Foxconn Goes Consumer?

Hon Hai Precision Industry Co., better known as Foxconn, is a contract manufacturer for consumer electronics based in China that builds products for many companies, most notably Apple. In tandem with Apple, Foxcon’s growth has been slowing. As a result, the company has begun developing its own consumer branded devices in an attempt to sustain growth and capture the additional margin a valuable brand can provide. But moving from manufacturing expert to brand savvy can be a perilous undertaking. If you find yourself in the same situation as Foxconn, consider the following:

  • It’s a people problem: You are not going to get there by simply hiring people who can design new products or manage brands, then bolting them onto your current organization. Converting from the manufacturing mindset (organized and disciplined) that dominates your organization today to the consumer and innovation mindset (creative and empathetic) needed for the future is gut-wrenching. The first key to success is educating everyone on the differences in their respective thinking styles and biases, and how to bridge those differences using specific communication techniques and frameworks that are proven to be effective. The other key can be found in your reward system in terms of how performance is evaluated for bonus and promotion. While you may already be very good at identifying and rewarding those who improve manufacturing efficiencies, moving forward you will also need to be able to evaluate and reward people in terms of the ability to envision new products over the long run, create and manage a product and brand portfolio, and refine product ideas into the specifications you need to efficiently manufacture them.
  • It’s an innovation problem: Too often a company thinks it can create a brand by simply putting its name on some products and then advertising them. In fact, in the early stages of brand development, the brands that turn out to be the most profitable over the long term are the ones with fabulous innovations that draw people to them. It's not about pushing out a name and some ads, rather it’s about pulling people in. Starbucks is one of many brands that rarely advertised and let its product speak for itself. Academic research supports the notion that the quality of the message and offer is far more important than the amount spent on advertising. That being said, the offer must be extraordinarily compelling to survive with little or no advertising. When the new products are incremental rather than transformative, advertising becomes a critically important factor in success.
  • Stay Open to Many Types of Innovation: Don't get tunnel vision that innovation is just about the design of the product with some fancy new feature. Innovation extends to other areas, such as making products less expensive and building services to support the product. We can see that Apple iTunes as a service is almost as important strategically to the overall business as the devices themselves.
  • Get the brand right: In a vast oversimplification, the two main branding considerations are determining what the brand will stand for and how many brands to offer. Companies starting out in consumer branding typically don't have a very clearidea of the meaning of their brand. While this makes sense when the brand is still evolving, constant clarification internally is critically important to keep the organization and initial customers from becoming confused. Companies starting out in branding also typically struggle to get the number of brands right in terms for the range of products and services to be sold. Lack of experience and discipline can result in too many brands, although having too few may lead to missed market opportunities. Theory aside, the practical challenge companies new at branding face is having more ambitions than the resources needed to realize them. Only in very, very rare circumstances will a company starting off in brand building have enough money to support the new products and advertising (if needed) to build more than one new brand at a time.
  • Be patient: Great brands are almost always built over decades, not overnight. Samsung made inexpensive, color television sets in the late 1980's with a brand that was unknown to most outside of Korea. Even as recently as 10 years ago, many Europeans viewed the brand less favorably than Americans. Yet today the Samsung brand is the envy of the world.
  • Spend: Brand building is expensive. The managers for one massive brand that's grown rapidly over the past few decades estimate it has taken about $100 million to build brand awareness by one percentage point globally. And that's just for the advertising alone without accounting for the billions spent creating the new products and services for advertising to tell people about. Get ready to spend a lot in areas in which you have limited experience.

Dogged persistence is essential to success. Plan on making a lot of mistakes and then learn from them. Never waver from the goal you have set to become one of the world’s premier brands.

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