Abhinav Sinha

Holistic Brand Management

In Brand Management, Holism, Systems Thinking on October 22, 2010 at 4:24 am

When someone asks you, ‘what’ would your next car be; ‘how’ do you answer? Would you call the thought process that gets triggered, rational? or analytical? skeptical? emotional? or none of them may be. Or maybe, all!

Whatever your answer to the ‘what’ may be, what I want to dwell upon in this post is the ‘how‘ part!

With my background in a variety of customer centric roles with the automotive industry, this question is also of immense professional interest to me. So, I like taking this personally.

On a number of occasions, my inquisitive self has asked this question to a eclectic mix of audience ranging from friends to family, all age groups and varying social strata. I avoid picking colleagues from auto industry though, and am happy about it!

Most people, come up with their snap second responses. Not just quick but firm and confident ones as well. No one has ever asked me for a KBC style set of four options to choose for an answer. Although, while making a a real purchase decision they probably would take into account most options available, but in this case they just seem to know it.

My next act of devil is when I start getting deeper. I quiz them on the power output that their ‘choice’ delivers. Majority does not have a faintest idea, but they somehow believe that it has to be good! I ask them if their ‘choice’ has an airbag option? a tilt steering? or  electrically operated outside rear view mirrors? etc. The most consistent answer that I have got for whatever choice of the car they have come up with is, ‘I think…’

Then ‘how’ do they answer? How could they be so confident in giving out a name, while virtually having no idea of the specifics!

The answer probably lies in the definition of what we delightfully call a ‘brand’. I researched my sources and stumbled across hundreds of definitions but none more satisfying and complete than this one:

‘A Brand is the costliest real estate; a piece in the corner of a consumers’ mind’.                 

To elaborate further, it is a collective set of perceptions that a consumer carries about a person, product or service.  Although a brand is something that provides an identity to that product, it in itself remains intangible.

This takes me to my answer. ‘How’ do people answer flash question pertaining to their choices. The piece in the corner of their minds shouts the answer out and the mouth just rattles it. All of them seem to have a  holistic perception about the product or service, and that is what drives their opinion. Simple! Rest are just details.

However, what isn’t as simple is getting your name plate up on that piece of estate. Brand managers slog their personal and family lives away in wanting to get their first. While getting there is important, what is even more critical is leaving the right impressions behind.

Management of brands is a highly complex business task. For many brand owning companies, brand value is the key driver for the company’s overall strategy. Though it may be considered from a number of viewpoints, one insightful starting point is to recognise that brand value is linked to ‘preferential choice’ for a brand relative to some other.

Organisations that are system thinkers at large and able to see a holistic image of reality, are concerned with not just the choices that their customer make but also the choices made by other stakeholders like employees and shareholders. 

Choice is affected by a host of factors both internal and external to the business. Most evolved companies, including the one for which I work for, have good tools to manage and control internal operational processes and the cost side of the brand management.

However, in my opinion far fewer companies will have the processes to manage the ‘intangibles’ and other consumer processes that are fundamental to the revenue generating part of the brand management. Competitive advantages in delivering the ‘intangibles’ can create substantial value that will be ‘hard to copy’ for the rest.

These processes could be hugely complex in nature and in the absence of systems thinking and a sharp understanding of the causality between drivers and outcome over time, brand management would continue to be dealt ‘intuitively’.

The dominant business tradition called the ‘spreadsheet thinking’ is designed to isolate key variables in order to reduce complexity using a bottom line focus and linear thinking. Most marketing managers would give their right hand away to trade it for a larger number of ‘spot enquiries’ generated out of a brand activity, while completely failing to mention the ‘long term value creation’ objective.

A balance of short term deliverables along with long term targets for the brand is desirable, but hard to achieve. This is where the opportunity exists.

In my very personal opinion, the key objective of successful brand management is to maximize the population of loyals. Thus brand strategy involves the identification of appropriate management actions to create loyalty amongst its stakeholders.

A brand manager in today’s world need to be cognizant of the fact that retention is as much a part of his portfolio as acquisition is.

The study of brands from the perspective of dynamic system theory is enlightening because it leaves the nature of the brand, especially their holistic and dynamic character, fully intact.

The Game Theory

In Game Theory on September 28, 2010 at 11:51 pm

While driving around the India gate, have you ever wondered why most (if not all) ice cream vendors are stacked together in and around a small patch.  Or that most highway ‘dhabas’ are located in clusters. Or maybe, next time when you fly out do check why various airlines schedule flights fairly close to each other, on a given route!

It comes to me as a surprise why would each one of them choose to operate in a zone of maximum competition. Maybe a possible explanation is that since the cluster is already frequented by a lot of potential customers, it makes sense for a new entrant to logically attach itself to the cluster, rather than someplace else, where he would have to invest in building customer traffic.

The question to be answered is how the clustering begins. What would the scenario be like if there was a unchartered territory and just two players in perfect competition. Does system thinking in any way influence the way, they would approach setting up their respective businesses.

Consider a scenario where the two ice-cream vendors A and B, who have to sell their products at similar pricing for sustenance, have to decide on where to locate themselves on a stretch of road, that will make perfect business sense.

To capture the sense of this example, imagine that customers are smoothly distributed all across the road and brand and price being the same for both A and B, they choose on the basis of sheer convenience and proximity.

 Imagine that the two vendors ‘A’ and ‘B’ start by locating themselves at roughly a position shown above. It now appears to ‘A’, that they have a equitable access to business opportunity, since half of customers located between ‘A’ and ‘B’ will go to ‘A’ and the other half to ‘B’, depending on a convenient walking distance for them.

‘A’ turns out to be an aggressive competitor to ‘B’ and decides to move a 100 meters towards the center of the road so as to gain access to a share of ‘B’ customers while protecting his own share of customers (lying to his left).

To offset this, ‘B’ plays his own counter move and moves 200meters towards the center. Subsequently, ‘A’ moves 300 meters and this continues till both ‘A’ and ‘B’ are located right next to each other, at the center of the road.

Both A and B have created an equilibrium that stays even when a third player C enters the market. C has limited choice, but to locate itself within the cluster for survival.

This is of course until C weighs his payoffs and decides to locate at a niche location and offset the disadvantage by offering a discounted price to the customers. This of course will set up another un-equilibrium which in due course will be answered by the competition A and B.

The study of strategic decisions making process in an interactive environment is called ‘The Game Theory’.

It deals with the situations where people who are a part of same overall system but with different (mostly competing) goals, try to take into account each others’ actions in deciding on the optimal course of action.

The Game theory finds applications in a lot of areas including behavioral science, business and a number of conditions appearing in day to day life including interactive decision making in a competitive environment.

There is a whole lot to delve into when it comes to the game theory. However, for the sake of avoiding complexity, I prefer to punctuate the discussion merely at the juncture of definition itself.

Would be looking forward to build on this discussion further, based on your comments, queries and feedback.

Systems Thinking – Randomness vs Chaos

In Chaos Theory, Systems Thinking on August 16, 2010 at 3:36 pm

Just four articles old, I had already begun to face the writer’s block, till Bollywood came to my rescue. My last movie going experience was both entertaining and a stimulating one. This Friday, I watched the much anticipated, ‘Peepli Live’.

The story deals with the sensitive issue of farmer suicide, served to the taste of the mainstream audience with a dash of humor and satire. What made me mention the movie here is the chain of events that get rolling by a seemingly trivial issue.

For the benefit of those, who have not yet been to the theaters, the farmer brothers in the story are deep in debt, when they pick up the idea of a suicide. They see it as the easiest way out of their woes, as the government would pay the surviving family an amount of 1 lakh as compensation.

Their decision does not seem to change or influence anything big until their story is accidently picked by a local reporter and published. This triggers of a sequence of events that alters political equations both at the state and at the center, sends national media into a frenzy with army of reporters and cameraman camping at Peepli. The village, with all the attention that it is getting, turns into a land of opportunities for everyone from bangle sellers to coffee vendors from nearby areas.

One single event twisted a large part of the previously existing socio-political system. You will have to watch the movie to experience the pandemonium yourself but at the end of the movie I found myself wondering, whether what happened was just random sequence of events or was it chaos?

You might wonder what the difference is, anyways!

Let me bring in another example that almost each one of us would be aware of (even the non movie goers).

In the US presidential elections of 2000, the Palm Beach county supervisor of elections, Theresa LePore decided to make the typeface on ballots larger for Palm Beach voters, because many of her residents were older and had difficulty seeing small print. She did not notice that it now took two pages instead of one, and that could confuse voters about which button to push when they voted.

As a result 19,120 voters punched holes for both Pat Buchanan and Al Gore, and their ballots had to be thrown out. Another 3,407 people appeared to vote for Pat Buchanan, which he himself found most surprising, expecting only a couple of hundred votes. Ms. LePore’s new design caused about 22,000 votes for Al Gore to not be counted. If they had, Florida would have gone to Gore and he would have been the President of the United States. (Source – CNN News report)

Gore in turn would have likely signed the Kyoto protocol on global warming and probably not have declared war on Iraq. Of course, other things would certainly have happened that we cannot imagine.
What do we attribute such an outcome to? Chance, Randomness or Chaos?

Such condition where, small differences in the ‘initial condition’ of a dynamic system may produce large variations in the long term behavior of the system is called the ‘Butterfly Effect’ in the ‘Chaos Theory’.

There is frequent confusion between chaos and randomness. There are some similarities in the nature of chaotic and random system, but there are also some fundamental differences.

A random sequence of events is one in which anything that can ever happen, can happen next. A familiar example serving as a paradigm of randomness is the toss of a coin. Here either heads or tails, the only two things that can ever happen, can happen in the next throw. The probability of throwing a heads on the next toss is the same as in any other toss. Knowing in addition the outcome of last toss, cannot increase our chances of guessing the outcome of next toss.

On the other end, chaos consists of things that are actually not random, but only seem to be. Knowing the initial conditions well, there outcome can be determined by the known laws of scientific enquiry. But their dependence on the initial conditions is so high, that perfect determinism is a practical impossibility.

As it is popularly understood, chaos deals with unpredictable complex systems. Chaos theory studies how these systems, once thought to be completely random, actually contain hidden ordered patterns.

An example of a chaotic system is the weather forecasting system.

Chaos theory as a field of study in mathematics stems, in part, from the work of Edward Lorenz of MIT, a meteorologist, who simulated weather patterns on a computer. Working with a computer having limited memory, after viewing a particular pattern, he wanted to recover the data. He started the program again, except that this time he put in the initial values of temperature, air pressure, humidity etc. rounded off to 3 places after decimal instead of the original 6.

He was surprised to find a completely different result of weather patterns on his computer, than he had before. The sensitivity of initial conditions in a chaotic system is so high. that it is sometimes metaphorically quoted, that even a flutter of a butterfly’s wing somewhere over the deserts of Rajasthan can create a turbulence miles across, over the islands of Andaman!

This is how the ‘Butterfly effect’ has come to become a popular slogan of the chaos theory. If you make a error while dealing with a random system, the effect would be nothing significant as it would only lead us back to randomness. However, effect of small errors in initial condition of a chaotic system could be explosive.

The same principle applies to human society. Tiny changes in one person’s state of mind can, on occasions, lead to major changes in society as a whole. Or simple acts can lead to unintended consequences.
Chaos is important as it helps us to cope with dynamic, complex and unstable systems (like a few described above, including weather forecast) by improving our ability to describe, understand and even forecast them.

Another arena within which chaos theory is useful is that of organizations.

Applying chaos theory to organizational behavior allows strategists to take a step back from the management of day-to-day activities and see how organizations function as unified systems. An organization is a classic example of a nonlinear system (i.e., a system in which minor events have the potential to set off grave consequences or chain reactions, and major changes may have little or no effect on the system whatsoever).

In order to exploit the chaotic quality of an organization, one needs to try to see the organizational shape that emerges from a distance. Instead of pinpointing causes in the organization for organizational problems, the company is better served, according to chaos theory, by looking for organizational patterns that lead to certain types of behavior within the organization.

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