Let’s pay respects to Eastman Kodak which appears to be rapidly fading into black, the victim of it’s own arrogance and the forces of creative destruction raging in our digital age.

As I write this post, I can’t help singing the lyrics of Paul Simon’s 1973 iconic tune: “Kodachrome gives us our life’s bright colors, give us the greens of summer, make us feel all the world’s a brighter day”.

Once the bluest of blue chip brands, Kodak is eminently about to enter some form of bankruptcy protection and reorganization. Of course, no surprise there, but as the Holiday Season draws near, I am nostalgically reminded of Kodak’s “open-me-first” dominance of the season and all the special “Kodak moments” throughout the year that were the foundation of its dominant position in our culture for over a century.

This is a dramatic ending to an iconic and beloved brand that was once as globally recognized as Coca-Cola.

With it’s stock price hovering around a buck, $800 million in cash on hand, and a monthly burn rate of $70 million, it’ll take less than a year for Kodak (like Polaroid) to become a history lesson for marketing MBA’s to ponder in business schools. Kodak is now frantically trying to stay afloat by selling its intellectual property. Buggy whips anyone?

The irony of the digital age.
Some people may not be aware that in 1975 Kodak engineers invented the digital camera. But like many innovations, the idea was not deemed particular useful by the management of a company deeply cemented into it’s dominant chemistry based film business.  The irony is palpable for sure–made worse by the arrogance of Kodak’s executive management over the years.

The last spool of Kodachrome film rolled out of a Mexican factory in 2009. With instant point and shoot digital photography on cheap cell phone cameras, even consumer-grade digital cameras are quickly becoming relics. Worse, only a tiny fraction of consumer images taken on cell phones or digital cameras gets printed to paper. Who needs printed pictures when people share digital photos on social media networks?

New economic models and global competition have destroyed other giant companies, but digital technology has been a destructive firestorm making every aspect of Kodak’s business completely irrelevant. I can think of no better example of Austrian economist Joseph Schumpeter’s “creative destruction” principle at work.

The arrogance of success.
Kodak is a lesson to any CEO in an industry dominant company– things change, nothing lasts forever. (This goes for the likes of Apple, Google and Facebook). Almost from it’s founding in 1890, the money came rolling in decade after decade fueled by the razor-blade strategy of selling cheap cameras and reaping lavish profit margins through consumables of film, chemistry and paper.

By the mid-70’s Kodak owned nearly 90 percent of the film and camera market. With this level of dominance, you can just imagine what kind of executive culture was brewing in the Petri dish of marketplace success. Arrogance and complacency are often the by-products of an unassailable competitive position, and Kodak has been no exception.

When Fuji Film entered the US market, Kodak executives refused to believe that Americans would embrace a foreigner over the sacred brand. Big mistake. Rebuffing its chance to become the official film of the 1984 Olympics in Los Angeles, Fuji brilliantly exploited the opportunity and achieved a permanent hold in the US market, significantly eroding Kodak’s share.

Then came the digital age. Although Kodak had embraced many me-too digital features in its products by the mid-80’s, it’s executives could not fathom a future where film would have no role whatsoever in image capture. Nor could they manage their bloated business, pension obligations and executive compensation on the low profit margins and competitive pace of a marketplace overflowing with short product cycle technologies.

The Kodak Moment has passed.
Every brand has a lifespan– a beginning, middle and an end.  That said, companies can remake themselves on a scale now confronting Kodak. IBM did it. GM is on that road now. It can be done.  Alas, we may be witnessing the last Kodak Moment right now.

True enough, it could be argued it’s premature to write off the Kodak brand. Kodak has a century of consumer marketing expertise and a viable technology portfolio to leverage. However, without visionary leadership at this critical time, Kodak may be forced to sell the remaining seeds of its potentially brighter future and fade into black.

When marketers behave arrogantly, the value of the idea people care about is instantly diminished. And once this happens, the road to redemption is long, difficult and expensive.

Consumers don’t value brands; they value the idea the brand represents to them. This idea will always be worth more than the product, or the actual bricks and mortar of the business enterprise. A recent example of a marketer’s arrogance towards its customers is NetFlix.

The story is classic, almost cliché. In the Netflix case, an innovative technology quickly ramps into an innovative business model with rapid customer acceptance and advocacy, and then inexplicably breaks its trust bond with the very people who were making it great. Other brands have done this as well. New Coke quickly comes to mind.

Of course, much of the hubris and arrogance was initiated by Netflix’s CEO, Reed Hastings.  When the decision was made to raise prices and change how customers receive value without any consideration to the value of the brand’s “reason for being” and what it represents to people, the value of the Netflix brand was instantly diminished.  Not even a gracious mea culpa from the CEO or promotional incentives will undo the damage done.

The Netflix brand paid an incalculable and heavy price. The lesson for brand managers is clear:

People place higher value and trust in the idea your brand represents– not the physical thing itself.  Before you change the physical thing, make sure the change will not damage the trust people have in the idea and its experience.

It’s not about the thing you make, the service you provide, promote and sell that matters. Netflix customers didn’t care about the “service” provided. They cared about something far more important– being in control!  Without warning or consideration, Netflix took that away from their customers. Bad idea.

This is an important and often overlooked principle in brand management.  When a brand is successful (like NetFlix), it’s because customers value an emotional experience more than a functional benefit. When the brand delivers on the desired experience, trust is earned, bonds are made strong, and brand value grows. Seemingly in the Netflix example, it’s the brand not being loyal to customers, not the other way around.

Function, features and benefits come along for the ride. They most certainly have to be there, but they don’t matter as much as the perception of “use value” inherent in the brand’s promise.

Continue to provide customers with greater “use value” than they pay you in cash value and your brand will always be trusted and command premium pricing.

No doubt about it change is hard. Humans resist change until they absolutely have to. Like a bad habit, you won’t kick it until it threatens your very existence. So it is with changing a brand’s perception in the minds of customers.

Once a customer’s mind is made up about a brand it’s next to impossible to change it. Marketers embarking on the journey of brand transformation must recognize it’s an inside-out process not for the faint of heart.

Brands become what they have proven themselves to be. Mental perceptions are hardened by experience. People can’t form new perceptions without a new experience. Like the chicken or the egg, what comes first?

Brand owners are the first to resist change.

There is a long period of denial before brand owners will change their own thinking. It can take years of sales declines before brand owners will wake up and deal honestly with a brand that is losing ground. This is especially true of iconic brands that once were leaders.

There’s a sense of complacency that cripples organizational action. Long before the cash starts drying up, iconic brands lose relevancy and customers. It’s hard to see this happening in real time. The dynamics of organizational thinking tend to favor the status quo.

If you’re going to change brand perceptions, the process begins by changing from within.

For many brand owners, the default button for changing brand perception is a new ad agency, creating a different slogan or new ad campaign. Truth is, saying it’s so won’t make it so.

Consumer’s perceptions only change through a changed experience. For consumers, experiencing new advertising (assuming they’re even listening) can never be a substitute for experiencing new and more relevant value from your brand.

Meaningful change in brand perceptions first requires honest internal assessment and deep introspection. This is difficult for brand teams to do these days– especially when their performance is judged by management on a quarterly basis. Brand teams hyper-focus on the urgent work (running the business) rather than the important work (creating new value that represents a bigger future).

The first question that requires a solid answer is “what must change within our organization that will enable us to create a greater experience of value our customers will care about”? You can’t begin the journey of changing outside perceptions without internal clarity, confidence and consensus on what defines your brand’s value proposition and why it will continue matter to people. If your brand where gone tomorrow, would anybody care?

There are only two options to consider.

Assuming your brand team has the necessary internal clarity, confidence and consensus about what must change and where the greatest opportunities for success are found, there are only two strategic options available:

1)    continue to invest in the current brand

2)    invent a new brand

There are positives and negatives associated with both alternatives, but both will require lots of time, hard work and money. Let’s take a top-line view of these options.

Continue to invest in the current brand:
If the strategic decision is made to continue to invest and turn around an under-performing brand, one thing must be understood–what created initial success may no longer insure future success. The key to successful transformation is how willing you are in helping consumers “unlearn” the associations they have with the current brand before you embed new associations and create more relevant experiences the target consumer segment cares about.

Iconic heritage brands that have abundant awareness but little relevance with a new generation of consumers are very difficult to change. Managers of iconic brands are naturally boxed in by the heritage the brand represents in people’s minds. Along the way it’s easy to blur the brand’s identity and value proposition attempting to stretch its meaning and value to new consumer segments.

Starbucks is a great example of a successful turn around of an under-performing brand. After twenty years of ubiquitous expansion, the very thing that made the brand great was contributing to its demise. In addition, the brand faced growing threats from unlikely competitors such as McDonalds and Dunkin Donuts who offered more convenience and lower prices. Starbucks responded by changing nearly every aspect of its operations and core store experience from the inside out. Today the brand is once again enjoying the fruits of its leadership position. But it was a very expensive journey.

Invent a new brand:
In the long run, inventing a new brand from scratch may be a more prudent decision than attempting to change customer perceptions of an under-performing brand. This is particularly true if the current brand’s positioning has boxed it into a market segment that has no future.

If the determination is made that the current brand associations by consumers bear too heavy a weight on the brand’s future expansion, inventing a new brand may be the only recourse for a fresh start.

Black & Decker faced this very challenge. As the market for consumer power tools began to get more competitive and saturated, Black & Decker brand owners decided to expand into the construction products market. Of course, the construction professional perceived the Black & Decker brand good enough for sporadic odd jobs, but not the kind of product that could stand up to prolonged, rigorous professional use. No amount of product design or advertising would change this perception.

To enter this market, Black & Decker invented the DeWalt brand. DeWalt has been an enormous success for Black & Decker. One of the benefits of this strategy is the Dewalt brand commands far higher price points. Plus a good part of the market doesn’t even realize Dewalt is even made by Black and Decker (and that’s just fine with Black and Decker).

To enter a new market, it may be necessary to invent a new brand.  By doing so, along with fundamental changes in product functions and features, positioning and pricing that are more attuned to a new target consumer segment, and you may be able to have the best of both worlds.

At the end of the day, there are no absolutes or easy choices. Changing customer perceptions about a brand’s value and relevance is dicey at best.  It’s worth repeating the process requires brand owners have a clear purpose and vision, the determination to stay the course, and lots of time and money.

You’ve all heard the timeless advice “know your customer”. Most marketers agree knowing the customer is fundamental to serving the customer. Basic stuff right? But I wonder how committed brand managers are to really knowing their customer? The very term “brand manager” implies something less that “brand builder”.
In my opinion, to be a brand builder requires empathy for the customer!

Empathy is a powerful tool for gaining richer insight into your customer’s experience at every step in their value chain. Really knowing what influences and drives customer behavior requires one walk a mile in the customer’s shoes. You can’t build empathy with your customers sitting behind the glass in a focus group, or putting them through long complex surveys.

Live the Customer.

Do you live the customer?  Is your marketing organization driven to deeper action toward sharing the customer experience first hand across all touch points.  Marketing organization that have an empathy-driven culture are brand builders, not brand managers. This is an important distinction, and one that has a profound effect on your brand’s competitive advantage. How you get to know your customer, from insight building and evaluative testing, to how you communicate with them in earned and paid media, at shelf, and how you engage with them in post-purchase- are all touch points for engaging customers with greater empathy. You can’t pay lip service to this idea. Empathy must be a core value of the promise your brand makes.

Customers know the real deal from shinola- especially in our current crowd-sourcing, transparent social media landscape. Customer empathy is not a social media activity or a marketing initiative to be executed on.

Empathy is a genuine desire to share experiences and build relationships as a basis for creating greater value in the marketplace. Brand builders engage with customers in real life!

Brand builders seek more than customer knowledge-they engage in a deeper, more personal consumer understanding that better equips them to impact brand growth. Brand builders are on a continual quest for engagement that brings them closer to their customers in ways customers value. Through conversation and observation, brand builders walk the talk. Brand builders know empathy and respect are the keys to earning customer advocacy.

New habits and routines.

Building brand equity through greater customer empathy may require your organization develop some new habits. Developing the mindset for increasing your level of customer empathy can transform your perspective from being a passive observer of behavior to a truly engaged collaborator, from product developer to game-changing innovator.

As you consider ideas and methods for increasing your commitment to developing stronger consumer empathy in your marketing organization, it’s important to remember what you know about your customers becomes the grist for what you do for your customers.

Please share your thoughts.

Dear Marketers:

I’m much smarter than your marketing gives me credit for. I don’t like to be sold… I don’t care about your advertising, your free samples, your promotions, your special offers. I don’t like to be told what’s cool, new, improved, last-longer, smells better, tastes better, or is less filling… I don’t care about your brand, it doesn’t matter to me. I avoid your interruptions to my busy day when ever and where ever I can… I don’t have time to pay attention to your sales pitch… You are white noise to me and I have tuned you out.  I know the real deal from shinola… if you want to be a part of my life, here’s what you’ll need to do:

be honest with me

keep your promises

treat me with respect

provide me with more use value than you take from me in cash value

teach me better ways to grow and expand my life experience

help make my day-to-day easier, lighter, more relaxed and enjoyable

help me to experience greater connection to what’s important to me

Do these things for me and you will win my trust and devotion. Then I will gladly welcome you into my life, and share the value of our relationship with others who are important to me.

Sincerely,

A. Consumer

Authenticity is an attribute that cannot be fabricated or mandated by management. You can’t fool customers into believing your proposition is authentic through ubiquitous marketing. It is or it isn’t. Authenticity is not veneer.

A few months back, a young couple opened a pizza joint a couple of blocks from our office. Every day I notice this little joint is always packed!  Why?  It’s actually not in a great location. The food, though good, is not that special. The prices are not extraordinarily cheap, and they started their little business in the worst economy in a lifetime.

Why are they thriving when other restaurants around them are struggling to stay afloat? Why is this business immune from the unfavorable circumstances that surround it? The answer is simple. It’s the real deal. They provide every customer with an authentic experience of love, fellowship and comfort over a simple meal. The value is in the authentic customer experience, not the meal.  Pizza joints are as commoditized as a business can possibly be, and yet, this one thrives!  I repeat, value creation begins and ends in an authentic customer experience.

Authenticity demands your behavior as an enterprise lines up with your value proposition to customers. Authenticity is yours to lose.

Home Depot is a great example. When Home Depot promised customers “you can do it, we can help” then did away with the experienced, retired tradesman salespeople in favor of cheaper inexperienced labor to save money.  Customers knew the claim was bullshit and the results to Home Depot were disastrous. Customers can smell deception a mile away. You can’t fool customers ever.  Authenticity and value creation are not mutually exclusive. You can’t have one with out the presence of the other.  Authenticity matters more than money.

Strategically based design is how you bake in experiences people really care about. A well-designed customer experience is the main event in defining how worthy your proposition is of the love (devotion) customers bestow on your brand.  Think of it this way, if your brand were no longer in existence, would it matter to anyone?

It is no longer enough to “exceed customer expectations” with product / service, quality and price. In the idea economy, those attributes are now the ante. To thrive in this new epoch we find ourselves in, enlightened marketers are shifting their focus from counting transactions to creating scintillating, dramatic, novel, relevant, transformative customer experiences.

More than facts, process management and functional product or service attributes, value creation is a designed based discipline of creating an episode, an encounter, an adventure, a perception, and a sense that there is greater use value in the experience than in the goods themselves. In leading companies, design is a strategic business imperative, not a decorative act. More than designing artifacts, innovation-driven companies use design as an integrated discipline for creating experiences people love. Experiences are somewhat metaphysical. Enlightened marketers know this, and design the experience to be emotionally rich.  Harley Davidson does not sell motorcycles, Starbucks does not sell coffee, and Herman Miller does not sell office chairs.

Remarkable brands have a metaphysical presence and deep emotional connection with their customers. They really matter! Strategically based design is the why behind the what.

And let’s remember that small companies can be remarkable companies too.  Value creation is an idea that transcends size and scale.  Starbucks is a perfect example how their bigness almost killed their greatness. How remarkable the experiences customers have engaging with your brand, determines how much you matter. Right now, not many people care that much about Chrysler. Do people care about Honda? Probably.

We’re at the dawn of a new economic age, one driven by ideas, not rigid process. The shake-out in our current economy is proof enough that “creative destruction” is a firestorm clearing the way for more innovation in serving people and being of great value to them in their daily lives.  If your value proposition is not of great value to people, it will not be rewarded with existence. This is as it should be.

In what direction is your enterprise headed?