Transformation

BOOK

Owning Game-Changing Subcategories

DAVID AAKER

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Summary

The only way to grow (with rare exceptions) is with “must-haves” that define game-changing subcategories. These subcategories must offer new or markedly superior customer experiences or brand relationships, an exemplar brand that positions the subcategory and creates barriers to competitors.

Subcategory-driven growth has exploded in the digital era because of technological advances and the fast, inexpensive market access made possible by e-commerce and digital communication.

The alternative, “my brand is better than your brand” competition, rarely generates growth because markets are so stable and difficult to disrupt. The book includes case studies from numerous companies including Airbnb, Etsy, Warby Parker, Prius and Muji to illustrate how subcategory creation has led to uncommon growth.

Highlights

  • Explanation of why growth almost always involves “must-haves” defining new subcategories, earning exemplar brand status, and creating competitor barriers
  • Tips for finding “must-haves” and examples with case studies featuring notable leading brands
  • Deep dive into how digital tech trends like e-commerce, the Internet of Things, brand communities and more that drive growth through subcategory formation

Endorsements

I really LOVE this book!! It is so right for organizations looking to drive growth. Through compelling insights, Aaker shows how to employ the Digital Revolution to create and own  Subcategories highly relevant to customers. A MUST READ book for our Digital times!

Joe Tripodi
Former CMO of Coca-Cola, Allstate, MasterCard, and Subway

David Aaker uses economics and case studies to show how growth comes from inspired breakthroughs that create new subcategories and not from expanding market programs.  Use the 20 takeaways to find your own subcategory breakthrough.

Philip Kotler
The Father of Modern Marketing

David Aaker teaches us how to grow in the digital era by harnessing the power of subcategories. A must have for all business leaders.

Yong-Jin Chung
Vice Chairman, Shinsegae Group (Korea’s Largest  Retailer)

Media

“From Brand to Subcategory Competition” in European Journal of Marketing, Fall 2018

“Winning in the Sharing Economy—Six Keys to Airbnb’s Success, ‘ Journal of Brand Strategy, February, 2019.

About the Author

David Aaker, is the author of more than one hundred articles and 17 books on marketing, business strategy, and branding that have sold over one million copies. A recognized global authority on branding, he has developed concepts and methods on brand building that are used by organizations around the world.

Connect

Want to interview Dave or feature him on your next podcast? Please connect with us or David Aaker directly.

Explore how David Aaker and Prophet can help your business create game-changing brands that resonate with both your customers and employees.

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PODCAST

Becker’s Healthcare Podcast: Interview with Scott Davis and Jeff Gourdji

23 min

Scott Becker interviews Prophet’s Scott Davis and Jeff Gourdji, co-authors of the book “Making the Healthcare Shift, The Transformation to Consumer-Centricity” on the Becker’s Healthcare podcast series for insights on what’s driving digital transformation in healthcare today.

Listen here for insights on how healthcare organizations can drive growth through consumer-led transformation.

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REPORT

China’s Brand New World

Working with Alimama, we’ve developed a model for brand building, adapted for market forces in China.

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Adopting the Brand-Building Model to Win

Brand building in China is at a crossroads. The long-term, equity-building playbook that once worked for Western companies is now less effective, as China’s increasingly tech-savvy and bargain-hungry consumers navigate a digital ecosystem that’s unlike any other. And the approach many local companies use – trying to quickly increase market share by focusing on speed to market, low prices and broad distribution, usually at the expense of branding – is also faltering.

But there is a new way forward. To help both multinational and local organizations build brand equity and drive growth, Prophet and Alimama developed the new Brand META Model, which stands for the Maintain, Evolve, Transform approach. It is an evolved model for brand building that is adapted for the unique market forces in China.

  • Maintain: Maintain the approach of positioning but localize it for different cultures.
  • Evolve: Evolve the way data is collected and activated to identify micro-targets of an audience and the planning process so it is more agile and omnichannel.
  • Transform: Transform consumer experiences to make them more proactive, experiential and hyper-personalized.

Prophet conducted interviews with more than 40 marketing executives who are thoroughly immersed in the Chinese market. The model blends insight about what makes China unique and finds new ways to develop profitable and lasting customer relationships.

To learn more about the Brand META Model, our collaboration with Alimama and how it applies to your business, contact us today.

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REPORT

The State of Digital Transformation 2018

Without ROI data, organizational buy-in remains a top challenge for those leading digital transformation.

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Now in its fifth year, our annual “State of Digital Transformation” research continues to document the constantly evolving enterprise. As disruptive technologies and their impact on organizations and markets continue to progress, our research aims to capture the shifts and trends that are shaping modern digital transformation.

In 2019, strategic digital transformation is only becoming more pervasive moving beyond IT to impact competitiveness throughout the organization. Budgets are soaring. The list of disruptive technologies on the radar of stakeholders is expanding. Ownership is moving to the C-Suite and managed by cross-functional, collaborative groups. Customer experience (CX) continues to lead digital transformation investments, but as we observed in 2017, employee experience and organizational culture are also rising in importance to empower and accelerate change, growth, and innovation.

Digital Transformation as an Enterprise-Wide Movement

This year, it’s clear that digital transformation is maturing into an enterprise-wide movement. Digital transformation is modernizing how companies work and compete and helping them effectively adapt and grow in an evolving digital economy.

What’s also evident is that there is still much work to do as companies are, by and large, prioritizing technology over grasping the disruptive trends that are influencing markets and, more specifically, customer and employee behaviors and expectations.

The State of Digital Transformation: 5 Key Takeaways

  • A successful digital transformation is an enterprise-wide effort that is best served by a leader with broad organizational purview. For the second year in a row, CIOs are reported as most often owning or sponsoring digital transformation initiatives (28%), with CEOs increasingly playing a leadership role (23%).
  • Market pressures are the leading drivers of digital transformation as most efforts are spurred by growth opportunities (51%) and increased competitive pressure (41%). With high-profile data breach scandals making daily headlines, new regulatory standards like GDPR are also providing impetus for organizations to transform (38%).
  • While there is a growing acknowledgment of the importance of human factors in digital transformation – like employee experience and organizational culture – most transformation efforts continue to focus on modernizing customer touchpoints (54%) and enabling infrastructure (45%). But many organizations are not doing their due diligence when it comes to understanding their customers, with 41% of companies making investments in digital transformation without the guidance of thorough customer research.
  • Organizational buy-in remains a top challenge for those leading digital transformation. The companies we studied report digital transformation is still often perceived as a cost center (28%), and data to prove ROI is hard to come by (29%). Cultural issues also pose notable difficulty, with entrenched viewpoints, resistance to change (26%), and legal and compliance concerns (26%) stymieing progress.
  • Innovation is staking its claim within the organization. Nearly half of respondents report that they are building a culture of innovation, with in-house innovation teams becoming the norm

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Digital Marketing Priorities in Financial Services for 2019

Our research shows that lead generation and customer experience top the list. And hiring is a major headache.

It’s clear that emerging Fintech and Insuretech entrants are shaking up financial services. Across the board – from large to small-scale companies – we’re observing an accelerated need for more digitally fluent marketing organizations to tackle new challenges in an evolving market.

To understand the challenges and priorities impacting the insurance and banking industries today, we turned to Prophet’s digital analyst group Altimeter surveyed 68 global financial services executives as part of their industry-wide 2019 State of Digital Marketing report that spoke to over 500 executives in North America, Europe and China.

“Altimeter surveyed 68 global financial services executives as part of their industry-wide 2019 State of Digital Marketing report.”

The report surfaced three primary digital marketing insights specific to where financial services executives are betting their marketing investments to address business challenges:

  1. Lead generation and customer experience are the
    top digital marketing priorities.
  2. Scaling marketing innovation, the right talent and proving impact
    are the greatest challenges.
  3. Data analysis, marketing automation and UX design are the
    most sought after skills.

Let’s dive into the results.

1. Lead generation and customer experience are the top digital marketing priorities.

Lead generation and customer experience came out on top (see Figure 1) – ranked higher than brand awareness and brand health – a top priority across other industries.

To measure digital marketing success, financial services companies are placing greater emphasis on customer loyalty/customer lifetime value (CLTV) – even before direct revenue (see Figure 2).

We see these forces working within financial services companies that are investing more to acquire customers through digital demand-building activities. Specifically, with the increases in the promotion of banking, investment and insurance products going more digitally direct-to-consumer. We also see loyalty as a rising metric to diagnose and resolve potential attrition challenges before being confronted.

2. Scaling marketing innovation, the right talent and proving impact are the greatest challenges.

Financial services marketing organizations are navigating several challenges with their focus on lead generation and CX development, particularly around scaling, hiring and proving business impact (see Figure 3).

In addition, we learn that compared to other industries, financial services companies are experiencing a much greater challenge in seeing a return on investment for their marketing technology spend with 32 percent saying that it took a long time before they saw any return. Consequently, it is now considered to be their top Martech challenge.

3. Data analysis, marketing automation and UX design are the most sought-after skills.

Financial services companies are now focused on building capabilities in data analysis, marketing automation, and user experience design (see Figure 4) to enable the scaling of marketing innovation across the full enterprise and ultimately to prove business impact.

Financial services companies as a consequence are finding the need for capabilities to apply digital marketing in new ways previously not considered.

These evolving digital marketing priorities are making way for the future

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FINAL THOUGHTS

What’s clear from the findings of Altimeter’s 2019 State of Digital Marketing report is that as financial services companies place greater emphasis on driving customer acquisition and shaping customer experiences, marketing must bring in new capabilities formally nascent within the organization, invest in the right marketing technology, and prove business impact on a small – yet scalable – way.

At Prophet, we help our clients drive uncommon growth through transformation. We work with leaders across the insurance and banking categories to understand where to play and how to win to unlock the full potential of the brand and customer relationships. Learn more with our guide to digital marketing excellence here or get in touch today. 

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REPORT

Smart Places: The Digital Transformation of Location

Hear about what’s working, with insights from early adopters, device makers, industry groups and vendors.

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The growing adoption of Internet of Things (IoT) consumer electronics — such as smart thermostats and digital assistants — has paved the way for brands to use connected devices in their physical spaces too. The same sophisticated technology that powers “smart home” devices is slowly finding its way into stores, hospitals, and other public spaces, creating “smart places.”

For this report, we outline how location-based brands can take the battle offline by investing in technology-rich locations that raise the bar for Customer Experience (CX).

We also examine the barriers brands will face, balancing the value of enhanced consumer insights, customer experience, and operational efficiencies against heightened risks around consumer privacy.

Key Findings:

  • Detailed use cases distilled from research into hundreds of different ‘smart place’ devices
  • Interviews with early adopters, device makers, industry groups, and vendors who focus on CX management in physical locations
  • Recommendations for incorporating these technologies into your business strategy, and the challenges therein

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REPORT

The 2017 State of Digital Transformation

Change agents still face challenges in transformation efforts, led by a lack of digital talent and expertise.

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Are Companies Investing in Digital Strategies?

In the new report, “The 2017 State of Digital Transformation,” we surveyed more than 500 executives and digital strategists to understand the current challenges and opportunities they are facing as they undergo a digital transformation.

This is the third annual report on the topic from Altimeter principal analyst Brian Solis. This year builds on his 2016 research and reveals how, why, and to what extent businesses are investing in digital strategies, initiatives and operational models. The good news is a growing number of businesses are investing in innovation strategies to uncover new growth opportunities. The bad news is most companies surveyed are ignoring the pervasive changes happening to connected consumers’ buying behaviors.

Key Findings

  • While businesses cite “evolving customer behaviors and preferences” as the top driver of digital transformation, fewer than half invest in understanding digital customers.
  • Some executives are beginning to own digital transformation efforts, and the Chief Information Officer (CIO) is most often at the helm (28%). As all companies increasingly become “technology companies,” the roles of the CIO and IT department are more important than ever — but true success in digital transformation is an enterprise-wide, cross-functional endeavor.
  • Companies and their change agents still face big challenges in the pursuit of digital transformation, including a lack of digital talent and expertise (31.4%), the perception that digital transformation is a cost center and not an investment (31%), and general culture issues (31%).
  • While companies are making attempts to modernize employees’ skillsets for a digital economy with new training programs (62%), only about half are investing in new digital talent. The employee experience is a crucial, yet often overlooked element of a successful digital transformation.

Undergoing a Digital Transformation? Get a Digital Maturity Assessment

To help companies navigate the digital transformation journey, Altimeter and Prophet have developed a diagnostic that assesses a company’s digital maturity. The tool provides an objective look at the current digital state vs. ideal future state while identifying major perceived gaps and opportunities that can be pursued as part of the digital transformation journey. Contact us today to learn more.

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REPORT

The 2016 State of Digital Transformation

About 40% of leaders say market share has already increased, and 37% say employee morale is rising.

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What’s Driving Digital Transformation Across Organizations?

Building on his 2014 research of digital transformation, principal analyst Brian Solis studied how companies are changing, and the challenges and opportunities they face while undergoing a digital transformation. Based on insights and data from more than 500 digital strategists and executives, the report found that companies are still facing significant challenges to operating in a digital economy.

The report, “The 2016 State of Digital Transformation,” shares the latest facts and figures on the top drivers, challenges and best practices of companies that are undergoing a digital transformation.

Key Findings

In our research, we identified key insights and trends impacting companies going through a digital transformation.

  • Customer Experience (CX) remains the top driver of digital transformation but IT and marketing still influence technology investments
  • 55% of those responsible for digital transformation cite “evolving customer behaviors and preferences” as the primary catalyst for change. Yet, the number one challenge facing executives (71%) is understanding behavior or impact of the new customer
  • Only half (54%) of survey respondents have completely mapped out the customer journey. This means that many companies are changing without true customer-centricity
    41% of leaders surveyed said they’ve witnessed an increase in market share due to digital transformation efforts, and 37% cite a positive impact on employee morale
  • The CMO vs. CIO: Digital transformation is largely led by the CMO (34%) not the CIO/CTO (19%)
  • Innovation tops digital transformation initiatives at companies today. 81% said it was at the top of their agenda, 46% stated their company has launched a formal “innovation center.” Right behind innovation was modernizing IT infrastructure (80%) and improving operational agility (79%)

Undergoing a digital transformation? Contact us for a digital maturity assessment.

To help companies navigate the digital transformation journey, Altimeter and Prophet have developed a diagnostic that assesses a company’s digital maturity. The tool provides an objective look at the current digital state vs. ideal future state while identifying major perceived gaps and opportunities that can be pursued as part of the digital transformation journey. Contact us today to learn more.

Download the full report below.

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REPORT

The 2014 State of Digital Transformation

What strategists need to know about the change journey, based on insight from peers and market leaders.

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How Companies Are Investing in the Digital Customer Experience

Digital transformation isn’t a trend owned by a particular role, nor a discipline that belongs to one department alone. It is, however, a significant movement where daring business leaders venture into tomorrow’s markets, today.

In 2013, Altimeter researched how businesses explore digital transformation. One finding revealed that while the word “digital” is part of “digital transformation,” the essence of digital transformation comes down to people and how their digital behaviors differ from that of the traditional customers before them. It’s also more than that.

In our initial report on the topic, Digital Transformation: Why and How Companies Are Investing in New Business Models to Lead Digital Customer Experiences, we set out to determine how digital transformation unified disparate digital efforts under a common vision. In the process, we uncovered a more human story. We followed up our initial research with a 2014 survey, aimed at digital strategists, to further understand the state of digital transformation.

This report shares its results and is designed to complement Altimeter’s annual State of Social Business report. Combined, this research helps strategists drive social business evolution and digital transformation based on insight from peers and market leaders.

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The Six Stages of Digital Transformation

Focusing on digital customer experience, this blueprint details the six steps toward digital maturity.

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The Race Against Digital Darwinism

In our research, we learned that digital transformation is a movement progressing without a universal map to guide businesses through proven and productive passages. This leaves organizations pursuing change from a known, safe approach that correlates with “business as usual” practices. Operating within the confines of traditional paradigms without purpose or vision eventually challenges the direction, capacity, and agility for thriving in a digital economy.

After several years of interviewing those helping to drive digital transformation, we have identified a series of patterns, components and processes that form a strong foundation for change. We have organized these elements into six distinct stages:

  • Business as Usual
  • Present and Active
  • Formalized
  • Strategic
  • Converged
  • Innovative and Adaptive

Collectively, these phases serve as a digital maturity blueprint to guide purposeful and advantageous digital transformation. Our research of digital transformation is centered on the digital customer experience (DCX) and thus reflects one of many paths toward change. We found that DCX was an important catalyst in driving the evolution of business, in addition to technology and other market factors.

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M&A Portfolios: Are You Thinking Like a Digital Native?

Companies need radical flexibility, not “house of brands” hang-ups.

After several quarters of near-frenzy pace, global deal-making is starting to slow. But for those in charge of managing portfolio and architecture strategy, the recent mergers and acquisition binge is creating something of a mess.

Many of the decisions about customers, brands and marketing have been addressed too quickly as deals were coming together. And once the integration process starts, those initial plans unravel. As the financial and operations teams that finalized deals hand them off to those responsible for taking new assets to market, tangles of false assumptions and the sub-optimal use of brand assets emerge; the value creation logic of the deal never gets out of the spreadsheet. And with $1.24 trillion in deals already on the books this year, that confusion presents material risk for shareholders.

Increasingly, clients are coming to us for help figuring out the best ways to organize and manage new, post-deal asset bases. Often, they start by asking: “Should we be a house of brands? Or a branded house?”

“Should we be a house of brands? Or a branded house?”

We’re not afraid to say that’s simply the wrong question. Digitally-focused companies can’t afford to think that way. The modern approach to architecture and portfolio strategy, and the one inherently chosen by digital natives, is radical flexibility.

Older companies are coming to understand this, too, focusing on customers earlier in the M&A process, aware that integration management offices are often working with incomplete data.

In order to get this right and maximize the value of today’s deals, we believe the best post-merger decisions come down to answering three essential questions.

Three Essential Questions For the Best M&A Portfolio Strategy

1. Are we customer-obsessed?

Our research on brand relevance offers compelling evidence that companies that are obsessed with customers significantly outperform others. It’s no surprise that the names that dominate the top of the Prophet Brand Relevance Index® are digital-first, including Apple, Amazon and Netflix. And those at the top of the list consistently outperformed the S&P 500 by 3x in revenue and 205x in profit in the last decade. These companies constantly ask themselves: Are we putting customer-use cases and environments first? All decisions are filtered through the perspective of customers and prospects.

When considering customers first—the buyers, the deciders–it’s easy to see how easily a company like Procter & Gamble and Schick might be outflanked. Direct-to-consumer brands like Dollar Shave Club and Harry’s have devoted themselves to changing and improving the razor shopping experience, rather than focusing on promotions and product features.

In post-M&A environments, brand portfolios should be built around key customer use cases, balancing the desire for efficiency with a customer-centric model that leverages the strongest brand for each use case. When J.P. Morgan & Co. and The Chase Manhattan Bank merged, they prioritized efficiency over customers and created a brand mash-up that weakened both brands. After a couple of years of brand value degradation, a new strategy that led with customer needs was founded with a powerful institutional brand, J.P. Morgan, and a powerful retail brand, Chase. This approach allows for effective targeting of clearly defined customer segments with separate brands and tailored offerings, and is paying off for JPMorgan Chase, with a five-year gain in brand value of 53%.

2. Can we find max value?

When M&A deals fail to generate revenue synergies, there is usually a lack of early focus on customer, marketing and branding issues. Playbooks often don’t include these steps and when they do, the discussions are qualitative and overly reliant on opinion and emotion.

The solution is in this key question: Are we deploying our assets to maximize customer use cases?

Companies can find significant incremental deal value when they integrate customer and marketing analytics in pre-close analysis and the integration management office. We studied one deal that doubled the final price of a $5 billion global asset by modeling the financial impact of future (post close) brand use cases. Another estimated market-share gains between 2 and 3% on a $60 billion deal through brand portfolio economic analysis. And on the cost side, we are helping companies lower post-merger migration costs between 15 and 40% by using cost-optimization analysis.

3. Are we serving up the right offer?

The best way to achieve this optimization is to constantly elevate the right offer for each person, on the right device and at the perfect time. Companies like Google, Amazon, Facebook and SAP are experts at this kind of hyper-responsiveness, with nearly-infinite capabilities for personalization, depending on the needs of each customer. They continually ask: Do we have an adaptive brand architecture? To win with today’s digitally demanding customers, companies need to maximize all the flexibility available through digital tools, making sure offers are as adaptive and individualized as possible.

Amazon remains a perfect example. Rather than being a monolithic Amazon or a fragmented collection of sub-brands, the brand adapts to its audience, use case or environment. Do you listen to a book at 9 p.m. each night? If so, it’s likely Amazon will push an Audible brand message just before. Recently ordered paper towels? Alexa will check-in to see if you need a refill. Context is king in our world, and successful companies will deliver an adaptive architecture that ensures maximum relevance.

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FINAL THOUGHTS

Older companies don’t have to cede their future to those that came of age as digital natives. Moving forward, all companies–and all brands­–can benefit from a modern portfolio and architecture strategy. And while all companies acknowledge that the future is digital, we’re convinced that those that win are those that also understand that the digital’s primary power is in better serving customers.

For more information on capturing greater value in the M&A, please contact us today.

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VIDEO

Healthcare Transformers Series: Featuring David Edelman, CMO at Aetna

Aetna’s CMO explains why he wants patients to be more engaged, and how consumer-centricity can help.

3 min

Meet the Healthcare Transformers Leading Change in Their Organizations.

Prophet spoke with leading healthcare transformer and contributor to the book “Making the Healthcare Shift: The Transformation to Consumer-Centricity“, David Edelman, chief marketing officer at Aetna to understand how he is leading change at his organization to drive deeper engagement with consumers while delivering better business outcomes.

Get the Book: “Making the Healthcare Shift: The Transformation to Consumer Centricity”

As the industry sits on the edge of disruption, healthcare organizations need to transform to stay relevant. A new book by Prophet’s Scott Davis and Jeff Gourdji, “Making the Healthcare Shift: The Transformation to Consumer Centricity” shares real examples of how healthcare leaders are driving this transformation in their organizations.

Healthcare organizations now have both the motive and means to empower, engage, equip and enable consumers. While healthcare organizations have recognized the need to change, they have struggled to get started and sustain the effort. Based on conversations with leading healthcare organizations such as Mayo Clinic, Intermountain Healthcare, Geisinger, Anthem, Aetna, Pfizer, Novartis and more, the book identifies five required shifts organizations can make to better compete in this evolving landscape.

Through case studies and practical examples, Making the Healthcare Shift provides healthcare leaders across the healthcare ecosystem with a playbook to make their organizations more consumer-centric.

Get the book here.

Interested in Hearing From Other Leading Healthcare Transfomers?

Watch Andrew Dreyfus, President and CEO of Blue Cross BlueShield of Massachusetts discuss how the healthcare industry is becoming more consumer-centric and how organizations need to be thinking about transformation.

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