In an environment where Words With Friends can unseat Scrabble, when does it make sense to invest in your brand?
When I speak about disruptive innovation, I almost always use the example of Words with Friends to demonstrate how a simple, smart game by an upstart company can be quickly iterated and improved upon, to the point where it trumps a brand such as Scrabble with an army of people and a ton of resources behind it. Today a strong brand identity is a necessary component of competitive advantage, but it isn’t sufficient in and of itself.
The most obvious lesson from the Words With Friends example is that, in many cases, speed to market and iterative improvements are able to effectively overcome the protections and competitive insulation that brand equity and market dominance used to provide.
And in the world of “crowd” everything, companies are no longer the sole owners of their brands. For better or for worse, consumers have assumed a major role in defining and positioning brands. As McDonalds learned the hard way, a hashtag can become a bashtag overnight. On the other hand, if you get lucky and the crowd takes stewardship of your brand, it’s a powerful and amazing experience that no amount of money can buy.
There’s no better example of this than Coke’s presence on Facebook. The Coke Facebook page was started by a couple of guys on the West coast and grew quickly and organically to more than seven million “likes.” At that point, the guys contacted Coke and asked the company to take over the hosting and maintenance of the page. Coke politely (and wisely) said no. As CEO Muhtar Kent tells it, they thought that a company-run page would never have the same integrity, trustworthiness and authenticity that the fan-run page had achieved. The key to the success of the whole undertaking was that the page was open and transparent -- wows, warts, woes and all. Since then, Coke’s Facebook “likes” have grown to more than 62.5 million.
In many instances, spending to build, promote and protect your brand makes a lot of sense. Often, consumers welcome a helping hand when trying to choose between the many options before them. Brand identity can be both a crutch and a comfort in the decision-making process.
You can think of a strong brand as a form of shorthand to cut through the clutter. The brand represents and communicates to the consumer what he or she has absorbed over many years of accumulated impressions about the company. The best companies earn this over years of consistent performance and delivery.
The question is whether we can define and identify the kinds of businesses and competitive circumstances where brand investments will continue to provide meaningful protection and reasonable returns.
One indicator is the primary basis upon which you compete. If you’re going to compete principally on price, brand doesn’t really matter. But at the high end, it means everything. That’s where obtaining premium pricing is less about dollars and more about attitude and status. The one exception is the sidewalk vendors in New York City. In those cases, the shoes or purses are original; it’s just the brands that are fakes.
HOWARD A. TULLMAN is the CEO of 1871 – Where Digital Startups Get Their Start and the General Managing Partner of G2T3V, LLC and of Chicago High Tech Investment Partners. He is a member of the Chicago NEXT & Cultural Affairs Councils and the Illinois Innovation & Arts Councils; an adjunct professor at Kellogg; and an advisor to many start-ups. He is the former Chairman and CEO of Tribeca Flashpoint Media Arts Academy. Over the last 45 years, he has successfully founded more than a dozen high-tech companies. @tullman @tullman