Millward Brown: Point of View

Brand: The New Business Leadership

The successful creation and management of brands will be the hallmark of business leadership in the 2 1st century. Does that sound bold?
Perhaps, but the world today is far different from what it was only a couple of decades ago, and these structural changes have placed brands at the forefront of business success. A review of stocks in the S&P index shows that businesses that own the strongest brands perform significantly better than other businesses. Business leadership and brand leadership have become inextricably linked, and a study by Millward Brown Optimor highlights the shift that has taken place. The analysis found that in 1 980, virtually the entire value of an average S&P 500 company consisted of tangible assets (chairs, factories, inventory, etc.). Now, in 201 0, tangible assets account for only 30 to 40 percent of a companys value. The rest is intangible value, and about half of that intangible portion close to 30 percent of total business value is attributed to brand. Therefore, it is not a stretch to say that for many companies, brand is their single biggest asset. What has led to this change in what matters to business success?

Mario Simon Managing Director, Americas Millward Brown Optimor mario.simon@millwardbrown.com www.millwardbrown.com

BrandZ TM Top 100 Portfolio Performance vs. S&P 500

(as of April 16 2010)

60% 50% 40% 30% 20% 10% 0%

18.5%
<r=n>?@ ABp 100 PBrDBEFB S&P 500

Apr 06 Jun 06 Aug 06 Oct 06 Dec 06 Feb 07 Apr 07 Jun 07 Aug 07 Oct 07 Dec 07 Feb 08 Apr 08 Jun 08 Aug 08 Oct 08 Dec 08 Feb 09 Apr 09 Jun 09 Aug 09 Oct 09 Dec 09 Feb 10 Apr 10

-10% -20% -30% -40% -50%

-1 1.5%

Portfolio signies strong brands in BrandZ as measured by brand contribution to shareholder value

Millward Brown: Point of View Brand: The New Business Leadership

to help add a higher order of meaning and fulfillment, not only to purchase decisions but also to the lives of consumers. What used to be sufficient for a companys success an excellent product and superior execution of service delivery are now merely table stakes. As consumers focus on higher meaning in making brand choices, companies have a unique opportunity to reinvent themselves through their brands. Unlike products, brands are impossible to imitate. In fact, by one definition, a brand is the unique place occupied in the customers mind by a product or service. Therefore, when a brand has carved out a unique position in peoples minds and enjoys a strong connection with its customer base, it has created the ultimate source of differentiation and therefore competitive advantage. Visionary business leaders have anticipated this and have carefully invested in their brands, making them the cornerstones of their business strategies. It is not necessarily the amount of investment behind the brand that has made the difference, but the fundamental principles these leaders have followed. This gives rise to the question: How have brands driven business success? The Rise of the Brand Ideal As previously discussed, prosperity has enabled an everincreasing number of people to satisfy their basic needs. With essentials taken care of, these people have turned to a search for higher meaning. Brands have the unique ability to tap into this pursuit for meaning, because both brand and meaning are intangibles. Both operate on the same plane of human existence and consciousness. So which brands will be most successful at connecting with their customers? A simple look at the brands that have created the most value over time can provide clues to the answer. According to the BrandZ Top1 00 Most Powerful Brands study, published annually in the Financial Times, the three largest brands today are Google, IBM, and Apple. What do they have in common? Although all three can be generally described as technology companies, they are wildly different in terms of their business models, their products, and their customers. Yet all three are at the top of the list. I argue that what sets these

Why Brand Is Driving Business Leadership The technological advances of the 20th century generated more prosperity than ever existed before. Consumers in developed markets came to have almost limitless choices in nearly every category, including many new categories that were created as companies innovated into new spaces.

As people find their basic consumption needs satisfied, brands are uniquely positioned to help add a higher order of meaning and fulfillment, not only to purchase decisions but also to the lives of consumers.
Abundance and prosperity have allowed companies to redefine what consumers need. Yet wealth hasnt necessarily made us much happier. As Daniel Pink writes in A Whole New Mind, The paradox of prosperity is that while living standards have risen steadily decade after decade, personal, family and life satisfaction havent budged. Thats why more people liberated by prosperity but not fulfilled by it are resolving the paradox by searching for meaning. This quest for meaning has huge implications for brands. As people find their basic consumption needs satisfied, brands are uniquely positioned

2010 Millward Brown

Millward Brown: Point of View Brand: The New Business Leadership

To create a brand ideal, a company must identify a higher calling than simply selling its product. This ideal drives innovation and inspiration, enhances recognition, and unifies brands apart from their competitors is an orientation toward the organization in delivering against it. It not only informs a brand ideal. Since its inception, Google has single-mindedly business strategy; in a very essential way it is the business focused on the ideal of liberating people through the universal strategy. availability of information. IBM has taken on the task of helping to create a smarter planet, and Apple has invited people to Brand ideals are not proprietary to large brands. One of my create their world through self-expression, to think different. favorite examples of a smaller brand that has successfully applied an authentic brand ideal is Method. Method surprised Therefore, the brands that have created the largest connection consumers by bringing design and emotion into the mundane with their audiences (and the largest value for their companies) category of home cleaning products. Its brand ideal, to inspire are those that stand for true ideals, because true ideals directly a healthy, happy home, created the aspirational lifestyle of tap into peoples quest for meaning. a Method home. Method built a culture that reflects its values, as suggested by the slogan People against dirty, Jim Stengel, formerly the global marketing officer of Procter and engaged its advocates in exciting and inclusive ways. & Gamble and arguably todays most influential marketer, The result has been Methods astonishing growth into a $ 1 00 is propagating the movement of Brand Ideal as the way to million company in only seven years. explain the role of brands in driving business leadership. He identifies the conceptual elements of the brand ideal, noting, Indeed, brand ideals, when executed authentically, drive A brand ideal is a higher-order benefit that a brand gives to business success. A shocking 87 percent of consumers say the world that actively improves the quality of peoples lives and they are likely to switch to a brand that is associated with a creates a meaningful goal for the brand that aligns employees higher purpose. While many companies have focused on and the organization to better serve customers. cause marketing or corporate social responsibility (CSR), humanitarian goals are neither a prerequisite nor a sufficient

The brands that have created the largest connection with their audiences are those that stand for true ideals.

Creating the Brand Ideal

To create a brand ideal, a company must identify a higher calling than simply selling its product. The ideal not only informs the business strategy; in a very essential way it is the business strategy.
condition for a brand to have an ideal. The ideal needs to serve and make reference to universal human truth, but that truth does not always have to be connected to a social value. For example, Red Bull has developed a business worth $4.4 billion based on a brand ideal that does not have a humanitarian bent. Red Bull created a category by serving the individual ideal of energy and freedom and by empowering people to lift their bodies and spirits. Red Bulls example also illustrates how a brand ideal differs from CSR and cause

2010 Millward Brown

Millward Brown: Point of View Brand: The New Business Leadership

When a company is organized around its brand ideal, it allows the brand to show up in the world with intentionality and a purpose that are instantly apparent.
marketing. The ideal of energy and freedom is not a project that the brand undertook. It is not a marketing initiative to fulfill the companys responsibility to society. Red Bulls brand ideal is what the company does. From the way its offices are designed (with ramps so employees can skateboard from floor

This has a tremendous impact on an organizations alignment as well as the behavior, satisfaction, and retention of its employees. When a company is organized around its brand ideal, it allows the brand to show up in the world with intentionality and a purpose that are instantly apparent. Starbucks was such a brand a few years ago. Starbucks brand ideal, to help create human connections, was delivered through its management and operating practices. The brand didnt advertise, but motivated its employees to create a unique and memorable customer experience, thus allowing Starbucks to become a third place (after home and workplace) where people could connect with one another. Here To Stay So is the importance of brand and brand ideals a permanent structural shift in the way we conduct our economic lives, or is it a transitory phenomenon? The answer to this question can be found in the very roots of this shift from product to purpose. As long as global output expands through technological advances and prosperity reaches a larger number of consumers, brands and brand ideals will not only drive business success, but their importance will continue to increase. Therefore, the businesses that make it their priority to organize around a higher purpose will continue to be the leaders of the 2 1st century.

to floor), to the kinds of people it hires, to every participatory event it organizes (such as the Red Bull Air Race World Championship and the Red Bull Storm Chase), to every piece of communication it transmits, Red Bull gives you wings. Organizing Behind the Brand Ideal The ultimate test of the authenticity of a brand ideal lies in the degree to which it permeates the business and provides a compass for everything the company does. As Stengel says, the brand ideal serves as an internal organizing principle.

To read more about brands and business leadership, visit our blog at www.mb-blog.com. If you liked Brands: The New Business of Leadership, you might also be interested in: What Price a Strong Brand? The Keys to Brand Success The Business of Brands Share this POV:

2010 Millward Brown