Category: Blog

Morgan Stanley – The Steady Riser

It’s 2008; I’m living in Canary Wharf, London’s version of Wall Street. One morning, on my way to work, I walked past Lehman Brothers. On the streets I saw men standing, boxes in hand, people turning, staring. What had they done? It must be bad; we’d never seen the bankers look helpless before. The usual image of the financiers spilling out of the bars as the sun begins to set over the imposing buildings; beers in hand, raucous laughter and bravado seeping into every spare patch of pavement, was gone. Perhaps it was a trade that went wrong or a harassment case that bit back. I kept walking and by the time I reached the Tube, my curious thoughts had dissipated. ‘It’s likely nothing’ I thought… Little did I know that the world had changed forever.

The crisis

The financial crisis hit causing recessions in countries the world over. However, after the initial shock and falter and the record-breaking bailouts, the dust settled and order resumed. Unfortunately, the bankers were skating on a much thinner sheet of ice than before. And the finance world knew it. Something had to change. The banks had to figure out how to regain the trust of the public.

Changing perceptions

Today, I call Manhattan home. Having spent many years working in London’s finance capital, I feel I at least have some insight into what life must have been like on Wall Street pre-2008. The same brash confidence of top dollar earners; the ability to hold more liquor than one should be able; the late nights; early mornings; calls at 3 am because somewhere in the world someone wanted to make some money. But here in the US much like in London, due to legislation, government initiatives, advertising campaigns and more, the mood is now different. The ‘Big Banks’ have changed public perception, and they’re getting stronger each day.

Time Magazine tells us, “The financial crisis and its aftermath have dramatically changed investor perceptions, particularly with respect to the soundness of our financial system. In response, big financial firms are changing, but few firms have changed more than Morgan Stanley.”

Measuring impact

Morgan Stanley, like most financial institutions, got negative press following the 2008 Crash, and it’s taken many initiatives to slowly improve perceptions of their brand. And there’s no better way to measure that improvement than by looking at the strength of their corporate brand, or as we call it – “BrandPower.”

BrandPower, as identified in Tenet Partners’ annual Top 100 Most Powerful Brands Report, is a measure of brand strength through two key metrics, familiarity and favorability. The index measures factors such as the perception of an organization’s management, the perceived investment potential of their business, and the familiarity of their brand to the general public.

Like other financial institutions featured in this year’s Top 100, such as Bank of America, Wells Fargo, and Capital One, which have all seen an increase in their BrandPower this year, Morgan Stanley is on the rise. Their multi-faceted approach to changing perceptions has resulted is a consistent upturn in the power of their brand.

Moving the brand needle

Since 2011, Morgan Stanley’s BrandPower has jumped up 37 places to the 58th most powerful brand in America according to Tenet Partners’ data. This hasn’t happened overnight. The bank had to concentrate its efforts on giving the public a view into the real people and real activities of their institution.

An alternative path

Morgan Stanley’s CEO, James Gorman, who unlike most previous heads of the bank, does not have a background in investment banking, has worked to change the bank’s brand. It has changed its course not, as Time Magazine tells us, completely away from its investment banking roots, but more towards a brokerage model advising clients which stocks and shares to buy and sell, as opposed to investment banking. The difference in approach has made wide impacts on the perception of Morgan Stanley, contributing to it being seen as more of a trusted advisor than a grasping moneymaker.

Marketing to new perceptions

To support their new path, according to Advertising Age, Lisa Manganello, Head of integrated brand marketing at Morgan Stanley says “their marketing efforts have focused on highlighting the firm’s “real human” benefits.” And Skyword reiterates with, “a new content-heavy campaign tells the story of Morgan Stanley’s brand in a different way—by presenting the company as a driver of positive human change around the world.”

Not only have Morgan Stanley’s marketing efforts been revamped, but to support their changing business model, their internal performance management process is also getting a makeover.

Changing the face of performance

Morgan Stanley is changing its employee performance management style, dispelling of the traditional annual appraisal process and adopting a fresher approach.

As Larry Oakner, Senior Partner in Employee Engagement at Tenet Partners says, “how [employees] demonstrate their brand through their behaviour has a huge impact on the successful integration of the brand into the organization.”

An article in the New York Times about Morgan Stanley’s new approach states, “The aim is to give more direct feedback and better steer staff members toward areas of improvement.” Employees will be evaluated on their overall contributions to the firm, not only the money they bring in.

On the rise

Elevating the power of a brand is a multi-layered initiative that encompasses all business activities, and Morgan Stanley is a bank that shows it knows how to do it. It’s been a long road for them since the 2008 financial crisis, and, like any organization, they’ve had their ups and downs. But with their varied efforts and a BrandPower ranking that’s consistently rising, it seems that their battle-tested CEO, James Gorman, is doing something right to reinvent the image for their institution.

I have been a Hilton HHonors Rewards member for several years now and was just recently notified that I earned Gold status. It has taken me so long to earn this elevated status because it is not that I am so much brand loyal, but rather place more of an importance on price and location when it comes to selecting a hotel. Granted, I do have a list of “acceptable” hotel brands that are always part of my consideration set when exploring options for both business and leisure travel. These tend to be the usual suspects — Hilton, Hyatt, Marriott and Starwood. Note: I am a Rewards member for each of these brands because they make it so easy to join and earn points. However, these Rewards programs are not enough to make me brand loyal. It’s plain and simple, the brand that best delivers against my core requirements will get my business and, in return, I will accrue points, albeit slowly.

Sure my elevation to Hilton HHonors Gold status has brought with it a few “nice to have” perks. “Nice to have” means just that; they may or may not be memorable and are not considered important enough to trump price and location over brand loyalty. However, my Hilton brand experience has been brought to an entirely new level when I recently downloaded the Hilton app.

This app has changed my life (when it comes to travel) and has increased my affinity for the Hilton brand. How? Simply put, it has made the user experience across the hotel segment of my customer journey memorable and even delightful. Across my entire customer journey (well, almost my entire journey) from property selection to registration and from pre-check-in, check-in and throughout the duration of my stay, Hilton has delighted and even surprised me on occasion. Unbeknownst to me, Hilton was the first hospitality company to enable room selection and customization via its mobile and web-based floor plans.

As a registered guest, I received a “Welcome to Hilton” message via both e-mail and the app one day or so prior to my arrival. This “welcome” then prompted me to select a room of my choice. Mind you that Hilton had already pre-selected a room for me based on my personal profile, and that room selection was perfect I might add. However, I was given the option to switch and even upgrade my room (for additional $’s) from the hotel floor plan, if desired. This is similar to the process of selecting seats on an airplane. I have to say that this was pretty impressive for a hotel chain.

But wait, there’s more. I was then asked if I would like to select from an extensive list of amenities and have these items waiting for me in my room upon arrival. This included snacks, beverages and/or toiletry items such as shampoo, toothpaste, etc. just in case I did not want the hassle of traveling with these items since many fall within strict FAA regulations at airport check-in.

Then the ultimate delight in my user experience happened when the app prompted me to sign up for the Hilton Digital Key program. Apparently, Hilton announced that guests will be able to use their smartphone as their room key in a majority of hotel rooms by the end of 2016, but I must have missed this announcement and was pleasantly surprised to learn more about this user experience through the Hilton app. Signing up for and activating the Digital Key is easy; you simply use the app to confirm your arrival date and indicate an expected time of arrival. The Digital Key is then activated via your smartphone once your room is ready upon the date of your arrival. Once my digital key was activated, I followed the prompts, holding my phone in front of my room entry device and the phone unlocked the door. Throughout most of my entire journey, I did not come in contact with one Hilton employee except for the parking lot attendant. Don’t worry; I am sure that this interaction will soon be alleviated as well with self-driving and self-parking cars.

This customer experience has certainly helped to elevate the Hilton brand for me with Hilton brand loyalty now top-of-mind. The personalization of the Hilton brand experience starting with the ability to select my own room and ensure that certain amenities are waiting for me upon arrival along with the innovative Digital Key technology all make the Hilton brand experience more personal, delightful, memorable and, most importantly, convenient. It is no wonder that Hilton ranks # 44 in Tenet’s Top 100 Most Powerful Brands 2016. In fact, Hilton’s ranking improved six points versus its #50 ranking in 2015. I am sure that innovation, disruption and the entire customer experience have contributed to this brand’s improved ranking. Other than Marriott, which ranks #81, there were no other hotel chains in Tenet’s Top 100 Most Powerful Brands Report. So Hilton must be doing something right to strengthen the power of its brand.

With such a positive customer experience, you may be wondering why the title of my blog is Why Hilton had me captivated until good-bye. The one area where my customer experience did not come full circle was when it was time for me to checkout, which was quite early in the morning I might add. Upon leaving my hotel room, I opened the Hilton app and kept looking for the checkout option, searching under various topics, but found nothing related to checking out. I finally had to go to the front desk where I was told that this feature does not yet exist. I am not sure if the app checkout capability was not available for this particular location or if it has not been implemented in general. But what started as a delightful customer experience ended somewhat on a disappointing note. If I had known that I had to go to the front desk to checkout, I would have checked out the old-fashioned way – via my television. This actually would have been better than finding out that I did not have the ability to checkout via the app, which had become my trusted personal assistant throughout my entire business travel.

Remember, when it comes to creating a memorable brand experience, every touchpoint throughout the customer journey is crucial. As we recently wrote about in our latest Take 5 series, mapping the journey across touchpoints is one of the many ways marketers can visualize the entire customer experience, and use it to effectively address shortcomings and seize new opportunities to foster customer loyalty.

Have you had any recent customer experiences that have changed your brand perception even prompting you to consider becoming brand loyal as a result of that experience?

Tenet Partners makes strategic investment in Verv Innovation, LLC.

Tenet Partners was built on the belief that creating exceptional brand experiences requires a multidisciplinary approach that brings together research, strategy, design, and digital. We believe the way forward to look at the world through the eyes of the customer and build brands holistically, fusing digital and real-world interactions and experiences to deliver greater value to businesses and their customers.

By 2020, estimates suggest 25 billion Internet connected products will exist. The success of these products will be contingent on a company’s ability to drive transformational growth across the enterprise, integrating customer insights, business strategy, design and digital capabilities into products, services and experiences that people love.

Just like the companies and brands we serve, in order keep pace in today’s digitally driven market, we must also evolve to meet industry demands and customer expectations. To strengthen our company and prepare for our next phase of growth, today we announced our strategic investment in Verv Innovation, LLC.

For nearly 20 years, the Verv team has redefined how to create and deliver successful innovations for products that are used across homes and businesses. Combining deep industrial design and development experience with next-generation co-creation tools, the firm has emerged as a leader in the application of design thinking during one of the most pivotal times of change in business and technology history.

By combining their proven techniques with Tenet’s global experience in business strategy, brand design and digital, we can now connect the customer experience in all channels and define the next generation of customer experience.

Here’s to a future of many memorable brand experiences.

Hampton

One of the industry sectors tracked in the Tenet CoreBrand Index is called ‘Financial’, which encompasses a range of financial services brands, including retail banks in the U.S. In recent years, one of the better performing brands among these retail banks has been Wells Fargo. Looking at Wells Fargo BrandPower relative to 12 peer institutions (large national network banks), it ranks among the top 3 in every quarter from Q1 2013 to the most recent measurement, Q2 2016. Plus, it has realized the largest improvement (24%) in BrandPower among any of those top three institutions over that same period.

Now, Wells Fargo’s performance in the CoreBrand Index comes as no surprise to me because before joining Tenet Partners, I spent several years as Director of Strategic Research at an industry leadership organization for financial services. And in virtually every study I commissioned to assess the performance and quality of large national network banks in the United States, the Wells Fargo brand mirrored what we’ve seen in the CoreBrand BrandPower Index in terms of the brand’s performance being one the best on customer sentiment, loyalty, deposit retention and most notably, in the quality of their lending.

Now, as most recall, in the 2008-2009 economic downturn, sub-prime mortgages and questionable loans were at the center of the housing bubble collapse that drove us to the great recession from which we have only recently started to emerge. However, Wells Fargo stood apart as being one of the few financial services brands NOT tarred by accusations of the questionable lending practices that ultimately doomed some financial services brands, like Wachovia and Countrywide Financial. In fact, in the wake of the much maligned Toxic Asset Relief Program (TARP) that bailed out many banks at risk from the collapse of the financial markets, it was the Wells Fargo brand that most thought would emerge from TARP in the best shape.

But oh, how the mighty have fallen!

This past week it was revealed that a large number of Wells Fargo employees secretly created millions of unauthorized bank and credit card accounts –– without their customers knowing it –– since 2011. The resulting furor over the revelation, and the clumsy handling of it by Wells Fargo (which fired 5,300 low to mid level employees responsible while allowing the executive in charge of the troubled unit to retire with a significant financial package) has now cast the bank as the poster child for the same behavior and deceptive practices that were at the center of the 2008-2009 financial crisis.

What is also troubling for Wells Fargo, and really the entire financial services industry, is that the behavior resulting in the Wells Fargo controversy had been going on for sometime with apparently the knowledge of Wells Fargo leadership. Still, little was done to raise an alarm, and those employees that tried to do so were either dismissed or fired for their efforts.

Of course, this is not the only case of a well known, if not iconic brand being tarnished by a crisis largely of their own making; we need only think about Volkswagen and the diesel emissions scandal, and the recent Samsung debacle where their Galaxy smartphones have spontaneously combusted, for reminders.

But the issue with Wells Fargo is different given the recent history of the financial services sector of which they are a part, and the basic tenets of trust and transparency that are needed for stakeholders to engage with these brands. The trust and transparency between the banks and their customers was severely tested in 2008-2009 and in the subsequent recession that roiled people’s lives. And now, just as many felt the lost trust was slowly returning, the Wells Fargo scandal has dashed any of those gains and called the entire industry’s trustworthiness into question.

At the time of this blog’s posting, recent developments reported in the most recent issue of Time indicate that the “Justice Department has reportedly issued subpoenas and begun a criminal probe.” And that “U.S. federal prosecutors are vying for the right to go after the bank, and the Office of the Comptroller of the Currency is weighing penalties for managers.” There have also been limited discussions of “the unlikely prospect that special powers could be triggered, allowing regulators to break up Wells.”

It will be interesting to see if Wells Fargo can survive or, as so many of the formerly well-known brands that were lost in the downturn, Wells Fargo becomes yet another bad memory of a brand that lost its way.

The problems at ESPN have been well documented. They significantly over paid for the rights to the NFL’s Monday Night Football package, paying in the same ballpark as NBC paid for the league’s premier matchup on Sunday Night Football. This move made it impossible for the network to operate profitably. Initially they laid off 4% of their global workforce, but it was all behind the camera workers, not on air talent. However, over the past year there has been significant drain on their talent.

As you tune in to pre-game NFL coverage and other shows, much of the old familiar talent is gone. As you may know, sports fans are creatures of habit. The customer experience for many of these viewers is being trampled on. It would be one thing if you slowly introduced new talent to these flagship programs, but when you tune into shows like Sunday NFL Countdown and Monday Night Countdown, with 1 or 2 exceptions, the faces are all new. It disrupts the comfort level that fans have in this programming.

This all comes at a very bad time for ESPN. NFL viewership has been down for each of the past 6 Presidential election years, this year it is off more than any other. Many speculate that it is due to the “Trump effect”. People are tuning in to the political media to see what he says next. Their ratings are up 40% while NFL viewership is down 15%.

There is also a much more crowded market place. Gone are the days when you simply tuned into ESPN, ESPN2, ESPN 3, ESPNews, etc. Now, the major networks, pro sports leagues, NCAA conferences and in some cases individual teams have their own networks. The result is that the market for sports news is becoming much more highly specialized. If I’m looking for news about Big 10 football, why sit through an episode of SportsCenter when I can tune in to the Big 10 Network and see exactly what I want? To compound matters, ESPN’s former talent is being sprinkled about the other options. Fox Sports 1 is a prominent example, taking Colin Cowherd’s show, The Herd with Colin Cowherd, directly form ESPN as well as commentator Skip Bayless who is now partnered with Shannon Sharp on their new show, Undisputed. These are two of many prominent personalities have their own brands and they have left ESPN and will take viewers with them. ESPN should have moved heaven and earth to keep their talent, it was one factor that they had that the other players in the market could not duplicate. It was the source of their customer loyalty.

What differentiated ESPN was that their on air talent felt like you were talking about sports with your friends. That was a huge part of their brand. That feel is gone. What they’ve failed to realize is that the ESPN brand is/was made up largely of the sum of the brands of their on air talent. That talent garnered much loyalty from the viewers and drove the customer experience. That customer experience is now gone. They must move quickly to stop the loss of their personalities and improve the customer experience or, in a market with increasingly appealing options, the ESPN brand will fall by the wayside.

ESPN cannot just assume that viewers will turn to them out of loyalty. As viewers abandon the network to view personalities that they enjoy that are now on other networks, they will be exposed to commercials for other programming on those networks that may interest them. The result will be in increasingly distributed sports audience and ESPN will see its share of that market dramatically reduced.

We are honored to capture the top spot on Clutch’s coveted list of the best New York City branding agencies of 2017. The recognition from Clutch, a B2B research firm, illustrates the tremendous talent of our team who have over 40 years of branding experience and a strong track record of delivering high-quality results.

Take a glimpse at what our clients have said on Clutch about our work:

“The quality is on par and best in class compared to all the agencies that I’ve worked with.” — Director of Communications, Eastman

“I don’t know if anyone could have done a better job than they did at learning the business at the speed we required.” — VP of Marketing, Distribution Company

“They’re a very professional and seasoned team.” — VP of Brand Marketing, Nationally Recognized Brand

“They figured out how we were being perceived and helped determine how we would like to be perceived.” — Brand Manager, Manufacturing Company

What Makes Us Stand Out?

Our ability to shape the brand and at the same time connect a company’s purpose to focused innovations and user experiences in its products and services is what makes us different as a firm. We are honored for the recognition from both our clients and Clutch as one of the best agencies in New York City.

How We Were Judged

To land a spot as a top agency on Clutch, we were judged on our ability to distinguish ourselves from competing firms and deliver quality results to our clients. Clutch first measured our market presence and expertise in the branding industry as evidenced by our offered services, established client base, and detailed examples and outcomes of branding projects we completed.

What Makes Clutch Special?

Clutch’s scoring methodology places a considerable amount of weight on the consumer reviews our clients give us. Their platform gives firsthand interviews, conducted by Clutch analysts with our clients, to gain an accurate and deeper understanding of our partnerships. The interviews, which are all converted to written reviews, are accessible through our Clutch profile.

To learn more about how we can help your company create value through the power of brand innovation, contact us today.

Advances in technology and the need to keep pace with a constantly changing business landscape are driving a workplace that needs to “move faster, adapt more quickly, learn more rapidly, and embrace dynamic career demands.” Deloitte 2017.

These changes, coupled with a dramatic increase in employees working from non-traditional workplaces, including contract, freelance and “gig economy” workers, have together taxed traditional systems of employee measurement and evaluation.

Change inspires change

A changing workplace requires a shift in the way the workforce is managed, evaluated, and hired. Many of the tools human resource departments used in the past are now inadequate to keep pace with current purposes. The changing workplace is calling for an overhaul of many of the traditional systems and processes organizations use to manage workforce performance. One of the major shake-ups in recent years is the need for a new approach to annual appraisals.

“Over the past few years, a fast-growing number of high-profile companies have been blowing up this annual rite of corporate life, replacing the traditional yearly review with something more frequent, less formal and, they hope — less reviled.” Washington Post 2016

More companies are abandoning annual appraisals, seeing them as onerous and subjective due to a lack of frequent, informal check-ins between managers and employees throughout the year to inform an end of year review. Couple that with the desire for on-the-spot-feedback which is more effective and preferred by many employees today, particularly Millennials.

However, these changes have not removed the need for performance measurement. Companies still need to understand the performance and progress of individuals, teams, and the organization as a whole.

The opportunity for brand to play a bigger role in measuring performance

Changes in HR and performance management have created opportunities for a closer examination of how HR and branding can connect.

Traditionally, HR worked alone to create systems that measure the performance of individuals sometimes based on arbitrary team goals set by leadership and managers during annual appraisals. In positive circumstances, these goals might be aligned to the organization’s internal corporate values and defined brand behaviors. However, we’ve found that these internal values often don’t correspond or relate to the external messages being sent to customers by branding and external marketing teams.

A recent survey conducted by Tenet Partners found fewer than 1 in 10 employees strongly agree about the relationship of personal recognition aligned to their company’s brand. 1

This intersection of HR and branding is where a partnership between your HR and branding teams could help to create an internal approach to managing performance that correlates to the external messages being sent to your customers. According to Deloitte’s study,

“A critical goal in PM experimentation is to devise ways to align it more closely with business outcomes. As organizations become more team-centric, PM is also beginning to shift from focusing just on an employee’s individual achievements to evaluating her contribution to a team and the team’s impact on driving overall business goals.” Deloitte 2017.

Individuals and teams need to be centered on a common culture that’s reflected inside and outside of the organization. This way your brand becomes your guiding beacon.

Brand lays the foundation for frequent feedback

In traditional performance appraisals, the manager would give the employee feedback once a year. However, in the new working environment, managers aren’t always around to see the employee perform. Employees need multiple, more frequent feedback for managers to give a fair assessment of their performance against the company goals.

Using your brand to guide performance management is a strong foundation that can be tied to desired business outcomes, but it’s just the beginning. The approach to performance management needs to be based on continuous feedback from employees, their peers, managers, possibly customers, and where appropriate, employees themselves. Receiving regular, brand aligned feedback helps employees fluidly reset personal and professional goals and be rewarded for their contribution to the organization, not merely for doing their job.

Build a multi-layered approach to performance management with your brand at the core

We don’t believe annual appraisals need to be removed altogether. They only need to be grounded in the organization’s brand aligned goals, and be an ongoing process throughout the year. When this occurs, the end-of-year wrap-up conversations can be fairer, more informative, and better aligned to the overarching goals of the individual, department, and the whole company.

Annual appraisals can still feature in a dynamic feedback approach

To work effectively, annual appraisals need to be designed in a way that ensures they have good data to work with. Start by defining specific goals – we believe SMART goals are an effective tool that can align your performance management process with your overarching business goals.

The appraisal needs to measure the “what” as in how well an employee meets personal goals while also measuring “how” those goals are achieved. The “how” are behaviors expected from employees that align with your company’s brand.

Brand behaviors are those that are defined by the needs of your customers, but aligned to the internal culture of your organization. This is the foundation of a company’s Brand Culture. To understand how important Brand Culture can be to an organization, we developed a webinar that delves into how Brand Culture is shaped by a company’s brand values and its impact on an organization.

These brand values can look very similar to traditional organizational values you might see from HR; the distinct difference with “Brand Culture” values is the link between the internal needs of the organization and the external needs of your customers.

Managing the “what” and the “how” with brand aligned data

• Make regular coaching sessions a priority. Encouragemanagers and employees to have open, candid conversations about how the employee is performing against their set goals and give them the opportunity to adjust goals should the needs of the business, brand or employee change.

• Give constructive feedback and celebrate organizational behaviors that are aligned with the brand. Positive recognition throughout the year of brand aligned behaviors reinforces what is expected of employees. However, for this to work, all employees need to be educated about your brand and what it means for them in their daily work. Branding can seem abstract to some, so making a brand real for people is vital for inspiring them to live the brand every day.

• Embrace feedback from all angles. Peer-led feedback during and after projects is particularly important for a holistic perspective of a person’s performance especially if the manager is not present on all of an employee’s projects. Put into practice these mechanisms and processes throughout the year to track how people are performing against their goals. Keep employees up to date with how their overarching business goals are being achieved, along with how their individual efforts impact the larger company goals.

Keep in mind:

• Not everyone works on site. People may work off-site, such as in factories, on rigs or at home. Make sure your approach makes giving feedback and recognition accessible to everyone – wherever they work. Mobile apps can help manage this task but it is key to give managers and employees easy access to these tools.

• Technology is not a substitute for face to face! Technology supports face to face conversations and should never be used in place of them. Technology helps us to keep records of conversations, which are vital for tracking development, but talking in person adds nuances to conversations that technology cannot replace.If a person works mostly alone or remotely, find ways to bring them into the mix. Have them get a buddy or a few buddies that can help them to see how their work impacts the wider business and their colleagues. Show them how and why their contribution matters.

• It’s not one size fits all. Any performance management approach is not a one size fits all solution. Every company has distinct needs.Do what works for your business. New unorthodox approaches may be too big a leap for your company if you’re transitioning from basic annual appraisals. Start with something that will be easy to implement.

Investing in the human element in brand building

As the workforce and workplace change, new tools are being created to meet the needs of HR and performance management. But, are these tools taking your company’s business and brand direction into consideration? Effective performance management needs to align employees to your business goals through your brand.

Reinforce that your people are a vital asset to your business by reiterating the “what” and the “how” and the way in which those aspects differentiate your company. Make sure they fully understand their role in the journey of building your business and keep them fully informed of their progress. That way, each person will be responsible for taking the company in the best direction.

Brand Culture Survey administered to Tenet Partner contacts

We’ve been involved in product innovation, design and development for decades. Both on the client side and as consultants. We’ve seen first hand many of the victories enjoyed and the struggles endured by companies engaged in innovation regardless of size, industry and culture. It’s clear to us that the risk inherent in launching new products hasn’t gone away. Or even been greatly diminished. What has changed is the source of that risk and the way companies have chosen to contend with it over time.

In several studies conducted by the Product Development and Management Association over the years, the failure rate of new products has remained remarkably constant from decade to decade.

1980s: 42% failure rate
1990’s: 40% failure rate
2000’s: 46% failure rate

A failed product is defined as one that doesn’t meet the objectives management established for it over a specified period and is withdrawn from the market. As you can see, not a promising trend. In fact, these are incredible statistics given all the strides we think we’ve made as an innovation community. Of course, different industries show different failure rates. Unfortunately for most readers here, consumer products and services show higher failure rates than commercial products. An interesting distinction that perhaps has something to do with the challenge of properly reading evolving consumer wants and expectations. As well as quick shifting tastes and trends that require rapid response—a difficult task for many organizations. The good news is that the often cited “80% failure rate” statistic appears to be a myth perpetuated by those who may stand to benefit from such a claim.

Why, after all our advancement in methodology and process, do so many new products continue to fail? It’s reasonable to say that the standardization we impose on other business functions just doesn’t work for innovation. That which is mission-critical for Accounting and Production may not play well in the art-and-science realm of innovation. That may be part of the answer, but far from the entire story. Let’s take a look back at innovation practices through the (recent) ages and see what we can conclude about why we seem to have hit a wall.

The 1980’s: Companies didn’t really know what innovation was, though many were doing it instinctively. 3M, GE and others were starting to measure the business impact of new products and considering “new product development” a survival tactic. It was popular to say that “X% of our revenue comes from products less than Y years old” as if that was, by definition, a good thing. Yet there was no clear, standardized approach to innovation. Companies were learning as they were doing. In this pre-methodology era, those few dedicated product development staffers were likely deported from mainstream, revenue generating business roles. And not always as a reward for strong performance.

Back then, new products were more likely to come out of R&D and then passed along to Marketing for packaging and communications. Companies would discover a new utility and then look for ways to exploit it in the marketplace. If there were people dedicated to product development, they were likely close to the technical side, challenged to find a customer for some new skunkworks invention. There wasn’t much in the way of discipline. But there was a bunch of ad-hoc creativity. And lots of dabbling.

It’s interesting that despite the risk inherent in this rather informal technology-driven innovation, the success rate was not abysmal. It could be theorized that risk in this environment almost took care of itself, as many of the skunkworks innovations didn’t prove out in the lab and never made it to market. And those that did were exposed to such a rigorous vetting process (and were so novel) that they likely stood a better than even chance of success. Perhaps the “hammer looking for a nail” approach is unfairly maligned!

Even so, it became clear that the practice of new product development needed some structure. Companies were fond of systematizing work for efficiency and to eliminate error across functions. Imposing methodology was thought to be the answer. And “innovation” as a discipline was born.

The 1990’s: Process discipline was all the rage. Standardized practices. Stage Gate methodologies and Six Sigma. Companies looked to import and install commoditized innovation methods in an attempt to minimize risk—considered the enemy of product development at the time. Organizations can’t survive without structure and process. So we asked the obvious question: Why can’t we automate innovation down to a zero error rate?

Well, we learned a few things in the 90’s: First, innovation is a blend of art, judgement and science. While we talked ourselves into believing that these ingredients are ripe for systemization, our efforts to do so underestimated the resistance natural creativity has toward any attempt to instill order. And while imposing rigorous process on innovation made everyone feel safer, it didn’t do much to ameliorate risk or improve success rates, as we know. But we did get a lot better at stopping things that appeared unpromising. But it’s not clear we were necessarily green-lighting the right initiatives.

Second, we learned that a year’s worth of standardization was in fact putting a choke hold on innovation. Production assets were designed decades earlier to do one thing really well: Fill this specific bottle with that specific goop. So now we have this early focus on innovation, people to staff it, methodology to guide it but not enough latitude to deliver on it. Frustrating.

Process, in conjunction with a lack of asset flexibility (ironic since process inherently limits flexibility as well) resulted in a desolate landscape for innovation. Great ideas were contorted to run on existing lines. And their salience suffered, victims of what we might call “Adaptation Risk”. Success rates stagnated. Methodology got the blame, but it was no one’s fault. The machines chunking out soap and cheese were paid off long ago. And no one wanted to pay to replace them. The tension was building.

The 2000’s: Design consultants save the day. Sort of. Companies decided they need outside help in cracking the innovation code. Design firms proliferated to address the mounting frustration internal methodology has left behind with copious amounts of creative energy. Some firms forwarded their own methodologies for those clients late to the discipline table and in need of that security blanket. Others promised raging creativity that internal staffers presumably couldn’t muster. And yet others dug deep into client production facilities looking for ways to squeeze a drop of flexibility out of those machines built to do one thing really well, really fast.

This was, in an odd way, the golden age for innovation. Many companies recognized that process discipline wasn’t the solution it promised to be. And we learned that risk could be a good thing. The power of creativity was winning favor on both the marketing and manufacturing sides. Those in innovation roles began to earn respect and were chosen for a set of personal and professional attributes that seemed to align with the welcomed uncertainty of innovation.

Management started—we say started—to become comfortable with risk and the notion that not all new products succeed. And that failures provided learning to feed later success. In fact, there was a certain misplaced pride in failure until management realized there was only so much failure an organization could enjoy without an occasional knock-out success to pay for it.

This, we believe, was the start of “Design Thinking” as we know it today. When companies can recognize failure as part of an iterative prototyping effort and can value the kind of user empathy that internal market research wasn’t providing at the time, we knew we were making real progress. Now, if companies could only learn to iterate and fail before launch…

The 2010’s: The smart money knows it’s not about “product” anymore. It’s about the story. The experience. The BRAND. Gone are the days of utmost concern about the new functional benefits consumers demand from products. It’s not enough to leapfrog competition with features we think we know consumers want. Consumer wants have been replaced by Need States: The emotional underpinnings that drive choice. People out there are too busy to discern why one product may be better than another without taking the time to experience it. So benefit-driven messaging no longer wins hearts and minds. And in most categories, those hearts and minds don’t care enough.

What they do care about is affiliation. Experience. Values. The absence of frustration. What does that mean for innovation? Tons. Now, innovation is about making a promise to consumers that resonates. That reflects who they think they are and what they want to say about themselves. And doing a job they care to get done with confidence and style. So, it’s the holistic offering that will win the day. Not just a new package. Not a new flavor. But the integration of everything we used to think of independently. Together. It’s about The Story.

As a consumer product, how does aesthetics, formulation and utility come together in integrated fashion to deliver a coherent brand promise? As a service, how must all the brand touch points behave to achieve performance and satisfaction? Key questions: What’s the difference between product and service in this new order? Answer: Not much.

How does a brand set parameters, provide latitude and profess values to guide new product and service development? Or better yet, become product development. It’s not about the “thing” anymore. It’s the experience. Sure, technology plays a facilitating and exciting new role. IoT for instance enables change and utility like nothing we’ve seen before, with the potential to upgrade convenience and lifestyle. But it’s a “how”, not a “what”. The “what” remains that need state fulfillment grounded in a satisfying experience, however delivered.

Why is this tectonic shift in the definition of “new product” so important to acknowledge? While this turn of events tamps down certain kinds of risk in innovation, it elevates others. And for companies, innovation has always been about risk. Now, there are more kinds. Where today’s innovation can ride on the strength of a brand and diversify across multiple touch points, its chances of success can be greater. And its costs can be lower. But—and this is a big one—in this day and age, a brand innovation story is subject to incredible scrutiny (and brand abuse). Much more so than a new feature set or package form.

Think about Dove’s recent stab at bringing the brand to life in an array of body-shaped bottles. In hindsight, it was easy to see how this would go wrong. A brand’s values are just that—values. They cannot be literally translated into a package form or any other physical manifestation. They tell a story—they don’t dictate product. Why dwell on poor Dove? Because in an attempt to define a brand message in the merging of new and old innovation paradigms (story meets design), they achieved nothing. That, coupled with a few thousand haters with the hand-held technology to make their feelings known can upend innovation like nothing has before it.

However, in an age where Tweets, stories, and pins are exchanged with lightning fast speed, companies can find a logical application for social media in the ideation and crowdsourcing phase of product innovation. There’s a definite draw for brands to use social media to replace some kinds of market research. However, brands struggle to find the right strategy.

Oftentimes, data from samples on social media can lead brands astray. There’s just too much of it and a lot of noise that comes with it. So, they’re relegated to “testing the waters” rather than to dive in completely. Why? Social media is an intrinsically consumer-focused and controlled channel. It gives consumers the freedom to express their feelings instantaneously, creating an emotionally charged environment where users are quick to react to experiences that either exceed or fall short of their expectations.

And, there lies the problem. Sharing and posting on social media is driven by emotional extremes whether negative or positive, which can make social data a bit unreliable. And it’s often the unqualified negatives that can torpedo a new product on emotional grounds before it gains momentum. One could call this “Hater Risk”. It’s important for companies to track not only the quality of the social data, but also the qualifications of the participants who provide that data. Identifying subject matter experts leads to the best expertise and increases the quality of insight for innovation. It’s all about listening to the right kind of data from the right kind of users while tuning out distractions, which is easier said than done.

While the risk to innovating has changed, it hasn’t diminished. As we pointed out, the proportion of successful new product launches has remained roughly constant since the early days. Why is that? We think it’s because:

1. We still face rigid actionability parameters in many companies. So we focus attention on the near-term little wins at the expense of category transformation. And the best ideas are often truncated to fit the parameters allowed by existing assets. One would think those little wins have a better chance to succeed. But we’d guess that incremental change does more to mess with a winning formula than it does to improve it.
2. Brand extension mania seems like a risk averse strategy for innovation. We would allege that such efforts can dilute a brand’s core attributes, perhaps weakening it’s pull for consumers. So not only might brand extensions fail of their own accord, they could bring the brand down a peg with them.
3. Cross-functional teams are great because they get things done. But they also water down great ideas. Let’s face it: If you’re representing R&D on a project team you may still be incented to push back against anything that could throw a wrench into a finely tuned production machine. And who could blame you with new product success rates as they are.
4. As a corollary to the above, organizational complexity has created project complexity. Core teams are huge and sell-in audiences are vast. We firmly believe that minds that work alone or in very small groups have the best chance of surfacing the truly transformational. That’s because mandating consensus is the surest way to dumb down a fabulous idea.
5. As suggested, consumer tastes and trends are moving so fast. Reading consumers properly and translating that insight into winning product on the store shelf has become more difficult. The science of consumer research and product development has had a difficult time keeping up.
6. Innovation as the melding of art, judgment and science continues to—and will always—defy standardization. Period.

We would like to think that process discipline, creative energy and risk is achieving a new, healthier balance. And that may finally reduce those intractable failure rate numbers. Perhaps the failure rate isn’t even that meaningful a measure. If you have one wild blow-away success in ten, you can absorb a lot of failure. Hollywood as learned that lesson, as they make bigger bets on fewer potential blockbusters. But there’s much to unpack in that change-of-paradigm for corporate America. In the meantime, here are a few tips for how to think about managing risk in your innovation projects, day-to-day:

1. Leverage consumers better. Don’t “order take”. Put them in contexts that allow them to do what they do best. And use what you see and hear as inspiration—not direction—for concept development and refinement. Talk to us about our Co-Magination approach. It’s a collaborative tool set that’s fast and flexible enough to avoid the rigid process trap and the pitfalls of taste-and-trend whimsy.
2. Don’t let process discipline choke off creativity. Reverse course. Deviate. Meander. Just don’t get lost. Remember: You manage the process—not vice-versa.
3. Use the brilliance of the single creative mind to your advantage. And then incubate it in close quarters until it has matured before letting it loose on the organization.
4. Don’t skip the design strategy phase where you assimilate defensible consumer insights (not evident observations) and chart specific innovation platforms. Use tools that focus creative energy, build team consensus when necessary and crisply communicate a path forward.
5. Be careful when concept screening. Many breakthrough ideas fall to the ground in the earliest stages because as initially presented, they don’t appear actionable or have too many moving parts and confuse consumers. In other words, rethink the “concept board”.
6. Iteration is your friend. Test and refine, test and refine, then test and refine. See #1 above.

So how can companies change the consistent flatlining of product success that’s plagued innovation for decades? There are two ways to go. Option one: Winners have to be bigger. Which means risks taken must be greater. Therefore, companies must be open to the heightened internal and external scrutiny that comes with misjudgment—fair or not. Doesn’t sound great.

Option two: Decades of circumstantial evidence points to an inability to read consumers as the largest thorn in the side of innovation. Sure, new product development has got to get faster. From ideation to production, there’s no time to waste. But that’s not enough. Tastes and trends come and go. But our new need state order remains fundamentally the same.

So focus on surfacing those underlying emotional triggers that may evolve slowly but don’t dramatically shift. Then, craft a story that’s much bigger than the singular dimension of new product success. And bring that story to life in redefined brand-relevant experiences that provide meaningful context (and content) for products and services rather than letting them hang out there all alone.

Can we break trend and revive innovation success starting in 2018? Certainly. We think the best way to do that is to rethink the role of consumers in your projects and the tools you use to engage with them. If we’ve learned anything over the past 30 years it’s that traditional research and creativity methods can reduce a project to a hit-or-miss proposition. This year, why not better your odds.

It’s no secret anymore that well-planned and longitudinal employee engagement programs rooted in a company’s brand are powerful and proven ways to inform and engage a company’s employees about their brand’s values. Internal employee communication programs can use multiple channels—from posters to emails to planned activities—to reinforce your brand messages among employees. Brand training programs can use gamification and guided role playing to help employees learn and practice the specific brand behaviors that will demonstrate the brand to customers and each other.

In a recent article entitled Engaging Employees Starts with Remembering What Your Company Stands For, published in the Harvard Business Review, consultant Denise Lee Yohn outlines the fundamentals for building a solid brand based employee engagement program. Her example of the program put into place at the MGM Grand organization demonstrates the powerful connection between employee engagement and financial returns. In her article, Yohn cites the research that Tenet uncovered which showed only a small percentage of employees who were surveyed knew their company’s brand values, and even fewer said that their company leaders communicated how employees should live brand values through their jobs.

After years of experience working with all types of companies, from manufacturers to service industries, Tenet has boiled down successful employee brand engagements to the most effective ways of insuring that employees will embrace the power they have to represent their brand. Internal communications can inform employees about the brand; behavioral training can engage employees to live the brand; and spotlighting those exemplary employees can inspire others to follow. These are the bedrock of any engagement program. But the single-most effective secret for to help employees to truly “be the brand”? Acting like an owner.

While on a tour of a Caterpillar manufacturing plant in Belgium, I came across an engineer carefully assembling a huge diesel engine. When asked why he was working so meticulously, he stopped for a moment, wiped his hands on a cloth and said, “If this engine fails in a piece of equipment, the contractor who bought it is out of work; the dealer who sold it must repair it at a loss; and the company’s brand reputation is diminished—all because of my failure to own my work!”

It’s not just for industrial companies. Banks are notorious for being impersonal and often not living up to their branding promises for customer service. But when a mortgage loan officer personally shepherds a customer through the entire loan process, responds promptly to every email question and sends a personal thank you note at the end of the loan—that’s taking ownership of the process and the brand.

Thinking like an owner of a brand not only means being responsible for an employee’s professional responsibilities, but also being emotionally and personally invested in the success of the brand and the organization through every interaction with customers and fellow employees.