In the third episode of PHD and eatbigfish’s podcast series Overthrow II: Challenger strategies for a new era – a spin-off of their 2019 publication Overthrow II – host and founder of eatbigfish Adam Morgan speaks with Ernesto Schmitt, co-founder at The Craftory, and Rohan Tambyrajah, chief strategy officer at PHD Global Business, on venture capitalists, investment in challenger brands and the common characteristics of a challenger. Episode three marks the halfway point of the six-episode series.
Episode 2, How does a brand reclaim its challenger status? heard Kerry Chilvers, Direct Line’s Brands Manager, share an honest perspective on how a brand which has lost its challenger edge in a changing category can revitalise its challenger status and brand proposition. The premiere episode, The changing landscape for challenger brands, featuring PHD EMEA’s Chief Strategy Officer, Malcolm Devoy, asks brands to honestly examine which path they’re taking at this advertising crossroads – the useful and practical, or the creative. Listen to episode three below.
The rise of cause capital
As part of The Craftory, a venture capitalist focused solely on challenger brands, Ernesto Schmitt knows a thing or two about challengers. In his conversation with Adam Morgan in episode two of the Overthrow II podcast, Schmitt states that to be an entrepreneur and a challenger in this new era, there is an need for optimism and imprecision. Entrepreneurs need to be optimistic and see opportunity where others see barriers and obstacles – for, he explains, “if others already saw the opportunity as you did, the idea would have been done before.”
Entrepreneurs need to be imprecise because when starting a new business, no one really knows whether it’s going to be a success until it’s part-way established and, if new businesses needs to know the destination before taking that vital first step, they would probably never take it.
“Implicit in optimism and imprecision is a certain declarative absoluteness,” says Schmitt. “You need to believe what you’re doing is quite fundamentally different, rather than just a little bit better than; and you need to believe that the path you’re offering stands, or has the opportunity, to transform whatever category you’re entering into.”
From Schmitt’s perspective, every investment made needs to have belief and optimism at its heart, as well as a well-rounded team with complementary skills.
Cause-driven challenger brands
In Overthrow II: 10 challenger strategies from the new wave of challengers – the 2019 publication which the Overthrow II podcast stems from – Morgan, along with co-author and chief strategy officer at PHD EMEA, Malcolm Devoy, talk about challengers not just challenging somebody, such as a heritage brand, but challenging ‘something‘ – something they feel needs to change in the category in which they are entering.
The Craftory carries a similar philosophy when deciding which brands to invest in. For Schmitt, it starts with the cause. The types of cause-driven missions he likes to invest in include; prospering sustainably and keeping within the resources the planet has to offer; progressing society, such as helping those in Fairtrade, equal rights, diversity and inclusion; democratising access, making something available to the masses which might previously have been restricted; championing self-esteem; and unlocking the promise of good health, such as brands which offer better foods and ingredients.
Schmitt explains that there are three ways you can effect change at scale: working inside the government; infinite means of wealth to quickly take action for large groups of people; or through the power of consumers. It is the latter which is most within reach. “If you engage with hundreds of millions of consumers who make small consumption choices every day and shift their perception in a slightly different direction,” says Schmitt, “the whiplash effect of change can be dramatic. For example, the abolishment of plastic straws – hundreds of companies now provide alternatives in a bid to save the planet’s resources.”
Where did this all come from? It came from a small number of consumers choosing products that represented an alternative to the status quo. Consumers opted for the alternative because it’s the alternative that mattered the most to them and clearly outlined the cause it represented. That is why cause-driven challenger brands are what The Craftory back and why it’s so important to have cause at the heart of everything.
Where is the opportunity for marketers to be challengers?
Following his conversation with Schmitt, Morgan is joined in the (remote) studio by PHD Global Business’ Rohan Tambyrajah to revisit and analyse Schmitt’s early observation that entrepreneurs and challengers need to be optimistic and imprecise.
Morgan recalls a conversation he had previously with Christian Woolfenden, former chief executive of Paddy Power, now part of Stars Group and a PHD client. Woolfenden discussed how Paddy Power wanted to be culturally relevant, but to achieve this, he specifically didn’t create a plan around it. He didn’t know what was coming over the course of the year so he deliberately withheld marketing budget in order to have the agility needed to quickly respond to the organic cultural moments that occur over the course of a year. Morgan explains this is a different way of being optimistic and imprecise, because Paddy Power wanted to ride cultural opportunities in an interesting way.
Tambyrajah agrees, adding that optimism can be quite a sensational state of mind, and the danger we all face, particularly in this current climate, is retiring into the safety of what has been previously proven. “It’s really important for marketers to brace the unknown,” he says, “to find new ways of working that is rooted in optimism and also embrace imprecision as a way of working.”
Tambyrajah concludes that published studies and data show clearly that growth comes from creativity that really pushes the boundaries and starts to chart unchartered territories. If cause is the compass pointing a challenger brand north, then creativity is the wind that actually gets them there.
Hear the rest from Adam Morgan, Ernesto Schmitt and Rohan Tambyrajah with the third episode of ‘Overthrow II: Challenger strategies for a new era’, available on Spotify, Google, Apple Podcasts and Audioboom. To purchase a copy of Overthrow II or to find out your challenger type, click here.