The group seems to be not interested in any business with an annual return less than 12%. Similar returns could be earned by keeping the money bank deposits. The brand ‘Vimal’ is included to enhance the deal’s attractiveness.

Reliance intends to increase its operating profits to one lakh crores in next five years. And this will be done by expanding the petro chemicals, telecom, retail, oils and gas business. The management wants to invest in business with returns over 25% and textile business does not fit in this strategic conceptualization of things.
Reliance is a good example of backward integration strategy. Reliance Textile was born in 1966 as a manufacturer of polyester textile. Its main raw material was polyester fiber. The company integrated backwards by making a foray in to polyester filament yarn business. Fiber and yarn come from petrochemicals accordingly the company moved further backward and entered in the petrochemical business and later into plastics. Reliance’s backward integration did not stop at the petrochemicals rather it moved back into petroleum refining. The raw material for the petroleum refining is crude oil which is to be explored. To complete the entire chain, Reliance’s backward integration did not stop here rather it went on to integrate backward by moving into oil and gas exploration. Reliance’s other businesses include retail, infrastructure and telecom.
Growth has its own lure. Growth can be achieved in a number of ways. Firm can stick to its business (concentration) or adopt integration route (vertical or horizontal) or diversify (other businesses). Concentration strategy manifests in two moves: vertical and horizontal integration. Reliance presents an excellent example of vertical backward integration. It branched into activities preceding textile production (assumption of supplier function). Among the factors guiding such a move include greater control, efficiency and quality to develop competitive advantage. On the flip side integration can reduce flexibility and raise exit barriers.

Reliance now stands as a diversified group with its fingers in different businesses. Firms diversify for competitive or returns considerations. Related diversification is instrumental in achieving economies of scope. Diversifying into related activities can enhance market muscle and block competition (strategic fit, synergies and effectiveness). Diversifying into unrelated business (conglomerate) is generally driven by the motivation of achieving higher profitability by which resources are invested in high return or high growth businesses.
In the new emerged form of Reliance, its textile business does not fit in its strategic vision (invest in businesses with returns around 25%). Developing and maintaining a healthy portfolio of businesses is the essence of management at the top. The BCG’s growth-share matrix is one of the tools (once called ‘the million dollar slide’) which is often used by planners in this regard. Reliance story is about how the team at the top needs to shift gears with changing time.


A brand is a perceived reality. It stands for ‘meaning extracted’ from the symbols disseminated by the sender. Critical to the success of a brand is the clarity and relevance. Brand is a symbol created out of exercise of symbols and symbolism. At the heart of brand building lays ‘meaning transference’. Typically brand strategists employ a variety of messages and media to build a brand but what is crucial to successful brand building is convergence. All signals create a clear brand engram (associative network in the mind). Divergence of associations in the mind is brand killer. Brand name is a sign the meaning of which is created in prospects’ minds. Symbols are instruments in the creation of this sign.
Confusion fails a brand. Anna brand has managed to evoke a phenomenal response. It is a case in the use of symbols. Express verbal communication plays a part in brand building but the dialogue at the subliminal level is more powerful (‘Aankhon Hi Aankhon Mein Ishara ho gaya’;’ Isharon Isharon Mein Dil Lene Wale’). Words convey meaning but symbols do those more powerfully and the beauty is that here communication escapes the scrutiny of cognition. Consider the following symbols and their symbolism which went into building Anna Brand:

  • Anna as person: his frail body, cap, simplicity, earthiness, spectacles and his presence against the backdrop of a huge Gandhi banner draws ‘conditioned’ response.
  • Anna’s dress: he sports ‘white’ (spotless) as against ‘black’ (blemished). It is ‘clean’ against ‘unclean’. It is ‘day’ against ‘night’.
  • Fasting: the term ‘fast’ is positioned against ‘feasting’; ‘self harm’ against ‘harming others’; ‘sacrifice’ against ‘self aggrandizement’; eating is ‘common’ fasting is ‘uncommon’; clearly it positions the powerful in a different lowly light. Fast is the common thread that creates a subtle mental link between Gandhi and Anna.
  • Ramlila Ground: ‘ground’ is against ‘high rise’. ‘earthy’ against ‘heavenly’, ‘discomfort’ against ‘comfort’; ‘humble’ against ‘arrogance’.
  • Anna Bands: these are tied to biceps indicative of ‘power’, ‘muscle’, ‘courage’ against the aggressor
  • Waist Bands: ‘fasten seat belts’ it is difficult time ahead, symbolizes ‘readiness’ ‘preparedness’.
  • Tricolor: In Mahabharata the discourse is about under which flag ‘you want to stand’: the right or the wrong. People assembled for the ‘nation’ not for ‘any party or group’, signals ‘unity’ against ‘division’; ‘transcending boundaries’ against ‘created boundaries’; ‘one identity’ against ‘multiple identities’. The flag: ‘higher ideal’ ‘ambition and aspiration’. Flag  held by hands in protests indicates importance and closeness and importance of the ‘goal and ambition’ as against ‘not holding’ or ‘giving up’ or ‘detachment’ (flag erected on ground).
  • Anna Cap: cap is headgear; head is house of mind. It symbolizes ‘particular philosophy or thinking’. The cap signifies subscription to ‘Anna thinking’ as against ‘Non Anna thinking’. Why wear cap: because now is the time to clearly show whether one is ‘with Anna’ because government is ‘not with Anna’.
  • Candle March: is ‘light’ as against ‘darkness’; ‘day’ versus ‘night’; light is used to ‘scare the creatures of the night’; creatures of night in mythology are demons and evil. Why march- to scare these off. March is movement; it is ‘progression’ as against ‘stagnation’; ‘it is movement towards the goal’.
  • Voluntary contribution: to contribute means ‘to be a part of’; ‘efforts made’ ‘share’ as against ‘not be a part of’, ‘no efforts made’. Contribution is required when the task ahead is ‘difficult’ or the opponent is ‘strong and mighty’. It is symbolic of a fight between two unequal: ‘government or establishment’ powerful and mighty. It is an opportunity to be a part of something not within the realm of ‘individual achievement’.
  • Raised hands and closed fists: fist symbolizes ‘grit’ ‘determination’ ‘strength’ ‘readiness to fight’ against ‘hands down’, ‘lose’ and ‘open palms’. When the hands are raised in unison upon a chant ‘it is willingness to rise up to a challenge’; ‘team spirit and togetherness’. This raises adrenalin. Fist is to ‘muscle up’ , ‘to collect’. It is ‘to scare birds or crow’ from the field.
  • Songs: the music connects to ‘heart’ as against ‘mind’. You don’t ‘think’ music you ‘feel’ music’. Songs and slogans trigger emotions and create bonding. Emotions elicit better commitment than cognitions. Rhythm and rhyme is ‘flow’ ‘movement’.

Collectively these symbols negotiate meaning at a deeper level and create a brand engram to which people seem to be connecting.