Companies heading the right way?

Tuesday, 21 January 2014 00:01 - - {{hitsCtrl.values.hits}}

Recently, I was at a ‘Strategy & Marketing’ program in Cambridge, UK. The core of the program was for each of individual to do a piece of original work on some of the organisations we work on; be it in our home country or overseas. After many hours of attempts that were unsuccessful, I decided to take a walk. It was a quiet sunny evening with long shadows covering the city due to the city’s majestic trees and lovely heritage buildings. It was a treat to experience students rowing on the famous waterways in Cambridge. Young undergraduate couples holding hands and walking in the picturesque parks that look on across the hallmark universities in the world. My mind went back to Sri Lanka and thought of focusing on the growing hospitality business, given that many CEOs and leadership teams around the world focus so strongly on strategising how to increase revenue, profits and thereby increase shareholder wealth, but forget that that the heart of a business are the companies’ brands.

I still remember the words of a CEO that I served with when I worked for a British multinational who said “Brands are the life blood of an organisation. Brands are the elements in a company that connects to the outside world”. I went back to my dorm and analysed some of the organisational data that I had brought with me that I just did not have the time to read. Let me share the details which were very interesting. Profit and brand value From the data of the Sri Lankan hospitality sector it was clear that companies are driving for double digit profit growth but not aggressively looking at building their brand value in that same manner. However, it must be noted that the 22% and 12% increase in brand value is a positive perspective that ideally can be built on in the years to come. I guess we must also note that what the media also looks at and highlights are the financial numbers, and this trend needs to be balanced with the reporting of brand value numbers so that it gives a long term healthy view of those numbers. A point that needs to remembered is that when we look back at companies like Sony, that has lost out to global brands like Samsung, is that in the long term the “leadership team” will be remembered for the people who took the company towards stability and health and not just for the top-line growth that we have seen in the short term. A very simple acid test to avoid moving into this black hole is to evaluate a company’s work on a monthly basis and check if the communication addresses the values of the brand, whilst pushing a short term objective like sales. If month-on-month a company is driving sales promotions and offers to the consumer, it means that one is driving the company or brand in the wrong direction. In fact I was pleasantly happy that on 2 January, when the Governor of the Central Bank presented the Road Map 2014, he mentioned that banks must stop playing the job of a lottery company. Many people forget that repeated sales promotions hurt brand imagery and this in turn takes away the value of the company’s brand value.

CEOs average a life span of 3 years At the program a Russian professor who advises the top oil companies globally mentioned that latest research reveals that the average life span of a CEO is only three years. He added that 85% of the CEOs get fired within this three year time period. The main reason being that a CEO’s drive for short term revenue and profit growth at any cost leading to shareholders being happy, than focusing on the real health of a company in the long term. Some can even ask the question if it is the environment that drives a CEO to focus on sales and profits or is it the personality of the new age CEO who is looking for supernatural remuneration and early retirement. Whatever the reason may be, the key learning for the world is that when evaluating today’s CEO, the qualitative aspect such as brand value must be included as a key parameter than just sales, profits and share price value. In other words, a good balance must exist between short term and long term objectives that must be orchestrated by an independent director of the modern day organisation. Ceylon Cinnamon If we take this discussion to a macro arena like the Sri Lankan spice market which is worth around Rs. 15 billion in export proceeds. Out of this, 80% is generated by the product cinnamon which has become a hot topic in the last two weeks with organisations like NDB supporting the Government agenda. A point to note is that Ceylon Cinnamon “is unique globally, due to the soil structure in our country. It is far superior to cassia that comes from South-East Asia. There have been many attempts to build the concept of branding into this category and finally its taking off with a private public partnership is interesting. We must take the 1st mover advantage in the market and differentiate Ceylon Cinnamon before the competition wipes our market away, is my view. We must move away from just being an exporter that drives sales to an international market, to developing a strong brand globally. It’s very clear that Sri Lanka has the ground network and architecture to position the industry on an ‘Ethically Produced’ platform as it a hip theme in the western world and can be a differentiating point for the South American consumer. The good news is that the industry is on the right path and the private sector is driving the agenda based on the policy architecture by the Sri Lanka Export Development Board. Ceylon Tea and Sri Lankan Tea On another front we see how Ceylon Tea with a private-public partnership is building a clear position for Ceylon Tea under the single origin architecture with the positioning of the category being the first ozone-friendly tea globally. The beauty about this strategy is that the private sector has got together with the public sector and developed a united strategy of taking the Ceylon Tea brand forward, together with a private sector funding mode that has collected almost Rs. 4 billion for global brand marketing. The selection of the

ad agencies were done professionally and the rollout is been championed in a tough working environment of a political economy, just like any other economy globally and must be commended. I would recommend that Ceylon Cinnamon follow suit using this same model. Sriya jewellery collection The jewellery collection developed by the globally acclaimed jewellery designer Webster some years back can be also a national branding agenda that can be pursued for Ceylon Sapphires. If we can get a top model and tennis player to endorse the brand in the likes of Maria Sharapova we can see a new dimension of national brand building taking form. Ethically produced fruits and vegetables Sri Lanka is also known the world over for quality fruits and vegetables. We can extend the category branding under an ‘Ethical Banner’ so that we can once again gain the premium price due to us using environmental friendly chemicals, no child labour and equality in the work place that have been so effectively architectured by the apparel industry of Sri Lanka.