Best Global Brands 2023: The Moat and the Drawbridge
Best Global Brands 2023: The Moat and the Drawbridge
In his classic book ‘The Western Canon’, American literary critic Harold Bloom reflects on the very notion of canon: “I have tried to confront greatness directly: to ask what makes the author and the works canonical. The answer, more often than not, has turned out to be strangeness, a mode of originality that either cannot be assimilated, or that so assimilates us that we cease to see it as strange.”
Bloom’s idea of canon is compelling well beyond literature: something that was once radically inventive – strange, even – becomes so essential to our approach, that it seems things must always have been that way. Greatness, according to Bloom, starts from originality and goes on to set new standards: what once broke the rules makes the new ones.
This is certainly true of brands. Brand moves that were daring for their time have, over time, formed new principles for brand building.
Today, Best Global Brands – the longest running longitudinal study of the impact of brands on business value – reveals the emergence of a new canon for exceptional business performance.
Exploring this canon is valuable for two reasons. Firstly, It helps us look back and appreciate the extraordinary evolution in the role that brands play – from communications to growth, to leadership. But perhaps most importantly, it guides us forward, giving brand leaders a practical roadmap to innovate and outperform.
Let’s begin with the context. Following two consecutive years of explosive growth, the aggregate value of the one hundred most valuable global brands has slowed significantly – from 16% in 2022 to this year’s meagre 6%.
The main observable reason for this decline is a widespread incremental brand management approach, focused on protecting the core. Most brands made no significant gain or losses in strength or value, nor did they make notable moves.
But look closer, and against this backdrop a small set of brands stands out, showing above average brand value growth. They also sharply outperform the average in terms of 5-year historical revenue growth rate (81.5% above average) and 5-year projected revenue growth rate (43.8% above average). Their pace is simply on another scale.
What brands are we talking about? Here are some.
Amazon, the world’s largest bookseller, but now also providing healthcare services. Ferrari, maker of the world’s most desired cars, and now a regular fixture at the Milan fashion week. Apple, of iPhone fame, now offering a savings account. Lego, recently described by their own CEO as an entertainment brand that’s less similar to toy makers than it is to Disney (incidentally, one of the world’s largest cruise operators).
What these brands share is, to use Bloom’s term, a bit of strangeness. They don’t fall into traditional categories and sectors, defined by products or services. It’s increasingly hard to describe Amazon as a retailer at a time when it is pours millions into entertainment productions; similarly, consumer hardware is where Apple comes from, but certainly not all it is today.
If categories fall short of making sense of the current situation, things become clearer if we shift our perspective from inside out to outside in – and rather than focus on what these brands do, question what they help people do.
For example, Apple helps many of us Play, Connect, Do, Thrive (the latest Apple Watch was pitched as a heath device), Fund (that account – again) and more. Rumour has it that soon it may help us Move, too. Ferrari helps us Play, Move and Express who we are. Amazon helps us Get, Play, Thrive – and more.
By implication, the likes of Apple, Lego, Ferrari (through e-sports and F1), Amazon, Netflix and many others compete in beyond their categories in a single competitive arena, which we may call Play. Likewise, Nike, Apple, Philips, pharmaceuticals and a host of other organisations all want to help us Thrive, vying for the same time, money and attention, and addressing the same fundamental motivation – or ‘job to be done’, to use Clayton Christensen’s term.
Thinking in terms of arenas rather than categories is a powerful antidote against competitive blind spots: as camera manufacturers know, threats may well come from outside your category. It is also a powerful platform for customer centric innovation and growth. While traditional diversification hinges on competences and assets – ‘if we do this, we might do that too’, arena-based growth starts from relationships – ‘if you feel good about us, here’s what else we might help you do.’
But what does ‘feeling good’ about a brand mean? In other words, how do these brands earn the permission to compete across arenas? Can we break their code?
An interesting trait emerges from our analysis: these brands play a significantly stronger role in driving choice relative to other factors like price, features, and so forth. The extent to which, for instance, you-buy-Nike-because-it’s-Nike is higher than for comparable brands. This is crucial, because the brand is the one asset that cannot be replicated: hence, competing and winning predominantly on brand means creating a formidable competitive barrier – a quasi-monopoly based on the special value customers attribute to the brand in and of itself.
But how do you turn the brand into the main reason why customers choose you?
The answer comes from both our Best Global Brands analysis and our fifty years of experience helping build many of the world’s most admired brands. As we look back, we can chart the evolution of brands across five ages, which we have previously written about.
First age. In the post-war economy, the foremost brands were strong identifiers whose role was to create attribution and differentiation. Coca-Cola is presumably the example par excellence of defining unmistakable codes, including Santa Claus’s red. In the sixties and seventies, Andy Warhol enshrined those codes into his art.
By pioneering Brand Valuation in the eighties, Interbrand introduced the idea of brands as powerful business assets. Much of the growth of BMW in the 80s and 90s was driven by setting the brand as the organisational principle guiding the entire business and sticking to that with admirable coherence.
Third stage: the most progressive brands became providers of all round experiences – not just products or services. At a time when consumer electronics was zigging away from retail spaces, the Apple Store zagged, creating a shrine that was about attraction rather than transaction.
The digital revolution and the launch of the iPhone brought about the birth of ecosystems – branded spaces offering seamless experiences fuelled by real time data. Mass personalisation became economically viable, and Amazon rewrote the rules of customer centricity. Burberry brought individual digital experiences to a new generation of fashion lovers.
Today, as we face extreme turbulence and volatility, some of the most influential brands have become acts of leadership – doing things right, yes, but also doing the right thing. At a time of declining trust in traditional sources of authority, brands are expected to take stances – walking the talk and talking the walk. Nike’s Kaepernick campaign remains a memorable illustration of showing leadership whilst reinforcing the bond with Nike’s key target audiences.
These five ages of branding can therefore be distilled into five imperatives: a canon, paraphrasing Bloom. What were originally bold and ‘strange’ brand moves are now part of people’s expectations, making those brand – as it were – canonical and, in some cases, iconic. For instance, while only a few years ago brands were consistently advised to steer well clear of controversy and focus on commerce, today silence on societal debates is seen as a sign of weakness.
This report delves deeper into each of those imperatives through conversations with brand leaders and Interbranders alike, but it’s worth summarising them here: they provide a practical playbook for moves that propel brands towards an iconic status, thus giving them permission to thrive across arenas.
The Identification Imperative: focus on a small set of brand codes that are memorable and flexible, and that travel well across arenas. On a purely visual level, think Tiffany’s blue or some of Apple’s unmistakable design cues. Whenever and wherever these brands are around, you just notice. Iconic shows up.
The Asset Imperative: start thinking of your brand as, simply, what the business should look like. If you do that, you are likely to realise that operations, technology, governance, and measurement are preventing the business from delivering on its brand. Hermès is a prime example of superb control of the entire customer experience, from supply chain all the way to communications, retail and beyond. The brand drives the business, as opposed to the business getting in the way of the brand. Iconic delivers.
The Experience Imperative: strong brands meet expectations – but the great ones shift them, creating a new normal. Listen acutely to your customers and see where you may shock the system. Netflix changed the paradigm of online entertainment by making all episodes of House of Cards immediately available. RedBull scrapped everything that was remotely expected of an energy drink, and rebuilt itself around offering head-turning experiences. Iconic engages.
The Ecosystem Imperative: use the power of data, technology and partnerships to become personal at scale. Louis Vuitton acts as Spotify was never just a catalogue, but a companion, helping you find what matters to you, share what matters to friends, listen to what matters now, and even telling you something about you through the Wrapped ritual. AI won’t be a threat to Spotify, but an enabler to their customers. Iconic is personal.
The Leadership Imperative: the business of business is no longer just business. If companies are today the most trusted type of institution, brands are the world’s most powerful narratives – and with greater power comes greater responsibility. Brands are no longer expected to just to follow the rules, but lead on standards – take Apple and privacy – and influence the cultural zeitgeist, like Prada with its Foundation. So – walk the talk and talk the walk. Iconic shows leadership.
By making moves along these five imperatives, the world’s most valuable brands have become complex meaning systems with which we have an aesthetic, functional, emotional, and even moral individual relationship.
As such, they become iconic beyond their original categories. We notice them. We need and enjoy them. We trust them. We follow them. And, therefore, we welcome them into new arenas, giving them a broader role in our lives.
As our study suggests, the financial rewards of this canon are considerable, delivering two seemingly contrasting types of results.
First and foremost, by following these imperatives and heightening their brand’s role in driving choice, organisations effectively build a quasi-monopoly, typically driving revenue resilience as well as greater profitability and capital attraction. Their brand becomes their most significant (and inimitable) competitive moat.
But, just as importantly, the brand also becomes a drawbridge, allowing organisations to race towards entirely new pools of profit whilst still protecting the core – their relationships with their customers. An effective arena growth strategy always feel like a natural expansion, because it is based on a superb understanding of customer motivations. It’s not about what else a brand can sell more, but how can it serve better.
Think about a personal relationship. When you meet someone whom you don’t just admire, but who also shares your values, helps solve your challenges, is there for you in the moments that matter (big or small), there’s a good chance you want to spend more time with that person – to have them more involved in your life.
The same is true of brands. When we have a strong connection with a brand – when this brand shows up with brilliance, delivering exceptional personal experiences and acting with integrity – we want to spend more time with that brand; we want it to succeed; and we want it to play a bigger role in our lives: we’re likely to trust them as they enter new spaces, and – in fact – may actually want them to do so. In the course of a global research we conducted a few months ago, a US consumer talked enthusiastically about Nike’s products and stances, eventually concluding how wonderful the Nike Heart Clinic would be.
The five imperatives outline a pragmatic roadmap to earn the license to grow across arenas, turning your brand into the single most powerful revenue and profit driver, capital attractor, and risk mitigator.
Greatness recognises greatness, and is shadowed by it.”Harold Bloom, The Western Canon: the Books and School of the Ages