Thursday, September 10, 2015

Google's Tragic Alphabet Soup

ICYMI: One of the world's most valuable brands has just burnt itself at the stake.
The cost has since gone up.
As the Wall Street Journal reported in August 2014, over the past decade Google has by far outpaced the stock market average in terms of performance:
The stock has risen 1,294% since it went public on Aug. 19, 2004, meaning a $10,000 investment in Google at its $85 IPO price would be worth $139,458.82 today. Google’s 30.15% compounded annualized return over the past decade outpaces the 6.1% annualized gain of the S&P 500 over the same time frame.
Does Google's performance as a company have something to do with its brand equity?
As of May 26, 2015, Millward Brown's annual BrandZ (TM) ranking had Google as the world's #2 brand.
Based on its methodology, Millward Brown calculated Google's brand value at $173.7 billion.
Whereas market capitalization reflects stock price multiplied by number of shares outstanding and can be hard to penetrate, MB's valuation process can be understood more methodically. 
Here is how they explain their approach, which progresses from a mathematical element to an intangible one:
  • Step 1: Calculate financial value. This involves two steps. The first is to figure out what percentage of earnings are coming from which of the corporation's brands. The second is to predict future earnings as a percentage of current earnings. 
  • Step 2: Calculate brand contribution. This is an assessment of how much product people are purchasing combined with its "brand power," a combination of three things: whether the brand means something to them, whether the brand seems unique to them, and how readily they think of it.
As the research firm notes, the more powerful the brand, the more financially valuable it is. Strong brands outperform the average company not only at any given moment in time, but also over time. 
"The BrandZ™ Strong Brands Portfolio increased 102.6 percent over 10 years...outperforming both the S&P 500, which grew 63 percent, and the 30.3 percent gain of the MSCI World Index, a weighted index of global stocks. This result confirmed the power of strong brands to generate superior shareholder returns."
In short, branding matters. It matters a hell of a lot, it matters completely. It is more important than anything when it comes to the financial success of a business.
Brand value is your only reliable metric of success no matter what methodology you use, regardless of proprietary metrics, despite the claims by one firm or another to hold the Holy Grail of brand value.
This is why, last night, if you listened closely you could hear the collective cry rising from the Internet:
Google, WHYYYY????
This is me, practically wailing, like a wounded animal:
We are crying over the historic implosion of one of the world's top brands, as Google has created another company, "Alphabet," to serve as its parent.
Why did Google do this? A fellow user of Quora asked me if I know.
Honestly, I couldn't tell you.
Often enough, though, leaders do stupid things because they're insulated from reality and they're totally bored. So I found this speculation by Felix Salmon, writing at Fusion, intriguing:
"He’s the founder and CEO of one of the most successful companies on planet Earth, but the company more or less runs itself at this point, and Larry doesn’t want to be judged on margins and earnings and boring things like that. He wants to be 'in the business of starting new things.' So he’s handing over Google, along with all of its management headaches....And he’s keeping the sexy entrepreneurial stuff for himself."
It is also possible that Google, oddly, just doesn't know how to brand. For example, the company's wild creativity has led to a proliferation of experiments that don't seem to have a unifying core. Others have called them out on this. As Mark Ritson noted in Branding Strategy Insider:
"For all its success, Google has been wildly inconsistent as a brand and this has restricted the degree of affection and loyalty it enjoys with customers. Along with its outdated mission statement, Google positions itself using a ‘philosophy’ of 10 guiding principles. A glance at these confirms that Google has been repeatedly and egregiously contradictory to the rules it was meant to follow."
I made a similar observation four years ago, arguing that Facebook would put Google+ down in a heartbeat. Which it did. Here is an excerpt from that post:
"Insanity: The definition of which is continuing to do the same thing over and over again and expecting different results. Examples: Google Wave. Google Buzz. Orkut. Knol. Face it, Google: Social networking is not your thing....Google is a great brand on many levels. But this one was a bad idea from the start. Doomed by its roots in envy of a competitor rather than the expansion of Google's own areas of excellence....Lesson for them and for the rest of us: Stick to your core competencies--your unique selling proposition--the thing you can do better than anybody else, almost effortlessly. Succeed at that and then expand from there."
Many people think that branding is a very complicated thing. But the rules are actually simple and intuitive.
So why can't we all build a top global brand? That, too, is easy to answer: Brands require total allegiance from the people who are building them.
Not only is it difficult for most people to meet that standard, but it is normally extraordinarily risky to confront the person in charge of the brand.
To be blunt about it, you cannot directly tell a senior executive, much less the owner of a company, that their brand is going off the rails -- unless you're willing to lose your job. 
Thus my answer to someone who posed this very question on Twitter:
What you can do, if you want to avoid making Google's mistakes, is as follows:
  • Gain third-party input on the brand, even if you already know the answer. Views from outside the organization are normally expected to be contrarian, versus for those working for an organization, "loyalty" demands that you not rock the boat too much.
  • Establish an authoritative standard of measurement and then evaluate performance against the metric. Never question a leader's decision-making process directly.
  • Highlight an external pressure or force that demands an appropriate brand response. This can be an inquiry from the press, a success announcement by a competitor, or any other situation requiring an appropriate and objective response. 
The key at all times, when dealing with brand decisions, is to avoid pitting one person against another. Keep it professional, keep it impersonal, keep it high-level and focus on what unites and motivates the team rather than what divides people from one another, creating unnecessary tensions and friction.
Branding is a financial endeavor, it is true. But it is primarily, at its core, an enterprise of people. You cannot escape the consequences of their dysfunction.
You disregard the Tao at your peril.
________
Author's note: To contact me with questions or to request a free initial consultation, connect with me here on LinkedIn or visit my website.  About the images: Photo by Derek Key via Flickr (Creative Commons). Stock chart via Google Finance. Top 10 global brand value screenshot via Millward Brown. Disclaimer: All opinions are my own and do not reflect those of my employer or any other entity, in part or as a whole. No endorsement expressed or implied.

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