Brands, capital and crises
Her main point – that the brand is the business, from the inside out – is one that many companies ignore at their peril.
We have been so spoiled for crises over the past few years that it is difficult to choose which ones to talk about. However, there are a lot of common lessons – good, bad and ugly – that it would be good to share. One thing to say about these crises is that the brand element is often overlooked until it is too late. When I was in Frankfurt at a conference just as the financial crisis was developing, the panel before me was discussing the prospects for the financial markets, speculating on what would happen and how it might all end in Armageddon. Then the chairman stood up and said: 'And now we will have a presentation on the value of branding in financial services.'
I had not opened my mouth or even stood up, but there was a scraping of chairs as at least a quarter of the audience got up and left the room. They clearly thought: “It has nothing to do with me, all this branding malarkey.” All I would say is that if the financial services industry had been more concerned with building sustainable brand value through strong customer relationships, rather than short-term financial incentives, we might not be in quite such a mess now.
A few months later, Warren Buffet – one of the world’s most successful and least sentimental investors – popped up in Frankfurt too. What is intriguing about Buffet is that when he was asked how he judged where he was going to put his money in the future, he said three things: at number three was a strong balance sheet; at number two was a strong management team; and at number one was a strong brand.
STAGES OF BRANDING
In his book, Capitalism 4.0, Anatole Kaletsky talks about the stages of capitalism since the 18th century and how it has evolved each time in a new and fresh way. It prompted me to think about whether or not we are at ‘Branding 4.0’ at the moment. It is an intriguing thought, considering the stages branding has passed through, from marks on cattle’s backsides, to consistency of products, to branding the corporation and corporate identity. Now, branding is seen increasingly as an organising idea for business. It does not just sit on the top, like icing, or just with the marketing department, but should penetrate everything a business does.
There are some common characteristics among the world’s strongest brands, and about half of the top 50 in the world have been up there for 50 years or more. First, they are clear about what they stand for. That sounds so obvious, but why is it so difficult to achieve? Many organisations have mushy positions or vague, generic values. If you are not clear about what you stand for and how you differ from your competitors, anything else is either less efficient, less effective or academic.
Second, it is about coherence and how it all hangs together, across everything you do. So how about a coherent customer experience, for example? How are all the pieces working together? How are you answering the phone? How are you recruiting and training people, and incentivising them to do the right thing that builds the brand in a distinctive way? How does everything really work together? What about internal to external coherence? It is no use pretending you have smiley customer service on the outside if you have an axe-murdering culture on the inside.
And then there is the characteristic of leadership – about staying ahead, being relevant, being restless, innovating and constantly renewing the business.
EXAMPLES OF BRAND CRISES
McDonald’s became the whipping boy for obesity. Despite advertising featuring Justin Timberlake, stakeholders felt that at the core there was a problem with what the fast food chain was doing day-to-day.
McDonald’s took it on the chin and completely changed the brand, renewing it from the inside out, being clear about what it was about – not just good fast food, but enjoying good food fast. A rather different proposition.
The company then made the brand changes show through better-for-you products and services and a wider range of food. It developed more pleasant, café-style restaurants that people wouldn’t mind hanging out in, and great coffee. It also embarked on some nice communication and is now right back up there.
Toyota is another example of a brand that has been in crisis – a strong brand, but a very big crisis. It is difficult to imagine a bigger crisis than people allegedly dying as a result of using your product. On top of all the bad publicity about the company’s accelerator problem, the LA Times carried out an examination into everything about the organisation. This was all at a time, in 2007, when Toyota was riding high, having just overtaken GM to become the biggest car company in the world. It was there in the top ten most valuable brands in the world and people talked about Toyota’s reliability, safety and quality.
If you look at the conventional measures over that period, at the return on capital employed, for example, you can see the radical increases. However, the measure of return on capital employed is one that looks in the rear-view mirror. It is simply an efficiency measure and does not tell you how the capital was employed.
There had been a build-up of problems at Toyota on the inside. The LA Times found that there had been some problems with the company’s accelerators since 2002. People knew on the inside – there were over a thousand letters about it – but there was good perception on the outside. That is why you need a better, more proactive and predictive monitor of what is really going on in the company before it spills into the outside world. If you are only looking at external customer data, it is already too late.
Now Toyota has got its act together. It has humanised the business and used its people and some of its quality measures to rebuild that brand from the inside out. It talks about having a dream and a path that includes all the people who work for Toyota and what they have in common in order to work together.
Marks & Spencer
M&S was in a similar situation when it went through its late 1990s crisis. Later, people on the inside would confess that they knew what was going on. They knew the products were not as good and that the quality was eroding, but there was a fear about speaking out. Yet customers on the outside were still thinking that M&S was great. All it took was a couple of difficult TV programmes and people started noticing bad stuff about the retailer. It was only a matter of time before public opinion and the firm’s business fortunes had well and truly turned, and it was too late to address it.
So it is too late by the time a problem shows up in the financials. Around the boardroom table, a lot of time is spent talking about finance, looking at the numbers in detail. But by then bad practice may already have happened. Why don’t all boards have a proper dashboard, indicating what is happening in the ‘front end’? You need to make sure you are monitoring the intermediate measures so you know what is going to happen in the numbers tomorrow.
Apple and Microsoft
Apple is one of the most overused case studies, but with good reason. It epitomises all the characteristics that are best about brand practice. It is clear – in fact, obsessive – about what it stands for: ‘Man shall not be subordinate to machines.’ It shows up in everything Apple does, including the way it develops products and services that are delicious to use and to look at. The way it has repositioned nerds as geniuses is a great way to humanise technology.
Steve Jobs epitomised the style and substance of the brand, and when he died the share price fell by 5% in a day. By contrast, when Steve Ballmer announced he was resigning as CEO of Microsoft, the share price went up.
Jobs epitomised Apple, which is about clarity, cool and cutting through confusion, expressing very simply what the organisation was about and using it as an organising and quality-controlling tool.
Ballmer, on the other hand, was like a bomb going off. At conferences, he would run on stage, punching the air, kicking ass and everything else. But, of course, as CEO he symbolised what the brand was about. The Microsoft brand is also a bit like a bomb going off. It has sub-brand-itis, with bits and pieces of innovation going on without a real centre of gravity. The centre was not holding. What was the Microsoft brand about? Where was the clarity? Under Ballmer it felt like a company run by a salesperson, rather than someone who really got the brand thing.
There was always a danger that Microsoft was looking at the brand in a surface way, trying to bring it all together in terms of the visual identity but not really reflecting the company’s DNA or the structure and practices that lay beneath.
Nokia is an interesting example of a company that seemed to think it was in the product business, rather than the brand business. It was very successful at shifting fashionable handsets (which have a tendency to go out of fashion), rather than living and developing a bigger brand idea that was about ‘connecting people’ – which is what Nokia said it was about in its advertising. If you start off with brand thinking, rather than how to make the next fashionable handset, you have a much bigger idea and a more open platform for moving things on.
Sometimes you hear commentators on Nokia’s performance say: ‘If only it had focused.’ But people can often mishear that. They are thinking about focus in terms of the product and category, not in terms of the brand and what that could have done for the company.
‘Connecting people’: how much more could Nokia have done with that? There are so many different ways in which it could have helped people to connect with each other. This brand-based, expansive thinking across categories is, of course, what Apple has done so successfully.
Samsung had its crisis in the 1990s, when it was going down the low price and commodity road to perdition, making products for other people. Yet it decided to focus on building its own brand, recognising how important that would be in the future. Samsung changed its philosophy to be a leader, not a follower and, critically in relation to the brand as an organising idea, started to incentivise its senior management on building brand value as opposed to short-term financials. It paid off. If anyone had suggested 15 years ago that Samsung would overtake Sony in terms of brand value, people would have laughed at them.
BUILDING A BRANDED CULTURE
Using the iceberg analogy, sometimes people get distracted over the top bit, the visible bit – the name, the logo, the advertising. But the branded culture and substance that lies beneath is the part that really matters and the visible bits need to do that justice.
The way this has been considered over the past few years has changed. Shown at the top of Figure 1 is the production model, with a marketing department, and the brand hangs off that. That is almost along the lines of brand as separable asset – you can almost float it off. The middle diagram in Figure 1 shows the next phase, which is brand strategy and business strategy as alter egos of each other. It gives you an angle on business strategy, which is clearly much better as it stitches in competitive advantage across what you are doing.
There is now a different way of thinking: if the brand is the most important sustainable asset you have, it makes sense for it to be the organising idea for all the other assets. This is a way of making all your assets work better, giving competitive advantage across them all. How do you really utilise all your assets – your people, your distinctive products and services, your management information, property and everything else – and rally them towards creating value?
It is this third phase (bottom of Figure 1) which is interesting. We do not distinguish between brand and business. As Starbucks CEO Howard Schultz says: 'I don’t run a business, I run a brand.' The brand is the business and vice versa. That is the thing that lies at the centre and that is what needs to organise the way you do business.
BRITISH BRANDS: COULD DO BETTER
If you wish to cheer yourself up about Britain, read Made in Britain by Evan Davis. He talks about the frequent complaint that we in Britain are going to the dogs and do not manufacture things any more.
It is true that we no longer do big, dirty manufacturing, but we do make some amazing, high premium, high value items that are desirable around the world. We have also won many more Nobel prizes than any other country outside the US, so we are really not doing so badly.
But we are not very good at building our own brands for long-term exploitation and management. While it is great to build brands to sell them, and indeed to build them for other countries, this is just a one-off transaction, hopefully with the money going into the economy and being reinvested in other businesses. We need to keep on creating and renewing them over time.
We do obviously have some great British-based brands. Dyson, by any measure, is an incredibly successful organisation, exporting to 50 countries and producing over £200 million of profit. But why is it that founder James Dyson felt the need to say 'I always refuse to consider the word ‘brand’... I think people buy products'?
I see the point he is trying to make. He does not want all this ‘flimflam logo stuff’ and the money spent on advertising to divert attention from the product. It might make a good contentious PR line, but it is not very helpful for the ambition of many other businesses. And perhaps we should be asking, why isn’t Dyson the ‘British Apple’ when it comes to domestic goods? Why are there no Dyson retail outlets (after all, Apple stores are the most profitable retail space in the world)? Why is the company not innovating and generating more and broader ideas and even more wealth? It is still quite a small company, relatively speaking. Why would it not want to try brand as the basis for its thinking, as opposed to just product?
We are not good at blowing our own trumpet in Britain, even though we have some great brands. Burberry, for example, doesn’t mind being called a brand. This is one of the most successful case studies, so it is ironic that it was run by an American, Angela Ahrendts, who recognised the power of British attitude in fashion and style and used it unashamedly to build the business and brand – and to keep on renewing it in a way that was ultra-modern in digital terms while still true to its heritage.
Burberry has been extraordinarily imaginative, individually tailoring coats through ‘The Art of the Trench’ and employing some breakthrough thinking about social media. It had something called the Tweetwalk, welcoming many more people into the Burberry brand than could ever possibly attend its London catwalk show. Just as models were about to go on to the catwalk, they tweeted the pictures to the rest of the world, creating excitement and buzz, and also relationships. It is not just about revenue generation and sweating the brand but also continually building the brand as an asset and organiser to the whole company. And with Burberry Acoustic, the brand is finding unsigned bands that create the right atmosphere and right associations for Burberry too.
So, how clear are we all about our brands, whether we are their owners, looking after them or advising on them? Are we clear about what they stand for? Is everything coherent inside and outside and across the customer experience? From a leadership perspective, if you have a potential idiot running the company, could you coach them to epitomise the brand instead? Are you renewing, innovating and setting the agenda in your markets? How is branding being championed and monitored in the boardroom? Because, as the old saying goes, ‘the fish rots from the head’.
This article was taken from the June 2014 issue of Market Leader. Browse the archive here.