19th August 2019:
Can innovation make the difference between surviving and thriving?
The 56 Degree Insight team are excited to share the results from our survey of 16 iconic Scottish brands - the 2019 56DI Scottish Brands Index survey. This will be an annual survey which adds a Scottish flavour to brand evaluation – a unique addition to the Scottish marketplace. Each week we will take a look at one of the key metrics of brand success. This week our focus is on Innovation…
Introduction
The world of business is always changing. The digital revolution is transforming how we engage with brands, government regulation is pushing companies in some sectors to change what they offer (from energy price caps to minimum alcohol pricing and the soft drinks ‘sugar tax’) while broader social and cultural trends continually affect consumer needs and what they expect of the brands they use.
And as we approach Brexit deadline day, what the future holds is impossible to predict, but it is certain that irrespective of the outcome, there will be major economic and political consequences with implications for many businesses.
It can be a struggle for businesses to survive in this challenging environment. However, those brands who are able to respond to their changing circumstances and remain relevant and valuable to consumers, by innovating their offer are the most likely to thrive.
Last week, we quoted Steve Jobs about the importance of Trust for brands. This week, we are quoting him again (we promise we won’t be doing so every week!) – he hit the nail on the head when it comes to this whole area:
Innovation takes many forms
What do we actually mean when we talk about innovation in business? Put simply, innovation is about finding new ways to address a previously unmet customer need. That solution may come in many forms, from the launch of a revolutionary new product or service to more iterative changes which add value such as the adaption of an existing product or tweaks to a service process to improve the customer experience.
While in some cases innovation can be ‘game changing’, disrupting an entire industry (think Uber or Air BNB), innovation is more often about a continuous focus on improvement which ensures that a brand stays relevant and continues to meet evolving consumer needs. So, for some brands, innovation may involve recipe changes, for others it could be a brand extension or new pack size, and for others it could be less about the product and more about shaking up how the brand is communicated.
Successful innovation is built on a clear understanding of unmet consumer needs
The word innovation might conjure up images of ‘boffins’ in white coats in R&D labs inventing new products to be foisted upon an unsuspecting public. However, to truly succeed, innovation must start with the consumer and a very clear understanding of their unfulfilled needs.
Of course, a multitude of factors are driving consumer needs and these vary by sector and market. In our increasingly complex world, consumers seek products and services which make life easier while other needs are driven by wider cultural and social trends, for example our increasing concerns over the environmental impacts of the products we consume, the rising importance of health and wellbeing and the increasing importance of the businesses we deal with making ethical choices.
Successful innovators look beyond their immediate sector to identify where their brand can provide solutions for unmet or even, as yet, unknown consumer needs. And, in a virtuous cycle, those brands that become known as innovators can lead their sector and build a brand desire and identification which sets them apart from the rest of the market.
Innovation is a key ingredient in brand strength
So whether or not consumers see brands as innovative is clearly an important element in the evaluation of overall brand strength. Thus, when developing the 56 Degree Insight Scottish Brands Survey, we knew that a question on innovation was a vital ingredient.
Our survey was undertaken during June and July 2019 using Kantar’s Scottish Opinion Survey – the only in-home, face-to-face omnibus survey in Scotland, and one that is representative of the Scottish adult population in terms of geography and demographics.Some 2,000 people were interviewed and asked a range of questions about a cross-section of Scottish consumer-facing brands – 16 in total
To make survey length manageable, around 500 respondents provided their opinions about each brand. As well as being asked to what extent they considered each brand to be innovative, respondents were also asked about brand awareness, trust, performance, likelihood to recommend, the brand’s potential for future success and the extent to which they portrayed Scotland in a positive light. Over the course of August and September we will examine responses to all of these metrics and then finally provide our combined score to reveal the leading Scottish brand among the 16 we tested.
Brands were selected carefully; all were consumer-facing, some longer established than others and coverage spanned a range of sectors – transport, food and drink, utilities, financial services and sport. The 16 brands were key players within these sectors but obviously we were unable to cover all brands – however our selected brands represent a good cross-section of different types of brands in the Scottish marketplace.
Which brands are most innovative?
So, which of our 16 brands do the Scottish population perceive as the most innovative? BrewDog tops the ranking with 39% of Scots rating them as ‘very innovative’ (and a further 56% as ‘quite innovative’). The company has come a very long way since their launch in 2007, growing from the two founders brewing beer in a shed to sell at local markets to the UK’s fastest growing food and drinks company with an annual turnover of over £112m.
A bold approach to innovation has been central to Brewdog’s phenomenal growth. They have disrupted a market which was previously dominated by a handful of global giants - not seeking to compete head on with the established mega brewers but instead offering an alternative, craft product and helping to create an entirely new category in the market.
The company’s innovative approach goes beyond beer to how the business is funded (crowd sourcing over £72 million from their 119,000+ ‘Equity for Punk’ investors), their approach to marketing and their diversification into new categories (from cider and spirits to hotels and television). Creating opportunities by innovating in areas beyond ‘the obvious’ has been key to success. As the co-founder James Watt puts it…
“Look for inspiration everywhere. The only place you should never look is within your own industry. Screw what all the other clowns are doing. Ignore it, blank it out; it is of no relevance or significance whatsoever.”
James Watt, Business for Punks
The second most highly ranked brand in our index is AG Barr, the company behind Irn Bru and a portfolio of other drinks brands including Rubicon and Strathmore water. Barr’s position close to the top of the ranking illustrates how a brand that has been around for many years can balance their heritage with an innovation strategy which ensures that they stay relevant. Recent examples include Barr’s innovation to tackle the potential challenges of the ‘sugar tax’, reformulating their Irn Bru recipe to reduce sugar content and introducing more low / no sugar products. More recently Barr’s have responded to changing consumer attitudes to alcohol consumption with the launch of their St Clement’s soft drink which is targeted at adults.
The Scottish Rugby Union (SRU) achieves third equal place in our innovation ranking (alongside Tunnocks) with 33% of Scots rating them as very innovative – in stark contrast to their football counterparts at the Scottish Football Association (SFA) who receive the lowest rating. While this high ranking for the SRU may to some extent be a ‘halo effect’ related to the Scottish rugby team’s performance on the pitch, perceptions may also be influenced by the governing body’s introduction of the new Super 6 tournament and other changes which have increased audiences and attracted lucrative commercial partnerships and other new sources of revenue. This type of relationship can be volatile however - Scotland’s heavy loss in Nice on Saturday to France impacts perceptions of the SRU. Let’s hope for a strong World Cup performance!
With the exception of the two sports governing bodies which sit at opposite ends of the ranking, we can see some clear grouping of brands within the same sector. All of the food and drink brands sit above the overall brand average while the banking, energy and transport sector brands all receive somewhat lower ratings.
This difference may be related to a greater ability for FMCG businesses to position themselves as innovators, adding value and delighting customers with exciting new (tangible) products. Meanwhile it is harder for those operating in the service industries to make such positive impacts due to lower levels of engagement or simply a desire to get from a to b.
Where is innovation less obvious?
Further insight can be drawn by looking at the other end of the innovation scale and those brands which consumers perceived as being ‘not at all innovative’ (see graphic on right).
Looking at the results from this perspective certainly emphasises the negative views of Scots towards the Scottish FA when it comes to innovation. However this view also illustrates the relatively high proportions of Scottish consumers providing very low innovation ratings to the energy and banking sector brands.
Notably both of these sectors have seen challenger brands (for example Monzo in banking and Bulb in Energy) taking market share from traditional brands by introducing innovative new offers, often using digital interfaces to provide customers with simple, cost effective solutions.
In conclusion….
So, what does this analysis tell us about levels of Innovation amongst Scotland’s brands? Well it is clear that there are huge differences between the brands included in our index; the long-established service businesses generally struggle to position themselves as innovative while companies in the food and drink sector are the most able to project a strong future thinking brand.
Can other Scottish brands learn from our two top ranking brands – BrewDog and AG Barr - who both place innovation at the heart of everything they do? They both have bold strategies which respond head on to emerging consumer trends and potential regulatory challenges, thereby positioning themselves as the category leaders.
And, of course, to stay ahead, brands also need to be looking beyond Scotland and their own categories. In particular, can our big energy and banking brands find ways to better compete with the more agile challenger brands that threaten to disrupt their markets?
We will close with some food for thought from US Business publication ‘Inc.’. The editors identified four key reasons why it is important that brands, irrespective of sector or industry, focus on innovation:
Innovation makes it easier to grow, regardless of the size of the business. It's easier for innovative companies to grow.
The right innovation will allow you to offer something unique to your customers. Innovation makes brands stand out in the market and makes it easier for companies to increase revenue.
Customer needs are constantly changing. One day, your customers might need exactly what you have to offer, and the next day, they might need something else. Innovators predict changes in the market and provide solutions before people even realise they need them.
If you are innovative, you will tend to attract the best talent. Talented, innovative people want to work for innovative companies.
Ultimately, it is human nature for brands to want to maintain the status quo. If it has worked in the past, why will it not continue to work in the future? In reality, the status quo only works for so long: to keep growing, you have to evolve and innovate and take the risks that come with it. Which of our Scottish brands will take these risks?
Next week, our focus turns to performance – which of the 16 brands do Scots believe are the best and worst performers?
