This quote from Jeff Bezos, Amazon’s CEO, (found via a great piece
by Zack Kanter) is striking in its clarity of thought and understanding of sound business strategy:
“I very frequently get the question: ‘What’s going to change in the next 10 years?’ And that is a very interesting question; it’s a very common one. I almost never get the question: ‘What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two — because you can build a business strategy around the things that are stable in time. … It’s impossible to imagine a future 10 years from now where a customer comes up and says, ‘Jeff I love Amazon; I just wish the prices were a little higher,’ [or] ‘I love Amazon; I just wish you’d deliver a little more slowly.’’
Among the many gems in this quote is the unmistakable and compelling power of a strong brand. Amazon’s brand is low prices, fast delivery and customer-focus. In the quote above, Bezos focuses on the first two pillars of the Amazon brand to highlight what its customers have come to expect from them and what they will likely expect from them for the foreseeable future. Therefore, Amazon can create and execute on a long-term business strategy focused on these pillars because customers’ expectation of them will not change.
A brand is the creation of consistent customer expectations through sustained operational excellence (or lack thereof). A strong brand is the alignment of your services and product roadmap with customer expectations. It’s the aspect of user experience that is both tangible and perceptible to the customer at every interaction. The art of branding is more than marketing…it’s when the company, its technology and strategy make good (or fail to deliver) on its promises to stakeholders, both internal and external.
When Branding Guides Strategy and Vice Versa
- People need to eat.
- Pizza is a popular food choice.
- People will pay for the convenience of delivery
- Start pizza delivery service.
What venture capitalists and founders in this space have failed to understand is that the major successes in on-demand food delivery (prior to recent startup entrants) were companies with established global brands. These brands were built up over many years, sometimes decades. The aforementioned Domino’s Pizza (founded 1960, IPO’d in 2004) and Grubhub (founded in 2004!) are a few notables. Not every company needs to take decades to build a brand, but real brand awareness is a requirement for a successful business. Especially in commoditized mass markets, like on-demand food delivery.
There have been two models for successful on-demand food delivery businesses: Full-stack food service platform (Domino’s) and marketplace for local restaurants that deliver (Grubhub). The Domino’s model handles the customer relationship at every point of interaction, allowing the company to build a direct connection with consumer that leads to brand awareness, affinity and loyalty. Maintaining that brand relationship creates feedback loops that help Domino’s augment and develop product offerings as well as optimize its logistics system. This optimization process is so intrinsic to the Domino’s brand experience that it’s taken on a life of its own in the popularity of the Domino’s Pizza Tracker
. The company has brought the pizza tracker (and ordering experience) to wearables and IoT like Amazon’s Echo device
, furthering the symbiotic relationship between strategy and brand.
Grubhub’s platform follows the marketplace model that’s becomes attractive over the last decade. Grubhub aggregates a listing of nearby restaurants that deliver, creates simple ordering process for consumers and then passes the orders onto the merchant to fulfill. Grubhub’s service is unique in that it relies on its brand equity with consumers to enhance the overall brand equity of merchants on the platform. This is the secret to its network effect: its brand provides discovery opportunities for merchants that leads to demand generation and repeat purchases, but also helps the merchant maintain a relationship with customer. Consumers associate a positive experience with both Grubhub and the merchant.
For Grubhub, its costs are significantly less than full-stack food delivery companies because it is not sourcing ingredients, paying cooks and fulfilling orders. This is where startups have made the mistake in thinking that in order to own the user experience, you have own every touchpoint with the customer. A great brand doesn’t have to manage every interaction with the customer; it just has to excel at the interaction that matters most to the customer in that moment. In Grubhub’s case, that moment is discovery, selection and convenience of checkout.
Having a valued and sustainable brand helps to edge out competition when margins are lower and unit economics matter most. Everyone likes convenience and everyone needs to eat. That doesn’t mean that customers will desire your service (demand generation) or even know it exists (brand awareness). Demand generation and brand awareness are two of the major benefits of a strong brand. They directly tie into product and business strategy because of their impact on profits, revenue, customer acquisition costs or CAC (greater consumer awareness can bring down firm’s ad spend and increase a marketing budget’s efficiency), COGS (greater leverage with suppliers which reduces sourcing costs) and product development.
Most on-demand food delivery startups have not built a brand, but a VC-subsidized user experience that feigns customer acquisition with none of the differentiated and perceptible value-creation that leads to sustained customer retention. A brand is intrinsically-linked to a customer value proposition. If your value proposition is undifferentiated, your brand is undifferentiated.
10 Years Plans
Where does this your leave you and your company? What is your company’s proposition? What is your company’s brand? Could your customers recite your unique value proposition and place in their lives in terms that would be materially different from your competitors or the market as a whole? If so, why? Dig deeper into that because that’s where your moat and sustainable advantage lies. Lean into that. If your customer can’t articulate any meaningful differentiation in your value proposition versus the market, seriously take stock of that. In there, lies the seeds of your abstraction (at best) and disruption (at worst).
I’m not a fan of 10 years plans because the best case scenario is that you achieve a goal set rooted in the past or worst case scenario, you miss the future entirely. However, the idea of the 10 year plan is useful as a thought exercise in determining what aspects of your specific industry will not change, allowing for sustained planning, execution and innovation. Understanding this part of the business terrain is how you build a strategy for the future that is defensible and creates space for a brand that is powerful, compelling and informs your business of potential threats and new opportunities.