Discover the Natural Laws of Product Innovation and Business Survival

Volume 17, Number 4 Article by Dhiraj Sharma , Dr. V S Pai December, 2005

The Origin of Brands: Discover the Natural Laws of Product Innovation and Business Survival : By Al Ries and Laura Ries, Harper Collins, New York, 2004, pp. 308. :

The primary thesis of this book is derived from Charles Darwin’s principle of divergence of species. In a nutshell, the authors hold that product categories keep diverging and eventually form the base for most successful brands to emerge.

Written in an easy style with the key points suitably emphasised, the book is organised around 17 chapters. The first four chapters establish the underlying theory and provide convincing examples of divergence and natural selection. For example, the product category ‘computer’ diverged from mainframe computers to network computers, handheld computers, desktop computers and laptop computers. Many of these product categories, such as the typewriter and the fax machine, will diverge and die like branches in the species tree. Like these branches, too, a brand, to be successful, should not aim to serve existing markets, because it would then be competing with leader brands instead of being one. It should instead focus on a new product category or even on creating one through divergence of the existing category, and become the first name in it. Therefore the companies which want to see their products as successful leaders should not hesitate to divide the existing market and launch a new brand for a new category, even if the market for it may be zero at this stage. Coca-Cola, McDonald, and Microsoft are a few examples of this phenomenon.

Divergence of categories, which essentially is the competition between species, is different from the competition between individual members of the same species. The latter can be termed as natural change, which leads to gradual improvement within the species. Natural change should not be mistaken for divergence, otherwise one might launch a new brand that is sure to be doomed. On the other hand if one mistakes a divergence for natural change, an opportunity for launching a new category is sure to be missed.

Chapters 5 to 7 reinforce the idea of divergence by negating the concept of convergence in various product categories. The authors question the pro-convergence views of the giants of the electronics industry – Bill Gates, John Scully, and Michael Dell – and argue that many electronics companies like Sony, Samsung, and Microsoft are going in a big way for technology convergence as a result of hype, which was also supported by the media. However, technology convergence is unlikely to happen as convergence companies as well as most convergence products like interactive TV and interactive phones are not faring well. A notable exception is the camera phone. Other convergence products, in general, may remain in market, but ultimately represent only a small fraction of the total market for that category. The idea of convergence is like believing that man is directly descended from the ape (Ch. 10). But in nature, species drift apart, which is the reason why there is no missing link. Many convergence products, like the missing link, are against the law of nature that manifests divergence. In Chapters 8 and 9, the authors describe the divergence tree as it exists for high tech and low tech brands, substantiating their theory with several examples.

Chapters 11 and 12 discuss what it takes for a brand to survive in the market. The first brand in a category definitely has a better chance of success as it is perceived as original as well as the leader. Even if it loses its leadership position in due course, it will remain a contender. Therefore companies should try to create a new category for their brands. Amazon and Dell are prime examples of companies that entered the market as the first online bookstore and the first direct seller of personal computers respectively. In that sense, marketing competition is not between brands but between categories, and the winners are those who invent and dominate a new product category. This of course is not possible through the concept of convergence. Using the analogy of the plant kingdom, the authors argue that for a second brand to survive in the marketplace, it should keep a distance from the first, both physically and mentally. The authors believe that the second brand should do just the opposite of what first brand does, no matter how irrational it may appear. For example, Burger King tried to emulate McDonald’s strategy and found itself in the middle of McDonald and Wendy, whereas BMW positioned itself as ‘the ultimate driving machine’ against Mercedes and outsold it.

Citing the analogy of pruning a tree to improve its health, the authors also question conventional boardroom wisdom on the subject of expansion (Ch. 13). Mergers are generally planned for the benefit of reducing competition and increasing market share. But a merger goes against the concept of divergence if the aim is line extension of a brand. In such a case, the units must either be spun off, or different brand names should be used. Chapters 14 and 15 explain the nuances of creating a successful category. For a category to become successful, the first step is to define it in simple terms, first creating the category name. A successful example is Red Bull, which defined its product category as an energy drink. The ambiguity in the category name, which carries a suggestion of being a performance enhancer, was another element in its success. The new category therefore should be defined with distinctive packaging, size, and a sexy new name instead of a plain rational name.

The authors are against the use of marketing research, test marketing and heavy advertising. They suggest two ways of launching a brand. Theory A advocates the slow take off like an aeroplane, using Public Relations as a tool. Theory B advocates the rocket launch, which of course cannot be imagined without the use of advertising. The law of nature favours Theory A for longevity of a brand. Theory B relies heavily on advertising and is consequently prone to a lack of credibility and familiarity. Strong brands like Microsoft, Red Bull, and many others have graduated through Theory A. The authors suggest a seven step process for launching a successful brand. In the early stages of brand introduction, PR techniques should be used, and when slow sales suddenly start turning up, a massive advertising programme should be used. This method takes care of the very slow acceptance of revolutionary products. On the basis of feedback obtained during the PR exercise, it also becomes possible to modify the message if necessary before the final soft launch.

Through interesting and live examples from the history of many brands, the authors succeed in substantiating their innovative and iconoclastic approach. This book will be an invaluable handbook for practitioners and may well inspire the most valuable brands of the future.

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