Change you can believe in

From the perspective of contemporary accounting standards, this isn’t actually a trick question. Tim Cook’s (likely very expensive) chair is considered a tangible asset that contributes to the value of the business over the course of its ‘useful life.’ The Apple brand, on the other hand, is an intangible asset. Because brands ultimately exist in people’s hearts and minds, there’s no straightforward way of accounting for them on a balance sheet. So we don’t.

That is, until it’s time to buy or sell one. If Apple were to ever put itself on the market, you can bet that its asking price would reflect far more than the combined worth of its desk chairs, office buildings, and stockpiles of aluminum and silicon. And a big chunk of that ‘goodwill’ line item would be attributable to the power of its brand to command a price premium, inspire intense consumer devotion, attract world class talent, and more. When it comes to brand value, we quite literally don’t know what we got till it’s gone.

There are ways to quantify brand value outside of M&A transactions, and these methodologies have found that brand represents anywhere from 15% to over 60% of a company’s market value. Anyone who’s paid extra for a piece of cotton with a swoosh on it or has proudly listed a former employer in their LinkedIn headline knows this to be true intuitively. Brands’ intangibility may make them challenging to grasp and inconvenient to measure, but it should not stop us from prioritizing, nurturing, and investing in them like any other business asset.

And yet, so often those advocating for brand transformation face uphill battles. Entire departments sweat over the appreciation and depreciation of machinery, inventory, and land, and are equipped with financial frameworks and standards that accommodate regular investment in, and improvement of, these assets. Brand, meanwhile, is treated as an expense with no assumed payback to the business. At best, brand transformation is viewed as a begrudging necessity in response to a merger or spin-off, a major pivot, or a true crisis. At worst, a subjective, superficial arts and crafts project.

Like upgrading to a bigger office before one’s workforce can outgrow it or replacing a piece of machinery before its gears begin to squeak, thoughtfully and proactively developing one’s brand should – and in fact, must – be part of any rational, responsible leader’s agenda. This is especially true in a world where 90% of the S&P 500’s value is estimated to lie in intangible assets, of which brand is a significant part. While we continue to wait for the Financial Accounting Standards Board to give brand its proper due on the balance sheet, here are a few time-tested principles for creating urgency and alignment around brand transformation now.

President Woodrow Wilson once quipped that “if you want to make enemies, try to change something.” The power of inertia immediately puts proactive change agents on the defensive, forcing them to “make the case” for an inherently uncertain payoff and to paint a picture of a future that does not yet exist. Since very little about the world five-to-ten years from now can be measured with certainty, the role of judgement and belief becomes critical. The status quo will always be more comfortingly quantifiable than an unknown tomorrow.

But those with vision see this as a moment to flip the script. What growth opportunities are we missing out on by remaining stagnant? What are the looming threats that might catch us off-guard if not addressed today? What does it look like for our brand to live up to its full potential? Brand transformation requires a sizeable investment, but inaction can be far costlier – just ask Blockbuster, Blackberry, or The Body Shop. In a world where over 40% of CEOs worry their organizations will not be economically viable in 10 years if they continue on their current course, it’s the stasis-seekers – not the change-makers – who should bear the burden of proof.

Discussions of brand transformation fall flat when framed solely as exercises in visual or verbal expression. The external manifestations of a brand are essential, but true transformation is fundamentally a strategic exercise. It entails a deep understanding of a company’s essential truths, its stakeholders’ needs, and where the two intersect and diverge; translating those insights into a clear, singular ambition; and defining a blueprint for making progress towards that ambition across every audience, communication, and interaction. A brand transformation is the ultimate Operating System update.

This framing unlocks an entirely different altitude of conversation, forcing leaders to reckon with existential questions about where the business stands, where it needs to go, and how to get there. It also holds a two-way mirror up to the entire organization, surfacing opportunities for the brand to better support the needs and objectives of every function, and for every function to be more active stewards of the brand. We invest, and re-invest, in tangible assets – from office furniture to power plants – to honor the direct and indirect role they play in helping a company create value. It’s time we (literally) appreciated brand in the same way.

Because of brands’ intangibility, it can be useful to analogize their benefit in concrete terms. One such analogy is that of a beacon. In times of intense competition, complexity, or uncertainty, brands can serve as ‘north stars’ that help leaders filter, focus, and prioritize. Think of Steve Jobs gleefully crossing products off his whiteboard as he sought to realign Apple around simple, sophisticated, ‘insanely great’ products and experiences. Or of CVS kicking tobacco products to the curb as it pivoted from one of many ‘drugstores’ in danger of online disruption to a true health and wellness provider that stood alone.

In both cases, a clear understanding of the brand’s strategic ambitions and tangible differentiators inspired big business moves – some costly in the short-term, many valuable in the long-run – and continue to do so to this day, from Apple’s AirPods business rivaling the GDP of some nations to CVS’s acquisition of Aetna and the expansion of its MinuteClinic offering. When there are seemingly infinite things a business can do, a strategic brand transformation illuminates what it should and must do to live up to its promise and truly create enduring value.

In other instances, a company may have already made business decisions and pivots that position it for the future, but is operating with a brand that’s out-of-step with that progress. Here, the brand must transform from a laggard to a booster, ensuring that a consistent, compelling story is told internally and externally, and that the company gets credit for who they are today, and will become in the future.

Lippincott recently partnered with two very different companies—Danaher and Bombardier—to do just that. In Danaher’s case, decades of successful acquisitions, operational prowess, and world-changing scientific innovation resulted in tremendous financial growth and investor admiration. But an unknown and undefined corporate brand hindered the organization’s ability to excite emerging partners, attract talent, and ‘connect the dots’ across its portfolio companies, leaving significant value on the table. 

For Bombardier, a brand rooted in a historically expansive transportation portfolio (everything from trains to Ski-Doos) belied a newfound focus on innovative, sustainable business aviation—and the quadrupled profitability that came with it. By crystallizing a singular brand ambition grounded in the business strategy and expressing it with an evolved identity, voice, and experience, each was able to unlock the full business potential of their brand, transforming it from an impediment to an accelerant.

Even with proper framing, brand transformation programs can fall apart if not conceived and executed with an organization’s people and culture in mind. Passion and advocacy from the top are essential – when the CEO, the senior management team, and even the Board are aligned and engaged, brand becomes a business imperative, and cascading the right beliefs and behaviors across the company becomes a smoother endeavor.

To really stick, though, change can’t just feel like a mandate from above. Cross-functional “steering” and “working” teams can ensure that a wide swath of the organization is represented throughout the transformation process, and that information and feedback are cascaded organically. Whether they’re a Product person seeking a focused spark of innovation inspiration, a Marketing person yearning for a distinctive center of gravity for external messaging, or an HR person in need of a foundation for the recruitment and retention of talent, every employee should see, feel, and understand the brand’s benefit to them, and their role in shaping it. When that happens, embarking on a brand transformation journey goes from something they should or have to do to something they genuinely want to do.

Regardless of what letter goes between the “C” and the “O” in your title, you’ve probably had an inkling at one point or another that your company’s brand could use a shake-up. Perhaps growth is softening for a once-unstoppable product line. Or the threat of a “disruptor” is looming larger. Or your brand tracker is showing yet another year of category stagnation. You may also just feel in your gut or your heart that the brand is not living up to its full potential as a ‘beacon’ or ‘booster’ for the business. You’d be surprised just how many Fortune 100 brand transformations start that way.

It would be much easier to act on these hypotheses if our financial systems reflected the significance of brand value and gave us a standard means by which to track it – “you can’t manage what you can’t measure,” as the saying goes. There are of course ways of measuring it – we have our own methodology at Lippincott – but until brand valuation becomes embedded in business-as-usual accounting practices, it will probably continue to feel a bit like a crasher at Finance’s party.

But it can be fun to crash parties. And those of us who have devoted our careers to creating and building brands likely don’t mind having to pull up our own (company-purchased) chairs to the table. We don’t fear brands’ intangibility; we relish them for being, as Jeremy Bullmore puts it, the “fiendishly complicated, elusive, slippery, half-real, half-virtual things” that they are. We know that, when managed with intention, rigor, and creativity, intangible assets can reap great tangible rewards.

Many of the things we value most in life – kindness, happiness, talent, love – are difficult, if not impossible, to measure. That doesn’t stop us from striving for and investing in them.

Brands, too, aren’t made of matter. And that’s precisely why they matter so very much.