Week 10: Identity, Branding & Strategic Innovation

Question 1

What is an organization’s identity?

Answer 1

It is the character and the essence of the company. It is made by the core, enduring and distinctive claims and understandings around the question “Who are we as an organization?”

Question 2

Identity & competitive advantage

Answer 2

Identity has positive impact on competitive advantage:

• Identification of employees in the company (higher loyalty, higher performance, etcetera)
• Sense of authenticity and commitment (the company stands for something that is clearly acknowledged)
• Identification of customers in the company and reputation (through branding), which creates loyalty and trust
• It is a guide for decision making, a “simple rule” that can be applied when evaluating choices (“We are a motorcycle-manufacturing company, thus we will not enter in the market of cars”)

Question 3

There are three types of innovations based on how they relate to identity:

Answer 3

• identity-enforcing innovations
• identity-stretching innovations
• identity-challenging innovations (strategic innovations are typically of this kind)

Question 4

Identity-challenging innovations

Answer 4

fig

Question 5

Identity and nascent markets (market is still in formation)
2 strategies to influence direction of market

Answer 5

The company identity and the market identity co-evolve over time. Companies need to
singularly and jointly make sense of what the market is about.

Companies put effort in trying to influence the direction of the market, through two strategies:

1. resource deployment ( higher entry barriers)

2.identity management ( influencing the core principles that constitute the market).

Question 6

Reduce barriers to strategic innovation coming from identity. Rigidities coming from identity

Answer 6

Identity can be a barrier to strategic innovation

o The pursuit of a strong, coherent identity might cause the failure of exploration activities (venturing, skunk works…), as they are not consistent with the core identity of the company.
o The nurturing of an identity that is consistent over time create rigidities when the company needs to change to adapt to strategic inn. The company can be trapped in its own past.

(Identity challenging innovations framework)

Question 7

Brand dilution resulting from strategic innovation. Extending the brand in strategic innovation

Answer 7

Extending the brand in strategic innovation
* In contexts of strategic innovation, companies often innovate their product lines within the same brand, creating so-called brand extension.

The positive effects are:
 Brand extensions can help clarify the meaning of a brand and its core values or improve consumer loyalty to the company behind the extension.
 Brand extensions can renew interest and liking for the brand and benefit the parent brand by expanding the served market, or even creating radically new markets (ipod)
 Consumers form expectations about a new product based on what they know about the parent brand and the extent to which they feel this information is relevant, reducing reduce risk and launch costs.

Question 8

The risk of brand dilution

Answer 8

Brand extension has the risk of brand dilution, blurring the connection between the brand and the product and ultimately reducing brand equity.
Brand dilution occurs when consumers no longer associate a brand with a specific or highly similar set of products and start thinking less of the brand.
.
* If a firm launches extensions consumers deem inappropriate, they may question the integrity of the brand or become confused or even frustrated: Which version of the product is the “right one” for them?
.
* The worst possible scenario is for an extension not only to fail, but to harm the parent brand in the process. Even if sales of a brand extension are high and meet targets, the revenue may be coming from consumers switching to the extension from existing parent-brand offerings - in effect cannibalizing the parent brand.

Question 9

CARD ID:

Answer 9

Values, mindset/attitudes, style, areas of interest, places, relationships, tone of voice

Question 10

Identity-enforcing innovations: Business as usual

Answer 10

In identity-enhancing innovations, organizational identity and innovative activities are consistent with each other, resulting in a self re-enforcing positive feedback loop.
* Organizational members all “know” what actions are acceptable or appropriate based on a shared understanding of what the organization represents.
* This knowledge becomes codified in a set of heuristics, which guide the selection of dismissal of innovative activities

fig:
Innovation: reinforcing org id
Org identity : guiding inno

Question 11

Identity-stretching innovations

Answer 11

• In identity-stretching innovations, organizational identity and innovative activities incrementally broaden or shift as a result of feedback dynamics.
  .
• Managers can proactively encourage and facilitate a broader range of innovative activities by making incremental, fluid changes to identity, and innovation can, in turn, stretch the organizational identity.

fig:
org identity: enabling inno
innovation: stretching org id

Question 12

Identity and category strategy

Answer 12

This function of organizational identity is called “categorical”, as it provides information about the belonging of the company to a market category.
.
With a categorical identity they come expectations to behave like a typical company within that category.
.
A category strategy is a type of strategy that is broadly aimed at obtaining competitive advantage by creating social meaning around a market category. The goal is for the category to become a social fact—easily recognized, acknowledged as important, and already in a potential customer’s budget. The evaluation standards should favor the firm’s strengths, and the boundaries defined such that rivals have comparable but inferior products.

Question 13

Important elements when designing a category strategy:

Answer 13

1. Choosing a label: labels are the way people communicate about categories. They facilitate processes of categorization. The simple act of choosing the same or a different label as a competitor influences others to see the firms as more similar or more different.
   .
2. Identifying rivals, Firms should consider what rivals form the best backdrop to showcase the firm’s strengths. Then, category strategy should include organizing industry associations, conferences, or festivals with the chosen group of competitors and excluding others, to define the category boundary. This is especially important if there is another adjacent market where competitive forces are not favorable.
   .
3. Connecting with activists: Many domains have activists—influencers, evangelists, or enthusiasts—who become genuinely excited about a new category and talk up its virtues. Activists are difficult to directly control, but they are useful in category strategy if firms take the right approach. Finding an authentic message and a constituency where the message resonates is crucial to leveraging activists for category strategy