Brand: Unclear on the Concept
God love BusinessWeek and Interbrand for their Top 100 Brands survey. It is absolutely critical that brand be valued as a strategic asset, and the Interbrand approach, while subject to debate, is as good a place to tart as any.
Both organizations seem to be unaware of a fundamental truth about brand value—namely that while it is has extraordinary relevance to B2C volume operations enterprises, it has virtually no relevance to B2B complex systems enterprises. To prove this point we need go no further than to examine the results of their own survey.
Of the 100 companies listed, fully 70 percent are pure consumer branding plays. Another 22 percent are mixtures of B2B and B2C lines of business. Only eight companies are more or less pure-play B2B complex systems companies: IBM, GE, Cisco, Oracle, SAP, Seimens, Accenture, and Caterpillar are great companies, but it is highly misleading to think of them as great brands. Here’s why.
In a volume operations business, customer intimacy is achieved by brand identification. Brand values intermingle with the consumer’s personal values such that the consumer identifies with the product or company and thereby gives it preference during buying decisions. This drives up both revenues and margins. Thus brand power is key to sustainable competitive advantage and is thus reasonably framed as a prime determinant of market cap.
By contrast, in a complex systems enterprise the mechanisms are completely different. Customer intimacy is achieved by face-to-face interactions between representatives of both companies, and buying decisions are made and reviewed by an array of people. By virtue of these differences the impact of brand is dramatically muted. Arguably it might still be said to have a role to play ("Nobody ever got fired for buying..."), but only marginally, and it is highly misleading to suggest such brands are a primary contributor to market cap. Indeed, it is far more likely to be the other way around: high market cap creates the effect that we are calling corporate brand. In reality it is far better to think of such a brand as a placeholder for a strong corporate reputation and leave it at that.