Friday, September 18, 2015

Integrating Brand Strategy with Business Strategy



Not much has been written about the intersection of business strategy and brand strategy. It is surprising to me because this is the arena in which I most often find myself consulting. When I was at Harvard Business School my largest concentration was in business strategy. I was weaned on Michael Porter’s Competitive Strategy, Competitive Advantage and The Competitive Advantage of Nations. I am a firm believer that brand strategy, business strategy, business model strategy and competitive strategy need to be a finely woven tapestry. But to begin to envision this, we must understand the key components of each of these.

Organization/business strategy considers many things – mission, vision and values, organization culture, product/service portfolio, bundling/unbundling, market structure, entry barriers, exit barriers, market segmentation, market focus, proprietary technology, network effects, economies of scale, accessibility/distribution channels, value proposition, sources of differentiation, branding, business model/revenue sources, cost structure (including fixed vs. variable vs. semi-variable costs), vertical and horizontal integration, strategic partnerships, supply and demand, substitute products, disruptive technologies, societal trends, cash flow, organization structure, organizational agility, keys for executional success and sequencing of moves.

Related to this is an assessment of core competencies and value chain analysis. In what ways does your organization add value to the end product and in what ways are you spending money that does not affect the end product’s value? And are you capturing the value that you are generating?

Business model strategy considers how a variety of factors come together to create a profitable business model. Key to this are how you are going to generate revenue (target customers/customer base, revenue sources, distribution channels, etc.), what your gross margins will be (pricing strategy, cost structure, etc.), how you will operate the business, what your working capital will be (cash flow, reinvestment strategies, etc.) and your sources and costs of financing.

Competitive strategy focuses on achieving competitive advantage in the long run, often via one of these three approaches: cost leadership, competitive differentiation or customer segment focus.

Another discipline that can applied to strategy formulation is game theory. This fascinating branch of mathematics has real-world practical applications. If you can structure the competitive environment properly, you can insure a maximally positive outcome for your business. Another area that can inform strategy formulation is behavioral economics, that is, the study of human psychology and behavior as they relate to economic decision making.

Brand strategy should include target customer definition (including prioritization of need segments), competitive frame of reference, differentiating benefits, pricing strategy, distribution strategy and how one will achieve awareness, relevant differentiation, customer value, brand accessibility and emotional connection to the brand. Brand strategy can also include the brand archetype and personality, which are highly correlated with the organization’s culture.

As you can see, there are several points of intersection between these types of strategy. Here are just some examples:
  • Mission, vision and values are closely related to brand essence and promise
  • Organization culture generally has some alignment with brand archetype and personality
  • Competitive frame of reference, market structure, market segments and target customers are fundamentally important to most of these strategies
  • Product/service portfolio is the way the brand delivers on its promise
  • The value proposition and sources of differentiation are closely related to brand positioning
  • Business and brand strategy should consider accessibility and distribution
  • Business model strategy, competitive strategy and brand strategy must consider pricing strategy
  • Brand extension sometimes requires strategic partnerships
  • All of these must consider societal trends to be viable in the long run

So, how does one insure that these strategies dovetail properly? Business strategy and business model strategy belong in the executive suite perhaps with the help of business strategy consultants. Competitive strategy links these to brand strategy.

Here are a few things that can help with integration. The brand strategy function should exist at a very high level in the organization. Graphic designers, copywriters and ad agency teams should not be crafting high-level brand strategy. They are too far removed from the work and discipline of business, business model and competitive strategy formulation. Marketing communication strategy and advertising campaign strategy are the appropriate level of strategy formulation for these functions.

Another integrating mechanism is the careful consideration of the nesting and sequencing of the strategic plans. That is, where does the brand plan fit into business planning?

One should also consider the role of brand metrics in a balanced scorecard.

Some organizations find that it is useful to use the brand as a way to rally the organization around its high level strategies. In this way, the brand positioning work may closely follow the establishment of the organization’s mission, vision and values.

Finally, it is important to have strategic thinkers and people firmly grounded in marketing research and analytical thought to be a part of the brand management team.  Brand management is a left brain/right brand activity. Strategic thought is as important as creative capacity.  And sometimes foundational research such as market assessment, attitude and usage studies, market segmentation studies, price sensitivity studies, volumetric forecasting and other types of predictive analysis inform strategy formulation in many of these spheres.

I wish you great success in integrating your business and brand strategies.

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