February 6, 2010

When your past is brighter than your present

Posted in Branding, Current Events at 9:03 am by R

I’m currently reading Jim Collins’ Good to Great. Which is a really great read.

If you haven’t read the book, here’s the premise: Collins’ asked the question “What takes a company from being just good to great?” He proceeds to do an exhaustive study of companies examining their success over decades, identifies a point of transition followed by a period of success 15+ years (sustained success). He compares these companies to those that performed at or below market value during the same period of time.

Collins does a great job of finding parings that are remarkable in their comparisons, which makes the findings in Good to Great all that much more interesting and impactful.

But…(you saw that coming right?)…there’s a catch. Collins’ book was written well before 2008. Why is that significant? Well, all of these companies did well before the humongous crash our economy took that year. And this is exactly why Collins’ inclusion of FannieMae and Circuit City as two of the success stories is so darn interesting as I read this book today.

There’s a chapter called the “Hedgehog Concept” in the book. One of the chief objectives of the Hedgehog Concept (there are three parts) is to identify what you can be the very best at. Guess what FannieMae said…”Assessing mortgage risk.” HA!

Also in the Hedgehog Concept chapter is a section  on identifying your strategy for being most profitable. Guess what Circuit City said…” Measuring profits by region not by store.”

It’s interesting (funny) because the same thing that Collins empirically identified as making these companies successful — GREAT– is the EXACT same thing that caused them so much trouble in the recent economic tumble.

Obviously, FannieMae wasn’t as good at assessing mortgage risk as they thought they were — or at least not under a certain set of conditions. What’s worse their perceived ability to assess mortgage risk is sort of the impetus for oh so many of the issues that happened with the “Great Recession.”

Circuit City’s profit loss by region is probably an accurate indicator of how the recession impacted every area of the U.S., since their strategic profit model was not to measure by store, but by region. As household dollars shrunk and discretionary spending cutbacks eliminated purchases like TVs, computers and other large home electronics, you’d better bet Circuit City suffered losses in the exact same order that regions across the U.S went into recession.

All of this leads me to my own question:  what do you do when your past is brighter than your present? Well, in the case of  FannieMae and Circuit City, maybe don’t go tell people to read Good to Great, but the executive suite, probably ought to pick it up and read it!

Part of any recovery is going back to basics. Circle back to the beginning and re-evaluate, re-affirm what were the things that generated success, shaped your brand and put you on the path to great.

All brands ought to do this at this point in time I think. There are but few Cinderella stories coming out of the financial and economic crisis and everyone needs to take an honest look and say, “This is what we did well.” and “This is where we really fell down.”

Because the new business normal IS change, it’s even more critical for businesses to adhere to their brand promise. Customers need something they can trust when so many things are changing. Your (the business) unwavering promise to be true to your brand is something people can rally around and come back to no matter what else changes.

Unfortunately for FannieMae, the turn of events is such that I don’t know if they’ll ever recover from the fall out. Their brand trust was so damaged in all this that it may be quite a long time before the taint of this recession and their significant role in it will wash away.

Circuit City, however, was a casualty of the recession…a victim of the times. A lot of people talked about this recession having a positive effect in that it purged the economy of weak companies. I don’t believe that Circuit City falls into that category. They were, as I said about FannieMae earlier, a company whose strategy and success were not tested under these circumstances, the result being that the strategy obviously didn’t generate success under these conditions.

Anytime a company suffers a set back, be it financial, a scandal, a product recall (Toyota I’m talking to you), or some other event that jeopardizes your outlook, it’s time to reassess. Nothing is so valuable as adhering to your brand promise. No matter what has taken place — STOP REACTING! Go back and proactively assess who you are REALLY, identify how you somehow abandoned the brand promise and state exactly how you’ll avoid doing that EVER again.

Let boil it all down to one famous phrase: If we do not learn from history, we are doomed to repeat it.

~R

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