Thursday, February 21, 2013

Yesterday's news

The next couple of days are jam packed here at OBX Thinking's global command center, so rather than letting the blog lay idle for a couple of days I'll be reposting content from a few years ago. Today, we revisit the evolution of obsolescence.

In the 1950s designer Brooks Stevens coined the term "Planned Obsolescence" to describe the fundamental underpinning of our burgeoning consumer economy. Companies were deliberately designing their products in such a way that within a few years – thanks to ephemeral style, technology or performance – people would be forced to buy new stuff on a regular basis.

My, how things have changed.

We've gone from a time when companies felt they had to design obsolescence into their products in order to guarantee future sales, to one where global competition is so intense that people are afraid to buy the latest computer, cell phone, car or fashion item for fear that it will be out of date by the time they get it home.

We're living in the era of "Forced Obsolescence." No one has the luxury of allowing products to become obsolete on their own timetable. The competition will do that for you.

If this had been the '50s, Apple would have launched the iPad and milked that platform for a few years before making significant investments in changing it. Instead they knew that competitors would quickly enter the marketplace and the iPad 2 was launched with more features, more functionality and an improved design for the same price less than a year later.

Apple knows, and hopefully your company does too, that today you have to eat your own young before the competition does it for you.

Wednesday, February 20, 2013

The power of love and hate

In an attempt to reignite the fire that grew the sport to unprecedented popularity in the 90s and 2000s,  NASCAR has hired Ogilvy NY and launched a new ad campaign.

As someone who spent a lot of time at Daytona as creative director for Chevrolet motor sports back in the late 80s, I applaud the effort. The drivers and their personalities are the sport. As nice as the campaign is, I don't, however, expect it to have a whole lot of short-term impact on either race attendance or viewership.

That having been said, I expect this weekend's Daytona 500 to do incredible numbers for one reason: Danica.

She's the lightning rod. The driver who is both beloved and hated at the same time. For the detractors, her fame far outstrips her talent and the opportunities she's been given. For her fans, she's battled the old boy network every step of the way and achieved success in spite of the obstacles. After a few lackluster finishes running a partial schedule last year, she was in danger of becoming irrelevant.

All that changed in 45.817 seconds.

Danica winning the pole at Daytona is not just news, it's the story NASCAR needed to get back on the radar. It gives those who love her a reason to crow and those who hate her a reason to get their bile up a little more. It also gives a lot of other people who don't particularly care about racing a reason to watch.

NASCAR thrives on love/hate relationships. It succeeds when its stars clash. It's better when the young guns antagonize the old guard. It's a sport that's powered by stories, not gasoline.

For their sake, I hope they put on a good show this weekend because thanks to Danica, the world will be watching.

Tuesday, February 19, 2013

Just a bit off the mark

Here's a tough one.

You make a product that's hot. So hot that you can't keep up with demand given current capacity. You have a choice, alter the product in an almost imperceptible way so you can stretch your supply or leave sales on the table. Maker's Mark choose the former and the outcry was as loud as it was predictable.

After sales increases of 14% in 2011 and 15% in 2012, last week it was announced the Beam Inc. super premium bourbon brand would lower the alcohol content of its product from 90 to 84 proof in order to have enough to meet the burgeoning demand. While they claim there was no discernable difference in taste, regular Maker's drinkers saw it as an attempt to "water down" the product. They shared their displeasure with the decision through Twitter, Facebook and email and within days Bill Samuels Jr., the Chairman Emeritus of Maker's Mark reversed the decision.

So why didn't Maker's do what other companies do when demand exceeds supply and just raise the price? Beam uses the popularity of Maker's as leverage to get distributors and retailers to carry its other brands like Basil Hayden's, Booker's, Bakers, Knob Creek, Laphroaig, Connemara, Ardmore, Effen, Sauza and more.

In essence they're saying, "You can't have our most desirable product, unless you carry a full line of our other products."

It's a good strategy until you kill the lead dog and the rest of the pack has no one to follow.

So what could Beam have done? It takes six years to make a batch of Makers at its current strength so they can't distill more and have it on the shelf tomorrow. In this era of social media and transparency making the change unannounced would have been a flat-out disaster.

In this case the best course would be to take the long view and build the business through a combination of activities. First, increase production capacity so in six years Maker's can meet the global demand. Second, select other bourbon or spirit brands from the portfolio and invest in them, creating additional leverage points with distributors. Given the fickle nature of trends in this business, that strategy also has the added benefit of providing options if and when consumer tastes change. While there's no guarantee of creating a blockbuster like Maker's out of the other brands, at least they wouldn't be devaluing any of them.

Ultimately the lesson here is: more sales aren't always good sales.