Reputation matters

Reputation matters

The World Intell-ectual Property Organisation’s (WIPO) latest report reveals a truth that we have all known for a while – that brands have taken over as the world’s most invested intellectual property. There is no longer a debate about whether brands influence long term business performance, but the bigger question is and has always been how and how much.

In this context, one of the more contentious issues over the last two decades has been around the slightly more amorphous role of corporate brands. Typically firms tend to actively invest in product brands, since they are the consumer facing trademarks that sit on retail shelves. Moreover, there is consistent pressure from the market to promote product brands as these have a direct bearing on offtake. Does the same logic apply for corporate brands?

Last year at a panel discussion on corporate branding, someone shot at me the inevitable question about the value and influence of the Tata brand and whether the internal brand licensing programme was justified. My short answer was that it is, but then Tata is the easy one. It’s big, highly respected and a bit of a holy cow. But what about the Aditya Birla Group (ABG), the Murugappa gro-up, ITC, the Mahindra group or even Dr. Reddy’s? We find that there are 34 discreet ways in which the corporate brand drives value. Ask yourself what leads to a group getting better than the market rate of interest for long term debt. You can do the math from their balance sheets to figure out how much additional economic value the organisation derives from the brand.

Arguably, the most sophisticated governance system in place for any corporate brand in this country is the one at Tata Sons. Here the brand custodian is a GEC (Group Executive Council) member, no less. It is no coincidence that he is also the chief ethics officer. The team now has a budget and a mandate to establish the Tata brand globally. Given the cascading benefits that accrue from corporate reputations, what makes companies neglect building a corporate brand? Why do most companies relegate corporate branding to a communications team?

While there certainly are issues of federalism at play, the primary reason is the general lack of recognition for the material influence of the corporate brand. Some have acknowledged the high stakes at play; Zee Entertainment now publishes details of its corporate brand, sometimes even including its value in its annual report. The group found that the Zee corporate brand has a disproportionate impact on how the company creates shareholder value from its operations. This is significant since any broadcaster’s top line derives primarily from advertising revenues earned in individual programmes. In the words of Roland Landers, Zee’s chief brand officer, “A brand is the most valuable asset of any business. While it is ironically termed as an intangible asset, I believe it is one of the most tangible and precious assets a corporation owns.”

Many analysts often ask me why a lot of potential investees suggest that they have great value in their businesses because their company brand is very strong. What is the financial connection, they ask. Given the results and rewards that have accrued to corporations globally and even to those closer home, I think it is time to turn this question on its head: Why do more companies not have a brand governance mechanism, given the impact that this can have on their financials?

[“source -business-standard”]

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