The Anatomy of a Challenger Brand

Founders are generally wired to seize opportunities. To build a better mousetrap, invent something new, expand a market. Yet certain new ventures tackle opportunities in a way that completely disrupts the status quo and, as a result, they earn the distinction of being known as a challenger brand. As we continue to build Phoenix3 Holdings through investments and our own start-ups, I have been thinking about the key factors that distinguish challenger brands from other start-ups.

It's a Mindset

A challenger brand business model is designed to reshape a category and give customers a new way to think about their needs.

It’s about rethinking an accepted mindset based on evolving customer expectations and a sincere desire to change for the good. ?

Warby Parker is a great example of a successful challenger brand because the business redefined the rules of the eyewear industry with a direct-to-consumer model offering quality eyewear at a fraction of the traditional retail prices. The free home try-on program leveraged technology to innovate the customer experience. They grew quickly but continued to iterate with retail store fronts to further grow their brand presence. Warby Parker addressed customer pain points and focused on inefficiencies.

Technology as a Differentiator

In the food and dining space, Sweetgreen used its app to simplify ordering and emphasize sustainability when it launched in 2007. The company connected with an evolving tech-savvy audience and used customer data to refine their offerings and personalize experiences in a new way. This approach challenged industry norms and drove Sweetgreen’s early success as a challenger brand. In my opinion, challenger brands today must use technology as a differentiator. Whether through automation, AI or a predictive analytics, digital-first models are the only way to effectively respond to performance trends and succeed.

It's Not Always a Challenge

Building a challenger brand is certainly not the only path to being a successful founder. If we stick with the fast casual segment, Five Guys and Raising Cains didn’t redefine their segment, but they successfully introduced higher quality options compared to industry stalwarts like McDonald’s and KFC. Similarly, when I founded Unidine in 2001, we adopted a fresh food approach to foodservice management, offering a higher quality solution for outsourced dining. We created a very unique corporate culture and built a successful business. We built a better mousetrap, but we were not a challenger brand. ?

Culture as the Lifeblood?

When you take time to think about commonalities among challenger brands, you will find they all seem to cultivate an infectious culture. As the saying goes, “Culture eats strategy for breakfast.” Anyone who has worked with me knows how passionately I believe in a consistent culture – top to bottom, from year one to 100.

Challenger brands must hire employees who are mission-driven, ask provocative questions, take risks and solve problems.?

This is a very different type of employee than someone who thrives in a large organization where being a maverick can be considered a flaw. One radical approach to culture came from Netflix founder Reed Hastings who decided to run the company like a sports team, only keeping the very best. ?Performance expectations were unapologetically high but paired with radical freedom like unlimited vacation and no expense policies.? The result was a company that was constantly adapting to market changes – successfully growing from DVDs to streaming and now a global content studio.

A Founder’s Checklist

Modern challenger brands are not focused on slaying a dragon; rather they take on an industry based on market gaps and embrace the underdog mentality. This is the approach we’ve taken with the recent launch of Restaura. We took a fresh look at a stale industry that is no longer meeting customer expectations, and we have woven our fearless approach into the fabric of our business processes and culture. From first-ever technology solutions and powerful branding to an employee ownership model that is game changing, we’ve purposely designed Restaura to fit into the Challenger column below:

Take a look at this short video to better understand my vision for the future of Restaura as a challenger brand. We are up for this challenge!