216. Public vs Private Innovation: when being SEEN to be innovative is just as important as BEING innovative

Burberry was the first luxury brand to get on Facebook.

By pivoting their image from fusty old raincoat maker to social media star, the brand appealed to millennials.

The share price rose 4x and the CEO became the highest paid chief executive on the London Stock Exchange!

Listen to this episode to learn when being seen as innovative is just as important as being innovative.
  

Timestamps

00:00:00 - Introduction

00:01:26 - The power of perception

00:02:32 - Burberry's radical transformation

00:03:32 - Burberry's digital innovation

00:05:42 - Aligning brand perception with strategic innovation.

00:07:35 - Branding and Public perception

00:09:30 - Innovation strategies

00:10:29 - Public innovation as a strategic business tool

00:12:21 - Conclusion

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Transcript:

00:00:00 Innovation isn't just about creating new product. Sometimes being seen to be innovative is actually just as important as making a new invention. And in this episode, you're going to learn how Burberry used this lesson to quadruple its share price. And you're also going to get prompts so you can apply this lesson to your own life and work.

00:00:25 Welcome to the Techies podcast. I'm your host, tech entrepreneur, executive coach, and Chicago Booth, MBA Sophia. My aim here is to help you have a great career in the digital age, in a time when even your coffee shop has an app. You simply have to speak tag. On this podcast, I share core technology concepts, help you relate them to business outcomes, and most importantly, share practical advice on what you can do to become a digital leader today. If you want to have a great career in the digital age, this podcast is for you. Hello, smart people. How are you today? In this episode, I wanted to talk to you about one of my favorite topics, and that is perception versus reality. Because in business, as in life, perception often matters more than what's actually happening. And have you heard this phrase by the glorious Sophia Loren?

00:01:26 She said that beauty is 50% of what you've got and 50% of what people think you've got. And honestly, it is the same with business. And before I teach you the theoretical concept, in today's lesson, I am going to tell you a story. So let's go back to the mid noughties and turn our attentions to Burberry. And you know, now Burberry is a super cool fashion brand, but back then that was not the case. And yes, its Trench Coat was famous. It's actually the same coat that was in Casablanca, you know, the super famous black and white movie. But apart from that coat, Burberry was basically either worn by old country gentleman to hunt grouse on the estate. So basically like the characters in the crown, or it was also really popular with basically English thugs, like red faced football hooligans. The Burberry C check became associated with fat, angry men who might punch you in the face.

00:02:32 So not great brand association. And you know what I remember I actually had a Burberry scarf, which was a gift from my mother, I think. And I was in Edinburgh and in Scotland, and I was going to a nightclub and a bouncer literally wouldn't let me into the club because I had this Burberry print. Because the Burberry print was associated with thugs. So clearly things that Burberry had to change because, well, let's just think of the financial reasons. The thugs couldn't really afford luxury collections. And a company can't grow if it solely relies on old gentleman characters from the Crown to grow Burberry, a listed company needed to attract millennial consumers, and it also had to change its image and move away from its really unappealing mix of frosty countryside raincoat and chavy ubiquity and designing new collections was not going to be enough because they actually needed to appeal to new customers.

00:03:32 So even if they made new stuff, but the brand was seen as unappealing, then the new stuff would also be unappealing. And so they had to have a radical brand change and they decided to invest in digital store experiences and to really invest in their online presence. And the CEO at the time, Angela Aarons set out to turn Burberry into the first fully digital luxury company. This sounds really kind of obvious right now, like this is what you should be doing, have an online presence. But at the time it was super radical and actually many luxury brands thought that Burberry were crazy. And at the time, many luxury brands didn't even have a website. And they thought that having a website really diluted their brand. Obviously things are different now, but come on, this was like 20 years ago. So in 2006, Burberry began its digital transformation with investments in technology. 

00:04:32 And Burberry was one of the first luxury brands to join Facebook. So it joined Facebook in 2009, and then it decided to advertise in other social media platforms. And by 2012, Burberry was spending 70% of its marketing budget on digital media. And again, I know that this seems really obvious right now, but at the time it was really massively innovative. And if you think about it, not long before the magazines and magazine editors were basically the most powerful people in fashion. And so directing your efforts, if you're a big fashion brand to Vogue and Harper's Baard, that made more sense. But Angela Aarons, she was right and reaching new consumers via social media, paid off in the company stock price. So the company stock price went up by four times in eight years. Like this is legendary. And also, guess what? This was personally very successful for the CEO herself because Angela Aarons became the highest paid chief executive in the Fsie 100.

00:05:42 And the Fie 100 is the UK stock market index. So not bad, right? And it's a case where a lot of her compensation, like for many CEOs was in the stock price. So when the stock price went up because of these innovation efforts, she personally did really, really well. And by the way, before I continue, my dear, my person, are you finding this useful? Are you finding this interesting? Well then you definitely need to subscribe to this show. If you haven't done already in this podcast, I am bringing you high quality free education at business school quality level, and this helps you have a great career in the digital age. And the more you understand how tech and business work together, the more opportunities open up to you and frankly, the more money you'll make. So that's a good thing, and I definitely think that it makes it worth subscribing to a free podcast.

00:06:39 So subscribe if you haven't done so already. And if you are already a subscriber, thank you, you are amazing, then please leave the show a rating and a review. Now, SmartyAnts, let's get back to lesson. The Burberry digital transformation story is an example of public innovation. Companies with more hype and a stronger brand are literally valued higher than those who are not. And equity analysts call this intangible assets. A reputation or a brand is an intangible asset because it's not an asset like a factory or an oil rig that you can see and touch. An intangible asset is an idea. And you know, when I was at Chicago Booth, a lot of my really mathematically minded classmates, they just didn't believe in the power of brand, which was insane because it's like, well, why did you go to Chicago Booth, one of those strongest brands in business school?

00:07:35 But anyway, they literally thought, how can you put value on a logo? And I don't want you to make the same mistake because I don't want you to think of brands as just a logo, a brand or a company image. It's a promise. And often a brand says something about the buyer. So think about like what would you assume about somebody who has a Bentley? What would you assume about that person? What is it that they want to say to the world? And now let's think about another luxury car brand, a Ferrari. How would the owner of a Ferrari be different to the owner of a Bentley? Can you think about the differences? And because you can, you can kind of identify them. And you know, of course these are guesses, but that basically shows that a brand is saying something about themselves and that extends to the person who is buying into the brand.

00:08:32 A brand is a signal of status, it's a signal of values, it's a signal of what you stand for, what you want to stand for. Anyway, the reason why I'm telling you this is because I want you to think about this in terms of innovation. Because when we think of innovation, most of the time we think about new things being invented, like the mRNA vaccine or the iPhone. And obviously this is innovation. I'm not taking that away, but I just want you to know that this is not the only type of innovation because creating an entirely new product, well, that's a type of innovation and it's called breakthrough innovation. And I wrote about the six different types of innovation in my book called Innovate. But how the pragmatist guide to Growth, it's really good. It's backed by research with researchers from the University of Chicago, and it's got really nice pictures and I've added a link to it in the show notes.

00:09:30 So go get it anyway. Breakthrough innovation is not the right path for every company all of the time because some companies, especially those for whom heritage and longevity are a big part of what they do. They might not actually need breakthrough innovation in their products. They might need to improve things incrementally, and they might also want to stick to their heritage. But if they want to enter new markets, if they want to expand, they need to be seen to be innovative. So how do you do that? Well, that's called public innovation, and that's basically what Burberry did. Public innovation is when being seen to be innovative is just as important as actually being innovative. And now I don't want you to think that this is fakery or telling lies because that's not the same thing. It's a strategic question of focus. So just think about your business strategy.

00:10:29 What's more important to focus on? Is it more important to focus on groundbreaking products or is it a better use of your resources to update your brand and appeal to a new market? Both of these paths can be hugely successful and both can create billions of dollars in value. And also both are difficult in different ways. So don't think that public innovation, oh, that's just super easy. It's a bit like ballet. Ballet looks like you could do it, but then can you actually do it? No. So you have to think strategically to make this decision. You have to see what's going to bring you the most money for the least amount of effort. Is it going to be a new market or a new product? And obviously this depends on your capabilities, on your organization's capabilities and on market dynamics. So in Burberry's case, they did actually create new collections.

00:11:24 You know, they're a fashion brand, they create new collections, but at the same time, they sell literally the same raincoats that they sold 100 years ago. So in this new transformation, they could still appeal to the grands in the crown and also to the rich young fashionable set. So public innovation was completely right for them, but also notice that it came as part of a really long-term business strategy. It wasn't just something that they did for one quarter and they stopped. So when you are thinking about what type of innovation is right for me, and I mentioned that there are six, and the other six are in the book, when you are thinking about what is the right way for you to grow, because that's what innovation is about, basically look at your capabilities and look at market dynamics and then decide what type of innovation is right for you.

00:12:21 And most companies, when they are choosing a path, they don't just choose one. So you could have product innovation in some aspects, you could have public innovation and other aspects. And if you want some help figuring out what type of path is right for you, then get in touch. And we would love to help you with that. We've worked with lots of innovators in tech and outside tech, but mainly in tech and we would love to share our experience with you. Okay, today, my dear smart person, I'm going to leave you with some questions to help you apply the public innovation framework to your life and to your work. So let's start with your personal life. My question to you here is what changes are you making or intending to make on a private level that would benefit from becoming more known? So for example, if you've been working with a coach, can you share some of the lessons that you've learned say on LinkedIn?

00:13:19 And basically use that as your thought leadership. So you see you are already making changes. So you've got this private innovation happening, and now let's make it public. Let's make this innovation public. So share what you are learning and the best way to do it is on a LinkedIn post. And here's how you could apply these lessons in business. So here's question one. Are the customers you are serving today likely to be the same customers in five years time? Do you want them to be the same customers in five years time? Then question two, if not, who are the new customers that you want to attract and what values and interests do they have? So with this, you can start plotting a path towards public innovation towards those people. And that's it for today's lesson. We've done quite a lot here. So well done, well done for listening. Thank you for learning with me. I really appreciate your time, dear, smart listener, and on this note, have a wonderful day, and I shall be back in your delightful smart ears next week. Ciao.