brands

A new point of view on why (brand) nations fail

A new book comes out tomorrow entitled Why Nations Fail: The Origins of Power, Prosperity, and Poverty, by MIT professor of economics Daron Acemoglu and Harvard professor of government James A. Robinson.

In the New York Times Magazine yesterday, Adam Davidson wrote a great piece about it. I pre-ordered the book and look forward to reading, but in the meantime, the New York Times article hints at some key conclusions the authors reach. From the article:

“…the wealth of a country is most closely correlated with the degree to which the average person shares in the overall growth of its economy… when a nation’s institutions prevent the poor from profiting from their work, no amount of disease eradication, good economic advice or foreign aid seems to help… If national institutions give even their poorest and least educated citizens some shot at improving their own lives — through property rights, a reliable judicial system or access to markets — those citizens will do what it takes to make themselves and their country richer.”

A relatively simple concept: Nations that give citizens opportunities to improve their lives—to create value for themselves—give them the incentive to create value—both for themselves and for the nation collectively.

According to the summary on the authors’ website, the book highlights examples of the theory in action around the world and throughout history, “from the Roman Empire, the Mayan city-states, medieval Venice, the Soviet Union, Latin America, England, Europe, the United States, and Africa.”

So how might this theory apply to the study of how organizations can build passionate and sustainable brand communities? If we think of brands as nations, what might make them fail or see great success?

Michael Porter wrote a now-famous piece in HBR last year entitled Creating Shared Value that to me articulates the business equivalent of the principle. Here is how Wikipedia describes Porter’s concept of creating shared value:

“The central premise behind creating shared value is that the competitiveness of a company and the health of the communities around it are mutually dependent. Recognizing and capitalizing on these connections between societal and economic progress has the power to unleash the next wave of global growth and to redefine capitalism.”

I think there is a strong connection here, and I would frame it as simply as this:

Brands (and nations) that exist only to extract value from their communities are, in the long run, less competitive and less sustainable than brands (and nations) that exist to create and share value with their communities.

Think about the brands you interact with on a daily basis:

– Which of them are clear value extractors (i.e. they unabashedly exist in order to extract as much money as they can)?

– Which of them are extractors in “shared-value clothing” (i.e. they hide their true selves behind a veneer of shared value)?

– Which of them truly create and share value with the communities that care about them?

If you are like me, some specific organizations immediately come to mind when you see the three categories above. Humor me for a second as I remix the quotes I shared from the New York Times article earlier, but putting them in a brand context:

“…the strength of an organization’s brand community is most closely correlated with the degree to which the average community member shares in the overall success of the organization and community… when an organization prevents the average community member from profiting from its work, no amount of PR, advertising, or charitable giving seems to help… If organizations give even their average community members some shot at becoming more successful — through providing innovative products, experiences, and connections to new people or opportunities — those community members will do what it takes to make themselves, the organization, and the overall brand community richer.”

I suspect that organizations interested in building passionate brand communities have a lot to learn from Why Nations Fail.

And I’ll let you know what I personally learn once I’ve had a chance to read it.

College rankings and the dark matter of reputational precision

Earlier this week, the New York Times published a disturbing piece entitled Gaming the College Rankings, exposing how Claremont McKenna, an elite college in California, had misrepresented data in order to climb up in the US News & World Report college rankings. By gaming the system, it rose to become the ninth-highest rated liberal arts college in the United States.

The most disturbing part of the article? Apparently Claremont McKenna College is not alone. Over the past few years, many leading institutions have admitted, been caught, or are suspected of gaming the rankings, including Baylor, Villanova, the University of Illinois, Iona, and even the United States Naval Academy.

Pretty depressing stuff.

So what motivates great academic institutions to risk their reputations to rise in a ranking from a magazine that only remains barely relevant? This quote from the article hits the nail on the head:

“The reliance on [the rankings] is out of hand,” said Jon Boeckenstedt, the associate vice president who oversees admissions at DePaul University in Chicago. “It’s a nebulous thing, comparing the value of a college education at one institution to another, so parents and students and counselors focus on things that give them the illusion of precision.”

The illusion of precision.

These top universities and colleges are risking their hard-earned reputations for an illusion.

Picking the right place to go to college is an excruciatingly difficult decision. I remember looking at these rankings when I was choosing a college too. Why? Those of us who did it were looking for any information we could find to help us ensure we were making a smart choice. These rankings gave us a quantifiable data point that we could use to validate our decision.

The problem is that the data we should be analyzing when making this decision is much harder to see and quantify. The dark matter of institutional brands resists easy measurement and the results of analysis are vastly different for each individual.

For example, I went to the University of North Carolina at Chapel Hill, which is #29 in the most recent US News & World Report rankings. But I grew up in Winston-Salem, where #25 Wake Forest University is located. Should I have applied there instead? Would I be more successful today if I had received a degree from Wake Forest?

Or what if I had made the decision to go to the University of Georgia (#62), where I was also accepted? Would I be living in a van down by the river because I gave up the opportunity to learn at a school ranked 37 spots higher?

The illusion of precision provided by the rankings may give someone peace of mind as they make their big decision. But at what cost?

The right college is different for every person. Some of us are better suited for big schools. Or small schools. Or nerdy schools. Or party schools. Or cheap schools. Or football schools. And how much does the college itself even matter? If your goal is to be a rich Wall Street banker, Harvard (#1) may have a program that will get you there. But if you want to be a marine biologist, Harvard may not be able to hold a candle to UNC-Wilmington (#11, regional universities in the South), and you’ll probably pay off your student loans faster.

Are the rankings actually harmful? I never thought they were—most people are smart enough to recognize that a degree from a high-ranking college is no guarantee of life success (and a degree from a low-ranking one is no indicator of future failure). The rankings were just one mostly-meaningless data point that gave your parents bragging rights when talking about your education with their friends.

But reading this article made me change my mind. If a great institution risks its reputation for the sake of rising a few spots in a mostly-meaningless ranking, what does this say about its culture? And is US News & World Report (along with others who do similar rankings) at all culpable for forcing colleges to worship a false god in the hope of building fast, cheap, and superficial brand value?

I’m certainly going to look at these rankings in a different light from now on… how about you?

We’re awesome! (you suck)

The best 21st century brands won’t be built on advertising alone. Here’s why:

In a world where everyone has a voice, the biggest brands in the world with the biggest advertising budgets can be quickly repositioned… whether they like it or not.

Ask Delta Airlines.

Or ask BP.

The problem isn’t your marketing. The problem is that, when it comes to your brand, your customers aren’t just listening to you anymore; they are listening to everyone who is talking about your brand.

You know this.

But if so many people are aware that the world has changed, why has the way most organizations allocate their marketing and communications time and money not changed?

My advice? Instead of focusing only on customers and prospects, take a more holistic approach where you engage all of the people who care about your brand: what I refer to as the brand community. (I spend a lot more time sharing ways to do this effectively in The Ad-Free Brand.)

In a world where every person on the planet has the power to change the fate of your brand (whether they spend money with you or not), the brand community has to be seen as more than just customers.

For some more from me on this subject, check this out:

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If you found this post helpful…

Consider taking a look at my new book The Ad-Free Brand (not an advertisement, mind you, just a friendly suggestion:). It has some nice tips for how to build a great brand without the help of… you guessed it… advertising!

Only $9.99 for the Kindle, but available in each of these formats:
Book | Kindle | Nook | EPUB/PDF

Howard Schultz of Starbucks: The role of culture in a crisis

This week I was lucky enough to attend the Ernst & Young Strategic Growth Forum in Palm Desert, CA. As you may recall, last year Red Hat Chairman Matthew Szulik was the national Ernst & Young Entrepreneur of the Year, and later this week, he’ll hand over his title to the next entrepreneur in waiting. One of the most exciting things about the Strategic Growth Forum is that it brings together some of the smartest entrepreneurial minds in the world in one place, and this morning, I had an opportunity to hear from one of the best.

Howard Schultz: Chairmain, CEO, and President of Starbucks

Howard Schultz, Chairman, President, and CEO of Starbucks, who won an Entrepreneur of the Year award in 1993, spoke about his experience leading Starbucks through the economic crisis. As Starbucks began going through hard times, Schultz, who had given up the CEO role in 2001 (while remaining Chariman), decided it was time to take back the CEO responsibilities himself in early 2008.

Why? He was worried that the distinct culture, mission, and values that had brought the company great success were eroding.

According to Schultz, he came back into an operational role because he felt that the way out of crisis was not a simple change in business strategy, but instead– in his words– “love and nurturing.” His key to turning things around was revitalizing the investment in his people, recommitting to the core purpose of the organization and providing employees with hope and inspiration.

He says the transformation of Starbucks since this revitalization has been key to a tremendous amount of new innovation happening inside the company. People have even commented to him that it reminds them of what the early days at Starbucks must have been like.

Schultz took 10,000 of his best people and brought them together in New Orleans in late 2008 for a leadership conference where they spent 50,000 volunteer hours helping communities re-build after Hurricane Katrina. Below is a documentary that was filmed about this event.

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