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Is Your Brand, Organization Being Marginalized?

Corporate + Strategy

What is Marginalization?It is best described as what happens when a host of internal and external factors combine to transform a dynamic, profitable and growing company into a marginal player that merely keeps pace, or worse, falls behind. It afflicts companies old and new, large and small, and as noted, can happen either over night or over a period of several years.

This article looks at companies and industries through the lens of marginalization. It also discusses the warning signs of marginalization and explains how a strategic communications process can help companies avoid it, or deal with it.

The CauseFrequently, corporate success is the precursor to marginalization. Success often breeds complacency. Typically, internal changes occur that cause the company to lose its edge and its hunger for learning.

Bureaucracy creeps in. Decision-making slows to a crawl, and more time is spent participating in endless meetings than on identifying evolving customer needs and marketplace shifts. Without this input, product development stagnates, effective marketing initiatives are impossible to undertake and the organization engages in endless self-justification.

Externally, your industry moves forward. Competitors commercialize new products, introducing value-added services or new technologies that signal their vitality and momentum.

Many companies in today’s ultra-competitive global economy go from existing at the center of their universe to the periphery, moving from “big players” to “bit players.”

The Impact of SocialConsider the following scenario….

For years, your company’s revenue and profits have grown. Interest in your stock is high and the media reviews are favorable. Employees are energized and motivated. Your company’s product, service or technology is the industry standard and no one else can touch it.

It’s subtle. Or is it? In some companies, marginalization can happen almost overnight. In others, it is a slow, “stealth-like” process that becomes visible on the corporate radar screen only when it’s too late to be reversed.Regardless of the speed at which marginalization occurs, however, the velocity of change in technology, regulatory and general business environments has caused it to take hold in many unsuspecting companies. Whenever your organization finds itself caught up in this dynamic, a strategic communications process can provide a framework for dealing effectively with or sidestepping marginalization.

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Then suddenly, your growth slows. Unbeknownst to you, a competitor is flooding social platforms with talk of a better product. But you don’t know that. You’re thinking maybe consumer tastes are shifting. Maybe market or product saturation has taken hold. Maybe the competition is merging or acquiring new technology.

Whatever the case, your sense of progress halts. Your options are limited, and cost reduction is paramount. Employees lose their conviction, focus, and ultimately, enthusiasm. The media stops calling and security analysts seem to create a cottage industry of questioning your prospects for the next quarter and beyond.

Implausible? Or is it too familiar for comfort?

Well, it’s certainly the latter if in recent years you’ve worked at Burger King, Yahoo!, Lenovo or in various other industries. When a company is insulated from its market, it fails to listen to its important constituencies because, somewhere along the line, it stopped building or maintaining those relationships, stopped asking itself the tough questions, and instead, began rationalizing market and organizational changes as “blips” that would correct themselves.

Meanwhile, it’s likely that at least one competitor is commercializing new products, introducing value-added services and developing new technologies that underscore its vitality and momentum.

Companies to watch...Burger King, which has long occupied a position as the second-fiddle alternative to McDonald’s, has never successfully positioned itself distinctively in the fast food industry as much more than that. Its signature burger, the Whopper, is under-leveraged and frequently discounted in promotions – a dead give-away of a company facing marginalization.

Rick Munarriz of Motley Fool identified Burger King’s strategy as principally consisting of mimicking McDonald’s. Burger King has come up with its own version of the Egg McMuffin breakfast sandwich, popcorn chicken, McCafe and, most recently, the McRib sandwich.

“It’s obviously deliberate,” Munarriz says, adding that the approach is one of riding its competitor’s promotions by offering customers the same experience. “Burger King is making no bones about it. It’s trying to copy McDonald’s. Again,” he concludes.

It seems like it wasn’t that long ago that Yahoo was synonymous with innova-tive technology and unfettered growth. In reality, it wasn’t that long ago that Yahoo was the king of the technology hill… until Google came along. Before

Yahoo knew what had happened, Google squashed it in the search game. Creativity ground to a halt and the company took on so many initiatives – as evidenced by a frenetic, unfocused home page – that employees and customers alike lost sight of what Yahoo stood for.

For a time, Yahoo was a revolving door of CEOs. In 2012, the board made a high-profile choice in plucking Marissa Meyer from Google. She joined Google in 1999 as employee #20 and its first female engineer. She worked her way up through the ranks to become Vice President for Local, Maps and Location Services before leaving for Yahoo. She has settled in quickly and set about rebuilding the company through a series of acquisitions, most notably Tumblr and Summly. Recent rumors suggest it is considering acquiring video site Hulu [as of 6/1/13] and local check-in site Foursquare [as of 6/8/13].

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According to a story in Wired.com, Mayer is “broadening, not narrowing, Yahoo’s scope, cementing its once passé reputation as the original Internet portal.” The moves seem counter-intuitive for a company that appeared to have lost its way and in need of redefining itself. As Wired.com points out, “Yahoo’s mission creep is a useful case study in why web companies like Google and Facebook continue to grow their functionality.”

It’s all about access to web users, as Wired explains, which is how Google and Facebook are minting money. “The most valuable information,” Wired continues, “is hoarded in proprietary databases that can only be assembled if you’re a portal, or at least look like one.”

In other words, rather than retrench, Mayer set out to grow Yahoo aggressively to be able to go toe-to-toe in the search space again. Whether Yahoo succeeds on this tack remains to be seen, but Mayer and her team are not standing idly by allowing Yahoo to continue to be marginalized.

Industries to watch...AirlinesIn the months and years following the September 11, 2001 attacks that involved four wide-body passenger aircraft from two major airlines, the industry struggled for profitability in the face of tightened airport security, increasing fuel and labor costs, and reduced business travel. To the latter point, the increasingly sophisticated and easy-to-use remote meeting opportunities now available with the Internet and various vendors, often eliminates altogether the reason for as much business travel.

The solution for most carriers was to cut back perks, shrink the size of jets they fly, make it harder to use frequent flyer miles, squeeze more seats into each plane by reducing seat pitch (the distance between seats) to the point of near-torture for most people, charge baggage fees, and a host of other irritating practices.

Bankruptcies followed bankruptcies, which in turn were followed by mergers and acquisitions: Delta bought Northwest, United acquired Continental, and most recently American and US Airways merged. These unions are already creating additional discomforts for air travelers in the form of further reductions in aircraft size, fewer flights between fewer city pairs, and further staff cuts. All told, what once was a pleasurable experience has now become all too often something to be endured.

As the Wall Street Journal summarized in a recent article, “There are three kinds of airlines now: full-service, international network airlines like United, Delta and American; lower-fare, lower-fee value carriers like Southwest, JetBlue Airways and Virgin America; and ultra-low-cost, high-fee carriers like Spirit Airlines, and Frontier.”

Note that there’s no mention of “quality,” “customer experience,” or “customer-centric behaviors” in that list. It’s all about costs.

Allegiant Air is a noteworthy newcomer because it represents another model that may prove successful in this cutthroat business. Allegiant is making its mark by flying from secondary airports that the major airlines have abandoned. They’re also charging comparably higher fares, as well as a range of fees. If the newly reopened destination doesn’t prove profitable quickly enough, Allegiant stops flying there. Its business model is all about profitability. Period.

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PharmaceuticalThe pharmaceutical industry represents an unusual case where an entire industry is highly susceptible to marginalization, primarily as a result of the tremendous up-front investments it requires, intense global competition, consolidation, government scrutiny, and public cynicism.

In recent years, big pharma has found itself dealing with serious issues ranging from inadequate pipelines and expiring patents to class-action lawsuits and failed drug launches. The result is that the industry is seeking relief through mergers, acquisitions and the wholesale divestiture of portfolios and product lines. Many are still struggling to regenerate their own pipeline, which will continue to represent a significant challenge, both from a cost standpoint as well as talent acquisition and retention.

Against this backdrop, the industry remains vulnerable and volatile.

NewspapersThere’s likely no industry that has been more marginalized than print news media. During the past 10-15 years, the numbers of major US daily newspapers that have folded have become too numerous to count. (Even two of the venerable newsweekly magazines, Newsweek and US News & World Report, have ceased publication, though both maintain shadows of their former selves on the web. Time magazine is teetering.) Where nearly every major city in the US once had at least two dailies, only Boston, Chicago, and Los Angeles have two, while New York has three.

The Internet stole newspapers’ richest source of revenue: classified advertising. But, it was more than just ad dollars that killed dozens of major newspapers. It was the societal trend away from print media. Younger Gen Xers and Millennials, who have never known a world without the Internet, had long been accustomed to getting their news and information online, while the older generations comprised print news media’s primary audience. The former audience is growing, while the latter is shrinking: a formula for marginalization and, ultimately, disaster.

In April 2006, Jay Smith, President of Cox Newspapers, was quoted in Business Week: “It wasn’t supposed to turn out like this. The world changed a lot. Newspapers changed a little.”

The industry has stabilized of late, with most major publications successfully rolling out some form of pay-as-you-go web presence to try to appeal to younger readers and sustain cash flow. The Wall Street Journal has been particularly successful in this venue. Electronic tablets like the iPad have also opened a new platform many major papers have been quick to adapt to with unique electronic versions designed especially for them--distinct from both their paper and web versions.

Still, it’s questionable how long the model can survive as the costs of running news gathering organiza-tions continues to rise in the face of declining revenues, especially considering that advertisers are not beating down the doors to advertise on newspapers’ web sites, nor paying the kind of rates on the web that print versions once commanded.

Who has turned it around?Even when the circumstances are dire, many companies have demonstrated an ability to emerge on the “other side” of marginalization. The key is how they did it: by recognizing the practices that enabled them to prosper to begin with.

It’s hard to recall, or even believe, that Apple was the quintessential marginalized com-pany. But, it was – and it nearly went out of business in the mid-1990s. When CEO John Scully had a falling out with founder Steve Jobs in 1985 and fired him, a string leadership

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changes failed to relight the fire that once was Apple. Once the luster as the hip alternative to Microsoft wore off, Apple was simply a second-tier competitor, with an oddball, non-MS DOS/Windows product.

And then, Jobs returned in 1997. Apple once again emphasized creativity, resulting in the company’s unpredictable re-emergence. Apple pulled off the amazing feat of repeatedly creating blockbuster products; including the iPod, iPhone, and iPad, all while it ingeniously promoted the user-friendliness of its computers versus the more staid competition.

The upshot is that while Apple was once the favorite of artistic types, today all kinds of people – even businesses – have converted to Macs. As much as any non-apparel or beverage company in recent memory, Apple is a lifestyle.

Despite the rebirth and meteoric rise of Apple, Jobs’ untimely 2011 death hints at the company’s vulnerability to marginalization once again. CEO Tim Cook may be one of the sharpest operational executives around, but he has neither Jobs’ magnetism nor creativity, and it remains to be seen whether he and his team can sustain the magic for long.

Critics are already pointing out that the well of groundbreaking new products the world had grown accustomed to under Jobs seems to have dried up. Since his death, the company has only introduced improved versions of existing product lines, but no hits on the order of an iPod, iPhone or iPad. Samsung and Google are nipping at its heels, grabbing market share in smartphones and tablets, all the while poking fun at the Apple aura in their advertising. Cynics suggest that Apple will coast on the momentum it built in the previous decade while its competition surpasses it with more creative products.

McDonald’s is another rare example of a company that has been marginalized and then emerged from marginalization. In fact, it provides a promising example of the vulnerability of every company. McDonald’s has a long history of losing focus, attempting all sorts of odd products, letting cleanliness lapse and embarking on misguided ad campaigns.

In recent years, however, McDonald’s is focused. When it lost its way through a series of disjointed new product introductions, it returned to its roots by stressing founder Ray Kroc’s original QSCV formula (Quality, Service, Cleanliness and Value), without exception. Meanwhile, most of the company’s food experimentation is less “innovative” (brats and tacos) and more consistent with core customer lifestyles (salads and chicken nuggets).

By staying true to its focus, McDonald’s proved its ability to stave off marginalization. But the effort never stops. In the last quarter of 2012, the company turned in three consecutive months of year-over-year lagging results, causing concern among analysts.

Who has turned it around?When IBM sold its PC Division to Beijing-based Lenovo in late 2004, the handwriting was on the wall: Lenovo was poised to become one of the true technology giants of the 21st century. Initially, though, the writing on the wall read, “help!”

Why? For one thing, the PC market wasn’t the unstoppable growth-force it once had been, and the competitive environment was, and still is, intense. Plus, Lenovo had been dogged by reports of unreliable supply. And, the company’s marketing was lackluster at best.

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Truth is, the company’s entire fortunes now rest on its aggressive strategy to re-energize its PC sales and market strategies by broadening its offering and linking a series of devices to attract highly lucrative enterprise customers, most particularly with its new ThinkPhone, which it expects will transform it into the “smartphone of choice for businesses.”

The company, which already has a strong foothold in China’s smartphone market, is expected to roll out its Android-powered smartphone line into the United States in 2014. That’s a bold move, considering the mixed success that LG, BlackBerry HTC, Motorola and Nokia have encountered against the dominant duo of Apple and Samsung.

The key that Lenovo has identified is to integrate the ThinkPhone with its ThinkPad laptop the same way that Android and Apple platforms link across devices. According to an analysis in CNET.com, “A Think-Phone would fit right into Lenovo’s device offerings of laptops, desktops, servers, and mobile monitors… Finally, Lenovo could tie it all together by offering its ThinkPhones to companies in bulk, right alongside its laptops and desktops as part of a package deal.”

Who has turned it around?JC Penney offers an instructive case in point. As the new century dawned, this venerable department store chain was without a clear image in the marketplace. In the midst of a field that included the likes of Target, Macy’s, Sears and Kohl’s, each with its own corner of the retail world, Penney’s struggled for a unique niche of its own.

As its revenue and market share continued to slide, the board took a gamble in 2011 and hired Ron Johnson, the man largely credited with the design and launch of Apple’s retail stores. The assumption seemed to be that Johnson could transfer some of the magic that made Apple Stores the most profitable retail chain ever.

The trouble was Penney’s was not selling the same kind of upscale lifestyle merchandise – iPods, iPads and Mac computers – to the same demographic niches as Apple Stores. Its established customers had built their loyalty to Penney’s on the basis of regular sales, promotions, and quality merchandise. In one of his first acts as the new CEO, Johnson dispensed with all that had made Penney’s what it was, doing away with coupons and sales, all in an effort to redefine the brand experience.

Johnson also did away with test marketing of his new concepts, explaining that they never did test marketing at Apple. After some 18 months of seeing the new store design fail to reverse sliding revenue, profit and market share, the board let Johnson go and brought back his predecessor, Myron Ullman, who immediately sought to return Penney’s to its former style of sales and promotions – but not until he’d had posted in a full-page letter to customers in major metropolitan newspapers, apologizing for Penney’s having lost its way. The jury is still out on JC Penney and whether it will return to profitability and come back from the abyss of marginalization.

Who has turned it around?BlackBerry, creator and purveyor of the phenomenally successful self-named line of mobile communications hardware, established the standard against which all future such devices would be measured. The ubiquitous BlackBerry was in every serious businessperson’s hand, virtually round the clock, to the point where people confessed to being addicted to their “CrackBerry.” It was the only way to stay in touch while away

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from the office, both through mobile telephony and email. Nearly every IT department in the major corporations established the BlackBerry as the only acceptable mobile device.

Then, seemingly out of nowhere came the so-called smartphone in the visage of Steve Jobs standing before a rapt crowd of Apple fans on January 9, 2007, at the annual MacWorld conference in San Francisco, introducing the iPhone, a Mac OS-based device that stood the mobile communications world on its ear.

The iPhone quickly established itself as the market share leader (though recently it has given up some share to Samsung’s Galaxy and Motorola’s Droid). Meanwhile, BlackBerry was slow to react and has since struggled to recapture its mojo. The BlackBerry, despite regular product updates, couldn’t compete against the iPhone and the new range of capabilities it gave its users, further pummeled by Google’s Android platform. Gradually, IT departments began to allow iPhones and Android-based phones, too, and there was no turning back.

Some thought they had seen the last days of BlackBerry. But the company has made dogged efforts to reinvent itself in the face of the fierce competition, introducing two next generation high-end smart-phone models – the Z10 and Q10 in early 2013 – with plans for a lower end version later in the year.

According a Credit Suisse analysis, “The challenge of a newcomer… into the high-end [smartphone] segment is that consumers here seek a powerful computing experience and ecosystem across smart-phones, tablets and PC’s, or they desire the highest quality specs on a device… The BlackBerry device, while positioned in this segment, offers neither, and as such we believe there is only limited room for their share.”

BlackBerry has bet its future on its ability to reverse its continuing market share slide. Share in the first quarter of 2013 based on product shipped placed Google’s Android platform (used on several different manufacturers’ phones) at 75%. Apple’s iOS (exclusively on iPhone models) had a share of 17.3%; Microsoft’s Windows phone had a 3.2% share, and the BlackBerry platform was fourth with 2.9%.

Strategic communications = process, dialogue, learningThe good news is that marginalization need not be terminal. It can be avoided at best and, at worst, treated. But how? A key component is a strategic communications process that monitors and tracks both the internal and external environment.

The communications function is as much about bringing news and perspectives into the company as it is about delivering the company’s messages externally. Communications serves two key functions:

1. An early warning system that can protect companies and provide them with the “real world” intelli-gence and insider knowledge they need to withstand the vagaries of an ever-changing marketplace

2. A momentum builder that harnesses the energy of the organization to provide a steady, unified

voice both inside and outside the company.

Spotting the early warning signsHow many companies can predict with certainty where their fortunes will take them? Probably none. Communications, however, is one of the disciplines best equipped to help companies ensure they’re heading down the right path.

The challenge is for corporate communications to be practiced strategically. WCG has created a checklist to help guide companies through the process:

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• First and foremost, can you articulate where your company is headed strategically? Has management developed and articulated a clear vision and direction for the company? Is progress regularly measured?

• Second, do your employees understand and support the corporate mission and business priorities? Even more importantly, do your managers and supervisors understand their roles in today’s information-driven environment?

• Do you know what the internal dialogue is? Are you shaping it through face-to-face, print, electronic and broadcast channels?

• Does your organization allow disagreement and debate in its search for “truth” and “understanding?”• Is the media calling you and covering you? If so, what are they asking? What are they writing about? If

they’re not covering you, whom are they covering? And what are they saying?• Do your marketing and business executives say anything publicly? If so, are their messages consistent

with the company’s direction, or just reflective of the specific forum at which they’re appearing?• What about your customers? Do they believe in the organization? How do you know?• What about the competition? How did they react to your last new product announcement? Just as

important, how did you react to theirs?• Does your company have anyone devoted to long-term issues and opportunities?• What do analysts and shareholders think of your company? Its management? Its prospects? What do

they think of your competitors?• Are you prepared to handle a crisis?• Are people being measured against where the company is going, or where it’s been?• Take a long, hard look at your organization. Have you stopped distinguishing yourself?• Has your company slipped into a commodity-marketing mentality, selling on price?• What about structure? Can you make decisions quickly?• Are communications people reporting to the right person (the CEO)?

Consider how you answered each of those questions. If your response was either “I don’t know” or “no” to most of them, then you might consider re-evaluating the role of strategic communications in your company.

Signs your company is in trouble1. Talking about what you know vs. what you don’t

2. Innovation is now a PowerPoint, not products.

3. Cost cutting is an event, not a process.

4. Decisions are based on assumptions, not data.

5. “Let’s change the name of the company.”

6. “We need a new logo.”

7. Media Monitoring lets you see the past not the future

8. No one is talking with you; they are talking around you.

9. Customer knowledge comes from written surveys.

10. You are communicating to a workforce and consumer base that doesn’t exist.

11. Goals and objectives are broad in scope, with few if any specifics.

12.Restructuring is seen as the solution.

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Specific steps to avoid marginalizationGreat companies are never content with the status quo, and they are never out of touch with their key publics. This is critically important in an age where a stray comment at a trade show in Brussels can cause a fluctuation in your stock price instantaneously.

Based on our firm’s work, there are specific steps that strategic communicators can follow to help their company avoid marginalization:

1. Stay plugged into reality, not your own rhetoric…the case for analytics

Employ analytics on a regular basis listening and discerning what your key communities are saying. Translate the data into actionable insights to drive decisions. Work to position communications as a strategic, behavioral function that’s integrated into the management process of the business. This starts at the top by having your senior communications officer report to the CEO.

2. Focus on outcomes vs. outputs

Rethink the purpose and values of communications to the organization. Strategic communications is seen more as an enabler of people, processes and systems. In this role, communicators become more of a consultant to management, ensuring alignment and consistency for building organizational momentum.

3. Expand your aperture

Open new channels to obtain insight. Consider using a 40 percent rule, where more than 40 percent of your communications staff ’s information comes from functions such as HR, IT, finance, operating divisions, marketing, sales, R&D, distribution and customer service. Seeing the work through their eyes and using the data will help the organization avoid inertial lethargy by providing and sustaining fresh insights that keep the internal audience informed and up-to-date about critical issues confronting the organization.

4. It’s about relationships, not connections

Understand that communication’s most valuable role is to build and maintain relationships inside and outside the company. Only two-way relationships allow for open and honest dialogue that can be turned into information, insight and action. Nurture those relationships and keep them fresh.

5. The power of “voice”

Take advantage of technology to open up dialogue within the organization and give employees a voice. That especially includes using it to listen more closely to employees to better sense their concerns, and learn what excites and motivates them.

6. Measure, measure, measure

Appreciate the importance of research and measurement, but always focus on measuring value vs. measuring effectiveness. Use the insights gleaned from measurement continually to refine and adjust content, context, cadence and channels to assure continuing connection with the internal audience.

7. See the business first, always

Communicators should be business people first by understanding the drivers of the business and the management models utilized to lead the business.

Communications can spot the formation of storm clouds or the beginning of a rainbow.

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Companies that use this keen perspective to help navigate the organization can help it avoid marginalization and become or remain a leading 21st century company.

Companies that successfully confront or prevent marginalization have one thing in common: communica-tions has gone from a purely functional activity to one that is a critical tool of business leadership.

At these companies, communications has the support and commitment of senior management, and they rely on a strategic communications process to make sure their focus is clear and that there is alignment with the company’s direction, its managers, employees, customers, and other important constituencies.

ConclusionThe true measure of whether your company is marginalized or faces marginalization begins with two questions:

• How are people characterizing my company?

• Is it managing its future with a mindset of the past, or is it a vital organization where people are constantly challenged and energized by their impact on the company and its success?

As history has shown, the companies that use communications to their competitive advantage are the ones most likely to succeed.

To paraphrase former General Electric CEO Jack Welch, when it comes to reinventing, revitalizing and reenergizing our organizations, “We have to do it ourselves or our competitors will do it for us.”

WCG’s Corporate and Strategy Group is the organizational communications consulting practice for WCG, a leading independent, global strategic marketing, digital, and corporate communications firm*. The mission of the WCG Corporate Strategy Group is to advise and assist organizations in effectively addressing reputational risk, change management, innovation, product supremacy, and brand leadership. The group offers distinctive expertise in culture transformation, strategy implementation, CEO transitions, leadership positioning, internal branding, M&A post-merger integration, labor-management relations, advocacy and issues management, internal communications improvement programming, investor relations, training and development, and employee worldview research/measurement through a proprietary combination of analytics, management outreach, employee engagement and strategic communications.

For more information, please contact Michael Estevez at mestevez@wcgworld.com or 646-503-4750.

* WCG is a unit of W20 Group, a network of complementary firms offering integrated communications, marketing, business and technology solutions focusing on product supremacy, brand reputation and organizational excellence.