Procter & Gamble, perhaps the world’s most-famous marketing organization, use to have a rule when it came to writing memos on strategy.
The first sentence of the memo had to start with “This is to recommend . . . ” And the rest of the sentence had to sum up the recommendation.
Today, we need to reinstate that rule for writers of business plans, too many of which contain dozens of ideas and concepts impossible to sum up in a single sentence.
That brings up a critical issue. What is the objective of a business plan? Is it to outline all the things a company needs to do to have a successful business? Or is it something different?
I say it is something different.
The most important objective of any company today is not to build a business. The most important objective of any company today is to build a brand.
If you build a business without building a brand, your business is vulnerable to competitors. On the other hand, if you build a powerful brand, you not only protect your company from competition, you can also build a profitable, long-term business.
For example, a couple of entrepreneurs from Silicon Valley created a company to develop an iPhone social-media app. Eighteen months later, they sold the company to Facebook for $1 billion in cash and stock.
Facebook didn’t buy the business because the company had no revenues. What Facebook paid $1 billion for was the brand, Instagram.
Every city in America had mom-and-pop restaurants that once had profitable businesses but no longer exist today, replaced by McDonald’s, Burger King, Wendy’s and other national brands. In banks, in hotels, in grocery stores and in many other categories, once profitable businesses are being replace by national brands.
No matter what industry you are in, the long-term trend is towards brands. Unless building a brand is your primary objective, your company is likely to suffer in the future.
Look at the personal-computer industry which got off the ground in 1975 with the introduction of the MITS Altair 8800.
By the year 2000, the global market for personal computers exceeded 140 million units a year. In the 25 years between 1975 and 2000, there were hundreds of brands of personal computers introduced in the American market.
Today, there are only three major brands left: Apple, Dell and Hewlett-Packard. What did these three companies do different that helped them survive?
Each was first in a new category.
Apple was the first “packaged” personal computer. Everything was contained in one attractive case.
Dell was the first personal computer sold direct to businesses. First via the phone and later via the Internet.
Hewlett-Packard was the first desktop laser printer. The vast profits that product produced allowed HP in 2002 to buy Compaq, the leading brand of personal computer at the time.
Let’s see how a business plan for one of these brands might have been expressed years ago by a Procter & Gamble marketing executive.
“This is to recommend that our Dell brand focus on selling personal computers exclusively to businesses and exclusively by phone.”
That’s exactly how brands are built. Narrow the focus so your brand can own a word in the prospect’s mind.
- Google owns “search.”
- YouTube owns “Internet videos.”
- BMW owns “driving.”
- Volvo owns “safety.”
- Porsche owns “sports cars.”
- Rolex owns “expensive watches.”
- Starbucks owns “expensive coffee.”
- Evian owns “expensive water.”
- Whole Foods owns “organic food.”
- Ikea owns “unassembled furniture.”
The trouble with many business plans is that they do exactly the opposite. Instead of focusing on a single word or concept, they devote many pages explaining how to expand the brand into different products, different markets, different distribution, different price categories.
That’s not the way to build a brand. That’s the way to destroy a brand.
Instead of expanding the brand, companies should keep the original brand narrowly focused and launch new brands. Which is exactly what Apple did.
Apple initially was a “home” personal computer. When Apple wanted to get into the office field, the company launched a second brand, Macintosh.
When Apple wanted to get into the high-capacity MP3 player business, the company launched the iPod brand.
When Apple wanted to get into the touchscreen-smartphone business, the company launched the iPhone brand.
When Apple wanted to get into the tablet-computer business, the company launched the iPad brand.
These four brands made Apple the world’s most valuable company, worth $578 billion on the stock market. And notice: The last three brands introduced by Apple were “first” in a new category.
- The iPod was the first high-capacity MP3 player.
- The iPhone was the first touchscreen-smartphone brand.
- The iPad was the first tablet computer.
There are other ways to build a brand in consumers’ minds. But the most effective by far is by being first in a new category.
“This is to recommend that we launch a new brand that would be first in . . . . . ”
If you want to build a powerful brand, if you want to create a company that is enormously profitable, your business plan should start with a similar sentence.
On the other hand, suppose you want to focus on building your existing brand so it becomes more dominant. Brands get out of shape, just like bodies. And the best way to get a brand into better shape is to narrow its focus.
“This is to recommend that we narrow the focus of our brand to . . . so that we can stand for something in the mind of prospects.”