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Thought Leadership

Digital Brands are fracturing the old brand value delivery rules

This piece is contributed by Mike Moran, former IBM Distinguished Engineer, senior strategist at Converseon, and instructor and lecturer at Rutgers Business School and the UVA Darden School of Business. @mikemoran

Don’t listen to people who say that branding is so twentieth century.

Brands serve a useful purpose — they signal value to buyers before they have purchased the product or service, because they believe they know what a brand stands for. Whether through advertising, content marketing, or word of mouth, customers use the brand name as a handle to hang all sorts of expectations of the value they will derive from their purchase.

But digital is fracturing the ways that we deliver brand value in ways that affect how we portray our brands, through dynamically-assembled value chains. You all know examples of these new kind of value chains–Uber and Airbnb are the two most famous. Instead of the brand “owning” all or most of the elements that deliver brand value, these newfangled brands own very little in comparison.

Hotels in recent years have differed in whether they own the land or even the actual buildings whose rooms they rent, but they all manage their people, whether contracted or employees. They have massive sets of procedures of delivering their service. They buy the supplies. They renovate the rooms and keep them clean. They centrally control the brand experience for the hotel guest.

Airbnb does very little of that. They control an app that prospective guests use to book a room. They provide a similar app for people who have rooms to rent. So how do they control the delivery of value as a brand such that they can compete with hotels?

  • Programming interfaces. This is the essence of dynamically-assembled value chains. Airbnb uses software to connect the dots digitally rather than relying on massive vertical integration where they control delivery systems. In essence, they just provide an open booking system. That system is the linchpin of the brand experience that they directly control. 
  • Social reviews. Rather than massive standards, procedures, and employee training programs, social media polices quality, both for the room guest and the room owner. Bad reviews make it harder for either one to use the service again.

What are the implications of dynamic value chains?

  • Entrenched brands face new competition. IBM is the king of helping large companies solve their computing problems, but cloud computing means no more on-premises hardware, software, or (most tellingly) consultants that integrate it all together to make it work. A problem that once needed the scale of a large company now can be attacked piecemeal by many smaller companies.
  • Brands must focus on service more than security. As people become more accustomed to using apps and getting dynamic delivery, they will naturally question their assumptions about what is safe. Today consumers care about the security of keeping their money in a bank. As banking goes digital, new entrants might deliver valued services without being a traditional bank. A brand that offers better ease of use, service, and value might trump the safe choice, especially among younger consumers.
  • Brands must focus on what they deliver as much as how. Faces of smiling workers who are working tirelessly for the customer are not as valuable in a world where the same of better service is delivered by independent contractors who come together to meet your need in the moment. (Uber doesn’t tell you how happy their drivers are–you just read the reviews.)
  • Some consumer brands might become B2B brands. General Motors just invested in Lyft, which might signal a significant change in their business, because companies (such as Lyft) might someday purchase far more cars from GM than consumers do. Between self-driving cars and dynamically-assembled value chains, getting around by car might become a service rather than a product.

While change is never comfortable, this change is one that will take years to play out. Have you thought through how digital is changing your relationship with your market? Do you have a strategy for how your messaging must shift in the face of these changes? Like GM, is it possible that your market itself is fundamentally morphing?