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Economics

Book review: Kellogg on Branding in a Hyper-connected World

August 25, 2019

Not all the names are the same. Some of them are brands. The difference is that only the latter have associations related to it. They can be positive, negative or mixed and they are the sum of all the things we think when hearing or seeing a brand.

Brands shape perceptions. They set expectations and give different meanings to their targets. A good quality brand sets the bar higher and may also yield more good will than a low-cost brand.

Marketing is full of lists and branding is no exception. Three challenges of branding are cash, consistency and clutter.

Cash is king in the short-term but the brand is a long-term asset. These two objectives are not always aligned and often the short-term results win at the cost of the overall brand image.

Branding down loop is an example of this where short-term financial objectives have negative consequences either by competitor actions or shifted consumer price expectations.

Consistency is a similar pitfall if the organisation does not believe in, own or understand the brand. How to ensure that every encounter with the brand is in sync through out the organisation in real-time?

Creativity and tactical excellence are ways to cut through the clutter and make the brand stand out among thousands of messages we receive every day.

Brand positioning strategy consists of four different components: a target, a frame of reference, a point of difference and a reason to believe. A brand positioning sets the brand in respect to other brands in the market. A brand purpose gives the reason why the brand exists. A brand positioning is the foundation for all brand-building activities.

Revenue growth seems to go hand-in-hand with brands that link all their activities to purpose. Strong purpose helps also in recruitment and employee engagement. It might not be a far-fetched idea to start to consider standards and reporting for a purpose audit in addition to the financial one in the future.

Pioneering has a high mortality rate. But the last 30 years of research shows that successful pioneers outsell later entrants across industries: the second entrant has in average 71 per cent and the third 58 per cent of the pioneer’s market share.

Market research shows that consumers systematically prefer pioneers, and this forces later entrants to spend more on differentiation or charge less in order to counter-balance the pioneer’s edge.

The first comer has the advantage of defining the category and benefits for the consumer. These stay over time and the positive attributes are associated with the brand the consumer learned about them first. A deeper learning curve and novelty drive concrete benefits for the pioneer. Later entrants need to adjust and respond to the pioneer’s definitions and expectations.

Fast copycatting can prevent the pioneer become an established and dominant player in the market. They also grow the fastest in the market compared to other players either earlier or later entering the market.

Brilliant strategies often stumble on implementation. Execution is a team effort across the organisation and involves many people. It’s less glamorous and therefore less credited as well as researched than strategy formulation.

The book consists of independent articles organised under different themes. The structure gives an updated overview to the topic.

The variety and quality of the content varies by the author but overall it’s a topical tome that can benefit both startup and established brand builders and managers alike as the above examples demonstrate.

Book review: The RegTech Book

August 22, 2019

FinTech has been around for ages and it is starting to shift its focus from digitalisation of money to monetisation of data in the financial sector.

After 2008, compliance has been a major issue for financial companies. Massive increase in regulation and reporting requirements have resulted in governance, risk and compliance (GRC) related costs racking up to 20-30 % of total costs in banks.

Nobody loves compliance. It’s horrible for customers and tedious for the financial institutions. If done in a wrong way it scares away existing and new customers.

Old legacy banking systems and isolated vertical data structures translate into manual labour intensive tasks and parsing of reporting data from multiple sources. This is the opportunity RegTech startups are starting to realise and materialise.

The old ways of doing things do not work anymore. Costs need to come down and productivity gains are expected. Yet, it is still early days and relatively little VC capital has been poured into the sector.

RegTech is a relatively new term that potentially can be used in respect to regulative processes in any sector, not just in the FinTech arena. Its earlier forms have been focused on streamlining compliance and reporting processes, often by means of digitalisation.

The latest trend is to start to see RegTech not just as a cost-centre but also as a means to provide business benefits and gains for the customer and revenue side of the business. Automation can provide valuable business data and improve customer experience if properly realised and understood.

Bank bashing is an easy target for politicians and public authorities since like compliance banks do not have many friends. Yet, even regulators have started to realise in some countries that they cannot just kill the financial companies with GRC without consequences to the overall economic activity and GDP growth.

Innovative companies have choices and they can move to more friendly business environments. For this reason some countries have started to introduce financial sandboxes where the full weight of regulations and compliance do not hit new ventures immediately.

UK, Singapore and Switzerland are examples of FinTech and RegTech sandboxing nations. The current $100 billion market of compliance spending is a good incentive for entrepreneurs to consider whether it’s worthwhile to enter the market despite its less than favourable appeal.

Book review: Transforming legacy organizations

August 19, 2019

When startups reach their unicorn status in a rapid pace and volume it puts incumbents in an uneasy position. The fastest startup to reach one billion dollar status might be Uptake who reached it in 236 days from its initial funding.

For established companies to survive in future they need to overcome innovation barriers. The easiest way to innovate is to optimise the existing, and therefore improve the past.

The second tier is to prepare for the future by augmenting innovation. Here the challenge is to mix the future to the existing structures and chores of the organisation.

The most radical and genuine form of transformation is inventing the future by mutating innovation. Amazon is good at this. They create and enter new markets amebae-like as they go along.

You have reached your end of the improvement line when marketing becomes the most significant thing about your product. Like Pine & Gilmore stated 20 years ago: “Marketing is the price you pay for being unremarkable.”

Roadblocks for innovation can be divided into three categories of immune systems: individual, organisation and society. The lack of general willingness to change is one aspect to consider but no individual is a match for a systemic resistance.

It is only a very few people who are actual innovators or first movers. This has been estimated to be around 2,5 % of people. The scope of the hill to overcome becomes evident also when considered that in most of the Western countries over 90% of companies are SMEs.

Their lack of resources, innovation power and awareness to change are among the biggest challenges for a long-term transformation. Just keeping up keeps their plates full. For majority the status quo and stability are more comfortable than the forthcoming changes and possibilities.

When considering what makes customers tick one way to look at the issue is dividing it into four parts where everyone wants to be better: Do, Look, Feel and Be. Some of these may be stronger for a particular product or service but for all it’s at least good not to be on the negative side of any of the four aspects.

Be and Feel are intrinsic but differ where Feel is reactive to the external stimuli and Be is proactive in nature focusing on values and morality. Similarly Do is proactive and extrinsic focusing on results, competences and skills where as Look is about social status, and as such reactive and extrinsic.

Millennials prefer to work for companies with a deeper meaning yet many organisations do not have distinctive transformational driver beyond being “industry leader” or within top x of a defined category.

How do you innovate outside of your category or industry if your company is defined to be the leader in the stated category?

Instant and cheap forex is here

May 15, 2014

Cryptocurrencies are here to stay. We are in the early days like Internet in 1994. Yet, the ideas and concepts are opening new vistas to many fields and industries. Former Goldman Sachs partner recently commented that all the smartest guys in the room have all turned their attention to Bitcoin.

Venture capital luminaries such as Marc Andreessen (co-author of the first widely used browser Mosaic) and Fred Wilson of Union Square Ventures are bullish on the Bitcoin technology in general. Wall Street grade trading platforms are introduced this year. Bloomberg service already quotes the Bitcoin price to its 320 000 subscribers.

In the banking field, the first bank has adopted virtual currency technology (Ripple) to its interbank and intra-bank operations overseas. This enables fund transfers with significant cost savings and faster delivery times.

For example, a regular international money wire from euros to dollars between a German and U.S. bank will take two central banks, two intermediary exchange trading banks and one to five days to complete. All the links incur fees and add to the transaction cost.

In comparison, a Ripple network based transaction involves only the two parties and if needed forex market-makers that are settled and selected by the network based on the cheapest prices at the same transaction instant. The transaction confirmation takes six seconds and there are no charge-back or cancellation risks. Still, trading partners need to trust each other unlike in the bitcoin-based transactions.

Cryptocurrencies are not without their own issues. Current bitcoin trading volumes are still low and the price is volatile. Price changes are something that are in the inherent nature by design for some of the cryptocurrencies, such as Bitcoin. If you have a fixed money supply, unlike in the fiat currencies, something must give and it is the price. A large daily volume will even out fluctuations but they will always be present. Volatility vs. flexible money supply is one component of balancing the the impossible trinity (money supply, currency rate and counterparty risk) when launching a new currency. The fairly stable currency rates we experience in the fiat currencies force fluctuations in money supply that eventually create the booms and busts.

Nobel prize winner F.A. Hayek noted that we have always had bad money because private enterprise was not permitted to give us a better one. Now we have an opportunity to disrupt financial industry by innovation and better services. Millennials are already considering banking at the highest risk of disruption. 71% of the surveyed would rather go to the dentist than listen to what banks are saying. Your future bank is not in the high street – it’s in your pocket.

Originally posted at Treasury Peer.