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Strategic Cross Pollination

David Trahan

How Digital Companies Are Reshaping Traditional Business Thinking

Strat Cross

Great businesses, whether they’re digital or not, are born through innovation, creativity and smarts.

Amazon. Foursquare. Facebook. iTunes. Throughout the business world, these companies find themselves mentioned with admiration every day in an incalculable number of meetings, whether about product marketing, or customer service, or the overall digital experience.

There’s a reason: These are all category-leading businesses built on a purely digital model. Along with many others like Hulu, Tom’s Shoes, Google, Warby Parker and Gilt, these brands are considered beacons in the post-digital era. And because many regard them as being in a category of their own, some believe traditional brands shouldn’t try to emulate them.

Yet traditional businesses already are like these brands. Great businesses, whether they’re digital or not, are born through innovation, creativity and smarts. Digital businesses are simply using technology to transform how businesses function. The question is how traditional companies can adopt best practices from digital ones. Perhaps instead of playing catch up, they can even start leading the process.

Simply put, digital offers two paths forward for traditional businesses: Innovate existing products and services to remain competitive, or innovate new business models where they currently have little to no market share.

Just as traditional businesses have done for centuries, digital firms have demonstrated an ability to come out of nowhere to completely change an entire category. Digital businesses like Hulu and Netflix simply carved out a space of their own amid competitors while leaving legacy platforms like Time Warner Cable and Blockbuster Video intact, if however in decline. (Netflix actually spurred innovation in its category, forcing other companies to develop technologies like DVR, HD cable and Blockbuster Express in their struggle to compete.) So while digital has changed the landscape in profound ways, it’s important to remember that the pattern of innovation and progress continues to unfold in ways that are highly familiar.

THE POST DIGITAL BRAND EXPERIENCE

The difference begins to emerge in examining how the marketplace of today demands simplicity and consistency. We live in an experience-based post-digital world—one in which a brand’s ability to deliver on its core promise is defined by how consumers navigate its total brand experience. Foursquare, for example, touts making sharing where you are, and what you’re doing, as easy as possible. If Foursquare was overly complicated, consumers wouldn’t believe in the application’s capability and core competency. Meanwhile, the luxury discounter Gilt uses a sleek and sexy design aesthetic to reinforce its luxury positioning within the crowded “discounts and deals” category.

This carries an implication for traditional business strategy: It’s never been more important to present a relatable and consistent public face that reflects pledges to customers. Whether in customer service, brand voice or any form of identity, there’s trouble if things don’t align. And well-designed digital businesses have heightened the expectation that they will.

Of course, it’s easier for digital businesses to design brand experiences in simple ways, given that new companies start from scratch with an array of technological resources at their disposal. Many traditional businesses are burdened by legacies of complex website infrastructures and back-end systems that inhibit their ability to re-imagine their digital space. (Commercial airlines come to mind.) For them, digital rejuvenation cannot happen instantly. Yet if appropriate long-term planning is conducted, a new brand experience can emerge for the future.

REINVENTION IS THE MOTHER OF NECESSITY

While reinvention isn’t a new idea in and of itself, it’s only in the last 15 years or so that the process has moved businesses from the tangible to the intangible, from the physical to the representational. Digital technology allows for greater cost savings, scale, access, and flexibility. Music was transformed from one tangible medium to another for more than 100 years until Apple leveraged its digitization, taking the music industry in a new direction via iTunes and the iPod. Apple’s contribution isn’t the creation of digital music itself; it’s the seizing of the opportune moment to innovate within an emerging space.

So while timing isn’t everything, digital has made it matter a lot more. Being first isn’t as important now compared to ensuring that the time you enter the market is right. The Greek yogurt maker Chobani took Apple’s thinking and applied it to an emerging trend in a traditional category. It allowed Fage, a Greek yogurt maker, to invest in creating the market, and trend, for the product. Then it innovated with better packaging, flavoring, and variety. Chobani is now not only the leading Greek yogurt brand; it leads the entire yogurt category.

While we tend to focus on brands that have reinvented their categories, others have become successful by simply reinventing an underestimated and otherwise overlooked customer need. A good example is the Internet-driven eyewear retailer Warby Parker, which digitized the experience of buying glasses. On their website, customers can digitally “try on” every pair of glasses available and then select five frames to be mailed to them for further evaluation. Their final selection can be purchased via the site—no need for a lunchtime trip to the eyewear shop, or to find a friend to come along for advice. Best of all, every purchase provides a pair of glasses to someone in need.

Consumers didn’t request these capabilities, but Warby Parker saw them as opportunities for innovation. It underscores how digital is now the space in which all businesses, including traditional and established companies, aim to display new levels of nimbleness and responsiveness. Businesses like Peapod by Stop & Shop, Blockbuster Express, and H&R Block have used thinking similar to Warby Parker to innovate in their categories.

IT’S NOT A DIGITAL STRATEGY—IT’S A BRAND STRATEGY

Digital has also made the overall notion of strategy more holistic, mandating companies think beyond their core industry and also about the capability they provide. Sometimes the best opportunities are in categories outside of a business’ main focus. Google does an incredible job at this through open APIs, free public tools, and partnerships to create products like Google Maps, Google Public Data, Google Sites, and Google Alerts. All of these extend Google’s core competencies into new categories while also fueling its core product: search. Meanwhile, Facebook has also taken this approach through social plug-ins such as the “like” and “recommend” buttons, single sign-on, and social commenting boxes, all of which extend its reach and collect more information from third-party websites.

Before the advent of social media, “word of mouth” was more than a metaphor; it was literally a key part of how we relied on information to spread. Brands gave out coupons and referral incentives to bring in new customers, and direct mail was the scalable medium of choice.

Social networks have supplanted this method as a key business strategy. Now, brands like Zappos and Hulu have the ability to fuel word-of-mouth buzz through consumers’ online social networks using plug-ins, share functions, and their brand-owned social media presences. Zappos deeply integrated social sharing into its shopping experience as a way for customers to share purchases and recommend products to friends. It also brought product sharing into its Facebook page, where the company’s most engaged customers interact with the brand.

Meanwhile, Hulu also capitalized on social sharing in its approach to platforming short-form video clips. While other sites might only post a TV show in its entirety, Hulu fuels word of mouth for its brand in part by dividing clips into shorter, share-friendly lengths.

Every business has its own way of working—its internal culture, strengths, weaknesses, trends, and opportunities. Traditional businesses are often held back by fear of failure and the inability to move quickly, while many great digital businesses have been built on a cultural bedrock of innovation and thrive on the concept of being in “permanent beta.”

Digital businesses have advanced the notion that fearlessness and experimentation are often strategic necessities. Granted, it’s easier to try something new when you don’t have brick-and-mortar stores, unions, franchisees, or a legacy heritage to worry about. It’s also easy to think of this as only a consumer-facing challenge. However, digital innovation must be a part of your total brand experience including employee engagement, supply chain management, and partner management.

Yet whether it’s dreamed up in a traditional or digital business, it’s easy for an industry-changing idea to fade into distant memory. Ideas in all kinds of business must survive a battalion of strategic cuts, internal politics, competitive direction, and budget considerations to become reality. But even if it takes 1,000 ideas to produce one game-changer, then the entire process proves worth it.

One of the best ways to get creatively inspired is to blur the lines of traditional and digital models. Think about the possibilities: What would Ford’s version of iTunes be? What about Costco’s version of Zappos social media? A mashup between traditional and digital helps business thinkers of all stripes open up to the truth: Business is business, and a great idea born in one arena often sees its greatest impact in another.

Visit InterbrandIQ.com to experience Brand Remix – our mashup of the best of traditional and digital brands.

FYIQ

  • ABOUT DAVID TRAHAN
    David Trahan is Consultant, Verbal Identity, Interbrand New York.

    What’s one thing you would change about the world if you could? David answered: I want people to have each other’s backs: fight back against a bully, give a dollar to the person on the corner, be courteous to others. I want people to stop being so individualistic and start thinking of every human being as part of their family.
    David.Trahan@interbrand.com
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