Building Great Brands and Disrupting in Reverse

InNOut Burger This is the menu at In-N-Out Burger, which was founded in 1948. Definitely no accident. Simple and affordable by design. Imagine the discipline it took to stick with such limited menu choices, despite years of intense competition from other fast food chains offering a much wider selection. Imagine how many times In-N-Out had to say "no." Come to think of it, the best restaurants usually have limited menus. 

And In-N-Out Burger probably has the best brand of any fast food restaurant in the United States. Its customers are very loyal.

In-N-Out demonstrates how disciplined product focus can lead to great products, loyal customers, and a great brand. Some of the very best brands have this product focus: Apple, Ferrari, Yves Saint Laurent. Very few products. But this approach seems fairly unusual. Most companies have lots of products, lots of choices. Christensen says companies should give customers more choice and customization options as a product becomes "good enough." See Concepts page and discussion of Clayton Christensen. The sustained success of more focused companies challenges that notion. It seems like too much product choice, and too much product customization, often results in average products, an average brand, customer confusion, and poor customer loyalty.

One of my favorite Steve Jobs quotes is the following: "Focusing is about saying no.  And the result of that focus is going to be some really great products . . . ." Focus also results in loyal customers, a great brand, and a differentiated strategy that few companies follow. 

Most companies are uncomfortable with big, you-bet-the-company commitments to just a few great products, so they place lots of bets through a wide selection of average products. As a result they never create a great/amazing product that delights customers, never achieve any meaningful customer loyalty, and never put what Steve Jobs called "a dent in the universe." This may be why Jobs said that "one home run is much better than two doubles." Home runs create customer loyalty and brand value. Singles and doubles don't.

And In-N-Out Burger shows how this approach can work even with really common, inexpensive products. Make a few simple, great products to create customer loyalty and brand value. 

And if you can, make products affordable. Affordability doesn't make a great product less great -- it just makes it more accessible to more people. Companies like In-N-Out Burger and Apple have shown that great products can be affordable without damaging brand value. In the next year or two Tesla is going to do this by making a more affordable electric car. Elon Musk's summary of Tesla's long term strategy sounds remarkably similar to Apple's approach:

"So, in short, the master plan is:

1. Build sports car

2. Use that money to build an affordable car

3. Use that money to build an even more affordable car

4. While doing above, also provide zero emission electric power generation options

Don't tell anyone."

Tesla and Apple seem to follow a top-down approach to Christensen's disruption theory. They start with a high end, integrated, innovative/superior new product; Apple did this with the original iPhone, skimming high end profits. They then use early profits from the high end product to increase manufacturing capacity and scale. Increased scale eventually allows them to offer a more affordable version of the innovative/superior product, penetrating and disrupting mainstream markets (kind of like new market or low end disruption in reverse). As the iPhone's become more affordable, it's disrupted more and more of the mainstream feature phone market. Michael Porter has noted that disruption can occur from the bottom-up and from the top-down. See Concepts page and discussion of Michael Porter and list of sources.

By starting with an integrated, high end product, Apple and Tesla free themselves to pursue cutting edge, market changing innovations that can later be incorporated into more affordable product versions, or can be used to create an affordable new product category that disrupts overserving modular alternatives (think iPad versus traditional PC). See post titled "How Outsourcing Can Destroy a Company." 

All this might explain why Apple hasn't been disrupted by low end competitors. Apple keeps things simple, great, and as affordable as possible, and creates affordable new product categories when existing offerings start to overserve.

The author owns stock shares of Apple.