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Davis Brand CapitalClarity.
Founder Brands From Original Vision to Sustained Value
September 2012
Copyright © 2012 Davis Brand Capital
What do some of the world’s most valuable and well-known brands
have in common?
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Copyright © 2012 Davis Brand Capital
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Copyright © 2012 Davis Brand Capital
They are all founder brands.
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Copyright © 2012 Davis Brand Capital
What does this mean?
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Copyright © 2012 Davis Brand Capital
A founder brand is most easily defined as a brand where a founder or founding family exercises significant influence over the business.
6Source: International Finance Corporation, “Corporate Governance,” 2007, p. 1
Copyright © 2012 Davis Brand Capital
That “influence” is manifested through ownership, effective voting control, management or history.
7Source: International Finance Corporation, “Corporate Governance,” 2007, p. 1
Copyright © 2012 Davis Brand Capital
Why do founder brands matter so much?
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Copyright © 2012 Davis Brand Capital 9
Founder brands make enormous contributions to the U.S. economy.
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more than 35 percent of Fortune 500 companies are family owned or controlled
Source: Conway Center for Family Business, “Family Business Facts, Figures and Fun,” 2012
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eighty to 90 percent of all U.S. businesses are family owned or controlled
Source: Conway Center for Family Business, “Family Business Facts, Figures and Fun,” 2012
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sixty percent of all public companies in the U.S. are family controlled
Source: Conway Center for Family Business, “Family Business Facts, Figures and Fun,” 2012
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the founder brands* on the 2011 Davis Brand Capital 25 had a market capitalization exceeding $244 billion…
* Apple, Microsoft, Google, Toyota Motor Corporation, Volkswagen, Samsung Electronics, Wal-Mart
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ARPIL 2011 JULY 2011 OCT 2011 DEC 2011 JAN. 2011
JANUARY 9 , 2011 – DECEMBER 30 , 2011
FOUNDER BRANDS (+13.53%)DBC25 (+9.32%) NASDAQ (-1 .80%)S&P 500 (0.00%)DOW JONES (+5.53%)
0%
-2%
-4%
-6%
-8%
-10%
-12%
-14%
6%
4%
2%
10%
12%
14%
8%
… and outperformed the S&P by 13.53 percent in 2011
Note: Based on a hypothetical stock portfolio comprised of the 25 companies on the Davis Brand Capital 25, with holdings proportionately allocated according to each company’s position in the ranking.
Copyright © 2012 Davis Brand Capital 15
Surprisingly, even when family businesses grow into major brands,
they are neither well understoodnor well studied.
Copyright © 2012 Davis Brand Capital
Think
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Copyright © 2012 Davis Brand Capital
Founder brands are oftenthe product of a
supremely charismatic and motivated individual.
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Consider
Copyright © 2012 Davis Brand Capital
The brand and the individual become one in the public’s mind.
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Copyright © 2012 Davis Brand Capital
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Think
Copyright © 2012 Davis Brand Capital
Separating founder and brand to ensure the brand’s growth and longevity is one of the core issues founder brands face as they grow.
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However, sometimes the founding influence
gets eclipsed over time.
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Copyright © 2012 Davis Brand Capital
Who would you name its greatest leader?
Thomas Edison or Jack Welch?23
Consider
Copyright © 2012 Davis Brand Capital
No matter the scenario, founder brands are unique brands …
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… facing unique challenges and opportunities for growth – everyday.
Copyright © 2012 Davis Brand Capital
Founder brands share five common challenges and opportunities …
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Copyright © 2012 Davis Brand Capital
For founder brands, image and reputation are not abstract concepts.
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1.
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Managing a personality-focused equity can be a major challenge and
how a brand handles it, can be the difference between
short-term success and sustained value.
Copyright © 2012 Davis Brand Capital
How to solve this conundrum?
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Copyright © 2012 Davis Brand Capital
For example, convey a brand promise that lives beyond a personality
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Steve Jobs effectively prepared the company and his successor, Tim Cook. Apple now is the world’s most valuable company, nominally.
Copyright © 2012 Davis Brand Capital
Or, define a higher ideal that both honors the legacy and shapes the future
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IBM has evolved into an iconic, global brand, honoring not its powerful founder, but the more universal power of “thinking.”
Copyright © 2012 Davis Brand Capital
So, what will Martha Stewart do next?
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Founder brands must consider that what is best for the brand may not be
what is best for the founder. This is an essential consideration for keeping
competitive position and consumer trust.
2.
Copyright © 2012 Davis Brand Capital 34
The road from founding garage to founder brand is not always clear, nor free of potholes and u-turns.
Copyright © 2012 Davis Brand Capital
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ThinkJerry Yang’s attempt to right the long-suffering Yahoo,
the company he co-founded.
The result?One of many executives dismissed by a board without a roadmap.
Copyright © 2012 Davis Brand Capital
The result?Too early to tell.
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ConsiderWall Street’s pressure on Mark Zuckerberg’s Facebook.
Copyright © 2012 Davis Brand Capital 37
Founder brands often struggle with how best to manage and leverage
past achievements in a meaningful and future-focused way.
3.
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To protect the equity in the founder brand, a portfolio strategy
is essential to its longevity.
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Allowing the brand to evolve …
39Hermes, contemporary artisans since 1837
Copyright © 2012 Davis Brand Capital
… and connect with a new generation of customers with different needs and habits.
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petit h, a new Hermes collection, made from up-cycled studio scraps but with the same level of artisanship
Copyright © 2012 Davis Brand Capital
Founder brands also tend to undertake innovation with extreme due diligence, which can be a positive and a negative.
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Copyright © 2012 Davis Brand Capital
Case in Point
Kodak’s auction of intellectual property has yet to produce a sale. But it has had one unlikely result: turning the fiercest rivals in the global patent battle into potential collaborators.
In recent days, the rival technology giants and patent-hoarding firms that had mounted competing bids for the portfolio have joined forces, people with knowledge of the negotiations said – a move that could take the patents off the market at a price below what Eastman Kodak Co. had hoped to raise in a competitive auction.
The bidding group brings together a raft of strange bedfellows. It includes Apple Inc. and Google Inc., …
Source: wsj.com, August 22, 2012
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Copyright © 2012 Davis Brand Capital 43
Founder brands are often synonymous with a strong company culture.
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Copyright © 2012 Davis Brand Capital
Founder brand cultures rise and may fall
on the vision and spirit of those who brought them to life.
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He serves as an adviser and teaches in the company’s learning and development center. Southwest has also created a video archive featuring interviews with Kelleher and the company’s founding
employees, “so people won’t lose that connection with the founder.”
ConsiderSouthwest Airlines’ founder and chairman emeritus, Herb Kelleher
Copyright © 2012 Davis Brand Capital
But, the intensity of founder brand cultures can end up creating insular
environments and blind deference to the founder’s ideals as well.
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It took a grieving mother and the government of theUnited Kingdom to expose what was likely clear to many on the inside: Murdoch and his children might not be the best choices
to run the global media empire he had created.
ConsiderNews Corporation’s phone hacking scandal
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Historically, founder brands excel at social responsibility and some have even
spearheaded new notions.
5.
Copyright © 2012 Davis Brand Capital
Founder brands are in a particularly good position to extend the
trusted relationships they enjoy with their customers.
They can further cement their brand’s future success by institutionalizing
the implicit contract they entered with early supporters.
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ThinkPatagonia
Under founder Yvon Chouinard’s vision, Patagonia became one of the first B corporations.
Copyright © 2012 Davis Brand Capital
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ConsiderChipotle
Steve Ells redefined fast food and introduced the notion of “food with integrity.”
Copyright © 2012 Davis Brand Capital
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ThinkThe Bill & Melinda Gates Foundation
While separate from Microsoft, the Foundation reveals the Gates mind at work in familiar ways:
finding and deploying solutions to global needs.
Copyright © 2012 Davis Brand Capital
Taken together…
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Copyright © 2012 Davis Brand Capital
Founder brands are subject to unique opportunities and challenges
throughout their lifetime.
To manage them for full value, a keen understanding of
their particular nature is paramount.
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Copyright © 2012 Davis Brand Capital
For ongoing updates and perspectives on founder brands, follow:
#founderbrands on Twitter#FounderBrands on Unbound Edition
Or, request a copy of the white paper:[email protected]
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