Branded by Design

AutoWeek Design ForumJanuary 10, 2007

My generation grew up dreaming about fast cars and fast

girls. Home-built, souped-up cars were everywhere; fast girls

were…a bit more elusive.

Like most of us in this room, I spent a lot of time in math

class drawing cars. Unlike most of us in this room, mine weren’t

very good.

That is probably why I turned to writing. As some of you

know, William Jeanes and I spent the last couple of years writing a

book—Branding Iron—about one of the things car companies

repeatedly screw up…the creation of great brands.

In it, we go into great detail about brands. Why they’re

critical, how they work, and how you can ruin them. And, on a

more positive note, build them.

That’s why tonight I would like to restate today’s topic. We

believe that to Design for Success you must be Branded by Design.

Because all successful designs begin with knowing who you are or

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who you want to be. Without that clear vision of identity, you will

spend your life looking for a theme.

Up front, be aware that we consider branding to be a business

strategy. This will come as a shock to the herds of business men

and women who believe that branding is a form of marketing. To

be successful, branding must permeate everything a company does,

marketing being but a small part of it.

The alternative strategy is to be generic, a commodity, and to

sell on price alone. Unfortunately, many of Detroit’s brands live in

commodity hell. A position earned over decades and an image that

will not easily be shed.

What most folks don’t realize is that, in either case, to

succeed requires that you be the best at something. If you choose

the generic route, you must be the lowest cost producer.

Choose branding and you must be able to convince people

that you do something better than your competitors. Better.

Otherwise, they won’t bother to remember your name.

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Some of my generation dreamed and schemed about cars

until we ended up in Detroit, working for one of the four

companies that were headquartered here at the time. I started at

Cadillac, a circumstance that I devoutly hope did not contribute to

GM’s deeply-rooted problems.

Our dream has turned into a nightmare, as we watch GM and

Ford dismantle themselves right before our very eyes. And the

trickle-down—or more accurately—the flood effect in the supplier

world has been devastating.

Chrysler is still deciding how much it needs to cut. But let’s

be clear, downsizing is just too polite a word. And admitting that

you are permanently giving up market share doesn’t make you

look like the winner we all want to be, does it?

Now what are the odds that the three companies in the most

trouble in the auto industry all reside in one city?

Is there something in the water? A death wish? Or is it the

refusal to see things as they are that keep them on the slow—and

now not so slow—slide into oblivion?

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How did we get here? The real issue in Detroit is failed

leadership and failed vision. Much of the credit goes to GM golden

paratrooper Roger Smith, who committed the biggest sin of all:

taking revenue for granted. As in we can take cost out of our

products, weaken the brands, disrespect our dealers and suppliers,

and the fools out there will still buy our watered down whiskey.

Ring a bell?

It is unfortunately the period when Detroit slid over to the

dark side…relying more on hype than substance.

A great many leaders have come and gone since Roger

Smith, but unfortunately much of the flawed thinking remains.

To be fair, the auto companies are swallowing some tough

medicine right now. And the local press seems to be upbeat about

the prospects for meaningful change, particularly at GM. Progress

has been made with the UAW and legacy costs, discounts have

been reined in, worker buyouts have gone well, new and improved

products have been launched—GM just swept the Car and Truck

of the Year awards, and GM is even sporting a longer warranty to

tout its newfound quality.

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Lord knows that we want the Detroit companies to succeed.

Yet, there is an unsettling feeling that we’ve heard it all

before. Remember that not one executive working at GM today has

been part of a team that led GM to sustained US market growth.

GM has been steadily losing market share since the ‘70s.

When Rick Wagoner joined GM in 1977, GM had about 44%

market share. When Bob Lutz joined GM, he said his goal was to

grow market share back up to 30% in four years, by 2005. GM just

closed 2006 with 24.3%, down from 26% in 2005.

As market share has dropped by almost 50%, the number of

brands in the portfolio has inexplicably increased by two—

standing now at 8.

By the way, Rick felt that our book, Branding Iron, was

wrong in every respect and told us not to stay up late waiting for

his testimonial. His dissatisfaction with us just may be the best

testimonial of all.

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As market share has inexorably declined and manufacturing

capacity outgrown demand, we downsize, but never change our

basic approach.

Permit me to vent for a moment. Contrary to the rivers of ink

that have been wasted on decrying the expense issues that Detroit

faces, let’s be clear. A car company finds itself under water

because it has lost the ability to attract more and more customers.

The major issue is the inability to grow revenue. In Detroit’s case,

it’s getting whipped in the marketplace, plain and simple. And we

believe that a failure to understand branding or to execute it

properly is the root cause.

So where to begin? Start by seeing the world as it is…over-

served.

Oddly enough, my favorite example is wine. The world is

awash in fine wine…wines from every corner of the world. It is a

great time to enjoy wine, but is it a great time to be in the wine

business?

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Supply outstrips demand in virtually every industry. In the

car business, we have the capacity to build 24 million units a year

more than the global marketplace wants.

We see examples of jam-packed markets every day. Why is it

so hard to accept? And what does living in an over-served world

mean?

It means that revenue is king. The first, the very first

fiduciary responsibility of a Board of Directors is to insure the

generation of Revenue. Not manufacturing, not engineering, not

finance, but Revenue.

We naturally gravitate to the Expense side of the profit

equation because the Expense side of the equation is rooted in

buying things, and when we buy we call the shots.

On the Revenue side, life is not so orderly. Here, those pesky

customers are the buyers, they are in control, and we hate that. And

we also hate that there are always competitors that might be doing

one heck of a better job attracting these customers.

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The hallmark of living in an over-served world is the

phenomena of too much choice.

We all know the misery of choice. Like when we go to the

supermarket to buy dog food only to see 20 or 30 choices staring at

us. Don’t get me started on sorting out consumer electronics, but

look at how Apple has set itself apart and made choosing them

simple.

Ironically, today’s more choice is in fact less choice. How

can this be?

The car business has undergone tremendous proliferation and

fragmentation. You can now pick from more than 40 brands. In

1995, buyers could choose from 256 models. In 2007, there are

316 models with more coming every month. In a good year, we

used to see 25 new model launches. We are now moving to 45 to

60 new car launches a year. Just takes “special” right out of new.

There’s lots of choice, but not bloody much of it is really

different.

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Customers are not being offered clear, meaningful choices;

they are being offered overlapping and “virtually the same”

choices. Customers are rarely given the clear choice between

chocolate and vanilla. Instead, they find themselves choosing

between ten flavors of vanilla…old fashioned vanilla, vanilla bean,

country vanilla, French vanilla—well, you get the picture.

This sea of vanilla is the result of forgetting our simple

alphabet lessons, as in D comes before E, or Desirability comes

before Efficiency. It is also the result of our herd mentality—

looking at our neighbor, seeing what is hot, and copying, copying,

copying. Much of this is brought on by fear of being different, and

fear of failure. Frightened executives have taken a dreadful toll on

our industry.

So how do you set yourself apart? In our rush to succeed, our

thinking goes directly from cutting expenses to developing hot

products. Funny, but we have missed an important step here.

Branding.

Not badge engineering.

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Not new ad slogans like The Road Ahead, Bold Moves, New

Doors Opened, or Reach Higher. When I hear all of this I feel like

a character in Charlie Brown listening to adults…Wah, wah wah,

wah wah wah wah.

Not building five different branded vehicles off of a single

mid-size SUV platform—including a Saab.

Not spending five billion dollars to rebuild Cadillac and then

dropping the Northstar V8 into the Buick Lucerne.

Not believing that you can build a Ford car off of anyone’s

platform—Volvo, Mazda—and just skin it to look like a Ford.

No, all of that is an attempt at the art of the Flim-Flam; it is

not branding.

Back in 1961, this is what a Ford looked like and this is what

a Lincoln looked like. Compare that to today.

So what is a brand?

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Our definition of a brand is…a promise wrapped in an

experience. A promise. The best promises are clear, compelling,

show commitment, are personal, and kept.

This definition also serves as an interesting test.

Can you name the promise made by Toyota? BMW? Land

Rover? Of course you can.

How about Buick, Mercury, or Mitsubishi?

The brand promise drives everything you do. The best brands

deliver their promise in a carefully-orchestrated owner experience.

Hence, branded by design.

We created a device called the Brand Triangle, which allows

you to look at a brand in the same way that customers experience

it.

Cutting to the nub, the Brand Triangle illustrates the inter-

dependent relationship between the product, the brand image, and

the retail experience…all of which are overlaid by a company’s

culture. Simply put, how do they work together?

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Think for a moment of Starbucks. Good product. Good

image. Comfortable surroundings and pleasant counter people—

and a culture determined to make you enjoy your three-dollar latte

whether you want to or not. That is stockholder value.

If we were all dealing with one brand, life would be a lot

simpler. But through growth and consolidation, most of you are

dealing with multiple brands. And that is where so many

companies get into real trouble.

Brand portfolios have advantages. But know that building

one world class brand is difficult enough. Building a world-beating

portfolio of brands is exponentially more difficult. And trying to

juggle 8, 10, or 12 automotive brands is impossible.

Portfolios allow you to attract new customers who are not

interested in your first brand—to enter a new market of customers.

And like all good financial portfolios, they spread your risk. Notice

that both of these are aimed at increasing revenue in both good and

bad times. Much further down the list would be synergies, a

homogenizing concept that is internally focused and has come to

mean share more than you should and hope no one notices.

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The best portfolios have brands that have no overlap, appeal

to entirely different markets, can work globally, and spread the

risk. They are usually comprised of one supermarket or mass

merchandise brand and one or more niche or specialty brands.

To extend your reach into different markets with multiple

brands, the brands should have different target markets, different

competitors, different products, different marketing, different…

you get the point. Too often they are the same brands in slightly

altered clothing.

Developing overlapping brands is the worst of all worlds, the

proverbial triple threat. You double many of your costs, barely

expand your appeal, and you create competition for yourself.

Tragically, both GM and Ford market overlapping, poorly

differentiated brands. They suffer from SDC.

What is SDC you ask? It is trying to market the Same Damn

Car under multiple brands. Or trucks.

We always thought that the assembly line referred to building

cars, not designing them. If you look at GM’s and Ford’s

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performance, you can only conclude that fewer and fewer people

are being fooled.

As we think about Branded by Design, let’s concentrate on

three critical ingredients…Focus, Authenticity, and Courage.

Even the casual observer knows that the key to success in an

overcrowded market is focus.

The brand that every automaker on earth is chasing is Toyota.

Until recently, Toyota has essentially flogged one brand

worldwide. Even counting Lexus and Scion, it would have only

three brands.

Perhaps the clearest example of focus is tiny, single-brand

Porsche—which accumulated the financial resources to buy twenty

percent of Volkswagen…in cash.

You remember Volkswagen—the company that spent the

better part of two decades buying up every loose brand on the

European continent. And which got itself so confused it tried to

sell the public on a $70,000 luxury Volkswagen.

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This is why we recommend in Branding Iron that Ford, for

example, should focus all of its energy on only three brands. That’s

three brands worldwide. We would sell or shut the rest.

What was behind our thinking? Was it just to sell more

books? No, it was simple observation on how things work today.

Nobody asked to play 3 sports, either simultaneously or

sequentially, can ever compete with somebody who devotes all his

efforts to one sport. That is why 99.99% of all pro athletes compete

in only one sport. The level of play is just too high to compete on a

part-time basis. Just ask Michael Jordan.

And that is Toyota in a nutshell. They play one sport, the

Toyota Way.

We firmly believe that the Ford-Volvo-Jaguar trifecta we

recommended would allow Ford to concentrate its talent and

resources. Focus them on what could be a successful effort to have

Ford displace Toyota as the world’s most desired brand. Clear the

deck of having to build three average vehicles off each platform

and instead put those resources toward building world-beating

Fords. Which in our mind is far more attractive than writing

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creative press releases that try to make reducing market share

sound smart.

As we apply focus to the task of setting ourselves apart, we

need to ask ourselves one more question about something that is

becoming increasingly important:

Are you real, authentic, and genuine?

In our contrived world, authenticity has become increasingly

more desirable. Think about the cars you would like to own. My

guess is that they all come from authentic brands. Brands like

Porsche, BMW, and Ferrari. Authenticity applies to mass

merchandised products as well—such as the Chevrolet Corvette,

the Ford F150 and Mustang.

Like you, customers seek authentic brands, brands that stand

for something. When you’re surrounded by so much that is fake

and phony, authenticity brings with it a cachet of trust. And more

important, it generally says good things about the people who buy

authentic products.

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One of the most interesting characterizations of Brands I’ve

come across was developed by Jonathan Hill & Ian Hilton at

WCRS/London. They believed that brands fell into one of two

categories: Conviction or Confection.

Conviction brands are developed by companies with a strong

point of view on products and market. Their inspiration for product

development comes from within. Their goal is to lead consumers

where they want to go, unlock latent consumer needs.

They felt the quote from Akio Morita of Sony epitomized

conviction brands. “Our plan is to lead the public with new

products, not ask them what kind of products they want.”

Confection brands enter the market with a blank sheet of paper.

Consumers dictate their point of view and ultimately the product,

which not surprisingly end up as a Me-Too product. Marketing

becomes the only source of product differentiation. Any brands

come to mind?

Of course there is always a catch. To be authentic requires

that you know who you are…and that you like who you are. You

enjoy the challenge of perfecting your own act, working each day

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to become a better you. All of us derive maximum satisfaction

from building something that is real. You know it, and I know it.

We have all worked with leaders who have the knowledge to

build great brands. But like the lion in the Wizard of Oz, they

lacked one thing: courage.

Every day our courage gets tested. How many times have you

sat in a meeting and bit your tongue instead of speaking out? And

if your response is that’s what our culture expects, then you have

some serious issues to think about.

To stand out, you must first stand for something. It is as true

for you as a person as it is for brands. In our world, this takes real

courage.

In my career I was blessed with being mentored by two great

designers…Dick Teague and Tony Lapine. One was gentle and

one was rough. Confident individuals, they both exemplified

courage everyday.

It takes courage to see differentiation for what it really is—

discrimination. Starting with your customers, you must

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discriminate. Choose the ones you want to buy your product and

forget about the rest. Most auto executives are congenitally unable

to do this.

It takes nerve to build cars like the Jaguar C-XF and Lincoln

MKR for many reasons. Not the least of which is that they make

the current lineups look borrowed, or old, or both.

It takes courage of the kind that tamed the Old West. Those

folks, the inventors of branding, weren’t intimidated by a life-

threatening environment. They were well-armed mavericks who

weren’t afraid to pull the trigger.

We must learn from them knowing that in a me-too world,

success demands an appetite for risk. Count on it.

Let me close with one of my favorite cowboy quotes.

“You can choose to run with the herd or you can set out to

run the herd.

One makes your mamma proud; the other don’t.”

–Marvin “Sidewinder” Abernethy

Thank you.

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