BrainTrust Query: Heritage vs. Innovations vs. Relevance
Through a special arrangement, presented here for discussion is a summary of a current article from Retail Contrarian, the blog of Dynamic Experiences Group
In an interview published a few years ago in Fortune magazine, Disney CEO Bob Iger was asked if Disney’s lessening emphasis on animation was diminishing the company’s core brand strength and legacy. In his answer, Mr. Iger said that animation is a “great wave maker for the company” and that they still have a very vibrant creative engine in both Pixar and Disney animation. But he went on to say something quite thought provoking. “When you deal with a company that has a great legacy, you deal with decisions and conflicts that arise from the clash of heritage vs. innovations vs. relevance. I’m a big believer in respect for heritage, but I’m also a believer in the need to innovate and the need to balance that respect for heritage with a need to be relevant.”
Heritage vs. innovations vs. relevance. This is something that almost all retailers will face at one time or another. This is true whether the heritage comes from being a multi-generation family business, a focused corporation or a successful entrepreneur.
If we’re not careful, the past can become an impediment to today’s and tomorrow’s success. The world changes, our customers change and our competition changes. At the same time, a company’s heritage is its foundation and more often than not has been a guiding light through these changes.
It doesn’t matter if a company has been in business 100 years or 100 days, there’s always some conflict between the past and the future. In my third year of running the Bose stores, one of my colleagues suggested trying something new. I said to him, “But we don’t do it that way.” He replied, “Exactly. That’s why I’m suggesting it.” In three short years I had become stuck on doing something a certain way — and only that way — because that’s the way we had always done it. We tried it his way and he was right; it was a better way.
Heritage should never trump innovation unless the innovation is in conflict with a company’s core values and principles. In the same respect, I’ve seen innovation damage a company because of the impact on its relevancy in the marketplace. The balance that Mr. Iger pointed out between heritage, innovation, and relevance is so important to retailers and vendors, especially for multi-generation ones. Time and time again we’ve seen retailers, so much a part of retailing history, fail to survive because innovation took a backseat to heritage and, as a result, they were no longer relevant.
This isn’t just a Mickey Mouse thing; this is about survival and success.
Discussion Questions
Discussion Question: How should conflicts over “heritage vs. innovations vs. relevance” be resolved? Can you think of a good or bad example of this principle in retail?
Achieving relevance to your target consumer does not mean that innovation and heritage are mutually exclusive. You can make an argument (using Doug’s example of Disney) that technology has led the company in innovative directions (e.g. Pixar) while staying true to its roots as the leading source of animated films in the world.
Surely the idea of innovation requires new platforms for delivering product, whether it’s live streaming of computer animation or e-commerce sites for formerly bricks-and-mortar retailers. The world is full of failed retailers (Blockbuster comes to mind) who didn’t stay relevant as customer preferences changed.
But another way to think of “heritage” is to define it as consistency of mission and brand position. In that case, “heritage” is not a negative but a core strength. It suggests that a company (retail, CPG or otherwise) knows who it is, and prepares itself to deliver its “brand promise” in new and innovative ways…even in Doug’s own example from the Bose stores.
The authentic core of a brand is more often a value, or set of values, rather than an artifact, so I say preserve those touchstones–physical or abstract–which are necessary to maintain the authenticity and credibility of the brand (heritage); continue to help those elements evolve over time (innovation); and make sure that neither the preservation of the past nor the pursuit of the future falls out of step with the needs, aspirations and lifestyles of your target market (relevance).
The world of business is full of examples of botched approaches to this problem from Xerox’s failure to capitalize on its development of the mouse, portable computation and an interface language (ergo its “miss” of dominating personal computing) to the Gap’s new logo gaff.
More positive examples might include Harley-Davidson and Nokia which evolved their product lines without losing their customer base. Of course, both those companies went astray in other ways, so just striking that balance is clearly not enough to guarantee success.
This is a good topic. The retail graveyard is full of once great retailers whose future was crushed when heritage trumped innovation. I remember early in my career as an IBM salesman when a highly esteemed exec at FW Woolworth explained to me that my proposal was unacceptable “because we don’t change very well.” Fifteen years later, the once mighty Woolworth was no longer.
They were locked in their former glory…too big to fail. Everything was “fine.” Innovation would have saved it. Woolworth tried by opening Woolco Discount Stores, following Kmart’s efforts to shed its Kresge legacy. But Woolcos were run like Woolworth’s. The store manager was king. Information was highly decentralized. Merchants struggled to keep pace with the consumer. Inventories moved like turtles. Margins eroded from the inefficiencies.
They should have listened more carefully to the young IBM salesman.
Great companies know how to innovate and re-invent themselves without losing the spirit of their heritage. However, it’s important to tell your customers what you are doing, changing, innovating, or modifying, with a very skillful, well planned approach. Don’t leave it to the consumer to figure it out the wrong way!
I remember about 10 years ago I was interviewing an executive of a successful family-run specialty apparel retailer with about 15 locations in New England (he was the founder’s son). When asked about markdown optimization, he laughed and said “if it doesn’t sell, I mark it down. If it still doesn’t sell, I mark it down more.” That chain is no longer in business.
Some retailers are trying to emphasize their heritage to show that they in fact, do have one. Forever 21 and Banana Republic both have brands called ‘Heritage’, and I think there are a few other clothing retailers that do the same. For Forever, the HTG 81 brand is a vintage line, and for Banana, it is more upscale.
We just have the words and juxtapositions out of order.
The innovation must be relevant to the heritage.
Too often we adopt innovation because it is relevant to the market’s needs of the moment, without considering whether it fits within our company or brand’s heritage.
L.L.Bean provides a case in point. Many would say that internet commerce would not be in keeping with the heritage of a company based on one man keeping his door open 24 hours a day to serve the needs of Maine’s woodsmen. But the heritage of L.L.Bean is not the Freeport store. The heritage is a focus on outdoorsmen, serving them with the highest quality products and unlimited customer service. When L.L.Bean entered the catalog business and later the online retailing community, they did it in a way that never lost sight of their heritage. That’s why it works.
Great points everyone. I was also struck by what Ryan says. It makes me realize that the more a retailer understands “heritage vs. innovations vs. relevance,” the easier it is to respond to changing market and competitive forces.
Take a look at the history of the members of the DJI 30. The original companies essentially don’t exist anymore. Is that because of heritage or small thinking?
Once upon a time Paramount was a member of the DJI 30. That was before Walt Disney started drawing Mickey Mouse. Why did Disney become an entertainment and media powerhouse and Paramount did not? Paramount certainly could have done what Disney did. But, it was more likely a lack of vision rather than heritage.
How is it that Western Union did not become AT&T? How is it that AT&T did not become the company that calls itself AT&T today?
Retail provides similar examples. Why did Woolworth not become Kmart? Kresge did! Why did Sears not become Amazon? Amazon today is nothing more than the old (1920s and ’30s) Sears catalog online. Sears started auto centers. Should Sears have developed Home Depot?
The good example must be Walmart. It was started by a variety store guy, who built the leading mass merchant. They then did the unthinkable, put groceries into their stores. When the club business became an opportunity, they opened Sam’s. When the U.S. market approached saturation they went international. Now they have declared that they will be the leading global internet retailer and they are making a move into convenience stores.
The real question, of course, is what is “heritage”? Is “heritage” being a mass merchant? Or is “heritage” being a retailer without constraints?
A few fashion companies have mastered the art and science of borrowing from the past while driving future relevance and innovation, particularly when new designers have been brought in to make what’s old new again. Karl Lagerfeld at Chanel, Christopher Bailey at Burberry, and Alber Elbaz at Lanvin immediately come to mind.
I’d start with either relevance to the customer, or innovation. Does the innovation make you more relevant, or does remaining relevant require innovation? With that settled, does the change you propose damage the tenets of your heritage? If not, go with it.
When I think about the value of “heritage,” I think of car companies. But heritage should *never* be a sales argument unless today’s product is every bit as good and as innovative as yesterday’s. Companies that have nothing to sell but their past achievements are walking dead. Companies that are pushing the envelope and innovating (like Porsche) can indeed play the heritage card: we are about performance and have always been. Now that’s a desirable product.
A wise professor in Japan told me once that the reason the Japanese continued to be so enduring in their culture is that they constantly changed. For me it took some time to really understand the ramifications. However, it is entirely appropriate for this discussion. If you stay true to your core beliefs, values, and mission, you will always honor and be in tune with your heritage. However, that does not mean that you have to do the same things always or do things the same way. Adapting to changing environments, consumers, and technologies allows you to be true to your heritage and relevant if you remain loyal to your core.
The answer to this question is like many things: easier said than done. But to summarize in one word, the solution is simple: Brand.
If the founders (heritage) actually understand brand and build a strong one, they will always be innovating to keep said brand relevant. They’d have to. Classic case study is The Limited. Formerly an apparel brand, now transformed into fragrance and lingerie at the behest of its founder, Les Wexner, who was one of the first retailers in the U.S. to really ‘get’ brand. That brand can live with or without him.
Now, the ‘done’ (execution) part is much more difficult for many founders in that most don’t have that type of relationship with brand and branding. They usually ARE the brand and do not foster brand building or brand marketing. This makes it almost impossible for the survivors to carry on the legacy, thus affecting relevance. There is a list a mile long of brands in the U.S. that fit that bill.
There’s a world of difference, I think, between maintaining the continuity of a brand’s meaning versus adhering slavishly to a quaint business process.
Disney is a rather good (though simple) example to cite in this regard, as it continues to re-market its classic film content on each new distribution platform that becomes primary–VHS to DVD to BlueRay. Here is one junction where heritage and innovation coexist happily.
Retailers have much inertia to overcome in this regard, since the entire practice of distributing and selling goods in physical retail locations could be considered “legacy” in nature. Layering technical innovation over this substrate–say digital signs or SMS mobile promotions–is not the same as integrating relevancy from the shopper’s perspective.
I could probably deliver a lengthy screed on that topic, but instead I’ll summarize by proposing that “relevant” offers (or assortments, or even branding) do not make a creaky legacy business model more relevant. You may as well wallpaper over a crumbling edifice.
Of the top 25 industrial corporations in the United States in 1900, only two remained on that list at the start of the 1960s. And of the top 25 companies on the Fortune 500 in 1961, only six remain there today. Some of the leaders of those companies that vanished were dealt a hand of bad luck. Others made poor choices. But the demise of most came about because they were unable simultaneously to manage their business of the day and to build their business of tomorrow.
IBM Founder, Thomas J. Watson Jr. once said, “I believe that if an organization is to meet the challenges of a changing world, it must be prepared to change everything about itself, except its beliefs.” A century of corporate life has taught IBM this truth: To make an enduring impact over the long term, you have to manage for the long term.
As the recent downturn reminds us, the tensions get harder the tougher times get. Shareholder expectations for higher returns don’t diminish when the economy stutters. In these moments, the temptation is strongest to cut investments in skills, innovation and R&D. But IBM actually increased investments during the Great Depression. In this most recent down cycle, IBM protected R&D and continued to make strategic acquisitions. But this also meant that we had to drive higher levels of productivity in other parts of the business our global supply chain and functional processes. Doing so required and led to major innovations in how we operate the company, resulting in $6 billion productivity savings over the past 5 years.
Keeping the investments in innovation has kept our relevance in the marketplace. Those innovative investments have also built our heritage in the marketplace and in our society.
The conflict usually appears when one of these is out of balance with the others in regard to the customer. Companies who listen to their customers have found the key to balancing heritage with innovation and relevance. The customer is always right is still the golden rule, but a better take on this might be find a new way to listen to the customer and follow their advice based upon our experience (heritage), affordable technology (innovation) and business (relevance). By doing this, business will not only succeed, but thrive as a cutting edge leader in their category.