Sid oct09#175 36pp.indd
It’s Time For Brands In Every Boardroom
Dr Lindsay Moore, of KLM, Inc in Boulder, Colorado, and
Lesley S. Craig, Esq., of Townsend and Townsend and Crew LLP
The brand, in whatever form it takes, is now a mainstream
Fifteen years ago the brand was not even on the radar
concern for every senior corporate executive. Dr Lindsay screen for senior corporate executives or their trademark Moore, of KLM, Inc in Boulder, Colorado, and Lesley S. counsel, and certainly rarely reached their respective Craig, Esq., of Townsend and Townsend and Crew LLP in boardrooms. At best, the brand as a working concept was Denver, Colorado, explain why.
limited to the marketing department of consumer goods enterprises.
The brand has risen to occupy a place of paramount importance on the pages of such stalwart business But during the early 1990s a new corporate strategy – publications as Financial World, Business Week and growth through acquisitions – emerged in the trademark-Fortune. In the 1990s, when these reputable magazines conscious world of consumer goods. This initiated a wave first started reporting financial valuations for brands, of merger and acquisition activity. However, as visionary much to everyone’s surprise, these valuations were often
corporate executives began to move across their market
greatly in excess of annual revenues. As the reality and landscapes in search of acquisitions, they encountered an significance of these valuations sank into the corporate unforeseen obstacle in setting the value of the companies world, the concept of the brand quickly rose to a new they wished to buy. In days past, book value and some level of strategic significance.
multiple of revenues had been adequate to strike a deal. But suddenly, attractive companies, with their enhanced
But, despite this, many start-ups, technology-driven market capitalisations, were not to be had at book companies and others in business-to-business and non-
value driven prices because of their intangible assets. As
consumer markets fail to recognise that this brand accommodations were reached and increasingly pricey phenomenon applies to all organisations. Individuals deals were struck, a whole new concept emerged that working in such sectors have been accustomed to thinking
has since found its way into the top ranks of corporate
of brands as a marketing concern that is only of interest to
management. It was the concept of intellectual capital.
those who provide consumer goods or services. However, This came to refer to a range of intangible intellectual the brand, in virtue of its significant financial value assets but primarily, because so many of these early and and enormous potential to drive economic markets, has astounding deals revolved around famous brands, to the become a major factor in the corporate world, providing brand.
competitive advantage, delivering shareholder value and creating wealth and social prosperity.
As we look back today, we can see that the early 1990s saw the beginning of a tremendous increase in economic
How and why has the brand become so important? And activity worldwide. Mergers, acquisitions, new financial how does one steeped in traditional concepts of corporate
vehicles and complex business arrangements emerged
management and trademark law come to grip with this to change radically the economic landscape, effecting new phenomenon? The answer to the first question is companies of every shape and size for the better. During easy: over the last decade or so, business and financial this time, mergers and acquisitions increasingly revealed forces have been driven to recognise and account for that what made a company attractive to an acquirer, be it the enormous value of a company’s off balance sheet a famous brand or patented technology or the promise of intangible assets, as collected in the brand. The answer a totally revolutionary business concept, was frequently to the second question is more difficult, and requires that
not captured on its balance sheet. Book value, for so long
executives and attorneys become more knowledgeable the measure of traditional assets within the industrial about what intangible intellectual assets are and how economy, and market capitalisation, the value of an they must be deployed strategically to fulfil corporate enterprise in the capital markets, had become widely objectives.
divergent numbers. Thus, the traditional approaches to valuing enterprises were proving to be inadequate to capture the importance of these new intellectual capital assets and their compounded market capitalisation values.
As growth through acquisitions gained momentum, the For such companies, the brand and brand strategy grew paradigm shift that led from valuing and managing rapidly throughout the 1990s, increasing in importance traditional physical assets to valuing and managing and often becoming the corporate strategy itself. intangible and intellectual capital assets came to pass. Branding became the uber-discipline for CEOs and And with it emerged the shift toward the strategic corporate strategists. On a weekly basis, the corporate management of intellectual capital assets that has world would see a new article or book emerge on the changed the priorities of corporate planning forever.
subject of branding, its management, its strategic significance, its financial valuation and ultimately how
to use it to increase that holy grail of public markets and boardrooms – market capitalisation. Simultaneously,
The strategic thinking surrounding brands advanced by numerous branding houses emerged, specialising in the leaps and bounds during the 1990s to become the province
new discipline of branding and creating every aspect of a
of the most successful executives and strategic thinkers. dominant, winning identity in the marketplace.
Spurred by the emerging theory of intellectual capital assets, the brand was soon recognized as the ultimate Soon, the marketplace became flooded with new brands, intellectual capital asset – the raison d’etre for all other trademarks and slogans as the understanding of the value forms of intellectual capital and as an end in itself for of brands and branding began to spread beyond consumer any and every successful enterprise, undertaking or goods into industries that didn’t even sell to consumers. corporate entity.
One of these pioneering companies, Intel Corporation, with its “Intel Inside” brand strategy, began to teach
The diagram on the next page articulates the supremacy technology players how to increase gross margins and of the brand and its relationship to the other elements minimise price degradation with a product line brand. of intellectual capital, demonstrating how means-to-
Pharmaceutical giants adopted product branding
ends roll up and distill their value into the brand as the architectures from food and beverage companies to turn ultimate intellectual capital asset. This model portrays drugs like fluoxetine hydrochloride into Prozac and then the general categories of intellectual capital assets, such
to go on to drive sales to record-breaking levels with
as ideas, innovation, intellectual property, corporate demand created by direct-to-consumer advertising.
culture and human resources such as talent and expertise. These intangible assets culminate in knowledge-based But what about the corporate brand? Despite the spread products and services that create goodwill and form the of brands into non-consumer industries, many enterprises structure of what the brand means to its constituency still viewed corporate brands as mere trade names. But and its surrounding world. In and of themselves, these soon some leaders began to recognise that well-branded prior intangible assets lack the orchestration and enterprises in any industry found it easier to command integration that they receive when they are organised respect and set policy with governments, influence and with meaning and significance under the identity of a establish industry-wide standards, find partners for brand in the marketplace. The brand has the potential to
strategic alliances and obtain new sources of capital, and
distill, assemble and incarnate all of the other intangible
that it was less expensive for them to expand globally,
intellectual capital assets in an enterprise. In other words,
when the corporation itself was well recognised and
the brand comes to symbolise all aspects of a company regarded.
in the minds of customers, consumers and society at large. When this meaning is respected, it becomes the Companies that sold business-to-business, or that positive brand equity that enhances the overall value of sold high-priced products and services in face-to-face an enterprise.
negotiations, began to understand that their lack of concern for trademarks could extend to a failure to
As brands emerged as a bundle of profoundly important Even companies with many brands began to understand intellectual assets in a number of forward, thinking that the company itself still needed a brand. Archer companies, brand management grew out of marketing as Daniels Midland and BASF both existed for years before a new strategic discipline, led by a chief brand officer and
they began to spend millions of dollars in advertising to
under the watchful eye of the CEO, CFO and other key tell the world that ADM was: “The Bread Basket for the executives. With this shift in strategic significance, day-
World”; or that: “BASF doesn’t make the products you
to-day marketing and the traditional role of trademark buy, … it makes them better”.
protection often came to be viewed as separate and more distant functions that were less integral to strategic thinking and the leveraging of intellectual capital assets per se.
Soon brands began to penetrate beyond the corporate • The brand stands for something specific: it is the world. Suddenly governments, non-profit organisations
corporate persona and it conveys value, creates
and civic entities began to realise that they needed a
trust, delivers assurances of a consistent quality and
brand to allow them to compete more effectively in
service, leading to repeat purchase and loyalty from
their strategic arenas, whether to deter terrorism,
consumers, users and the world at large.
obtain grant money or attract tourism. In this way, every industry and every undertaking was learning the brand • Brands are assets, constitutive of intellectual capital business model.
value and significant drivers and creators of market capitalisation, reputation and public integrity.
As distillers of the intellectual capital value of intangible
Because all enterprises operate under a name, de facto assets, brands and their combined brand equity constitute all enterprises have a brand that connects their intangible
the major economic force within the entire global
assets with their customers and constituencies. In this economy, delivering marketplace value, shareholder sense, every name is a brand, whether it represents a wealth, livelihood, prosperity and culture.
company, an enterprise or a civic or public entity. Thus, the brand revolution is an opportunity for every entity in There are hundreds of thousands of brands within this any sector of the economy, society or culture to establish,
world but only thousands of these are brands that move
manage and leverage its meaning for its gain.
markets and are highly valued. Successful brands are recognised as rare and valuable assets, which must
As a result, executive leadership within every organisation
be exploited carefully with wise and knowledgeable
needs to recognise that brands are more than just the management that retains their financial value, their name of the company, a trademark for a product or a economic power and their social significanceservice mark for a service. Instead, the brand is a complex concept that creates organisational value and performs Brands have become the most valuable asset within a number of important functions for every enterprise. many enterprises, capturing the knowledge, the art, the Here are a few of those functions:
science and the work of each person in each work day, making them the ultimate symbol of the companies for
• Brands identify the enterprise or company and the
which they speak. This is the business reality of the 21st
source of all its goods and services.
The brand is an end in itself. It is the
ultimate Intellectual capital asset and the reason for being for all other forms of
2004 Dr Lindsay Moore and Lesley S. Craig, Esq. All right reserved.
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