Innovation: brand it or lose it

Branding can help an organisation own an innovation, create and dominate a new subcategory and enhance the perceived effectiveness of the organisation. US branding expert David Aaker argues that these benefits are often overlooked and that branding decisions should be part of the innovation strategy.

INNOVATION is increasingly at the centre of the strategy and the DNA of most firms, from HP’s ‘Invent’ to Toshiba’s ‘Leading Innovation’ to Toyota’s ‘Moving Forward’ to Cargill’s ‘Nourishing Ideas’. The logic is that innovation will lead to growth and profitability. Growth will come from innovation-driven new products and businesses, and profit will follow from innovation-inspired margin increases and cost decreases. Further, as most markets drift towards commodity status, with offerings becoming similar, innovation is seen as the way to create differentiation, thereby shielding firms from price erosion.

Indicators of the interest in innovation abound. Each year some of the most influential books are focused on innovation.1

Further, business publications such as Business Week and Fortune regularly have cover stories on or related to innovation. Yet with all this interest in innovation there is little discussion of how innovation should be branded. Firms emphasising innovation often regard branding as a tactical detail. And the subject of branding is virtually never raised in the books and articles on innovation. The focus is on the benefits and even necessity of innovation, how to make it happen, how to overcome organisational barriers, and how to overcome implementation problems. Nothing on branding.

I would assert that branding and innovation should always be considered. A brand strategy can enable, sometimes crucially, the potential of an innovation to be realised. There are times when you literally need to brand it or lose it.

Branding, it should be emphasised, does not mean putting a name and logo on an innovation. Rather, it means that a brand is developed guided by a coherent brand strategy and supported over time by actively managed, adequately funded brandbuilding programmes. An ill-conceived, poorly executed brand strategy will not be helpful. Further, not all innovations will merit a resourced, actively managed brand-building programme. Far from it. There is a real risk of overbranding with its resulting confusion and underresourced brands. To merit a brand, the innovation needs to represent a significant advance, be valued by customers and merit investment over time.

With that caveat, this article will discuss the upside of branding an innovation in the context of three distinct innovation roles: creating or improving an offering, creating a new subcategory, or influencing the perceived innovativeness of a corporate brand.

Creating or improving an offering

Innovations directed at creating or enhancing the value proposition of a business to the customer can combat the slide into a commodity status with the associated margin erosion. However, when the innovation is not branded the impact is usually short-lived, if it occurs at all.

Amazon developed a powerful feature – the ability to recommend books or whatever based on a customer’s interests as reflected by their purchase history and the purchase history of those that bought similar offerings. But, tragically it never branded it. As a result, the feature became a commodity that is an expected feature of many e-commerce sites. If Amazon had branded it and then actively managed that brand, improving the feature over time, it would have become a lasting point of differentiation that today would be invaluable. It did not make that same mistake with One-Click, a branded service that plays a key role in defining Amazon in what has become a messy marketplace.

The problem with sliding innovations into the existing offering is twofold. First, the market is made up of those who are not motivated or perhaps not able to sort out claims and the rationale behind those claims. A coping strategy is to ignore what are seen to be confused and contradictory competitive claims. As a result, an innovation not anchored by a brand simply fades in the muddled environment. Second, any dramatic visible improvement is likely to be quickly copied or appear to be copied by competitors so that any belief that a unique point of differentiation has been achieved will recede as the perception that competitors have matched the advance carry the day.

Branding changes all that. A new offering can have its own brand (NetFlix), endorsed brand (Apple’s iPod), or subbrand (Glad Press’n Seal). Further, an innovation that represents a feature (Cadillac’s OnStar), ingredient (Dove’s Weightless Moisturiser), or service (Best Buy’s Geek Squad) could also be branded directly. A brand provides several powerful functions most of which go back to branding basics (see Figure 1).2 First, a brand makes communication more efficient and feasible. A new product or product feature, for example, may lack interest among the target audience. Even when the communication registers, it can be perceived as too complex to warrant processing and linking to an offering. The act of giving the product or feature a name can provide a vehicle to summarise a lot of detailed information. A name such as Oral B’s Action Cup provides a way to crystallise detailed characteristics, making it easier to both understand and remember.

Second, a brand name can help make the innovation visible because it provides a label for the ‘news’. As a result, it is likely that it will be easier to achieve higher recall and recognition scores around the innovation. It is easier to remember a brand name than the details of a new offering or a branded feature or service. In fact, one of the characteristics of a good brand name is that it is easy to recall.

Third, a brand can add credibility and legitimacy to a claim. An unbranded claim, a better fabric or a more reliable engine is likely to be interpreted as another example of puffery. The brand specifically says that the benefit was worth branding, which is not only meaningful but impactful.

One study showed that the inclusion of a branded attribute (such as ‘Alpine Class’ fill for a down jacket, ‘Authentic Milanese’ for pasta and ‘Studio Designed’ for compact disc players) dramatically affected customer preference towards premium-priced brands.3 Respondents were able to justify the higher price because of the branded attributes.

Fourth, and perhaps most important, a brand provides the potential to own an innovation because a brand is a unique indicator of the source of the offering. With the proper investment and active management of both the innovation and its brand, this ownership potential can be extended into the future indefinitely. A competitor may be able to replicate the offering or its new feature, ingredient or service, but if it is branded, it will need to overcome the power of the brand. Another firm can copy the objective features of Apple’s iPod or Westin’s Heavenly Bed but there will be only one authentic product and that is the one carrying the brand name.

Managing the perceptions of a new subcategory

There is a spectrum of innovation, from incremental to substantial to transformational. Especially when a transformational innovation occurs, an opportunity often presents itself to create a new subcategory or category, to change what people are buying. The challenge is first to make sure that the subcategory is selected by customers and second to make the brand the dominant choice. Winning occurs not because a competitor’s brand is rejected but, rather, because the competitor’s brand is not seriously considered as relevant to the new subcategory. When an innovation has the potential to create a new subcategory, branding that innovation can help make sure that the opportunity is realised. A branded innovation can provide a vehicle to define, position and dominate the new subcategory.

The opportunity is to equate the branded innovation with the new subcategory and use the brand to define, position and dominate the new subcategory.

Under subcategory competition (as opposed to brand competition), a key step is to make sure that the subcategory is selected. A brand can play a key role by helping to define and position the subcategory. So the Westin Heavenly Bed, for example, introduced in 1999, defined for some a subcategory within the hospitality industry: hotels with premium beds. As the innovator, Westin managed the subcategory by defining premium beds around the Heavenly Bed. By extending the subcategory scope with the Heavenly Bath brand, it made it harder to copy the concept.

The early market leader brand has the potential to position or reposition the whole subcategory, making it more appealing. Winning the subcategory battle for relevance can be more important and impactful than winning a brand share fight. Asahi, as the dry beer subcategory innovator and early subcategory leader in 1986, positioned the subcategory with respect to taste (sharp, clean, less aftertaste) and personality (young, energetic, aggressive, innovative). A few years later when it became the clear category leader, it repositioned dry beer as being global, a market leader, and delivering the freshest beer, and, as a result, created a market share surge. Asahi leveraged the resulting subcategory success and its subcategory dominance to go from a 10% also-ran in 1985 in the highly competitive Japanese beer category to a marketing share leader less than 15 years later. When the brand defines the subcategory it will take on the characteristics of the brand. Further, the brand will become the most visible option for the subcategory. The inevitable result will be that the brand is also considered the most relevant brand, perhaps the only relevant brand, for the subcategory.

One goal of subcategory management is to define the subcategory to include features that influence which brands are relevant. Consider the iPod. When it arrived there was a category, MP3 players. The iPod created a subcategory that involved more than playing music. With a design that was cool, elegant and compact, with easy-to-use features, it was visually and experientially appealing – characteristics difficult to deliver credibly in that general space. Additionally, the companion brand, iTunes, provided easy access to music and other entertainment vehicles plus computer-based management of the iPod content inventory. Thus the category was defined in such a way that Apple’s iPod was the only game in town. The iPod subcategory earned credibility and clarity by linking with the Apple and Steve Jobs brands. Competitors emerged, such as Microsoft’s Zune, but struggled because they were perceived to be deficient with respect to some of the attributes even though that perception was not always accurate. Attribute perceptions attached to the brand iPod became difficult to overcome.

Research has shown that the development of new subcategories or categories, on average, creates aboveaverage profits because when competitors become less relevant, then the marketplace will become more attractive. Chrysler pioneered the minivan subcategory in 1983, sold over 200,000 cars in its first year and maintained leadership in the subcategory for at least a decade, which created a profit stream that helped it survive. In one study of 108 business launches, those 14% that were categorised as creating new sub-categories had 38% of the revenues and 61% of the profits of the group.4

‘Perceived innovativeness’ of an organisation

Branding an innovation will also provide another benefit. It can affect the ‘innovativeness’ image of the organisation brand, which is often the corporate brand, resulting in two benefits. First, an innovative image provides credibility to new products. Research has shown that an image of being innovative will enhance the prospects for new products – particularly, products that are different from their predecessors. Second, an innovative reputation will enhance the attraction of the firm to customers. It will provide energy to a firm. In fact, the best energiser is an innovative product, especially one that has a buzz around it. Further, innovation can contribute to a firm’s stature because of its association with success and leadership.

It is not easy to achieve an innovative reputation. In fact, most firms aspire to be perceived as innovative, but few break out of the clutter. Branding the innovation can potentially help make the innovation visible, communicate its features, and provide credibility and substance to the effort to affect the perceived innovativeness of the organisational brand.

Consider the top three firms in the Business Week – Boston Consulting Group’s list of the World’s Most Innovative companies in 2007, based on a survey of top executives.5 Each of these positions was undoubtedly influenced by branded innovation. Apple, the top firm, rode the success of the iPod, iTunes and iPhone. Toyota, the number three firm was helped by the success of the Prius. Even Google, the number two firm, which does not espouse any brand strategy, benefited from branded innovation that helped create its leadership position in internet advertising, namely Adwords and Adsense.

Sony, the number 13 firm in the survey and, until recently, the number one firm in Japan on the innovativeness scale, is given credit for being innovative despite a dismal record in the last two decades in terms of actually delivering innovation. This reputation is largely based on its branded innovations of the 1970s and 1980s, starting with the Trinitron TV technology introduced in 1968, which enabled Sony to take a lead in the TV market over two decades. Then came brands such as PlayStation, Handycam,Vaio, and AIBO that, even today, influence perceptions of Sony.

The fact that branding an innovation can help affect the perceptions of a brand with which it is associated has theoretical and empirical support.

There is a large body of evidence in psychology that the perceptions of an object will be affected by what is associated with it. A person’s personality is affected by their clothes, friends, activities and living space among other things. They all send signals as to what type of person they are. A brand’s image is associated, for example, with the colour of the product or package, the price, the music in an ad and the store in which it appears. The organisational brand that can be linked to a branded innovation will benefit from that association. The brand can help make the innovation and its link to the organisational brand more salient.

There is also empirical evidence that one brand can drive perceptions of another linked to it. One study of a quarterly database of high-tech firms found that brand equity as measured by attitude towards the brand seldom varied from quarter to quarter.6 However, one exception was the observation that the brand IBM significantly improved at the time that the ThinkPad brand got traction in the marketplace. Even though the brand ThinkPad was a tiny part of IBM’s sales, it moved the IBM brand.

More evidence comes from an annual survey by Nikkei BP Consulting that rates over a thousand brands in Japan along some 15 dimensions including innovativeness.7 Analysis of the survey data over eight years shows that correlation between changes in the innovativeness scores of innovation subbrands and changes in their parent brand score over 72 data points is 0.44. Also, if the six subbrands that were in the top ten sometime during the last five years are examined, the relationship is strong. For example, Nintendo’s perceived innovation score went from 70 in 2006 to 114 in 2007 and to 127 in 2008 (when it was far and away the most innovative Japanese brand), while the subbrand Nintendo DS in the same time frame went from 73 to 114 to 118 (where it was the number 2 most innovative brand in Japan). During another three-year period, the Apple image went from 74 to 80 to 71 while its subbrand iPod went from 89 to 115 to 106 and the subbrand au (a mobile phone service) went from 82 to 88 to 104 while its parent brand, KDDI, went from 78 to 82 to 94.

A final word

The forgotten dimension of innovation is branding – not just applying a name and logo but creating a brand supported by a strategy and an actively managed brand-building programme. Unless an innovation is branded, there is the risk that the innovation could fade into the crowded marketplace and see its life shortened. The return on investment could then be reduced by orders of magnitude.

Branding has the potential to own an innovation over time, to add credibility and legitimacy to the innovation, to enhance its visibility, and to make communication more feasible and effective. When a transformational innovation that creates a new subcategory is involved, a brand can help to define, position and dominate that new subcategory.

Finally, a branded innovation can add new product credibility and energy to a corporate brand. Not all innovations should be supported by a strong, actively managed brand, but the brand decision should be part of the innovation strategy.❦

[email protected]

References

1. Books like Christensen, C. M., Anthony, S. D. & Roth, E. A. (2004) Seeing What’s Next. Boston: Harvard Business School Press.

Foster, R. & Kaplan, S (2001) Creative Destruction. (2001) New York: Currency.

Hamel, G. (2000) Leading the Revolution. Boston: Harvard Business School Press.

Kelley, T. (2001) The Art of Innovation. New York: Currency.

Kim W. C. & Mauborgne, R. (2005) Blue Ocean Strategy. Boston: Harvard Business School Press,

Moore, G. A. (2005) Dealing With Darwin. London: Portfolio.

Tushman, M. L. & O’Reilly, C. A. (2002) Winning through Innovation. Boston: Harvard Business School Press.

Zook, C. (2004) Beyond the Core. Boston: Harvard Business School Press.

2. For a more extensive discussion of the value of a brand to customers and firms see Aaker, D. A (1999). Managing Brand Equity. New York: The Free Press, Chapter 11.

3. Carpenter, G. S., Glazer, R. & Nakamoto, K (1994) ‘Meaningful brands from meaningless differentiation: the dependence on irrelevant Attributes.’ Journal of Marketing Research, August, pp. 339–350.

4. Chan Kim, W. & Mauborgne, R. (2005) Blue Ocean Strategy. Boston: Harvard Business School Press, p.7.

5. The World’s 50 Most Innovative Companies, Business Week, 8 April, 2008.

6. Aaker, D. A. & Jacobson, R. (2001) ‘The value relevance of brand attitude in high technology markets’ Journal of Marketing Research, November, pp. 485–493.

7. Brand Japan 2007, conducted by Nikkei BP Consulting, is the seventh annual survey-based evaluation of some 1,000 brands in the Japanese market.

Adapted from the article by the same title published in California Management Review, Fall, 2007

Innovations directed at enhancing the value proposition of a business can combat the slide into a commodity status with the associated margin erosion. However, when the innovation is not branded the impact is usually short-lived, if it occurs at all

The iPod created a subcategory that involved more than playing music.

Toyota, one of the top three firms in the Business Week – Boston Consulting Group list of the World’s Most Innovative Companies in 2007, was helped by the success of the Prius.

There is a large body of evidence in psychology that the perceptions of an object will be affected by what is associated with it. A person’s personality is affected by their clothes, friends, activities, and living space, among other things. They all send signals as to what type of person they are