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"I am just fascinated by the power, the quirks, the determination, and the durability of individuals," asserts HBS professor Nancy F. Koehn, describing her latest book.
An authority on business history as well as branding, consumer behavior, and business strategy, Koehn cut her historical teeth on understanding and interpreting the economic and social contexts for businesses.
In Brand New, she offers interrelated "business biographies" of six visionary entrepreneurs through more than 250 years of history. All six built strong, meaningful brands and launched companies, often literally from scratch, which have endured to this day. The six include Josiah Wedgwood, the eighteenth-century British pottery and china manufacturer; H.J. Heinz, of the famous food company; Marshall Field, the Chicago retailer; Estée Lauder, who created one of the largest cosmetics companies in the world; Howard Schultz, of Starbucks Coffee Company; and Michael Dell, of Dell Computer Corporation.
Their genius, she points out, emerged through their ability to plumb the demand side of business rather than just the supply side. All six were able to understand how rapid, widespread socioeconomic change affected consumers' preferences and then not only satisfy, but also anticipate buyers' evolving wants and needs. And they did so profitably.
"In writing Brand New," Koehn explains, "I wanted a book in which the entrepreneurs would speak from their own words, so the story would be told at least significantly, if not overwhelmingly, by the entrepreneurs themselves. I had to have their words." She discovered that Heinz, Wedgwood, and Field had left very good archives; and to examine Lauder, Schultz, and Dell, she started with their autobiographies and then pursued many other sources to get to know the person and the company.
Below are some of Koehn's thoughts on how the three earliest entrepreneurs—Wedgwood, Heinz, and Field—approached the tricky subject of branding.
The concept of branding as we understand it today was just barely entering business parlance at the time of Heinz and Field, who came to prominence in the late nineteenth century, Koehn observes. It almost certainly was never part of Wedgwood's vocabulary when he began his own pottery workshop in 1759. Nevertheless, each of the three, she writes, instinctively grasped the fundamentals of earning long-term customer trust and loyalty.
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| Effective brand creation and management have a vital interactive component, and this two-way communication served Wedgwood remarkably well. | |
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| —Nancy F. Koehn |
In Part Two, to appear in the April 23 update of HBS Working Knowledge, Koehn discusses the remarkable brand power created by Estée Lauder, Howard Schultz, and Michael Dell.
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A parachute through time
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Even though they didn't all use the word 'branding,' these three entrepreneurs knew that 'If we build it, they may not necessarily come.' This is a lesson that we could all learn better in the wake of the recent 'dotcom implosion.' Wedgwood, Heinz, and Field needed to make a market [for a product and/or service] and show consumers why their respective offering improved their lives. This meant appealing to them. Engaging them. And then, once consumers had initially tried their product or service, earning their repeat business and their loyalty by creating trust between the product, the company, and the consumer.
To me, that is the strategic essence of a great brand: For a company it creates distinction, sustainable, defensible, and value-added differentiation. And clearly, that is what Wedgwood, and Heinz, and Marshall Field used it for.
How did they do that? Let's look at each and see how they dealt with that challenge.
Targeting with elegance
Wedgwood created a brand, a reputation, 'a relationship with the consumer,' to use modern language, that was built around quality, elegance, and social stature or social place.
How he came to that set of distinguishing characteristics, the essence of his brand, is a fascinating story that I worked long and hard to reconstruct in Brand New. It has a lot to do with the context of a changing social hierarchy and Wedgwood's bringing what had been the trappings of a small minority, the aristocracy, to the growing middling classes at a moment when Britain was industrializing. From a branding standpoint, it is a brilliant example of creating a fairly unique, distinctive, and defensible source of competitive advantage.
How did he do that? He did it operationally; he did it in terms of how he marketed to consumers; he did it in terms of the customers he targeted. When you are making a market, who you choose as your initial customers and whom you decide not to market to is critically important in defining what the brand and company will become.
And he did it by listening to consumers. Wedgwood, Heinz, and Field all understood that they needed consumer feedback. Success wasn't based on just what they offered as it came out of their factories or—in the case of Field—onto their sales floor. Wedgwood conducted some of the first focus groups on record with aristocrats and gentry about new vases. Henry Heinz went door to door, or grocery store to grocery store, saying, 'What do you think about these pickles?' Field walked the floors of his Chicago department store observing customer reactions to merchandise, displays, and, of course, salesclerks. As each of these entrepreneurs gathered consumer feedback, they adjusted their product and services accordingly.
Effective brand creation and management have a vital interactive component, and this two-way communication served Wedgwood remarkably well.
Purity and convenience
Heinz understood all this, too. In a different moment, with a much larger potential market, with new technology, and with a very different kind of market—processed foods—he built a brand on a different set of benefits, and with different sources of differentiation.
The quality of Heinz's food products—like that of Wedgwood's china-was and is critical. But I argue in Brand New that functional quality is an essential, though not sufficient cause or condition of success. Working in the late nineteenth century, Heinz built his brand on quality food that tasted good and was made in a clean, healthy way. This was a time of diluted, distorted foods. There was no FDA or FTC. His brand was created on quality, tastiness, pure manufacturing techniques, and on convenience.
Convenience was not part of Wedgwood's equation. But convenience needed to be part of Heinz's thinking because at the time that he was beginning his business, people were pouring into the cities as urbanization accelerated. The family farm and even the family plot, was disappearing. For the first time, women were going into the paid workforce in large numbers, as they became part of factory labor and stenography pools during the Transportation and Communication Revolution.
The magic of "experience"
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| Field's brand was built on the appealing, elegant, retail experience or encounter in a department store defined by quality goods that have Field's name on them. | |
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| —Nancy F. Koehn |
[His late nineteenth-century store] was replete with quality offerings, but he was selling more than the gloves, fans, corsets, or picnic hampers. He was also creating a brand with a very important service component to it, and this component was not nearly as important in Wedgwood or Heinz's brands. Field's brand was thus integrally tied up with how he trained the store's sales clerks, how they approached customers, what they did for customers, how hard the sales pitch was, and whether they treated women who appeared to be wealthier differently than women who appeared to be middle or working class.
All those things suddenly became part of the Field brand and part of the entrepreneur's means of distinguishing his offering at a moment when there were more than a dozen department stores in Chicago. So how did Field make his strategic mark? By establishing a powerful, relevant brand which acted-and still acts—as a valuable piece of real estate in consumers' minds-one they go back to over and over again when they think of department stores.
Every spoke in the strategy wheel
A very important point of commonality among all of the entrepreneurs-and it is very apparent in the actions of Wedgwood, Heinz, and Field-is that building a successful brand in a new market when there is lots of competition involves paying attention to every spoke of the strategy wheel, every division of the emerging, evolving organization chart.
The brand is involved in everything the firm does. So if you are at Marshall Field's, how fast you turn inventory is related to your brand. Where you set up buying offices in major cities around the world is related to your brand. What kind of credit policies you extend to your customers, and to whom, and on what terms, is related to your brand. What kind of merchandise you offer where in the store. How you train your salespeople is related to your brand. As is whether you establish a bargain basement and what strategic purpose it serves.
Creating and maintaining a brand encompasses the whole playing field.
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Brands All Over the Map
"We often think of brands as primarily a marketing and advertising issue," says HBS professor Nancy F. Koehn. "If these six entrepreneurs show us anything, they show us that the brand—and the connection that the firm and the entrepreneur is creating with the customer—is created all over the company's map.
"I don't think these six entrepreneurs woke up every morning at the beginning of their business careers and said, 'Hey, I am going to create a brand today, and it is going to involve every single one of my departments.'
At the time they founded their respective companies, they didn't have formal departments for their enterprises. Why? Because each entrepreneur had few employees, meager revenues, and rudimentary management systems.
Two of the six made their early products out of their kitchens. A third worked from his college dorm room; a fourth from a room in the back of his café. In such contexts, these entrepreneurs were not focused on departmental responsibility for brand stewardship.
"But at the same time, each quickly came to see that if you are going to make a new market, every way you touch the customer directly or indirectly affects your brand. That's an important business lesson for today."
In May 1759, Wedgwood left [Thomas] Whieldon's workshop and established himself as an independent potter. He was twenty-eight, ambitious, and eager to test his talents. His new establishment at Burslem consisted of a cottage, two kilns, sheds, and workrooms, all of which he rented from his cousin John Wedgwood for £15 a year (about $1,350 today). ...
For the next three years, Josiah, his cousin Thomas, and several hired hands manufactured tortoiseshell and other ware. Josiah began coating creamware in the new green and yellow glazes he had perfected while working with Whieldon. He applied these brilliant glazes to teapots and plates molded or pressed in many shapes, such as pineapples, cauliflowers, cabbages, and pears. He bought the ornate molds needed to produce these elaborate pieces from one of Whieldon's potters.
Pineapple and cauliflower wares were eye-catching, functional, and, most important, novel. These ornate pieces were immediately popular and are still manufactured today. Of course, not all Britons in the mid-eighteenth century could afford to care about the fashionability of new products. But as per capita and family incomes climbed, increasing numbers of consumers from the upper and middling ranks acquired new possessions...
— from Brand New: How Entrepreneurs Earned Consumers' Trust from Wedgwood to Dell
The safety and quality of various foodstuffs was a growing concern in many mid-nineteenth century cities. These issues were not new. Various local laws had mandated inspection of meat and flour exports since the colonial period. ... But as urban areas and the sources of food supplying these areas expanded, older controls weakened. Public anxiety about contaminated food, including milk, meat, eggs, and butter, mounted. So, too, did worries about adulterated chocolate, sugar, vinegar, molasses, and other foods. ...
Henry Heinz realized that consumers were suspicious of food they did not know and could not see. But he believed he could reinvigorate and expand the young horseradish market. Using his mother's recipe, he began bottling unadulterated horseradish in clear glass. A tireless, exuberant salesman, he peddled his product to individual housewives, local grocers, and hotel owners, emphasizing its purity, encouraging potential customers to examine and sample his goods, and comparing his to other bottled horseradish packed in colored glass. The young entrepreneur's sales of horseradish and vegetables rose steadily. In 1861, he had more than three and half acres under cultivation. His revenues for that year totaled $2,400 (about $43,000 today). ...
By 1900, the H.J. Heinz Company was the largest food processor and one of the first multinational businesses in the United States. ...
— from Brand New: How Entrepreneurs Earned Consumers' Trust from Wedgwood to Dell
Marshall Field, from his early days as a clerk in a general store, realized that creating a successful distribution business involved more than efficient management of merchandise, accounts, and supplier relationships. To build a prosperous wholesale and especially retail operation in Chicago at a moment when other entrepreneurs were trying to do the same thing, Field would have to attract consumer interest in his company: first earn their trust, then convert it into long-term customer loyalty.
Field understood that department stores offered potential new benefits to nineteenth-century women over and above the mere presentation of a large assortment of goods. He and his business partners believed that female shoppers wanted an elegant atmosphere, the latest fashions, and courteous service—preferably from other women. During the late nineteenth century, Field and his colleagues developed a range of initiatives, including sophisticated buying by New York and European agents, innovative marketing, and close attention to customer service. These steps were designed not only to meet but also to enhance consumer expectations and to create a special position for Field's company in the emerging world of mass distribution. ...
— from Brand New: How Entrepreneurs Earned Consumers' Trust from Wedgwood to Dell