Is the Industry Headed Toward Groundhog Day?
Q1 of your financial year is the perfect project seed time for a brand strategy consultant. Three months into the new fiscal year, brand executives begin to think about ways to fix subpar brand growth. In other words, when growth is below plan, management sentiment tends to develop chronologically:
- 1. Month => Bad weather! That will change.
- 2. Month => Far East Deliveries late! No problem, we’ll catch up.
- 3. March => Product/New Collection, maybe we have to react!
- 4. Month => Growth problems could last on all year.
In a way, the start of Q 2 is traditionally the time when boardrooms shift from annoyance of strategic growth problems to accepting the need for change.
How Q2 is handled separates best practice growth planning companies from the rest. The advanced companies review past strategies for growth because, after all, the next planning session is only six months away. The rest will only focus on cutting costs and investments, setting the scene for their very own Groundhog Day experience the same time next year. Like Bill Murray in the film, they won’t be able to escape this loop until they discover the deeper cause of their below-plan growth, and change the strategy accordingly. So, what are your routines?
Crisis Management Has Become Lived Experience
Many brand growth strategy processes have changed based on experience during the current pandemic. In early 2022, far more managers than before know how to develop sales turnaround programmes and manage cost-cutting projects. Far more CFOs have short-term liquidity tools on hand, and far more boardrooms value conservative over aggressive planning.
After two years marked by sudden store lockdowns, retail customer bankruptcies and global supply chain issues, nobody blindly relies on planning from six months ago. Crisis management has become the new normal. And large parts of the industry have become very good at it, as regular growth and profitability reports show.
With Columbia, Crocs or Deckers, not just luxury brands report sales and profits above their 2019 performance. Not all 2021 results haven’t been published yet, but my cautious estimate is that a third of the industry has improved compared to 2019, despite Q4 supply chain challenges.
Brand growth strategies describe a brand’s action for growth. A good brand growth plan is ambitious without exhausting the brand’s resources. While there currently is not enough representative research on consumer goods brands, post-Covid performances indicate that well-managed companies with robust planning are emerging from the crisis stronger than before.
Does the Industry have Strong Growth Strategies & Planning?
Traditionally, the brand industry has been coping well with crises. A business model based on global sourcing and global distribution is accustomed to handling challenges and disruptions on a regular basis. Add to this long order lead times, and solid growth planning become an essential quality of successful brands.
But the brand industry’s success was less based on strong growth planning tools (MS Excel is still predominant), than on managerial improvisation skills. When stores went into lockdown, assortments were moved overnight to the very same online market places that the industry tended to avoided pre-pandemic.
When consumers couldn’t get to stores, Dutch lingerie brand Hunkemöller equipped 150 of its store managers with tablets and headset to sell on live stream and ship from store. The Gap, Mammut, Estée Lauder and Adidas participated in Zalando’s Connected Retail to distribute slow turning items to Zalando’s online customers. To ship from store, a previously unwanted process, became normal during the pandemic. And brand distribution became more flexible, but more complex and costly too.
Why Brands Will Strengthen Their Growth Planning
Whenever one distribution channel struggles, another door is opened pragmatically. While this has traditionally been an industry success factor, it doesn’t necessarily lead to higher-quality planning. But after the emergence of the global supply chain crisis in 2021, that may well change.
When large parts of your supplier base go bankrupt, or when you can’t find shipment capacities to get your orders into store on time, board rooms begin to look into long-term contracts. And suddenly we witness retail powerhouses like Ikea or Walmart commit to a shipping provider for years in advance.
Billion-dollar lifestyle brands, in contrast, are unlikely to significantly invest in shipping. But securing manufactures with longer-term commitments to key strategic suppliers has become a similar priority for brands. Hugo Boss, Bennetton, Lululemon, among others, have secured supplier contracts, often much closer to their home markets than before.
It remains to be seen whether capacities booked pre-seasonally and regional manufacturing will strengthen brand growth beyond 2025.
Times of Crisis Make for Better Strategy & Planning
The Organisational Sciences have always emphasised that organisations change in times of crises. And while some may question the relevance of science for business, the brand industry harbours several perfect examples where a crisis provided the tipping point for a brand revival and long-term success: For both, Gucci and Adidas, a great deal of their current growth strength was born from their experience of crisis in the early 1990s.
The same could be said for Apple in 1997, Puma in 1993 or LEGO in 2004: Years of bad growth strategies and last minute rescues were followed by ‘back to the basics’ strategies that eventually led to global brand growth. A crisis can trigger positive strategy changes and open the path to long-term growth. If this logic even partially holds true for this pandemic, we should see strong industry years ahead of us.
How Brands Can Strengthen their Planning
Don’t wait for the next resilience test before you strengthen your planning; 2022 is the perfect year to initiate change and prevent Groundhog Day, especially for strong brands.
Strategy planners tell me that the tools and processes developed over last two years have largely been pragmatic quick-fixes. Healthy and robust growth planning requires a more holistic approach. But I remain optimistic that planning tools and processes will improve through the pandemic.
Whether your brand’s strategic planning is organised top down, bottom up or something in-between, there are several ways of improving the quality of your growth planning. My favourite way to improve is reviewing processes and tools, and to learn from relevant benchmarks:
|Scope:||Define the areas of strategy planning processes you want to review.|
|Benchmark:||Develop Hypotheses on where you can learn.|
|Research:||Have someone (internally or externally) study and document market examples to learn from.|
|Inspire:||Organise a structured in-house exchange of learnings.|
|Match:||Prioritise the practices your brand aspires to.|
|Implement:||Plan for process and tool changes.|
The performance at a Formula 1 pit stop is no relevant benchmark for a tyre retailer. Make sure you choose practices that match your organisation’s skill set, as challenging your teams with unrealistic benchmarks will likely go wrong. But there are always benchmarks that fit and inspire, you just have to find them.
Let’s face it, quality improvements have procrastination written into their DNA. If we don’t break that habit, our planning is unlikely to ever improve. You can begin drafting a preliminary list of things to tackle right now! Because no matter how advanced your fiscal year, there are four things you can do to improve at any time: schedule your planning much earlier, reflect on and where necessary revise your current processes, study best practices, and get on the board agenda to discuss your findings and suggestions for change.
If there is one thing you should take away from this, it’s that the quality of next year’s planning begins today. Because a solid strategy for growth and planning should be initiated during good times.
About the Author:
Guido is a brand strategy consultant and planner, with expertise from more than 50 global brand growth projects. Have a look at his other publications or contact him here to discuss the quality of your planning or more best practices.