Chief Strategy Officer, Issue 21

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Adidas: The Power Of Music In Branding T H E

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How Culture Impacts Branding

How Digitalized Is Our World?

In order to achieve success globally, brands need to focus on their local presence and accelerate growth by learning cultural aspects of their audiences /8

We look at how emerging and developed economies are benefiting from the rise of digitization, and what it means for society /10

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Brand Strategy Innovation Summit September 15 & 16, 2016 | los angeles

Speakers Include

+ 1 415 604 3777 sblunsdon@theiegroup.com theinnovationenterprise.com

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ISSUE 21

EDITOR’S LETTER Welcome to the 21st Edition of the Chief Strategy Officer Magazine

A successful business is one that builds an efficient internal strategy by objectively assessing its weaknesses and strengths, but it also keeps an eye on external factors that may affect business performance. The ability to distinguish threats is particularly important, although it is not so easy to develop.

Occasionally checking on what competitors are doing is useful, although companies shouldn’t see every competitor as a threat and they shouldn’t assume that every new entry in the market is a disruption.

Even though a competitor may appear intimidating by launching a similar product or service, it’s critical not to act rashly when making a decision on how to respond.

It’s also important to consider what constitutes real disruption. The term was first introduced by Harvard Business School professor Clayton M. Christensen, who defined it as an innovation that allows upstarts to build a completely new market by offering simpler, cheaper products or services, at a lower price than the incumbent,

thus becoming more appealing to a customer and replacing them.

Once you properly understand the threat, a company may respond in one of three ways. It may start thinking about pivoting its strategy, it may try adapting the same methods and principles as a competitor, or it may assume that it is better to double the effort on the existing products or services. If any of those scenarios appear after a new entry in the market, it indicates that a company identified it as a potential disruption.

As always, if you have any comments or would like to submit an article, please don’t hesitate to contact me at anastasia@theiegroup.com

Anastasia Anokhina managing editor

It is necessary to appreciate that not all ‘threats’ are the same. Often, when companies start thinking about their response to a competitor, they may make a decision that will harm a business, simply because a ‘disruptor’ was wrongly identified. Instead of allowing the fear of disruption to take over, it’s worth taking a step back, measure the risks, re-analyze the company’s position on the market, and only then, come up with new approaches and an alternative strategy.

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Chief Strategy Officer Summit

September 6 & 7, 2016 | Sydney

Speakers Include

+ 6 128 310 4943 dwatts@theiegroup.com theinnovationenterprise.com

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contents 8 | HOW CULTURE IMPACTS BRANDING

In order to achieve success globally, brands need to focus on their local presence and accelerate growth by learning cultural aspects of their audiences 10 | HOW DIGITIZED IS OUR WORLD?

We look at how emerging and developed economies are benefiting from the rise of digitization, and what it means for society 12 | CHALLENGES FOR MARKET LEADERS IN 2016

Startups now hold more influence in business and innovation, and large companies need to adapt to the fact that ‘big no longer means better’ 15 | WE NEED MORE FEMALE ENTREPRENEURS

18 | ADIDAS ORIGINALS: THE POWER OF MUSIC IN BRANDING

Adidas is moving away from sportswear and now enjoys huge success as a streetwear and hip hop global fashion brand. Charlie Sammonds investigates 20 | NEGATIVITY ISN’T ALWAYS A BAD THING

The ability to say ‘no’ in business is critical and shouldn’t be treated as rude as it can often prevent a project from failure, argues Allie Laurent 22 | THE DIRECT-TOCONSUMER MODEL IS TAKING OVER THE WORLD

With internet usage increasing, it is now easier than ever to create a buzz around a product or brand, and e-commerce brings many opportunities for retailers

More female entrepreneurs are needed as role models, with systematic prejudice and a lack of confidence still holding women back when it comes to setting up their own business

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| assistant editor charlie sammonds creative director chelsea carpenter | contributors emma taylor, harriet connolly, frank lampen, managing editor anastasia anokhina josie king, allie laurent

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Krispy Kreme introduced a doughnut culture to the UK, by playing on the British understanding and appreciation of American culture

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How Culture Impacts Branding Emma Taylor, Strategy Commentator

The world’s economy is rapidly merging into a single market, and companies may underestimate the importance of a locally-orientated brand strategy because they focus too much on their global performance.

However, in order to succeed globally, brands must just consider the local aspect. Businesses are becoming increasingly concerned about how to run a global, yet localized business. So how can we achieve this?

Some countries may be more interested in specific brands, although, if there is an absence of authenticity, a brand strategy risks failing. Trying to convince consumers overseas that a particular brand’s products are beyond cultural barriers is a big mistake. Brand strategy should adapt to cultural differences and portray a product as a good alternative, rather than something similar. For one country, a breakfast bowl of cereal may look normal, but it doesn’t mean that the

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same can be applied throughout the world. Weetabix Food Company, for example, exports breakfast goods to more than 80 countries, and this diversity creates a bigger chance of failure as brand strategy needs diversification. While some products, such as phones, TVs, and other home appliances may stay the same, the food and drink market, for example, is much more culturally specific. Thus, Weetabix’s CEO, Giles Turrell, believes that Weetabix needs to convince countries like, Kenya, that their product is a good alternative to the breakfast food that is already there.

It’s also important to understand customers’ preferences towards global and local brands. According to data acquired by Nielsen, nearly 75% of global consumers listed brand origin as a key purchase driver in 2016. Patrick Dodd, Group President at Nielsen Growth Market, said it was surprising to discover that consumers are influenced by the origin of the brand even more than they are by quality and price of the products.

Data also shows that local brands win over global ones in many categories related to the food and drink market.

However, there are also examples of global brands succeeding overseas because they are foreign.

The US Krispy Kreme doughnut brand managed to expand overseas, /8

by keeping its American heart. The brand introduced a doughnut culture to the UK, by playing on the British understanding and appreciation of American culture. They also aimed to encourage UK consumers to practice the communal experience, where doughnuts are bought in boxes and shared in a group of friends or coworkers. The marketing campaign included ‘give aways’ of gift cards that gave holders a box of 12 doughnuts every month, intended for sharing.

The outcome was positive and the UK welcomed Krispy Kreme to the market.

Culture is the main aspect that brands need to work with in order to achieve a global success and retain their strong positions locally. John C Jay, a president of global creative at Uniqlo, rightly pointed out that the idea is to have a space devoted to culture, that is unique and relevant and brings something back to the community.

Chief Strategy Officer Summit

September 7 & 8, 2016 | shanghai

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+ 852 5808 1636 ryuan@theiegroup.com theinnovationenterprise.com /9

how digitized is our world?_

Harriet Connolly, Head of Strategy

Strategy&’s econometric analysis estimated that despite the uncertainty in the global economic climate, digitization has already provided a $193 billion boost to the world’s economic output, and created 6 million jobs globally in 2011. The positive impact of digitization is uneven due to differences in the state of the economies of developed and emerging markets. Developed economies enjoy the impact because it improves productivity and usually has a measurable effect on growth, but it also affects the job sector, creating a high demand for cheaper labor. Emerging economies are driven by tradable sectors and exports, therefore, digitization improves their employment rates, but has a slower impact on their economy growth.

To get the most out of digitization, it has to be diffused within both the economic and social sectors of the nation. According to the Digital Index, calculated for the United Nations Commission on Science and Technology, out of 150 countries, only 58 are at the advanced stage of digitization, and nearly 60 were placed on the limited stage of digital development.

In the corporate environment, the influence of new digital technologies

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and the Internet of Things is capable of providing sustainable growth. Gartner Inc. research suggests that 75% of businesses are going to be digital by 2020. There are, however, difficulties in digital implementation, such as affordability and complexity in its adoption, which puts many businesses at risk of becoming isolated and not capable of catching up with innovation.

There is some good news coming from developed economies, as emerging technology will be able to speed up

the transformation. There are hopes that the appearance of 5G connection will streamline the transmitting of the even larger amounts of data that is needed for connected intelligence and better performance of the digital devices. It is rumored to be launched in 2018, although the real impact of it would not be visible until 2020.

Digitally connected devices are capable of creating a connected society, and as a result, we may have cities and countries, where almost everything is digital. Dubai can potentially become one of those cities and according to his Highness Sheikh Mohammed bin Rashid Al Maktoum, it will be the smartest city in the world by 2017. Sensors are already embedded throughout the city and will connect utilities, urban transportation, energy, entertainment, policing and even politics. Such improvement is predicted to produce an added value of $4.7 billion by 2019.

Digitally connected devices are capable of creating a connected society, and in a result, we may have cities and countries, where almost everything is digital

There are not many ways to escape digitization, as neither businesses or societies want to become obsolete.

However, digitization is creating as many challenges as it is opportunities, with the business world having to adjust to the new digital routine fast enough so it doesn’t suffer from losses, regulation changes, or legal challenges. According to the World Economic Forum, there is an overall 10% increase in the digitization index amongst countries, which can result in a 0.75% rise in GDP and a 1.02% drop in unemployment. However, there may be job losses amongst the roles that will be replaced by digital services. The job market will have a chance to recover, though, as new software industry roles will be needed to maintain those digital services and create new ones.

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Challenges For Market Leaders In 2016 Frank Lampen, Co-Founder Independents United

Have you noticed how many of the best new products of the last few years have been created by new companies? From drinks brands like Innocent, Fever Tree, Brewdog, and Brooklyn Brewery to financial services apps like Osper (in which we proudly hold an investment), Mondo and Atom, today’s most exciting brands are new companies, not established heavyweights.

There is no doubt we are living in an age of disruption and in 2016 the biggest challenge to market leaders remains the startup, the entrepreneur, the revolutionary new challenger with / 12

the power to reshape whole markets with new innovative products and services.

Whereas once-upon-a-time market leaders would have been able to simply stamp out this threat by pouring money into the development, distribution and marketing of their own new products, in today’s world this is no longer a viable strategy. Incumbent advantage is declining in a world where big no longer means better.

In 2016, there are a number of key ways startups are challenging Goliath corporations.

1 Market Access We’ve seen huge disruption in the journey from manufacture to purchase.

In the past, the tie-ups between big consumer goods companies and a small number of mega-retailers made it hard for new brands to get on the shelf, the rise of online channels and the hard work that Amazon and other logistics companies have put into solving the challenge of shipping globally has made it easier for small brands to reach a big audience.

2 Better Infrastructures One of the reasons you’re likely frustrated with your (big) bank is that they typically run dozens of separate systems which barely connect to each other – the person you’re talking to might be able to see your current account, but they are unaware of your credit card statement, your years of being a great mortgage customer and the multiple savings and insurance products you have.

In contrast, the opportunity to create a ‘greenfield business’ built from scratch, often enables new players to eliminate the huge costs of running complex infrastructures with which many established players are burdened, and at the same time enables quantum-leaps in levels of service. New players have agile, unified systems that can see the whole picture in one place – they know as much (or more) than you yourself do, and so are able to anticipate and meet your needs much more easily.

3 Better at meeting consumer needs The traditional corporate structure has proved itself an utter failure in looking after the interests of consumers.

Mis-selling of PPI insurance by the banks, the horsemeat scandal in our

food chain, VW’s deliberate cheating of emissions tests… the list of failures by big corporates is long and getting longer.

Meanwhile, founder-led businesses are uniquely placed to meet what consumers are looking for right now in the brands they buy. Elon Musk’s mission to build the best car, the Brewdog founders’ commitment to making great beer, and Osper’s desire to see young people empowered to make smart money choices through taking on responsibility at a young age – all of these inspire a trust that big listed corporate entities have shown they can’t generate and in many cases don’t deserve.

So if this trend of new innovation happening outside of the corporation is going to continue, what should the big corporates do about it?

Many corporate boards turn to acquisition – BBVA bought the US startup bank Simple, while Coca-Cola bought Innocent, and craft brewers from California to Camden Town are being snapped up at a rate of knots. But this is no easy route: being absorbed into the big corporation might very well kill the special sauce that lies behind the startup’s success, and retaining the founders who created and stand behind the brand can be really difficult in the medium term.

One solution is to adopt more of a venturing and partnership approach rather than a straight M&A model.

It’s become a hot topic, and models which have long existed in the technology space, like accelerators and corporate venture funds are now spreading into sectors like retail and consumer goods.

on many fronts, they likely still have considerable assets which can be tabled alongside the energy and agility of startups to create mutually beneficial approaches.

An example of this is the Distill Ventures accelerator we created for Diageo. This sees Diageo contribute technical expertise, knowledge of regulations and product specifications, insight into global drinks trends and cash investment to entrepreneurs who bring unique ideas, brands built around a genuine purpose, and innovative thinking in how to build communities around those brands.

Other corporate venturing programmes we’ve consulted on have enabled travel companies to access exciting new services to enhance the customer experience, while we’ve also worked with companies who have deep R&D resources and many valuable – but unused – patents which are now being offered to startups who are creating powerful and purposeful brands against them.

Getting these deals right can help big corporates play an active role in the new economy, participating in growth opportunities, adapting their resources, and leveraging them in new ways.

Big corporates can become the engine of great brands, innovative products, and breakthrough services – but this comes through adopting a partnership model where providing growth finance and access to huge customer bases creates viable pathways for entrepreneurs to reach global scale.

One of the benefits of this approach is that it can prompt an honest appraisal of what the big corporation is good at, and what is best done by entrepreneurs and startups.

Although big players face challenges

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we need more female entrepreneurs Josie King, Strategy Observer

So long has Hillary Clinton stalked the halls of power and pervaded the public consciousness that it’s easy to forget that her nomination for president is a truly historical moment for gender equality. She has not so much broken through the glass ceiling as she has fired a cannonball through it, and the idea that she could be the leader of the free world by the end of 2016 has the potential to signal a seismic shift in gender roles for future generations.

However, as much as it feels like a big moment, there is still tremendous inequality across all aspects of society, especially in politics and business.

This is particularly reflected in the tiny number of female entrepreneurs.

In the Independent’s article ’20 best cities in the world for female entrepreneurs’, Chicago ranked number one, with 30% of startups

launched by women. And that’s the best in the world. By the time you get to London in 11th place, that number has fallen to 18%. Relative to the percentage of female CEOs in the Fortune 500 of course, which stands at just 4%, 18% is a veritable tidal wave, so in some ways I suppose you could say it’s a positive.

The number of female-owned businesses is, however, growing. While the financial crisis sparked a sharp decline in the number of American businesses, falling 3.8 million between 2007 and 2012, women-owned businesses rose by more than 27% during the same period. According to a Global Startup Ecosystem Ranking report, the number of new businesses started by women went up by 80% in the past three years.

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This adjustment is necessary for the economy. New research by Facebook estimated that the UK alone is missing out on a potential £10.01 billion boost to the economy by not tackling the challenges facing women who want to start their own business. If a mere fifth of potential female entrepreneurs were empowered to start their own business, the UK would benefit to the tune of more than 340,000 new businesses and 425,000 jobs.

The reasons for the disparity are complex and deep rooted in unconscious bias. The Facebook research found that one in ten women want to start their own company but don’t feel confident to do so. Sociologist Sarah Thebaud ran experiments last year asking participants to evaluate a mixture of mundane and innovative entrepreneurial pitches. Some were told that women led the ventures and others that men were in charge. She found that when it came to business ideas, those led by women were rated as ‘generally less viable and less investment-worthy than those described as spearheaded by men’ by both female and male respondents.

They also ‘systematically perceived them to be less competent and/or skilled than their male counterparts.’

This was found to change when it came to more innovative ideas, though, with women considered ‘more competent and skilled–and their businesses more worthy of support– than their less innovative female counterparts.’ The response to men / 16

was the same. Thebaud concluded that: ‘This finding suggests that when a man proposes a business idea, he can typically expect others to respond on the basis of a simple risk-benefit calculation, the kind any venture capitalist might make when deciding whether to help finance a project.

But when a woman proposes the same idea, she can expect others to simultaneously be looking for cues that she, in fact, possesses the types of skills and traits needed to make a venture a success–abilities she’s often assumed to lack because of her gender.’

This is evidenced by the lack of capital available to females who run their own businesses. Companies started by women and those with female CEOs receive approximately 50% less investment than those run by men.

Just 3% of start-ups to get venture capital funding in 2014 had female CEOs; a clear hinderance to any women looking to start a business, and a fact likely to put many off even trying.

Correcting this is no easy task. One obvious way is to get more women into venture capital, as currently, just 6% of global VC partners are female, although that Thebaud’s study showed both genders to be guilty of preconceptions about women’s abilities suggests that this may not be as beneficial as you’d initially think. What’s needed is a whole scale change in the way we see both

women in business, and the business itself. Women need to be encouraged to start their own business and shown that they will not be held up, and investors need to appreciate that business does not need to fit a masculine model to succeed.

There are a number of programs attempting to empower women to start their own businesses. The AltheaImperial Program is a personal and professional development program aimed at women studying at the UK university, Imperial. They run a series of workshops for women designed to help develop enterprising ideas, with tailored one-to-one mentoring.

Facebook has also launched the SheMeansBusiness initiative alongside the British Chamber of Commerce and the Federation of Small Businesses, which is a platform with advices, online learning sessions and workshops for potential female entrepreneurs.

Ultimately, women need role models and trailblazers. Female entrepreneurs like Michelle Mone are now prominent media faces, and inspirational for young women looking to start their own businesses. However, such women are still presented as outliers.

A female president would obviously go some way to showing that anything can be achieved. It is likely to be a slow process, but the sooner it can be expedited the better for everyone.

Strategic Planning Innovation Summit

october 19 & 20, 2016 | london

Speakers Include

+ 44 203 868 4215 sblunsdon@theiegroup.com theinnovationenterprise.com

Adidas Originals: The Power Of Music In Branding Charlie Sammonds, Assistant Editor

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If you found yourself in Manchester over the weekend of June 18th, you would have been amongst nearly a quarter of a million Stone Roses fans. The streets were lined with giggoers, sporting bucket hats and track jackets as a throwback to the band’s heyday of the late 80s and early 90s.

What was striking, though, was the sheer presence of Adidas Originals in the city. Almost all Stone Roses merchandise on display featured some

variation of the Adidas Trefoil logo, and anyone not wearing classic Adidas trainers stood out.

A subsidiary of the sporting giant, Originals has become synonymous with Adidas’ close relationship with musicians and music scenes stretching back decades. However well their sponsorships have fared on the pitch, the field, the court, or the track, Adidas has always managed to

stay on the right side of cool, and the brand has arguably found far greater success in its musical endorsements than its sporting ones, particularly in the US. When an area of music picks up a brand, it keeps it relevant, and for years Adidas have been the beneficiaries of the music scene’s fascination with its clothing.

In 1986, the story goes that Adidas executive Angelo Anastino attended a Run-DMC show at Madison Square Gardens, following years of his company supplying the hip hop outfit with endorsements. When the group dove into their hit ‘My Adidas’, tens of thousands of teen fans held their Adidas sneakers aloft, and the following summer the brand launched a Run-DMC sportswear line. Cited as the birth of hip hop sneaker collaborations, the tale may in many ways be apocryphal, but Adidas’ links to hip hop in the US are as real as they are profitable.

Adidas’ much-lauded collaboration with Kanye West is perhaps their most high-profile to date. More rooted in fashion than in music, West’s ranges sell out almost instantly, with pairs of Yeezy 750 Boost sneakers selling on Ebay for a sum in the region of £1,500 ($2,200). Exclusivity is, after all, a sure-fire way to guarantee interest regardless of quality of design. The collaboration has been such a hit that Fortune ran a piece entitled ‘Can Kanye save Adidas?’ and the resounding conclusion is that poaching him from Nike was one of the brand’s major strokes of genius of recent years.

In the UK, Adidas has been associated with far more musically than just hip hop. There’s a reason that Stone Roses frontman Ian Brown, along with Adidas aficionado Gary Aspden, flew 17 hours to visit a veritable cathedral of retro Adidas sneakers, owned by one man in a backstreet part of a Buenos Aires suburb - the footwear helped define his era.

Adidas (particularly the sneakers) was unfortunately associated with the casuals movement in the 80s, which

is itself inextricably linked to football hooliganism. Around the same time, though, the fashion was picked up by the likes of Brown and later Oasis’ Noel Gallagher, both wildly famous for their looks as well as their music.

Fast forward 25 years and the current shining light of Adidas’ effect on music is grime’s Stormzy. The UK MC’s release schedule correlated exactly with a 40% rise in Adidas’ brand trend last year, with one video alone picking up over 33 million views to date. You won’t find a Stormzy video without a heavy Adidas presence - some 70 million views. The details of the arrangement between the two aren’t public, but with Rita Ora’s Adidas deal worth £1.6 million in 2015, it’s safe to assume the Croydon-born MC is profiting well from an endorsement that he himself seems to have cultivated.

Adidas Originals has become the fashion side of the giant’s business.

But, thanks to its ubiquity, it has grown larger than its sports division in many people’s minds. Many now see Adidas as first a hip-hop, streetwear, and fashion brand, rather than a top sports performance apparel manufacturer - a dangerous road for a sportswear brand to go down. Attempting to straddle both more explicitly than the likes of Nike, Under Armour or Puma will be a struggle, and musical collaborations are just one of many branding techniques Adidas will need to employ if they’re to keep up.

The three-striped giant is currently struggling in the US. Associated with soccer, it has fallen behind both Nike and Under Armour in terms of actual sports products sold, and it may be emphatically losing the sneaker war to the former. Even so, with Manchester’s streets lined with vendors selling Trefoil-adorned merchandise - official or otherwise - in an attempt to grab a piece of the much larger pie that is musically endorsed streetwear, Adidas is alive and well.

Editorial Credit: Radu Bercan / Shutterstock.com OlegDoroshin / Shutterstock.com

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NEGATIVITY ISN’T ALWAYS A BAD THING What does NO mean to your company?

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Allie Laurent Strategy Writer

Whether it’s a business decision or something related to everyday life, saying ‘no’ to something can be difficult. Even the most confident person may hesitate or feel insecure about, for instance, changing a decision or reversing someone’s idea.

However, the ability to stay strong is critical for decisionmaking and is a part of the successful business strategy. So why is it often so hard to say no?

The hesitation exists at every company level, from junior positions to the C-suite, but saying yes to everything will cause nothing but problems.

With each request or proposal, it’s important to acknowledge what’s important and what’s not. Often, human factors may not let us make the right decision because we believe we should always be nice to people or we may want to give a second chance to that project that has been in the development for too long. In fact, saying ‘no’ has nothing to do with a bad attitude, it is simply a prioritization.

It’s a good sign when colleagues make requests from people in the workplace as it shows they trust others and recognize their skill. Such belief in others should be appreciated, but it doesn’t mean every request should be granted. No matter how capable or talented the person is, additional work may lead to failed promises or burnout from trying to please everyone. As a result, the trust may disappear quickly and more problems will be created.

Saying ‘no’ in a business context, will seldom be taken as rude and those who can manage their time effectively through being selective over their projects are often the most successful overall. It is not simply in the ways that people take on tasks or communicate with one another, but also how innovation is managed.

When it comes to innovation projects, ideas cannot just be ‘good enough’, they must be disruptive. There are projects that have got potential,

but they need a kick. Let’s imagine the R&D department where one of the developers pitches a new idea during a meeting. The leadership team shows its interest in the new product, but there is no certainty that the investment will pay off. Instead of abandoning that idea, the executives say ‘no’ for the moment, but mention that it can become a ’yes’ if product improves according to the company’s strategy. This then drives teams to work on their idea to make a better product in the future, increasing the potential for the product to be a genuine game changer.

There are cases where these kinds of projects are green-lit simply because significant amounts time and money have already been spent. Thinking like this is a recipe for failure because a product is introduced to the market that is likely to be raw, not as well thought out and won’t produce value for consumers.

meaning the duties would have to be transferred elsewhere. Avoiding risks is a safe bet, but it won’t progress the innovative drive of the company. The company may well avoid significant disruption, but ultimately it will be losing out on the potential that the new marketing system will bring in the long run.

Saying ‘no’ is obviously not the answer to every problem. It’s a tool that can stop a company from making an important strategic decision based on gut feeling alone and those who utilize rejection within a company effectively are likely to reap the rewards in the long term.

There must be a careful balance maintained in decision-making, and rejecting someone’s idea for short term cost savings as it may cost you in long-term profit. Let’s imagine another situation, where a member of the marketing team proposes to use a new marketing platform which requires the bulk of the manager’s time during implementation. After considering all sides, the Head of Marketing decides to say ‘no’, because sacrificing the manager’s duties and focusing on the idea with no reliable forecast is not safe. Any project is time-consuming,

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The Direct-ToConsumer Model Is Taking Over The World Anastasia Anokhina, Managing Editor

Our shopping experience may never be the same again

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Both retailers and consumers rave about the efficiency of the direct-toconsumer (DTC) approach which is gaining prominence in e-commerce.

So what are the reasons for choosing the DTC model over a traditional instore or distributor one?

With the strategy being a relatively new one, we have to bear in mind that brands are still experimenting with it.

While some are currently having more success than others, sooner or later, the future of retail may well revolve around it. One of the reasons why the model has become popular is that consumers have become increasingly aware of the inner-workings of the retail business model and its markup scheme.

In terms of sales, the math is quite straightforward: items purchased at traditional retail outlets usually have a markup of 400%. That means that the $1,500 leather jacket in a store would cost around $300 to produce. After adding a modest 100% markup for the sake of designers, it is then being topped up by another 150% markup on the final price tag.

One of the advantages of the directto-consumer approach is that entrepreneurs can avoid investing in brick and mortar sites, rent and hiring staff. The internet has always been a cheaper and in some senses, a more convenient place for retailers and consumers. It has seen a huge increase in the numbers of direct to consumer models not only from a monetary perspective, but also in the sense that one of the key aspects of a distributor/retailer model is that they create the buzz around the product and the producer only needs to create the product itself. With the increased use of the internet, it is now easier to bypass this and create buzz around a product or company. Through basic approaches like social media marketing and even gaining popularity through crowdsourcing sites like Indiegogo or Kickstarter, direct-toconsumer companies have found that they can create their own buzz and demand for a product.

A pioneer of this model is Warby Parker eyewear, a brand which could be considered as one of the most successful examples of a company using the DTC business model.

Warby Parker was founded in 2010, a time when the US eyewear market was operated as a nearmonopoly concept with one large company controlling pricing. Using a DTC strategy, the brand managed to undercut the bigger player by aggressively using its direct-toconsumer strategy. It beat the rival's prices which led to a reshaping of consumer opinion on how much a pair of glasses should cost. That's not all, Warby Parker also managed to create a strong social message by donating one pair of glasses for each pair sold. Dozens of brands attempted to use a similar approach, but most of them have not had the same kind of success.

twice about buying from them in the future.

In order for the DTC movement to continue to grow, brands need to champion their strategy. While new brands will continue to flourish, established companies need to be patient because it may take some time to integrate the model into their business routine. It changes the dynamic of how a company operates, but can have significant results if it is done right.

So does it mean that the directto-consumer approach only suits particular brands? No, not necessarily, it just needs to be done correctly.

When it comes to strategic planning, it is important to look at all relevant elements. In order to make the model work, there must be the right 'value'.

There are two types: one lies in a good product at a fair price. The other is the value that derives from cultural credibility, trends, and other intangible factors. Brands that want to survive and succeed by using the direct-toconsumer approach must apply a good blend of both.

Another element is that supply chain and customer experience need to be at least at the same level as traditional retail models. Bike manufacturer Canyon recently fell foul of this when switching to a new factory and software system, with customers complaining about missed orders, slow manufacturing times and frustrating customer service. It seems that the worst is over and they are back to the point they were at, but the reality is that it did significant damage to their brand and made people think

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