Public concern pivots from privacy to pandemic
Brands refine devices, expand services
Weeks spent quarantined—working, playing, or communicating with friends and family online while social distancing because of the Covid-19 pandemic—reminded people how instrumental technology has become to most aspects of everyday life. Of the 14 categories ranked in the 2020 BrandZ™ Global Top 100, technology was second only to retail in value growth, increasing 10 percent after a 4 percent increase a year ago.
The BrandZ™ Technology Top 5—Apple, Microsoft, Google, Tencent, and Facebook—proved extremely resilient, especially relative to brands in most other categories, with revenue and profit generally improving, although at a slower pace. Variations in performance depended on the business mix of the brands, with Google, Tencent, and Facebook more vulnerable to the downturn in advertising spending.
The pandemic added a counterpoint to consumer impatience with the iterative pace of device improvement and disappointment that their personal data had been inadequately protected or misused. Older consumers had maintained a co-dependent relationship with technology brands, unhappy with them, but not unhappy enough to leave. Younger consumers had been less bothered by the exchange of personal data for free services.
Regulatory changes, particularly in Europe, shifted more control over personal data to consumers. And market developments, like the explosion of streaming content options, empowered consumers, making them less tethered to a single brand ecosystem. Also, iterative smart phone improvements left consumers less tempted to upgrade annually from aging devices that still worked well.
To contend with these dynamics, brands pursued new strategic bets, expanding from devices into services and pursuing both business-to-consumer and business-to-business opportunities. Google, for example, acquired an Irish start-up called Pointy, which produces a device that gives small brick and mortar shops an e-commerce presence, enabling them to compete more effectively with large-scale operators.
Services and devices
Apple’s sustained growth, even during the pandemic, validated its strategy of synergistically linking the incremental improvement of its devices, particularly wearables, with its increasing range of services, including iCloud, iTunes, Apple Books, Apple Pay, and AppleCare.
Apple launched a subscription streaming service, Apple TV+, which includes some original content and takes the brand into a competitive space where it faces other well-established content providers, including Amazon Prime, Hulu and Netflix, along with newer contenders like Disney+, AT&T TV, and Quibi, a short-form, mobile-first entry.
In partnership with Goldman Sachs, Apple introduced a credit card and that exists virtually on Apple Pay and physically in titanium. With the launch of an app called Attain, in collaboration with Aetna, a US health insurance provider, Apple deepened its involvement with healthcare. The app is designed to help users track their fitness and design regimes to improve personal health and wellness. It includes performance-based incentives, like discounts for Apple Watches.
In a similar move into healthcare, Google parent Alphabet planned to acquire Fitbit. But the proposed deal has stirred regulatory concern in the US and Europe because the technology giant would gain access to vast amounts of personal health data.
Even as Apple shifted into services, several new iterative and shiny devices helped the company drive record sales and share price. AirPods Pro with noise cancellation achieved immediate popularity despite a price tag of almost $100 higher than the original AirPods, introduced in 2016.
The iPhone 11 offered longer battery life, an improved camera, and prices that made the device more accessible.
Accessibility became more important to expand the audience for Apple services and also to compete with the availability of quality, lower-priced phones from Chinese brands such as Oppo, Vivo, and Xiaomi. At the same time, pressure at the premium end of the smartphone market came from Huawei and Samsung, which introduced its foldable Galaxy Z Flip priced at around $1,400.
Samsung, the leading mobile phone brand in number of units sold has not moved into services. Instead it has relied on innovation, with the introduction of smartphones made with foldable glass that enables a compact device to have a large screen display.
Privacy and trust
These services and devices illustrate how intertwined technology has become with every moment of people’s lives. Advances in AI and 5G promise to deliver greater consumer benefits in exchange for a more intimate relationship between consumer and brand. Trust will be fundamental, and brands face different challenges cultivating or restoring trust depending on how the use of customer data fits into their business model and how scrupulous they are about protecting it.
With a business model that does not rely on monetizing customer data, Apple addressed privacy directly in a Super Bowl ad promoting respect for privacy as an important attribute of the Apple brand. An iPhone ad featured doors shutting, blinds closing, locks locking, paper shredding, and an airline lavatory clicking to the red “occupied” sign. The ad ended with the line: “If privacy matters in your life, it should matter to the phone your life is on.”
Google took a different approach in its Super Bowl ad, with an emotional display of how personal data, transformed by AI, can enrich life. In the ad, the voice of an old man asks Google to show him photos of his wife. The screen shows search requests for a long-ago vacation trip to Alaska and anniversary photos. The photos trigger new searches that the power of AI assembles into highlights of a long and loving marriage. The ad ends with the old man and his dog, alone.
Privacy concerns centered particularly on Facebook because of the Cambridge Analytica experience, when an online disinformation campaign attempted to influence national elections in the US and UK. The ensuing debate questioned whether Facebook and other social media brands are neutral conduits of information or publishers responsible for monitoring the content on their sites.
Facebook began the process of integrating its WhatsApp, Instagram, and Facebook Messenger functions to assert more centralized control over reliability and privacy protection. Facebook decided against selling adds on WhatsApp, but it was anticipating a new revue stream with a cryptocurrency called Libra. However, the erosion of public trust precipitated by the Cambridge Analytica scandal, provoked regulator resistance, prompting a revision of Libra strategy and a launch delay.
The privacy issue is significant but less contentious in China, where consumers are more willing to trade personal information for the extreme convenience provided by super apps like Alipay or WeChat, owned by Tencent Holdings Ltd. Tencent revised its purpose to advancing technological innovation that improves society, expressed in English as “Value for Users. Tech for Good.”
Europe and the US disagreed contentiously about the security threat posed by having Huawei participate in the development of 5G infrastructure. Huawei’s intention to develop its own operating system means that mobility could operate on three separate platforms worldwide, and at least two distinct 5G systems.
Meanwhile, the European Union strictly regulates technology brands with its General Data Protection Regulations. Although the debate about regulation is heating up in the US, the federal government has not imposed significant restraints, while California, the home of Silicon Valley, has adopted European-like regulations.
The ultimate implication is that brands that once envisioned technology as a way to unify humanity, may eventually face the difficult prospect of operating in a world divided into at least three distinctive and incompatible regulatory dominions: American, Chinese, and European. For now, technology brands are operating in the economically interdependent world as it exists today, when a virus that begins in a Chinese city can disrupt life everywhere.
Cloud fills with large
and niche competitors
Analytics and AI add value to storage and security
Both business-to-business and consumer-facing brands developed their cloud technology capabilities, as cloud rapidly evolved beyond large-scale data storage and security, to value-added analytics and cloud-based AI.
In a parallel development, purchasing dynamics also evolved, with decisions no longer centralized in the IT department. Technology decisions today impact all parts of an organization and require comprehensive input. Choosing the right cloud partner involves not just technology, but also consideration of corporate values and sometimes geopolitics.
Serious contenders, including IBM, Oracle, SAP, Cisco, and Intel competed for cloud business, not only from large businesses, but also from the smaller- and mid-size companies that often adopted a hybrid approach, hiring multiple cloud suppliers with complementary specialties.
Three of the leaders in cloud—Amazon, Google and Microsoft—faced an additional challenge: they serve consumer and business audiences. Serving both consumers and businesses can complicate messaging because how people experience Amazon Web Services (AWS), Google Cloud Platform (GCP), or Microsoft Azure depends on whether they are consumer or business customers—or both.
Brand and reputation
As a consumer, a retail executive could be satisfied with the product range, prices, and convenience provided by Amazon Prime. But as a business customer who sees Amazon as a competitor, the retailer might resist storing sensitive information on AWS. (BrandZ™ ranks Amazon in the retail category.)
In contrast, the experience people already have navigating the Amazon website or using Microsoft Office may predispose them to prefer AWS or Azure. Strong earnings growth by Azure is one of the factors contributing to Microsoft’s 30 percent increase in brand value, which pushed the brand passed Google to No. 3 in the BrandZ™ Global Top 100.
Brand familiarity is potentially helpful to Google, a more recent cloud entrant, because the young people who have used Gmail, Google Maps, or even Google Classroom will be making purchasing decisions in the future.
Reputation can also help expand, or limit, cloud business. Google’s history in collecting and analyzing data may influence customers looking for analytics strength. But customers looking for essential cloud storage and security might turn to AWS or Azure because of their size and experience.
Although it operates in a different competitive landscape, the experience of China’s Alibaba Group is illustrative. Known primarily for its pioneering leadership in China’s e-commerce development, Alibaba Group has become a vast, diversified technology company with cloud storage and analytics designed for both large and small businesses.
In addition to the leading generalist cloud providers, the competition includes an increasing number of organizations that provide a cloud-based specialty.
Adobe, for example, has developed a cloud centered on creativity and marketing technology that potentially brings the precision of marketing B2C to marketing B2B. Salesforce had a specialty in cloud-based CRM. It bought MuleSoft, which creates the technology protocols that enable users to integrate data, whether based in the cloud or on premise.
Client needs for specialties and the desire to have a combination of cloud-based and on-premise data storage and services has also led to a rise in acquisitions and partnerships. IBM acquired Red Hat, a hybrid cloud platform and developer community. IBM signaled its long-term commitment to cloud with the appointment of a new CEO who had headed the company’s cloud and cognitive software division.
SAP acquired Qualtrics, a cloud business that combines operational data with customer experience data gathered in surveys and other feedback mechanisms. And Microsoft bought GitHub, a platform for software developers to collaborate on projects.
AWS partnered with VMware, which enables companies to operate data center capacity both in the public cloud but also on-premise in a private cloud with VMware. Cisco acquired AppDynamics and Perspica, machine learning operations.
Reputation and geopolitics
The greater choice of cloud suppliers can create anxiety for IT purchasers looking for solutions that are compatible with their existing technology. At the same time, cloud purchases increasingly are not made exclusively in the IT department. Instead, multiple departments that will use the cloud—sales, marketing, human resources, for example—will have a say in its selection.
This change in the buying process increases the importance of brand and reputation. When decision makers sit throughout an organization their prior experience with a brand, even as a consumer, influences decisions. In contrast, decisions made in the IT departments tend to result from technical reviews and bidding against detailed the requests for information (RFIs).
Geopolitics adds further complication. Data centers need to be widely distributed to limit data latency—the slight lag time in transmission of data over distance is potentially complicated by the intensifying debate between China and the West about data security.
Huawei is at the center of East-West tensions with the global rollout of 5G intensifying the debate about whether awarding infrastructure contracts to Huawei compromises security. And Huawei, which also operates a B2C business, with its mobile phones, added a new cloud and AI unit.
Microsoft and Amazon entered litigation after Amazon charged that politics influenced the Pentagon’s decision to award Microsoft with a major 10-year cloud computing contract. Subsequently, Oracle, which operates a suite of integrated services called Oracle Analytics Cloud (OAC), filed an appeal, objecting to contract being awarded to Microsoft.
it is indispensable
The pandemic was a pivotal moment for the technology category. Concern about protection of personal data and disappointment with a more iterative rate of device introductions had cooled the romance between consumers and technology brands. Then Covid-19 and days working and socializing from home reminded people that technology was their indispensable life partner. People depended on digital connections to order necessities, conduct meetings, communicate with family and friends, and in the most tragic cases comfort the dying. Apple’s services and wearables drove a revenue gain. Benefiting from its strategic shift to subscription-based services, Microsoft surpassed Google to become the third most valuable brand, after Apple, in the BrandZ™ Global Top 100. Google and Facebook rebounded from advertising revenue declines in the early weeks of the pandemic. Anticipating that the Covid-19 signaled a new normal, Facebook introduced Messenger Rooms, a chat feature that can accommodate 50 people. The technology category increased 10 percent in value after a 4 percent increase a year ago. That performance was second only to retail among the 14 categories analyzed in the BrandZ™ Global Top 100. In both categories the transformative impact of digitization on people’s lives primarily drove the results.
Brand Building Action Points
- Update the theme song
Consumers do not expect technology brands that are trillion-dollar businesses to stay “Forever Young,” even if they were still incubating only a few years ago. Development from start-up to maturation takes time. But consumers are not patient. They may feel nostalgic for those start-up days, but they expect brands to act like grown-ups—accepting credit when it is due and admitting and correcting mistakes.
- Have a POV
Have a clear point of view about technology-related issues that are troubling consumers, such as data security or the tension between protecting freedom of expression and guarding against the dangers of spreading false or defamatory information. A unifying POV can foster trust, which is important for recruiting talent, attracting investors, and satisfying stakeholders—including shareholders, customers, and employees. Losing society’s trust can lead to greater government regulation.
- Build on trust
Build on the trust earned during the Covid-19 epidemic when people and businesses relied on technology brands to communicate and help structure their days with some semblance of normality. Honor the trust people demonstrated. That trust is critical as brands attempt to reach the deeper levels of interaction with consumers that 5G will enable.
- Anticipate a new normality
The amount of time people spent with technology and the way they relied on it during the Covid-19 pandemic provided a global focus group of consumer engagement with technology under extreme conditions. The habits that remain as pressures eases will signal new opportunities.
- Do onto consumers
Practice the Golden Rule. Easy to say, harder to implement. Support employees, safeguard their health and wellness, promote diversity, and foster an embracing culture that helps people thrive. Today, people are more aware of how organizations treat their employees. They may turn away from organizations that do not treat people as they would want to be treated.