Tuesday, June 10, 2014

Is Brand Strength Any Defence Against Big Bang Disruption?

One open question arising from my previous post about disruption and design thinking is whether brand strength (1) provides any potential defence or hedge against disruption?

At this stage we are all familiar with the narrative of true business model disruption. Entire industries, such as travel agents and book shops, have been made made redundant as low-end disruptors reinvented the rules of those businesses within a few short years. For accuracy I will also include Thompson’s complimentary concept of ‘Obsoletive’ technologies which posits high-end innovations that make older technologies obsolete.

For businesses to survive disruption, they need to abandon and completely rethink their long term strategic plans. The old rules no longer apply. As Steve Denning observes:
“Big-Bang Disruption is just one of the more dramatic symptoms of this broader and deeper economic phase change: the emergence of the creative economy, where continuous transformational innovation is the game being played.”
It is trivial to come up with examples where disruptive or obsoletive innovators have destroyed the value of incumbent’s brands (as a by-product of destroying their business).
  • Think of the many mobile phone manufacturers who had built global brands (most spectacularly Nokia) only to have them wiped out in less than five years by the disruptive market entrants iPhone and Android. 
  • The Walkman brand for mobile music was so dominant in its time that it became the default name for a whole product category. All of that brand’s value was destroyed when Sony's internal politics allowed MP3 players to disrupt their business. 
  • Yahoo had established the pre-eminent brand in the area of Internet search before Google arrived with PageRank, an innovative alternative approach to search, and completely disrupted Yahoo’s business. Now Yahoo licenses search technology from Microsoft.  
  • Garmin lost 85% of its market capitalisation in the eighteen months following the introduction of Google Maps.

Counter examples are more difficult to find. What are the relevant examples of businesses under sustained Big Bang Disruption who succeeded in using their brand strength to delay (or avert) their decline?

The disruptors begin by attracting the low-value customers and then capturing more of the high-value customers. So during disruption, the classes of business assets that brand consultants leverage: brand equity, corporate reputation, even customer service experience, all become progressively irrelevant as customers migrate to the disruptor’s better, cheaper products.

My opinion is that Big-Bang Disruptive business model innovation routes around brand strength and makes it redundant. Therefore it is probable that brand strength only operates within markets based on standard competition of similar business models.

So while the methodologies of branding, as currently configured, may not be fit-for-purpose in defending against disruptive business models, it remains an open question as to how one would re-invent or re-orient branding so that it could provide more of an effective hedge against disruptive competitors.

A related question is how then should branding consultants effectively engage with companies undergoing Big-Bang Disruption?

1 — Note on ‘Brand Strength’
Up to now I have been using the phrase ‘Brand Equity’ too loosely in my writing. I became irked by the confusion around that phrase caused by both a vagueness of terminology and a variety of definitions. Kapferer (New Strategic Brand Management, 2008) proposed that brand equity is composed of three aspects: brand assets, brand strength, and brand value. With brand value being “the profit potential of the brand assets, mediated by brand strength”. So, in the context of this article the relevant aspect is the strength of a brand.