Investment, innovation and invention
How to survive and thrive in challenging times
Global Director of Innovation
Regular BrandZ™ readers would know that if you had invested 15 years ago in brands from the BrandZ Strong Brands portfolio, you would be a much richer person today. Almost three times richer in fact, having gained far more than from a typical S&P 500 tracker fund over the same period.
What you may not know is that BrandZ performance forecasting for UK brands is even better than the global average. A similar investment in the Top 75 UK brands would have outperformed a FTSE 100 tracker over the past two years by a factor of 10!
Whilst this fantastic proof of the value of BrandZ, it also reflects generally poor recent performance of UK companies on the global market. In 2018, for instance, the global economy grew 3.7 percent, while the Top 75 UK brands’ value shrank by 3 percent. Indeed, the highest-ranked UK brand, Vodafone, barely scraped into the Global Top 50 that year.
The advice to marketers then was to invest in building brand saliency and differentiation, which still holds true now. But it was also to invest in innovation, which UK brands need desperately to do now if they are to stay relevant to consumers locally and globally.
Innovation to defend against disruption
There is a stark difference between BrandZ’s leading Global and UK brands. The top of the UK ranking features energy, telecommunications, banking and retail brands, whereas the global leaders are Amazon, Apple, Google, Facebook and Alibaba. All are household names (they have high levels of saliency), but many of those top global brands have achieved that in just 20 years or less.
Having a good product and brand saliency are the cornerstones of a successful business, but those attributes alone don’t always prevent disruption by a new competitor with a radically different, and exponentially better, product.
UK brands are particularly vulnerable to disruption. Innovation scores for UK brands tend to be around 10 percent lower than those in the BrandZ Global Top 100. Yet we know that British consumers are increasingly demanding greater convenience and better experiences, which requires brands to stand apart from the competition and give people a reason to buy.
The top BrandZ global [a]brands have consistently invested in innovation (higher frequency of new product launches, and large R&D budgets), and this is reflected in their brand value growth vs. low-innovation brands – around seven-fold over the past decade. But the top UK brands need to urgently revaluate their innovation approach if they are to stay relevant in changing times.
Further down the UK list we see the difference innovation is making.
- Costa Coffee’s recent purchase by The Coca–Cola Company has helped them launch at-home products and a mobile ordering app similar to that of Starbucks
- Scottish brewer BrewDog innovates in a purposeful way in terms of retail, product and how the business is run that helps it stand out from better-funded competition with strong brand heritage
Importantly, both brands are building global footprints to compete against slower innovators in their category abroad. But, increasingly, brands like Costa and BrewDog are also looking to drive growth through innovation.
Necessity is the mother of invention
When observing post-recession brand growth, you see not only that brand investment and innovation are key drivers, but also that invention has become increasingly important, particularly for new brands entering already-competitive categories.
These brands are true disruptors that leverage real-world shifts to launch into categories where innovation has been slow. A notable post-recession launch was Airbnb, which took advantage of home ownership shifts resulting from the collapsed housing market, as well as companies such as Uber, WeWork and Instacart, which disrupted their respective categories through a growing trend for entrepreneurship and “side hustles”.
However, it’s not just real-world circumstance that enables disruption, as the emergence of new opportunity can also be key enabler for brands to continue to grow. Apple, Facebook and Google (YouTube) have witnessed high growth over the past decade by inventing (or acquiring) products built for emerging smartphone technology and high-bandwidth 4G.
In the post COVID world, more disruptive brands could emerge. In the UK, online grocery shopping grew 20 percent during March, Kantar data shows, as people self-isolated or reduced visits to physical stores. Although big-box retail will do well in the short term, inventive supply and delivery companies will likely see higher growth over the long term.
Both Ocado and Deliveroo have recently partnered with High Street retailers to help grocery customers avoid “out-of-stock shock” and provide quicker delivery than retailers can manage alone. They may have limited fleets and warehouse capacity, but as consumers increasingly look to online as grocery channel, their ability to deliver a scaled, reliable service puts them in a much stronger position to grow as customer behaviour evolves.
These conditions also help Amazon continue its incredible growth story. Circumstance brings great opportunity for disruptors but will also continue to provide opportunity for large brands to innovate and outsmart the competition.
It’s easier to start running when you are already walking rather than standing still. And in a post COVID, pre-Brexit economy, it will be more important than ever for brands not just to continue investing, but to invest in innovation and invention in order to grow and resist new competition.