The two deadly sins.

May 1, 2004

The big news on Wall Street this week is the forthcoming initial public offering of Google, Inc. According to The New York Times, the stock offering is expected to give Google a market value of

“at least $30 billion and perhaps $50 billion or more.”

If you were a visitor from another planet, you might be asking yourself, what big, sophisticated, high-technology company is behind the success of Google?

Could it be IBM, Microsoft, Intel, Apple, Oracle, SAP, Hewlett-Packard,

Cisco, Dell, Xerox, Sun Microsystems, Philips or Siemens?

Of course not. The brains behind Google are two Stanford students, Larry Page and Sergey Brin, who launched the website in 1998. Some six years later, the two founders will each be worth billions.

With some exceptions, big companies seldom launch new brands that become big successes, even though big companies have all the advantages. Big companies have the resources, the people, the credentials, the distribution networks, the media contacts. I can’t think of a single advantage an individual entrepreneur has over the big global conglomerates.

Yet there wasn’t a big global conglomerate behind the success of such brands as: Starbucks, Red Bull, Linux, JetBlue, Amazon, Yahoo!, eBay, Priceline, and a host of others.

Nor for that matter was a big global conglomerate behind the success of most of the big brands of the past. Brands like Apple, Microsoft, Digital Equipment, Dell, Sun Microsystems, Hewlett-Packard, Oracle, SAP, Siebel, Compaq, Quicken, McDonald’s, Subway, Pizza Hut, Domino’s Pizza, Papa John’s, Wendy’s, Gatorade, Mountain Dew, Wal-Mart, Costco and a host of others.

I repeat. Big companies seldom launch new brands that become big successes.

There are two reasons for this phenomenon which we call “the two deadly sins of marketing.”

The first deadly sin is “timing.”

The good book says “There is a time to be born and a time to die.” The time for a brand to be born is before the category is established in the mind.

It was 14 years after the launch of Red Bull that the Coca-Cola company finally responded by launching its own brand of energy drink, KMX.

Does KMX have enough energy to overtake Red Bull? Not a chance. Once a competitive brand is established in the prospect’s mind, it’s almost impossible for a me-too brand to overtake the leader.

It was 32 years after the launch of Southwest Airlines that Delta finally responded by launching its own “no frills” airline called Song. You can’t give your competition a third-of-a-century head start and expect to build a brand. All the momentum is on Southwest’s side. Not to mention the money and the resources.

I can remember spending all day in the boardroom at Digital Equipment Corp. trying to convince the chief executive and his staff to launch a serious 16-bit business personal computer before IBM did. No luck.

We don’t want to be first, said the chief executive. And I’m not concerned about IBM, he continued, because if IBM does go first, “we’ll beat their specs.”

Well, IBM did go first with the launch of the PC in August 1981, the first 16-bit serious business personal computer, a product that went on to dominate a fast-growing market. And Digital Equipment did follow with not one, but three different lines of personal computers, none of which made a dent in the marketplace in spite of their presumably better specs.

IBM had become the standard and if you wanted to participate in the personal computer marketplace, you had to be a clone.

Too bad. Digital Equipment had the credentials to dominate the PC market. Brought to you by “the world’s largest maker of small computers” was our tag line for Digital Equipment’s new personal computer.

I can remember spending all day in a boardroom at Xerox trying to convince the corporation to launch a desktop laser printer before the Hewlett-Packard LaserJet got strongly established. No luck.

Too bad. Xerox had the credentials to dominate the laser printer market. In 1977, Xerox had introduced the 5700, the world’s first successful laser printer.

(With my track record, you’re probably wondering how we stay in the consulting business, a question I sometimes ask myself.)

The second deadly sin is “naming.”

A big companies want to put its own name on a new brand. This is generally a mistake. New categories generally require new brand names.

In spite of IBM’s head start in business PCs, the company eventually lost out to Compaq and Dell, both new brands created especially for the personal computer category. To most prospects, IBM meant mainframe computers, not PCs.

(It’s interesting to note how many marketing people chide IBM for not moving fast enough into personal computers, when in fact they were first. “Mainframe mentality” is their usual complaint.)

I can remember spending all day in the boardroom at Continental Airlines, trying to convince management not to name its new no-frills airline Continental Lite.

You have two choices, I said. Either you can make the entire Continental system a no-frills airline (my preference) or you can give your new no-frills airline a different name than Continental. No luck.

In spite of my elegant argument to the contrary, the company went ahead with Continental Lite, an airline that took off and then just as rapidly came down to earth, after losing many millions of dollars.

Then there’s Kodak, a company that is paying the price for not giving its new digital camera line a different name than Kodak.

Kodak means film photography, not digital photography. The irony is that Kodak invented the first digital camera (back in 1976.) Yet the Kodak name locks the company into the past.

Like Digital and IBM, Kodak had the credentials, the organization and the resources to dominate an emerging new category, but not the foresight to recognize that a new category needs a new name.

One exception should be mentioned. In 1994, Bill Gates asked Richard Barton to develop a Microsoft CD-ROM idea involving travel guides. Barton convinced Gates that the CD-ROM idea would fail, but that an online travel agency might succeed. Furthermore, he convinced Mr. Gates to give the project a different name than Microsoft.

Richard Barton called Microsoft’s online travel agency “Expedia” Seven years later Microsoft sold control of Expedia to USA Networks for an estimated $1.3 billion.

Mr. Barton, wherever you are, the consulting business needs you.