In Asian boardrooms, one of the most difficult issue to table for discussion is reviewing the brand portfolio and what to do with underperforming brands. The general approach is to increase and innovate by creating new brands and very rarely it is about cutting, or streamlining existing ones. Therefore many large Asian firms retain a great number of brands in the form of subsidiaries and products, even though many are underperforming and still require resources to manage. Over time, many of these underperforming brands are simply left alone because no one dares to propose cutting them off. These under-performers still requiring maintenance also means that better performing brands cannot always have priorities in terms of resources. This makes it difficult to implement a performance-driven approach to increase returns.
Why it is hard to kill off a brand in an Asian portfolio
Any western professional looking into an Asian portfolio that is unwieldy will most certainly exclaim that it is simply common sense to go about streamlining these brands to increase return on investments. However to the Asian CEO, it is not so straight-forward. In the past, many Asian economies do not possess the open characteristics of western economies so it is normal for many large firms to be involved in almost any sector that they can get their hands on. So for many decades, whether it is industry or product, the preferred strategy is, more about fulfilling needs and meeting opportunities first. Due to the lack of quality competition, the ones who had the 1st mover advantage generally won over the market. So this means a faster roll-out of the new brands, at the expense of margins and proper strategy so that it will crowd out the competition. Another characteristic of this approach of moving fast, means assigning loyal staff or family members who will dedicate themselves towards making things happen quickly. Loyal suppliers are also involved in this process so that support elements are in place to help the company gain victory. Therefore to outsiders, these may only be brands but to insiders, these brands are extremely valuable because of the relationships that have been forged. And to shut down any brand may also mean losing the very people who have made things happen.
A new era is forcing many Asian firms to change
In the last decade as many the economies open up, new regulations and better competition has forced large Asian firms to review and streamline their portfolio. Some companies who had the foresight were able to divest their non-core portfolios and reinvest the cash raised to strengthen their core business. Many, however are still struggling to review and decide on what to do with the numerous business interests.
The other reality facing many Asian firms is that while they dominated local markets, once that space is no longer secure, they found it quite hard to build a regional business. This is due to a lack of strategy to develop leadership capacity and implementing the necessary processes to achieve a more disciplined form of execution. It takes at least 5 – 7 years to transform a large organization (USD250 – 500 million annual turnover) with numerous interests to be ready for overseas expansion and global competition.
Once any Asian market opens up to foreign competition, their consumers have a tendency to choose foreign brands in the early years. It is not just about the perceived quality but a desire to experience a more global lifestyle. This is also why it is important for Asian firms to reduce the number of brands so as to increase investments in the fitter brands within their portfolio, transform the brand image, increase marketing resources so as to defend market share. When resources are too spread out, even the fitter ones will not survive.
3 ways to simplify and manage your brand portfolio
For Asian conglomerates that are now reviewing their portfolio and deciding what to do, here are three strategic approaches to simplify and ensure success:
1) Keep those that you can build on or improve value
Having too many opportunities can make any leader blind, therefore it is very important to have a framework for a more objective review, one that will help you arrive at your vision. When reviewing the existing brands, start with the subsidiaries and look at where you are going in terms of your strategic plan. Then retain those that you can build upon and improve value. Here are a few basic points for consideration in terms of retaining subsidiaries:
- Is the subsidiary a critical component for the strategic plan to succeed?
- What is the current competitive advantage of the subsidiary in terms of license, distribution channels, brand or technological advancement?
- Do we have the talent, skills and vision to build on its existing good work?
- Do we have a unique understanding of the industry as compared to our current and emerging competitors?
- How much are we willing to invest and make this subsidiary even more competitive?
We have experienced that once top management are asked question number 5, it is a clearer indicator of will in terms of how important and strategic the subsidiary really is. The next step is to move onto reviewing product brands and over here, other variables at play. Some products may be retained for the sake of retaining influence while others may be promoted more as they are flagship products. These are some of the aspects for consideration:
- Recognition in terms of identity
- Uniqueness of Intellectual Property
- Ease of Distribution for local and international markets
- Value to customer in terms of uniqueness
- Possible advantage versus a similar global brand
- Capacity for innovation
- Relationship in terms of influence of sales for other brands owned by the company
Such studies will take months as they include a deep financial analysis as implications have to be factored in, if certain brands are discontinued or even sold off to raise cash for the company. In any case, it is always good to set up a review process to determine the indicators of whether the portfolio is performing as expected. Whenever competition heats up, there will be lesser room for brands without purpose. Every single brand must contribute to improving profit margins and revenue opportunities.
2) Consider it a priority to have a roadmap for people development
Another aspect which always stymie the implementation of this kind of exercise is poor manpower planning. Once management decides to go ahead to streamline the portfolio, a lot of attention is focused on achieving synergies through cost-savings. Many a times it is done without understanding the existing capabilities of the staff. A wrong configuration and poor matching of talents to relevant brands can have a huge impact on the sustained performance of the new portfolio strategy. Therefore prior to implementing massive change, it is prudent to identify the kind of talent needed by setting up a people development plan. In the case of some new products and services, new talent might be needed. Here are some things to consider in terms of developing this plan:
- Review the capacity of existing staff before redeployment
- Identify new type of talents needed to accelerate implementation
- Set up a common internal institute for existing talents and new ones to synergize their thinking and collaboration
- Align the performance of the individuals to the new portfolio strategy
- Set up a new career roadmap to reflect the goals and evolution of the strategic plan
We have found that when companies make an effort to communicate and develop a plan for existing talent and new staff, they will see a greater commitment to achieving change. This is necessary because people need assurance. With change comes a lot of uncertainty in terms of personal growth. A people development plan alongside with the new portfolio strategy acts as insurance and will result in better performance.
3) Build capacity for shared innovation
Once the months of review is done and the portfolio strategy is ready to take shape, it is important to develop another strategy to support shared innovation. This development does not only refer to technological advancements but also in terms of how to nurture a creative environment for staff to share and contribute ideas to advance competitive edge.
In our fast moving world, it is now important to try and bring people together to collaborate more rather than less. Therefore everyone must have the opportunity to get involved in reviewing products and services. Then a process will have to be set up to demonstrate that these ideas are being listened to and do have an impact. Once any idea has been reviewed, pass it onto a more dedicated team to make it happen. Use these moments of collaboration to reduce product silos. Increasingly large firms are discovering that when departments get to know each other’s work, they learn new insights and opportunities to collaborate.
At the end of the day, you want a portfolio of subsidiaries and brands that are actively working with each other to find new ways to bring a more creative experience to the customer. When a portfolio is able to work beautifully together, they create more moments of magic. This is what retains customers, a more magical experience and not one that is incoherent.
Lawrence Chong is the CEO of Consulus, a company specialising in helping Asian firms rebrand and redesign their organisations to be more innovative through business design. Consulus has begun operations in Sri Lanka in partnership with Hummingbird International. Shiraz Latiff is the CEO/Lead Consultant of Hummingbird International, a regional knowledge house specialising in coaching, consulting & outsourcing through global partnerships & collaborations.
This article is part of a weekly column called Shaping the World where Lawrence and Shiraz share insights and ideas about building innovative Asian Brands. It is published by one of the leading dailies in Sri Lanka, Ceylon Today.
