Interview with Dr.

Colin Egan, professor of marketing, IEDC-Bled School of Management and Warwick Business School, UK Podjetnik, Slovenia, interview by Nastja Mulej (December 2010) The original version of the interview is available here

Back to basics

Colin Egan: The brand is not what you say, its what you do. Successful companies didnt set out to build strong brands. They tried to give their clients the value they wanted.

Colin Egan advises entrepreneurs to get back to basics, such as focusing on value for the customer, brands, innovation and having a clear strategy. In his hometown in Ireland in the 80s, Colin Egan had a pub, a restaurant and a club. He was a DJ, offering entertainment with videos even before MTV. His marketing in the restaurant business in those days was intuitive. He did things differently from the way the leading large companies did things. His patrons were all people who couldnt get in to other establis hments. He was in charge of the music, so he could play anything he wanted. His main difference was his bouncers, former soldiers who did not drink, who knew how to fight and who were respectfully feared by all of his guests. Their pay was twice as high as in other bars. And he paid his workers 30 per cent more than others, since he didnt have to pay a DJ. I personally think that small and medium sized enterprises face two main challenges: one is the transition to becoming a large company, and the other is handing over the reins from the founder of the company. Today, Colin Egan is a researcher, consultant, speaker and author. He has created a brand. Its called Colin Egan. His topics are strategic marketing, strategic management, focusing on the customer, the power of the market and brand management, about which he lectures at the IEDCBled School of Management. He has worked for BP, Philips, Castrol etc. At the same time, he is a master of micro and macro brands. His strategy: you always have to be a step ahead of the rest. And he recommends this for you as well.

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The most difficult thing is to be in the middle You say that small and medium sized enterprises create their marketing intuitively. How? Can you systematise that assertion a bit? The majority of small companies never grow beyond 20 employees, since that requires hiring professional help for management. I could give you a thousand examples of where the person hired from outside didnt get along with the owner. The best example is Apple in the ear ly 80s, when a manager who had previously worked for Pepsi fired Steve Jobs, the founder, because there was no growth. I personally think that small and medium sized enterprises face two main challenges: one is the transition to becoming a large company, and the other is handing over the reins from the founder of the company. The best example is in Germany. It is known for companies like Porsche, Bosch, Siemens etc. But the real engine of the German economy are companies with less than 500 employees, typical family companies which win on the global market, each in their own niche, and are the champions of German imports. One of my colleagues at IEDC, Dr. Hermann Simon, who researched hidden champions for his doctorate, found the same thing in Slovenia: producers of sailboats, skis etc. Otherwise there is no difference in marketing between consumers or an inter-organisational market, producers of services or products, large or small companies. The greatest challenge for a medium-sized Slovenian company is that they are too big to be flexible and too small to compete. As you say, there can only be one price leader on each market, and the strategy of all the others lies in differentiation. But Slovenian companies act as if they want both or nothing. And thats the challenge, since in the long term there are only a few examples that succeeded. In the short term, its sort of possible. Let me explain it with a metaphor: if you put a middleweight boxer in the ring with a heavyweight, hell die. Therefore its not allowed. Since hes not fast enough to escape, and not strong enough to withstand. If you put a flyweight together with a heavyweight, hell be able to survive for some time, 15 rounds, since he is flexible , he can move, and he can do some damage. All research of economic cycles shows that medium-sized companies suffer during crises. Every market has two or three large companies that are strong enough to survive, and a lot of successful companies with up to 20 employees. The solution lies in cooperation Have you worked with small and medium sized Slovenian companies? Theyre in a Catch 22. They know that they need it but they cant afford it. What do you suggest? Consulting, and then going back to basics. Focusing on value for the customer, brands, innovation and having a clear strategy. Actually, if I were advising an entrepreneur who was an owner, I would recommend that he sell the company before it goes bankrupt. Thats definitely going to happen. Narrow targeting gives small companies potential

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Its tough, because its a business that he created himself. But it would be wrong for me to evaluate Slovenian small and medium sized enterprises, since the circumstances are always different from case to case. I can give you a general outline of a mature, established market: three or four large companies, and a lot of small ones. I cant give you black and white solutions. I can suggest connections, networking, and cooperation between companies. Like Mercator, which is awarding franchises. The company gets Merc ators brand and Mercators knowledge of the local market. Networking and mergers could be a solution. Slovenia is in a difficult position. From the point of view of price leaders they are close to Macedonia and Bosnia and Herzegovina, where production is much cheaper. Striking a balance is really difficult, especially in this situation. Why are people forgetting about the marketing basics? Because of their short-term point of view. Michael Porter of Harvard said that what a lot of people call strategy is just solving yesterdays problems. Small companies deal more with costs, and large ones with building their brands. How can a small company create an international brand? Is it even possible? Ebay, Google, Facebook, two kids in a dormitory... Of course it is. You have to be smarter. Social networks are an opportunity. Narrow targeting gives small companies potential. When I worked for IBM in the 90s, we asked ourselves whether the Internet was a distribution or a communications channel. Today in a lot of p laces its both. For instance iPod applications. You can be anywhere, and you can get one. Since they identified that specific customer need. You dont have to create global distribution chains. Target narrowly, only on target customers How can an average small Slovenian company build its brand? If a company can support 30 employees that already means that they are a brand. In the eyes of their clients they are doing something right. The question is, do they want to build a global brand? The brand is not what you say, its what you do. Successful companies didnt set out to build strong brands. They tried to give their clients the value they wanted. Bosch, Porsche and Siemens were also small companies. I could list 10 German companies which no one has ever heard of except their customers. But they have something that keeps their customers coming back. That is probably on the interorganisational market? It doesnt matter; it could be on the consumer market. Linn, Bang & Olufsen and Denon are hi-fi equipment brands and they are global. 90 per cent of people have never heard of them. The 10 per cent that knows them are so loyal to them its unbelievable. This was always the disadvantage of advertising. Like a farmer in a field shooting rabbits with a shotgun. With a lot of luck he could capture 2 per cent of the market. Thats how marketing used to work. On the other hand, there is a sharpshooter who knows exactly which rabbits he wants to hit. A few days ago I gave a talk in Romania in which I said that direct marketing, like advertising, is obsolete. We have to use marketing which incorporates customer databases, which contain information about the customer. You focus your task only on the target customer. Rumours, web-based social media, viral marketing.

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Do you think that its possible to control rumours? There are two myths associated with rumours: that they are free, that you dont even have to invest a penny in them, and that all publicity is good publicity. Thats not true. Think about the biggest microbrands in the world. David Beckham for example. Crossbranding is for instance another solution for small and medium sized companies. Roger Federer and Gillette. Piggy backing, where one carries the other. Omnibus marketing, where certain people or compan ies are connected in order to invest together. These are possible solutions. But they are general. This is where a lot of professors make mistakes, because they dont take the specific circumstances into account. As you said in your lecture, its easy to talk about marketing, but difficult to put it into practice. What questions do you ask when you come to a company? I ask the right person three questions: about clients, about competitors and about capacities. This last also includes employees. Are people working with passion? Do they believe in the company and the products? Can you control passion? Yes. Through motivation and leadership. You dont need charisma. This moves from marketing into management. In management there is no single model for passion. The best example is from football. Look at Manchester United, Arsenal and Real Madrid. All three are exceptionally successful clubs. Arsenals manager Arsene Wenger inspires his team to play with passion. Hes the most boring person in the world, they call him The Professor. Manchester Uniteds manager Alex Ferguson is a person from the working class who started in a shipyard. He has a totally different style. Right now Rooney is not afraid of his wife, but hes afraid of Ferguson, because hes very direct. In Real Madrid you have Jose Mourinho, a man with charisma, someone special. They are all different, but they all inspire passion among their partners. The only thing they have in common is that they didnt succeed in football as individuals.

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