Niraj Dawar is the author of ?Tilt ? Shifting Your Strategy From Products to Consumers?. In his book, he talks about the two approaches that companies are concerned with. The upstream approach which is about the product and the production cycle. On the other hand, the downstream approach is about engaging consumers in meaningful discussions and the art of customer acquisition. Corporations have to inevitably tilt towards the latter and it is here where future growth will come from. Dawar is a professor with the Ivey Business School and has executed assignments for leading global companies such as BMW, HSBC, Microsoft, Cadbury, L?Oreal, and McCain. He has been involved with start-ups in the biotech and information space. His publications have appeared in ?Harvard Business Review?, ?M.I.T. Sloan Management Review? and other leading academic journals. In a conversation with FE BrandWagon?s Anindita Sarkar, Dawar says that big data has traditionally been about the factory and its products. It is time that big data also concerns itself with the customer. He says that companies like Apple should ideally focus on building differentiation that competitors cannot replicate, rather than being gimmicky about product features. Edited excerpts:
Could you talk about your book ?Tilt ? Shifting Your Strategy from Products to Customers??
I wrote Tilt for three types of companies. Firstly, for the companies that are obsessed by their products. If one were to look at the technology or the pharmaceutical companies, one would observe that they tend to be obsessed by what they produce. These companies need to think much more broadly not just about their products but also their customers. The second type of companies are those who find themselves in commodity traps. Their products are no different than their competitor’s products. So they end up competing on prices since the customers do not see any other difference between their products and that of the competitor’s. Now, the third type is those companies that are looking to add value through their products. They are looking to move up the value curve and capture more of that value as they add services. They look at more of the ?how? rather than just the ?what? of what they are selling.
What are the advantages of going downstream versus upstream?
The upstream competition has become very stiff. If your product is no different from the competitor?s product, it is unlikely that you can price your product in a way that will help you to make better margins. It is also quite unlikely that you will be able to obtain any sustainable competitive advantage. Consequently, the answer resides increasingly in the downstream where, in activities that surround the product, you are able to build differentiation and maintain that differentiation over time.
What are some of the important lessons for marketers?
The lesson is to understand the value that resides in how customers buy, consume and find out about products. They also have to understand how customers use the products and dispose of these products. It broadens the view that marketers have of the market place. They should not just look at the transaction process anymore but rather at the entire consumption cycle.Once you start to disaggregate that whole process, you can ask what costs and risks the customer incurs at each of those stages. Then by reducing those costs and risks, we develop downstream innovation.
Have companies successfully re-oriented their strategies around customer interactions?
Some companies have spent a lot of time looking at not just what they sell, but how the consumers buy. So, by understanding the ‘how’, they were able to develop innovations. For example, the iTune store for Apple and BMW’s mobility contract.
How has globalisation and technology irreversibly complicated the branding process?
Globalisation and technology has certainly made product life cycles much shorter. So any competitive advantage that you had in the product is very quickly eroded. And that makes it even more important to focus on the downstream.
What role does ?Big data? play today? Are a lot of the lessons generated from big data, lost in the translation or the interpretation?
Big data today has a very important role to play. We have spent 250 years developing data related to the factory and the products. However, we have very little information about the customer. So what the big data revolution is really doing is to generate a set of measures related to the market place that will become extremely valuable as companies tilt downstream.
Your thoughts on Apple?s product innovation strategy? You mentioned that it is placing itself on a competitive treadmill rather than building a sustainable competitive advantage.
I said this in relation to the features that were highlighted in the launch of the iPhone5s and iPhone5c. When these products came out, there were two or three specific features that were highlighted but it was evident that the next generation of the competitor’s products would also have those features. Therefore, rather than being gimmicky about these features, what Apple should have been doing would be to focus on building sustainable differentiation – differentiation that they knew competitors would not be able to replicate.
Are there other companies that are falling into this same trap?
Yes, a lot of companies are falling into the trap. In most of the industries (auto, banking, insurance), you will have companies that focus on easily imitable features rather than the building of competitive advantage over a long term.
What do you make of native advertising?
We are seeing much more of native advertising today because the traditional time slots that used to be available in media are fading. And yes, their impact is fading too. Customers today are likely to be much more sceptical about advertising that is labeled. Instead, they are much more likely to be receptive to advertising that is embedded in programming, for example.
In an era where there is more bad news for media companies than good, how can they manage their brands better?
I think the question that all companies need to ask is, why do our customers buy from us rather than our competitors? They also need to ask why customers, who used to buy from us, do not buy from us anymore. If the management teams of these companies can sit down and spend half a day answering those questions, they will have a much better idea on what their future strategy should be.
What are the things that brands need to consider before they leap on to competitive brand battles? For example, who is the real winner in a Pepsi versus Coke war?
In those brand battles, they have to ask what they are battling for first. And I believe the answer to that is that they are battling for the customer’s mind space and for the ownership of criteria of purchase. Brand managers unfortunately tend to spend a lot of time in thinking about capturing media pages, exposure, page rank and shelf space. They should be thinking much more on capturing the mind space.