Great new products often fail because they’re launched by the wrong company. Case in point: the Chevy Volt
I’m one of the few owners of a Chevy Volt. I bought mine in December 2010, when the vehicle was first released. It’s an amazing car. I’m averaging 112 miles per gallon of gas. Yet most of my “Green” friends are uninterested. They’d rather own a Toyota Prius—or await for a plug-in from some other company. Why? Because the Volt is made byGeneral Motors (GM [1]) and they just can’t believe GM’s heart is in it.
In fact, a recent survey from online market researcher Compete.com [2] shows that only 9 percent of Toyota Prius shoppers even look at the Volt as an option. Yet the Volt won Motor Trend’s prestigious “Car of the Year” award. What’s the problem?
Most consumers no longer shop for products. They shop for a company. With a plethora of product choices, it has become far too difficult and time-consuming to attempt to evaluate each offering. It is much easier to determine if the company you’re buying from shares your values and is likely to provide a good experience. Toyota (TM [3]) has long supported fuel-efficient vehicles. If Toyota had launched the Volt, chances are it would already be a runaway success. But GM? It’s hard to associate the company that brought us the Hummer with a green image. How could GM executives possibly care about fuel efficiency? Or even get it right? Are they doing this only to look like good corporate citizens?
GM could fix its public relations problem, but it would take some bold moves, such as making Al Gore chairman. Rather than just saying that GM supports the Green movement, its executives would need to demonstrably lead the charge by actively working to make all its operations more environmentally responsible. Actions of this magnitude are necessary if GM is to change the view of the buying public. Otherwise it’s simply making gestures that are too easy to ignore.
The world has wised up. No one is going to be tricked into buying something by cute TV commercials. In the Internet Age, everyone has the ability to find out everything about your company, market, and products. If you want to sell, you’d better show customers that you care intensely about your product and what it stands for. You need to demonstrate that your motivation is not mere greed but a desire to help improve your customers’ lives—because in so doing, the world will become a better place.
“COOL” APPLE, “INDIFFERENT” MICROSOFT
Microsoft (MSFT [4]) and Apple (AAPL [5]) both make great products. Over the past several years, Microsoft gained a reputation of being indifferent about improving its products. By contrast, Apple is the “cool technology” company led by rock star Steve Jobs, whose mission in life is to bring ever-improving technology to us all.
Microsoft has put forth solid new products such as XBox 360 and Kinect. Had either been launched by Apple, they probably would have been blockbusters. In 2002, Microsoft launched the Windows XP Tablet [6] eight years before Apple’s iPad. The tablet got good reviews but never caught on. When Jobs announced Apple’s iPad, it became an overnight hit, even though many of its two million purchasers weren’t entirely sure how they were going to use it.
Many Apple consumers feel a personal connection to Jobs and trust that he will not let them down. Increasingly, consumers are asking: “Who makes this product and what is their story?”
Many corporate executives mistakenly believe that consumers are anti-big company. In fact, most consumers have greater confidence in buying products from big companies—if its values and mission are aligned with theirs.
DISNEY OWNS PARENTAL TRUST
Walt Disney‘s (DIS [7]) mission is to provide families with great entertainment in a wholesome environment. Even the street sweepers are kid-friendly and fun at a Disney theme park. Other companies have tried to crack Disney’s market. As a parent, what company would you trust most to entertain your kids?
Big companies that span categories, however, often operate at a disadvantage because it is harder to have a single-minded mission for everything. Some have tried corporate advertising or PR across general “we’re good people” themes. This just turns them into corporate drones.
A better solution is to create business units or divisions that are run independently. Unilever (UN [8]) has done this effectively with Ben & Jerry’s Ice Cream, maintaining the company’s mission, values, activism, and Vermont operations. Ditto with Coca-Cola‘s (KO [9]) Odwalla and Kellogg‘s (K [10]) Kashi.
Each of these businesses has a high degree of independence and is often empowered to pursue social goals, product strategies, and communications that are at odds with their parent company. For example, Kashi and its employees actively promote healthy lifestyles and education about food nutrition—to the detriment of such stalwart Kellogg products as Sugar Frosted Flakes and Pop Tarts.
MCDONALD’S BLUNDERED WITH CHIPOTLE
Like Kellogg, many companies are locked into undesirable missions by legacy products that contribute huge profits but are out of step with societal trends. In these cases, innovation projects that establish new missions are critical. Kashi generated over $500 million in growth for Kellogg over the past decade, offsetting declines in many of its sugar-coated products and helping to position the company for better long-term growth via a more productive mission.
Ten years ago, McDonald’s (MCD [11]) was in a similar position when it invested in Chipotle restaurants, a concept based on using sustainably raised, hormone-free beef. In 2006, McDonald’s sold off its Chipotle stake to refocus on its core. Big mistake. Today Chipotle (CMG [12]) has a market cap of $9 billion (10 percent that of McDonald’s). The revenue growth it generated during those five years would have more than doubled McDonald’s total U.S. topline growth.
The real pain for McDonald’s is still to come. Unlike Kellogg and Kashi, McDonald’s has no on-ramp to a future mission that’s more in tune with emerging consumer values. Every time McDonald’s launches something that really is healthy—such as apple slices in its Happy Meals—the offering is viewed with skepticism by critics who perceive it a PR ploy or an attempt to placate them.
If the Volt were manufactured by a company that really cared about saving world resources, the automaker’s entire team would care about my energy savings, both before and after I bought my vehicle. Instead, I suffered through a lot of red tape to get a charging unit economically installed in my garage. While the GM service team was pleasant enough, it didn’t much care about my charger because the company doesn’t make one and saving energy is not part of its mission. I ended up wasting a lot of time and money solving this problem on my own.
I guess I should have bought from the guys with the right mission.