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If you use Cisco as an example, in the mid to late 1990s, what Cisco had was great management vision, great brand direction and great category leadership. Those were the pillars of Cisco’s differentiation on our dashboard. As we headed into 1999-2000, Juniper Networks had taken some significant market share from Cisco in one of our key product categories. What the dashboard was telling us was that in category leadership, our perceptions of innovation were starting to fall, but it was also telling us that in the area of market agility, we were starting to see perceptions of Cisco not keeping up with technology. It was through the combination of understanding how those two forces of differentiation added up to the idea of basically, “Are you going to be innovative in the future or not?” That was the analytical point on the knobs and dials that were telling us that you need to really understand how each of these forces of differentiation leverage each other. Some part of this is a little bit of art, and some part of this is a lot of science, and you need to understand how the combination of these forces affects customer expectations. In the case of Cisco, the product leadership and market agility forces of differentiation were the places where we were starting to lag behind Juniper. Since then, we’ve adjusted and we’ve won back a whole hunk of the market share that we had lost in 2000 to them.

For most companies, it depends on what you are and where you fit in the marketplace. If you’re a large, established company, it’s more important to manage all six forces of differentiation in combination with each other. An Intel or a Microsoft or a Nokia or a Nintendo or a Verizon — that class of companies, they’re such a well-established company and brand in the minds of the customer that it’s really important to understand mass, speed and direction in combination with each other. If you’re a startup company, it’s much more important to focus on one or two or three of the forces of differentiation. In particular, it’s important to focus in on your management vision — on what you see about the future that makes you relevant, and it’s absolutely vital to focus in on the category leadership aspect of your product because most startup companies have, if you will, a better mousetrap. How well they position that mousetrap as a new category leader in context to management vision is really what creates the initial phases of momentum for a younger company.

eMarketer: What if you’re a follower? There’s only room for a few leaders and most people are followers.

RR: Exactly. If you were sitting over at a Juniper or, say, Gateway versus Dell, it’s more important to know where your competitors are weak on the six forces and then to use that to attack them. What Juniper did so well against Cisco is that on market agility and category leadership, they combined those two and said, “We’re going to show customers that we are ahead of Cisco on the innovation curve.” And for a 12 to 18 month period, they succeeded against it.

The main point is trying to understand how differentiation exists in customers minds is very difficult, and this provides a vocabulary for that. The second thing is knowing how to manage the differentiation, and being able turn and tweak knobs and dials — that’s really what we try to prove and try to bring to the marketplace with this book and the concepts in it.

eMarketer: Why does the celebrity CEO matter at Cisco and Microsoft and not at Coca-Cola or Exxon-Mobil?

RR: It matters for really one fundamental reason: gasoline and Coke haven’t really changed in a hundred years, and what happens in the digital business is products are never finished, and because they’re never finished, that means that every time that you go to upgrade your product, it’s a natural human reaction to wonder, “How’s this company doing? How's this brand doing? Is this product keeping up? Can I trust this company?” I’ve got a nine-year-old kid and I’m already on my third video game platform. So I’ve had to think about the company way like I think about the PCs and PDAs that I buy more than I’ve had to think about the Coke I’m buying or the gas I’m putting in my car.

As it turns out, when we ask customers, “What’s one of the ways with which you feel like your future’s contract is being satisfied?” customers told us that they really want to know what the CEO has to say about the future because they know they’re going to keep upgrading and upgrading and upgrading their products. And CEOs and senior management turn out to be, in the minds of customers, one of the best barometers for the trust they have that it’s okay to upgrade that product. And it’s based on the fundamental nature of digital products being never finished.

eMarketer: Would this book be of interest at all for people who work at non-digital companies?

RR: I think that it is because there are some non-digital companies where it’s not going to matter. One of the key premises that I say in the book is to sacrifice. I know this book is more appropriate for some companies than others, however I do think that some products that have typically not been digital but been more conventional like automobiles, appliances and consumer electronics — in those cases, the digital component of the products is beginning to manifest itself to customers, like OnStar is the classic example for GM. I do believe that at some point in time, OnStar might be so important to customers’ relationships to GM that they might care more about OnStar than they do about the car.

To be prepared for that future, whether you’re at a General Electric making appliances, Sears selling appliances or an automobile company selling cars, at some point in time, this might give them insight into how the strategies that worked for digital products may end up having an impact on their markets in the future. Two things about it would work. One is to prepare them for the future, but also to find techniques that work in the digital world that might be valuable in their world, such as, perhaps, doing a better job of positioning their CEOs as spokespeople for their products. I mean, look at [Ford] CEO Bill Ford. He’s right there.

eMarketer: You touch on the importance of trust early on in the book and then stress the importance of it in the epilogue, citing it as the “single most important factor in maintaining customer loyalty after a customer is acquired.” In this era where top executives from some of the most renowned companies are under investigation and consumer confidence is shaky, what can companies do to earn customers’ trust? Or if you prefer to answer specifically, what is John Chambers going to do to make sure he gets out the word that his integrity is intact?

RR: A few things are very important here. First of all, I think it’s critical to recognize the CEO is part of your product lineup if you sell digital products. Two things are most important in building trust based on the CEO personality. One is the CEO has to find a way to make his or her value system ubiquitous in the company, and then to translate that ubiquity to the outside world. I don’t think it’s enough to just have a plaque on the wall that says, “We’re an honest company.” It requires a greater commitment to communicate what your value system is to all your employees. Keep in mind that while this is important to get right with your customers, it’s equally if not more important to get right with your employees.

One thing that I think is really important is to be out there. For instance, I think we’ll all end up looking back at Martha Stewart — it’s the same thing with Bill Clinton — and say, “Why didn’t you just say right away in the first 30 seconds, “I’m going to deal with this problem up front.”” The same things that are critical for anybody in this limelight when your integrity is challenged is to be clean and to be humbled about it. If you’re not in trouble, and John Chambers is most definitely not in trouble — he’s a very high integrity CEO, you have to continue to reinforce that value system.

The second thing that’s really important is trust comes not only from the CEO but trust comes also from, “Do you have any experience using the very products you’re asking customers to buy?” For instance, it’s really important that John Chambers uses our networking technology to do his job. And he uses it extensively in how he communicates to the employees of the company. Our video-on-demand system is a virtual television network here. So when we say to customers, “We think you should do this,” they say to us, “Why should we believe you?” We say, “Because we do it ourselves.” The fact that we do it ourselves creates a really strong sense of trust that we’re not creating smokescreens of hyperbole for our customers.

In the end, when you add that all up, the buck stops at the CEO. The question on every brand’s mind today is, “Is my CEO a liability to my brand’s trust with customers or is my CEO an asset to building trust with my customers?” All that comes down to their ability to get that value system out there and to be out in the world making sure people understand what that value system is.

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You can reach Online Editor David Berkowitz at dberkowitz@emarketer.com

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