Waiting for the uplift

I once had a flatmate who was a pilot. He used to fly these ridiculously small planes in and out of crazy airstrips throughout Papua New Guinea. Every take-off, he used to tell me, was almost literally a leap of faith. You barrelled down a ramshackle runway in the middle of the mountains, literally fell off the end and waited for the winds to pick you up.

He used to come home from an assignment, throw his bags on the couch, and announce, “So far, so good”.

For some reason, I thought about Simon today as I read this article about the fall of Martha Stewart Omnimedia (MSO). What a long way down. In 2005, Martha Stewart’s publicly listed company was worth north of $1.8 billion. Since then, the stock has plummeted a whopping 88%. Now it looks like it may be up for sale – maybe even revert to private ownership – at a fraction of its peak worth. Sure, they’ve been some contributing factors to that – conviction for Stewart herself and of course the small inconvenience we all know as the GFC – still, that’s one hell of a fall from grace. A fall that, according to one analyst quoted in this article has left the company “undersized, underfollowed and undervalued”.

Moral of the story? There are probably several. But let’s focus on one: the myth of the sustainable brand. Sustainable in the sense that it is perceived as self-perpetuating and self-sufficient. Capable of continuing to run on its own. Endlessly.

But strategy, as the great Vijay Govindarajan reminds us, is not a set-and-forget exercise. On the contrary, as the Professor has tenaciously and convincingly argued, your strategy starts dying in terms of its effectiveness the moment it is created. The initial lift-off does not last.

Observes Malcolm Polley, chief investment officer at Stewart Capital, “Martha Stewart is a textbook example of what can go wrong with an entrepreneurial company … Martha Stewart’s company is undergoing a slow death that is a result of management failing to make a transition to the next generation.”

The article seems to imply that the company has been hamstrung at least to some extent by having a key investor who holds more than 90% of the voting power but who is expressly prohibited from joining the board until the third quarter this year. Perhaps the company has had no choice but to run ‘business as usual’ because of that. If so, the alarming dive in the company’s value would appear to support Govindarajan’s point.

My own view is that brands need an iterative strategy – one that addresses Govindarajan’s theory by ensuring that they shed or at least reduce their reliance on hero lines once they start to commoditise and continue prospecting for new ways to replace them. The key it seems to me is to ensure that those incoming lines fit with the brand and its storyline without simply repeating what is being replaced. (Hey, no-one said it was easy.)

It’s a reminder too that the whole point of profit is not just to reward shareholders for their faith and patience, it’s also to fund that prospecting process. The only brand that you can sustain, in other words, is one that you continue to refresh, or at the very least review. Every brand needs continuing attention. And continuing attention requires a running motor. A motor fuelled by cash.

It always amazes me the number of companies that seem to believe they will be the ones to defy gravity. They’ll take the profits without reinvesting anything. Or they’ll keep running their brands to the very last drop without any replacements or refreshments in sight. And when their value and market share falls, they seem to do next to nothing new, perhaps more of the same … they talk about their history and their past achievements and they wait.

They wait for the uplift.

Here’s the thing. Any brand, no matter how strong it has been, without renewal, without invigoration, without powerful forward leadership … will eventually run out of air.


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