Branding Means Connecting

A conversation with Professor Nancy Koehn

In her recent book, Brand New: How Entrepreneurs Earned Consumers' Trust from Wedgwood to Dell (HBS Press), HBS professor Nancy F. Koehn surveys the work and lives of six legendary entrepreneurs who built enduring companies and powerful brands: Josiah Wedgwood, Henry Heinz, Marshall Field, Estée Lauder, Howard Schultz (Starbucks), and Michael Dell. In an interview with New Business, Koehn discusses the lessons their successes offer to today's managers and e-commerce pioneers.

What distinguishes the six entrepreneurs you studied?

The most important characteristic that these six entrepreneurs share is a keen eye for the needs of the consumer. In the initial stages of widespread change, such as the information revolution we're experiencing now, it's very natural for managers, investors, and others to concentrate on the business opportunities that lie on the supply side of a particular market—on new technologies, new ways of manufacturing, new management processes.

By contrast, the six imaginative strategists in Brand New were focused on the demand side of young markets—on how rapid change was affecting consumers. They all knew how to spot an opportunity and translate it into a product, a brand, a way of connecting with the customer, and an organization. Today, the information highway is littered with entrepreneurial visionaries who weren't able to translate their vision into a product that met consumers' needs; to sell it at a profit; or to build an organization that could do that over and over, while also informing customers about that product and getting their feedback.

From Wedgwood to Dell, each entrepreneur was able to thrive during times of extraordinary social, economic, and technological transition. Because they succeeded in periods analogous to our time or indeed are succeeding today, they can help us understand what's happening in the information revolution.

What were your goals in writing about these visionaries?

As a business historian, I wanted to understand why these people were successful. It is important to recognize that they were sociological and cultural entrepreneurs who understood the impact of rapid social and economic change upon consumer behavior. For example, Howard Schultz, who built Starbucks, watched the accelerating geographic mobility of Americans and their exposure to new cultures and tastes and saw the opportunity to build a chain of upscale coffee cafés.

As a managerial scholar, I was interested in the powerful influence that shifts in the social and cultural landscape exert in shaping new business opportunities. A major goal of this book, therefore, is to broaden our understanding of how important that landscape is to the growth and success of companies, especially during times of great change.

You state that each of the six helped create markets for their goods and services. Why have some Internet entrepreneurs been unable to create markets for their offerings?

One of the most powerful lessons of the recent wave of dot-com failures is that "if you build it, people may not come." Consumers will come only if a new product or service fits into their lives, hopes, self-identities, and schedules. Henry Heinz, for example, saw that late-19th-century American women living in cities without access to a family garden might welcome convenient food products. But he also understood that they'd only buy processed foods that were as tasty and healthy as those they produced themselves.

I think some Internet companies missed the importance of understanding the customer side of things. What has captured the most attention during the opening chapters of the information revolution has been possibilities on the supply side of the economy; for example, the power of technology to reach people. Yet bringing a new Web site to consumers is a very different thing than earning their trust and having them make a new offering part of their lives.

This same lesson had to be learned in earlier moments of great change. For example, during the transportation and communication revolution of the late 19th century, there were many different attempts to produce steel more efficiently, even though at the time it was not clear exactly what steel was going to be used for. Eventually it would go to construct railroads, elevators, and skyscrapers, but initially the efforts of most people in this young sector were concentrated on refining the Bessemer process and producing better steel.

So it's not surprising that in the early phases of the information revolution, when technological innovation fueled such rapid change, the focus was on developing technology as quickly as possible, without too much concern about how a specific innovation and its products fit into consumers' lives. But if history teaches us anything, it teaches us that all companies have to understand the demand side of their businesses as well as the supply side to succeed. Serving customers' needs at a profit remains a crucial management imperative.

If connecting to consumers is key, what went wrong with the many Internet companies that touted their ability to communicate with their customers?

All communication is not created equal. Facts are not knowledge. Information is not wisdom. And for many consumers today, more raw data does not necessarily improve their daily lives. The six entrepreneurs in Brand New were especially skilled at figuring out how to speak to consumers in ways that resonated with their lives. When Michael Dell started out in the PC business, he dealt with many of the firm's potential customers himself. Since he understood that his idea of "mass customization" depended upon strong connections with his customers, he enlisted knowledgeable, courteous, and responsive salespeople and technicians. Great brand builders have always understood the importance of connecting meaningfully with customers.

Each industrial revolution ushers in not only new technologies and business models, but also evolving consumer priorities and new social contracts. Understanding these emerging preferences and the broader socioeconomic shifts that underlay them is critical to building a brand and company that earns consumers' trust and creates competitive advantage.

>What lies at the core of an enduring brand?

It begins with a product or service that is exceptional in its ability to address specific needs and wants of prospective buyers. But that's just the starting point. Investors, managers, marketers, and others who participate in bringing a product or service to market must thoroughly understand why and how it addresses customers' needs. Companies and entrepreneurs need to develop creative ways to relate to consumers. Michael Dell, for example, understood that a personal computer was more than just a tool for running spreadsheets. Estée Lauder knew that lipstick meant more to women than merely something to wear when going out for an evening. And Marshall Field envisioned department stores as much more than just places with a large merchandise assortment. These master brand builders all had deep respect for the way products fit into the lives of consumers, and their marketing communications reflected that.

Are the entrepreneurs in Brand New the models for our time?

In addition to being fascinating biographical studies, their stories provide important lessons in strategy and brand building. People in every era need to learn these lessons on their own terms and in the context of their unique environment. I believe the shakeout we are seeing in the dot-com arena reflects that kind of relearning in ways that are appropriate for our time.

Brand New sounds a call for managers to adopt a far broader view of what customer relationships really mean. The entrepreneurs in this book succeeded in building great institutions, but the most important real estate they own lies in the hearts and minds of their customers. NB