Amid endless talk of "disruptive innovation" it is important to remember that not all competitive landscapes are remade violently, overnight. Obsolescence creeps as often as it lunges. While CEOs obsess over getting big-banged out of existence, odds are good that their companies will suffer a more pedestrian fate: they will simply cease to matter. The brand goes stale, core strengths languish, and opportunities to keep pace with--or get in front of--changing customer needs pass them by. The world moves on. They don't.
"Companies are afraid to ask the 'relevance question': Is what I am making or selling still relevant, and will it be five or ten years from now?" says innovation expert Debra Kaye, author of the book Red Thread Thinking. "But they need to ask it every year, because if a company loses relevance, it dies." Profitability from customer relationships over time is higher for companies that "are fixated on changing ways of providing value to customers," says Andrea Coville, CEO of public relations firm Brodeur Partners and author of Relevance: The Power to Change Minds and Behavior and Stay Ahead of the Competition. "Customers are human beings," says Coville. "Human beings evolve, and you have to evolve with them."
Those observations are borne out by a new study from the Turnaround Society, an organization of restructuring experts. The study found that the top two internal precipitators of a corporate crisis are leadership's hanging on to strategies that no longer work and a failure to stay in touch with customers, coupled with unwillingness to adapt to changes occurring around them. So, for example, the now discontinued brand Hummer never came to terms with rising anxiety over fuel efficiency. Some retailers were looking flyspecked even before Amazon blew into town. Earlier this month, Radio Shack filed for bankruptcy. But the writing had been on that wall for some time. "Radio Shack announced plans to close 1,000 stores throughout the U.S," remarked Conan O'Brien on his program last March. "Radio Shack customers were very upset when they got the news on their pagers."
The danger intensifies over time. Long-established ways of looking at a business breed inertia, even as successive generations of leadership lose touch with the roots of the company's success. "You're vulnerable if you rest on your laurels, but also if you are constantly reinventing yourself," says Coville. "Relevance means being relentless about innovating on your core assets."
The following companies have done just that: Sustaining relationships with longtime customers even as they have innovated their way into new markets. As a result, they have thrived for decades, across many changes in their competitive landscapes. Such businesses demonstrate that to achieve success over the long haul, nothing matters more than mattering.
The company: O. C. Tanner
2013 revenue: $500 million
Core strength: Employee-recognition programs
Current relevance strategy: Help clients create workplaces where people thrive
Company founder Obert Tanner was a seminary teacher in high schools; his first effort to acknowledge a job well done was making class pins for new graduates. Tanner then graduated to a grander mission: promoting human values in corporations that often treated workers as faceless cogs. His company's machines pumped out brooches, rings, and lapel pins, which corporate clients awarded to employees to commemorate, for the most part, years worked. The idea was slow to catch on, and the company didn't break the $1 million revenue mark until the 1950s. But once customers got it, they really got it.
As companies globalized and automated during the '70s and '80s, O.C. Tanner continued to produce commemorative tokens but also implemented computerized awards-administration programs for large global workforces. By 2000, competition for talent, particularly technologists and other knowledge workers, was raging. O.C. Tanner encouraged customers to switch focus from commemorating years served to tracking and recognizing outstanding performance. Star players felt appreciated, and companies could more easily identify high potential. O.C. Tanner built custom programs and software systems to manage all that.
"Forty years ago, custom-designed awards made up most of the revenue in a typical employee recognition program," says Dave Petersen, CEO since 2009. "Today's programs still include awards, but also comprehensive program management, communication campaigns, recognition training and--most importantly--advanced software technology." The company's resource allocation has tracked that change. Through the 1960s, 70 percent of people costs were in manufacturing. Today the number is half that, with most of the growth in areas like IT.
The concept of competing through thought leadership gained currency in the early '90s. O.C. Tanner--which as far back as 1978 began sponsoring lectures on human values at Oxford, Cambridge, and other prestigious universities--expanded its reputation as a creator and disseminator of intellectual property. The business stepped up research on such subjects as retention and motivation, conducting regular surveys of the millions of employees working for its global customers and deep dives with top leaders and HR directors. Education increasingly became part of the mix: In 2004, O.C. Tanner launched an annual summit where customers share with one another best practices in employee engagement. And the company is building a wing with a large auditorium to facilitate the hundreds of people who march through its classes each year. In 2013 it aggregated and formalized those efforts by creating the O.C. Tanner Institute. The Institute's resources are free to customers as a way to reinforce the company's broad and deep expertise.
The business also leverages its IP for content marketing, "particularly now that there are so many ways to share what has always been practical, useful content," says Petersen. For example, O.C. Tanner literally wrote the book(s) on employee appreciation, including the bestselling Carrot series and last year's Great Work, targeting folks who want to make a difference on the job. And, of course, the business keeps pace with technology, working via social media, where peers can honor peers.
"We've grown the intellectual property side of the business to become a thought leader, an expert," says Petersen. "We collect loads of empirical data and we facilitate our customers' sharing of ideas, with each other and with us. We are evolving together."
The Company: R. Torre & Co.
2013 revenue: $100 million
Core strengths: Product development
Current relevance strategy: Work closely with customers to anticipate trends and collaborate on new products
In 1925, husband and wife Rinaldo and Ezilda Torre returned to the United States from a trip to Italy with recipes for syrups that could be blended into sodas. They mixed them up, one batch at a time, and sold them door-to-door to restaurants and groceries in the North Beach area of San Francisco.
In 1933, the repeal of Prohibition presented new opportunities for the beverages and flavorings industry. The Torres expanded into liquors and cordials and, as cocktails became more popular over the next several decades, they thrived.
By the 1980s, growing health consciousness and the newly launched Mothers Against Drunk Driving movement made alcoholic beverages less appealing. At the same time, R. Torre observed that coffee was fast becoming the social lubricant of choice. The company returned its focus to syrups and flavors--only now its goal was to educate coffee roasters and other partners on how its products could enhance a cup of joe. At that time, Starbucks--still relatively young but R. Torre's biggest customer--asked the company to create a line of private label syrups to use in coffee drinks in its stores. Fearing that it would be forced into the role of low-cost producer, R. Torre chose instead to innovate its own products, sacrificing all Starbucks business as a result.
Over the past decade, R. Torre observed new interest in making fancy coffees and flavored beverages at home. It responded by creating smaller versions of its products in easy-to-use packaging for distribution in supermarkets and specialty stores, channels it projects will eventually account for half of sales. Aware of the swelling ranks of affluent and adventurous foodies, R. Torre is also hunting an ever-greater variety of flavors, often with customers in tow--literally. Once a month or so, R. Torre employees lead distributors on "flavor safaris" to places like gourmet ice cream shops (one of which featured flavors that included Peanut Butter Curry and Strawberry Candied Jalapeno). The excursions are followed by debriefs in which R. Torre staff and clients brainstorm on how to adapt what they've observed into new products. "We are on the lookout for the inceptions of trends," says Melanie Dulbecco, CEO since 1991. "We've always been crazy, geeky about flavor."
The company is so committed to getting as many voices into the new-product conversation as possible that in 2003 it erected a large tent in its parking lot and invited more than 100 customers, distributors, business partners, and people from the flavor industry to join in a group-visioning exercise. "We had all these different perspectives telling us what we, as a business, needed to do to be successful eight or ten years into the future," says Dulbecca. Over the years, R. Torre has hosted "mini-tent meetings" for more targeted groups, such as participants in its international business. Such sessions generated so many good ideas that when the economy bottomed out, the company had a pipeline of new products that it could bring to market quickly. As a result, R. Torre roared out of the recession, doubling its revenue between 2008 and 2012.
To help employees understand how the company has changed over time--both where it has been and where it might be going--R. Torre divides its history into "eras." It began with "Taste of the Homeland," followed by "Liqueurs and Cordials," "Café" and "Consumer." The eras correspond to "the places where people have come together to sit around a table and socialize: in bars and restaurants, then in cafes and coffee houses and now at home," says Dulbecca. "And wherever that happens, that's where we are."
The company: Zippo Mfg. Co.
2013 Revenue: $200 million+
Core strengths: Reliability and design
Current relevance strategies: Extend an iconic brand into global markets, expand into new categories
In 1932, George Blaisdell noticed a member of his country club using an Austrian lighter to spark a cigarette in the wind. It worked, but the lighter was utilitarian looking, made of thin metal, and required two hands to operate. Blaisdell was inspired to create a version that was more attractive, durable, and easier to operate. He called it "Zippo" because that sounded "modern."
Although the company initially targeted consumers, with the outbreak of World War II it focused exclusively on demand from the military. The product's ubiquity among the troops established the brand in the public mind (and provided a financial windfall as the plant ran at full capacity).
In the 1950s Zippo had a battle on its hands as disposable lighters entered the market. The company brandished a built-in weapon: a lifetime guarantee, something it had touted since its founding. That guarantee allowed Zippo to compete on price. Consumers might buy five or six disposables every year at $1.25 each, while a low-end Zippo cost $12 and could conceivably last a lifetime. The company leveraged that message to seize some of the disposable market--a neat example of reverse disruption. "For a consumer that is more price-driven than quality-driven, disposables could have been a disruption," says Greg Booth, who became CEO in 1999. The guarantee "was a very bold statement of quality that built a loyal following."
As smoking became a serious public-health issue in the United States, Zippo found new markets overseas, where it now sells over half its products. Domestically, the company changed its emphasis, from the utility of its lighters to their status as desirable artifacts. It aggressively pursued licensing deals with popular brands from Harley-Davidson and Playboy to Jim Beam and Jack Daniel's to the NFL, the NBA, and MLB, all of which were eager to offer Zippos emblazoned with their respective logos. "Now they were personalized," says Booth. "It's not just a lighter. It's my lighter and my motorcycle and my favorite team." Later, in response to younger consumers, Zippo sought more distinctive, customized designs, partnering with art schools around the world.
Zippo also doubled-down on its association with music by sponsoring more than 100 concerts annually. Audiences can buy performer-branded lighters, both as a memento of the event and to wave in time-honored fashion. Or they can download the free app of a flickering Zippo lighter and wave their smartphones "If you are in tune with your audience," says Booth, "you ought to have an app."
Recently, Zippo has been establishing itself as a lifestyle brand, initially in those welcoming global markets. By the end of 2015, it will have 50 stores in China that sell not only lighters but also Zippo-branded apparel, backpacks, and other items. Even in its domestic strategy, Zippo keeps the critical global market in mind, opening three retail stores this year in Las Vegas casinos, with three more in the works. Vegas attracts an international crowd hungry for made-in-the-USA souvenirs: and it doesn't hurt that Zippo's gambling themed lighters are perennial bestsellers. The company also introduced a line of camping supplies that hark back to the brand's historic functionality.
As Zippo diversifies, its core product remains as relevant as ever, even if the activity it serves does not. Booth says the company has long been prepared for its lighter sales to track downward as tobacco products fall from favor, but that hasn't happened. Lighters still account for more than three-fourths of the company's sales. "A person might think, 'Gosh, you've been doing this same thing for 80-plus years. The aura has got to kind of go away," says Booth. "But so far, we haven't faded.
The company: 1-800-Flowers
2013 revenue: $736 million
Core strengths: Selling flowers and gifts
Current relevance strategies: Leverage mobile technologies and social media; offer low-priced products that encourage more gift-giving
In the mid-1970s Jim McCann built a chain of 30-some flower stores in New York and New Jersey. The stores, called Flora Plenty, were designed as friendly neighborhood places where customers could enjoy a cup of coffee and chat.
As national brands and big-box stores weakened Main Street businesses, however, McCann wanted Flora Plenty to go national. But he saw no clear path toward greater economies of scale by opening more brick-and-mortar stores. What he did see was customers getting busier and demanding more flexibility in how and when they shopped. So the company started selling off stores to raise capital for a new brand: 1-800-Flowers. As an early adopter of the toll-free, vanity-number business model, the company attracted lots of attention, including a starring role in AT&T's ads for such services during the 1992 Olympics. "Others in the industry said it wasn't going to work," says McCann, who remains CEO. "But we knew better because we see things through consumers' eyes."
Having watched the phone call replace the walk-in, 1-800-Flowers spent the early '90s anticipating what might replace the phone call. The company experimented with as many as 50 different technologies, including putting catalogs on CD-ROM, in an effort to stay in front of consumers' changing preferences. Whatever platform won, 1-800-Flowers vowed to the first florist/gift business on it. The company succeeded: 1-800-Flowers was the first in its industry to be found on CompuServe and AOL, and later to debut its own Web site. A 1999 IPO allowed the business to invest in technology to ward off upstart ecommerce competitors.
About eight years ago, at one of 1-800-Flowers' regular "What Have You Learned Lately?" dinners, a new employee (and recent graduate) talked about this new thing called "Facebook." As soon as the platform expanded from students-only to the general public, 1-800-Flowers was on it. The company instantly saw the potential to run ads on a site that, among other things, alerted a user to a relative's upcoming birthday. It also recognized the larger possibilities inherent in multiple social circles: more "friends" meant more occasions or milestones to celebrate. In response, 1-800-Flowers began to offer low-priced gifts, such as a $5 cookie and card, that allowed customers to recognize their weaker ties with something more than an emoticon but less than the $60 bouquet they might send their mothers. It also continued to invest in mobile, even during the downturn, because it anticipated customers would flock to that channel.
Ask McCann, whether 1-800-Flowers is, in effect, a technology company, and he says no. "We are a floral and gift company," says McCann. "We just happen to embrace technology." In fact, he says, social media has yielded "deeper, more conversational relationships with our customers. It's more like back in the days when they'd come by the store and have a cup of coffee.
"It's our job to help our customers act on their thoughtfulness," says McCann. "So if they have an idea in the morning when they are taking a shower--'jeez, Liz did something nice for me yesterday; I'd like to send her something to say thank you--then when they step out of the shower we will be there for them in whatever is the most convenient way."
All Talk, No Relevance
To understand what relevance is, companies must understand what it is not. To the detriment of actual strategy, the word has increasingly been co-opted by marketers. Ellen Degeneres's Samsung selfie at the Oscars and Oreo's Superbowl blackout tweet temporarily elevated the profiles of Samsung and Orea above the artists and athletes competing. By contrast, the genuinely impressive product and packaging changes Oreo made to gain true relevance in China have received little attention.
Relevance should not, in short, be confused with buzz. While being talked about is necessary, it is not sufficient. Two years ago, the ill-advised remake of the movie Carrie opened to wan box office results despite an inspired marketing stunt that garnered 55 million YouTube views. Coca-Cola's "small world" campaign, in which people in India and Pakistan connected through live video feeds via Coke-branded vending machines, won many raves but did nothing to halt Coke's declining sales.
"It's great when people talk about you, but that doesn't make you meaningful to old customers, or new customers, or disenfranchised customers," says Andrea Coville of Brodeur Partners. "Staying relevant means being diligent about talking to customers and others about the quality of your product, and about creating a personal connection with your community. If you don't do that, the best ad in the world won't make up for it."
Ten Ways Companies Remain Relevant
- They see their past, present and future as a continuous arc and understand what made them successful at each juncture.
- They are shrewd consumers of technology, adopting and customizing new platforms as applications for customers become apparent.
- They pay attention and respond to societal changes.
- They study new entrants closely but avoid knee-jerk reactions; some of those new players might become partners rather than competitors.
- They practice a kind of perpetual beta with customers, working together closely so that both sides learn from each other.
- They seek new partnerships and the perspective of outsiders.
- They become thought leaders in their fields.
- They listen to their young employees.
- They improvise and innovate on core strengths, rather than blow up everything and start again.
- They remain true to foundational values.