Creating an iconic brand requires more than great design and technological breakthroughs. According to Soon Yu, the former Global VP of Innovation at VF Corporation, when something is iconic, it has three simple qualities: Distinction, relevance, and universal recognition.
“There are a lot of great companies that have learned how to harness this idea of what I call iconic advantage,” says Yu. “It’s not that they don’t innovate the new. They do. They do chase some shiny objects, but they double down on where they’re already strong, where they’re already making money — on the franchises that oftentimes in businesses people tend to neglect.”At VF Corp., the publicly-held company that owns brands like North Face, Vans, Timberland, and JanSport, Yu was involved with bringing new innovation practices to the company and helping strengthen the organization’s innovation processes and culture.
On a recent InnoLead Live call, Yu discussed some of the innovation lessons he learned while working at the company, including how to avoid doing too much at first, separating the long-term from the short-term, finding the right champions, and more. He also touches on some of the trends he’s seeing in retail, including the benefits and downsides of hosting your own e-commerce website versus selling on Amazon.
One of the first things we did [at VF Corp] was we changed the behavior of the company. The company grew up with 30 brands that were fairly independent — actually fiercely independent. Also, being in the apparel industry, we definitely had more of a mindset of merchants and designers. Basically, we were going to tell consumers what they wanted two or three years from now, so it wasn’t necessarily fully consumer-centric.
The one thing we did is we really broke down those silo walls and opened up the company to going outside for new ideas. Going outside meant going to outside consumers, universities, experts, and other brands and really opening our aperture in terms of the model. Let’s go out there and learn from other people and put it back into our business. Culturally that was the big behavior change….We enabled [that] by starting an innovation fund that was actually a fund set up to help people go outside, and we encouraged people to come up with their ideas of where they want to go and learn, and what new experiments they wanted to try. We saw almost 350 ideas in about a five-year time frame, and funded about 130 of those ideas. That led to a billion dollars of actual pipeline ideas, a third of which have been commercialized into the marketplace.
Separating the Short-Term from the Long-Term
Sometimes, the tension is so strong, and the pull to deliver short-term is so strong, that it’s really hard to think beyond a 12 or 24-month time frame.
We started looking at other people and how they’re doing it and really quickly came to [realize] that we probably needed to separate the short-term from the long-term. That’s when we developed a recommendation to launch innovation centers [to focus on long-term innovation].We launched three innovation centers. One on technical apparel, one on technical footwear, and the other for jeans. By the time I left — I was employee number one on innovation— there were over 200 people employed in innovation.
We defined [innovation] as four types of innovation and then three ambition levels of innovation. Think of it as a four by three little matrix.The four types [are] product innovation; the second [is] supply chain innovation; the third [is] experiential innovation, which should be everything from the retail stores, to your online experience, to how people find out about you through your marketing…; the fourth is business model [innovation].
In terms of ambition levels…we had what we call your incremental / sustaining in the first area… At the far end of the whole spectrum, we had transformative or breakthrough. We realized, let’s try something in the middle. We didn’t really know what to call it, so we just called it “stretch innovation.”What the innovation centers were very focused on was increasing our ambition level to get to more stretch and breakthrough, and very focused on extending our product and our cost innovation areas. That’s what the innovation centers were set up for — to go on the two verticals of product and cost, and really stretch us in terms of going to higher ambition levels of innovation.
Avoid Trying to Do Too Much
The hardest thing and the biggest temptation is to do too much, because everybody loves innovation, everyone gets excited about it. For a few brief moments they get swept away by it.
Then they get back to their desk, and there’s always phone calls, or emails, or fires that they have to put out. What was at the top falls quickly to the bottom.If you really want them to do something with innovation…be very focused. We tried to do three or four different capability builds right in the beginning. We went into design thinking. We want people to go outside, we want…all these things, and we quickly realized they couldn’t absorb all that.
We narrowed to the idea of, let’s do the one thing that would probably move the organization the farthest in the shortest amount of time with the least amount of effort… Let’s just get more ideas into the organization. In order to do that, let’s just go outside, because quite frankly they’ll learn from other people. We don’t execute teaching; they’ll immersively experience it by visiting other people or working with other people.
Finding the Fight People to Mobilize
We’re a 60,000 member organization at VF. We thought we needed to get 1,000 to 2,000 people behind [innovation] to mobilize and get it going. After a couple years, we realized there’s probably only 30 or 40 people that actually really were moving the needle.
If I had hindsight starting from day one, I would have tried my best earlier on to identify who were those 30, 40 people. I would have tripled down on those people in terms of giving them money, giving them resources, giving them management clearance, instead of trying to go after 2,000 people.Stepping back, there is obviously a pattern and something that [these 30-40 people] share.
They weren’t always the most creative people, but I would say they were always the people that when they tried something and it didn’t work, they were curious about why this didn’t work and then they tried something else. It was an idea of resiliency married with resourcefulness. They tended to be just very resourceful. They didn’t take no so easily.It wasn’t necessarily the purity of the process, or the purity of the creative. It was more, ‘We’re going to learn straight from the lesson, and let’s be willing to mix it up a bit and get to the end outcome.’
If You’re a Retailer…
Don’t sign any more big leases. It’s a tough industry. Why? It’s an old model that’s predicated on lots of traffic, pushing a lot of product, and buying through those channels. Obviously, we’re all consumers. Our behaviors are dramatically shifting in terms of where we buy products, where we learn about products, and when our decisions are made. I think it’s very fluid. It’s very dynamic.
Quite frankly, most of us don’t think in channel structures any more. We don’t even think in product category structures any more… Truthfully, the way businesses are set up — you have retail, you have online, you have marketing, you have product. All these are very functional silos, and consumers don’t even think that way.They think about a brand, and do I want to buy into this brand, and how do I want to use this brand? Therefore, the current structures…they’re all broken. The idea that retail in itself is considered a functional structure — that is broken.
If you only look at retail as four-wall profit, you may be missing the true value. You may not be capturing the true value of having a storefront. If the role of retail is to have an experience with the brand, an experience with the product, are you set up to have experiences? Are you set up to demo things? Are you set up to engage? That’s the main reasons consumers actually go and visit you right now…
Just to give you an example — Timberland, and how they’re doing it right. Obviously, your typical Timberland store is a few thousand square feet…Instead of 3,000 square feet, they cut it down to 300 square feet…and actually set up a customization shop for the yellow boots [in Japan].
You basically go into these little 300-square-foot, it’s a little bit bigger than a kiosk, and there’s a passion in there. You see all the boots. You see the possible designs. Then, you can customize a boot the way you want it — with the colors, with the name on it, with different patterns, with different buckles and different laces, etc…That’s been very successful for them. That’s actually had one of the highest ROIs per square foot ever. That’s an example of just rethinking what the store can be for you.
Individual E-Commerce vs. Amazon
Is there a different role for your e-commerce website than just transactions? Because if it’s purely transactions, people generally have an easier time or a better experience, or a cheaper, more cost-effective experience, going through Amazon, if it’s purely a transaction. You need to actually have something that differentiates you versus Amazon if you’re going to have your own website…
If you’re going to have your own website, you have to think about what is the reason for that website. If it’s only, purely to maximize revenue, that’s a tough reason to have a website, because I do think the Amazons of the world are the killer apps.If you purely just want to get revenue, you actually may be better off going out, flying out to Seattle…having a sit-down meeting and saying, ‘How do we partner together so that you win and we win in terms of building a brand site within the Amazon universe?’ Because their back end is going to be way better than any back end you’ll have.
If you had exclusive products that you could control that are only available on your website, then yeah, that might give at least a transactional reason to be on your website.The other reason you want to have the website is, truly, to build the relationship. People are still going to buy products, but that’s an afterthought. That’s not your primary purpose of building that website. Building that website [has to be] a lot more than transactional. If you’re going purely transactional, I just think that the momentum is always going to be against you. It is an uphill battle.
I’m not saying you can’t do it. I’m not saying you can’t protect it for a while. I’m just saying that, in terms of share of mind, people go to Amazon first.
The Power of Iconic Brands
I had the opportunity, in my role in innovation, to think about how world-class design impacts great innovation. One of the things we learned is you can have the best consumer insight that led to the biggest need in the world, and you could service it with a technological or advanced-material breakthrough, and that actually created a great benefit, but if the thing looked ugly, or if it was hard to use, or just was — from a design point of view — unfriendly, it flopped.
Yes, have the great consumer insight that speaks to the need that then you’re going to address with your technology…but also make it beautiful. Make it something fun. Make it something useful in terms of a design — both the aesthetic but also an experience perspective.
That led to the question, what is world-class design? We benchmarked over 50 companies, and through that process, we learned certain companies not only understood design, but they were able to use both design, innovation, marketing, and sales as opportunities to actually build iconic status.
When something is iconic, it generally has three very simple qualities. The first is there’s something distinctive about it within the audience that they are serving — something that they’re known for, something that they’re recognized for.
Number two, it’s highly relevant. It’s this idea of distinctive relevance. It’s relevance that’s not just historical, but it’s relevance that actually speaks to today and will speak to tomorrow…You don’t get to iconic status unless you’ve had that longevity, and you don’t get the longevity unless you have a formula to get to timeless relevance.
The third is, you have universal recognition for your distinctiveness that’s highly relevant. If you can achieve those three qualities over time, you’re going to have a higher likelihood of becoming iconic. Why that’s important is, iconic products generally tend to be the most profitable in many categories. You tend to have the highest gross margins. You tend to have the highest loyalty. On top of that, you probably have the highest cost differential versus your competition, but you probably have the highest volume.
There’s a lot of business reasons why you want to focus on iconicity. Companies that have done this well that we researched were companies like BMW, Nike, obviously Apple.
There are a lot of great companies that have learned how to harness this idea of what I call iconic advantage. It’s not that they don’t innovate the new. They do. They do chase some shiny objects, but they double down on where they’re already strong, where they’re already making money — on the franchises that oftentimes in businesses people tend to neglect.
The cash cows tend to be the unsexy ones. They tend to be the ones where the designers or the merchants or the marketing people go, ‘Oh, God! I’ve got to work on version 4.3.3. That’s been around forever! That’s so boring! I want to work on the new stuff, the innovation stuff, the front end, the blue ocean, all that.’ The sex appeal’s always over there.
These businesses that have capabilities, processes, organizational structures, and KPIs all set up to basically grow their cash cows. They don’t just milk the cows. They butter them up.
Here’s one of the big a-has we had when we were talking to people from Nike. It’s not the product nor the marketing guys that were the biggest proponents of this iconic advantage. It was the finance and supply chain guys. They were the biggest heroes.
Think about it from the supply chain point of view, right? You’re going to take something that’s already selling well, that people already love, and what are you going to do with it? You’re going to leverage the existing dies and molds, you’re going to leverage the existing product lines, you’re going to leverage the existing vendor relationships, and you’re going to do more of it, so my cost-per-unit goes down. …From a customer-acquisition or from a sales channel, distribution-build point of view, it’s already there. You don’t need to go and get new customers, nor do you need to build new distribution channels. They’re already built in, and you’re just going to leverage them further.
Actually, the biggest champions were people that have generally been, let’s say, resistant to innovation at times in the organization.