Brand Relevance: Making Competitors Irrelevant - always yours

WINNING THE BRAND RELEVANCE BATTLE 35
feasible pathway to substantially higher performance for most
fi rms is to “ exploit some change in your environment — in technology,
consumer tastes, laws, resource prices, or competitive
behavior — and ride that change with quickness and skill. This
path is how most successful companies make it. ” 6
The fi nancial success has some elements that are not often
so obvious. First, a new category or subcategory can represent
a growth platform of its own capable of spawning new businesses.
Second, the new category or subcategory can create
new customers who may have been sitting on the sidelines
because of their perception that existing competitors lack offerings
that fi t them or their needs. Before the Luna energy bar for
women came along, customers were uninterested in the products
that were designed and positioned for men, for macho
men in fact. Before ESPN sports fanatics were confi ned to newspapers
and magazines.
In fact, there is empirical evidence supporting the proposition
that, on average over many decades, an abnormal percentage
of profi ts come to those fi rms that have dominated a new
business area. This evidence comes from a variety of studies that
involve different perspectives, databases, and time frames. We
will review the evidence from fi nancial performance research,
new product research, and perceived innovativeness data.
Financial Performance Research
McKinsey has collected a database of over one-thousand fi rms
(all with sales of over 50 percent in one industry) from fi fteen
industries over forty years. One fi nding was that new entrants
into the database (84 percent of the fi rms were new entrants at
one point) each achieved a higher shareholder return than their
industry average for the fi rst ten years after entry. 7 That return
premium was 13 percent the fi rst year, falling to 3 percent in the
fi fth and never rising above that level for the second fi ve years.
Further, there was an extremely high correlation between industry