Figuring out Enterprise Winners And Losers
The differences in the performance of Apple and Amazon compared to Radio Shack, Toys-R-Us and Blockbuster in the same economic environment raise the question of what made their fate so different. Why would an ATM like Blockbuster go under while a $ 1,000 investment in Apple in 2008 would be worth over $ 7,000 at the start of the great recession in 2018? Toys-R-Us, an established, innovative retailer, fell apart during this time. In the meantime, a $ 1,000 investment in the experimental startup Amazon would be worth over $ 20,000 at about the same time in 2018.
Was it a great brand? The winners Apple and Amazon as well as the losers Radio Shack, Toys-R-Us and Blockbuster have or had great brands. Was it scale? In his day, Radio Shack was the world's largest telecommunications retailer with thousands of retail stores. Toys-R-Us was considered a "category killer" as the world's largest seller of toys with thousands of retail stores. Blockbuster used a sophisticated computerized inventory management system to become the dominant distributor of video entertainment, even with thousands of retail stores.
Was it a great distribution? In their day, Radio Shack, Toys-R-Us and Blockbuster were strong retailers.
Was it superior marketing? Radio Shack, Toys-R-Us and Blockbuster carried out strong advertising and sales promotions. Radio Shack advertised during the Super Bowl and filled pages of newspapers with advertisements for its products. With Blockbuster Rewards, Blockbuster offered a very powerful customer loyalty program based on a highly developed customer database. Toys-R-Us created an iconic "spoke animal", Geoffrey the Giraffe.
Was it access to capital and other resources? All three companies, which have since been liquidated, had significant cash flow and access to investment funds. In fact, all three were acquired more than once in some cases.
Then what's the difference between a business winner and a business loser?
While there is no doubt that the happiness of being in the right place with the right product at the right time plays a role in success, the real difference is in the ability of managers, including marketers, to have positive NPV products to create and marketing campaigns. Product innovation without a positive return leads to failure (see DeLorean). Good advertising without a positive return will not be successful (see Kodak). There is no doubt that quality, innovation, creativity and execution are important. Marketing is important. However, a company cannot be successful without the discipline of positive financial results.
Corporate strategy and marketing strategy are about finding positive opportunities for cash value. It is not as easy as it seems. If it were that simple, there would have been no colossal failures by some of the largest and dominant companies in the past.
Innovative ideas can fail in two ways. The most visible mistakes are those that have been brought to the market to no avail. Mistakes that come with good ideas that never come to market are more insidious because they lack the resources and management support to implement them.
ContriBranding Strategy Insider: David Stewart, Professor of Marketing and Commercial Law at the President of Loyola Marymount University, Author, Financial Dimensions of Marketing Decisions.
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