The (New) Wealth of Nations
By Manfredi Ricca
We are typically accustomed to think of brands in the context of individual businesses. At Interbrand, we pioneered the notion of brands as valuable business assets. Developing a ranking of a country’s most valuable brands provides an excellent opportunity to take a step back, widen the angle – and look at the role that brands play in the overall growth, stability and prosperity of an economy in its entirety.
Brands are, at heart, the economic reflection of freedom of choice. They are intrinsic to ideas like free market and fair competition. Above and beyond this, they also have a formidable impact on the wealth of nations and communities.
By making their products and services less interchangeable, brands shape the destinies of the world-renowned organizations represented in our Best German Brands study – be they highly respected automotive giants, manufacturers of beloved household goods, or ubiquitous distribution channels. In addition to contributing to growing revenues and earnings, the brands are also helping increase the demands and requirements for these businesses. Consider their investments in capacity and innovation, their employment plans and the tax streams they generate. All of this translates into a wider, ramified impact on the entire economy.
When looked at through this lens, the Best German Brands generate considerable wealth and prosperity for the nation (as well as for the various other countries and communities in which many of them to operate worldwide). These brands transcend the role of business assets, and acquire macroeconomic significance. The demand they generate reverberates well beyond the organization which owns them. They act as powerful leverages which create traction across the entire chain of value, ultimately providing disproportionate returns not only for their owners but, in turn, for their home economies.
Contrary to what some believe, strong brands are not a by-product of affluent societies. They are, in fact, one of their strongest catalysts and drivers. Where there are strong, world-celebrated, highly desirable brands, there are faster growing and more stable businesses. This in turn brings a stronger attraction of capital. There are busier suppliers. There is a greater risk diversification in exports. There is more need for talent. There is a stronger opportunity to invest on research and innovation. In essence, there is an ideal environment for other business ventures to thrive.
A quick look at the Best German Brands makes these points immediately tangible. From Mercedes to SAP and Nivea, from Bayer to Hugo Boss and BASF: Consider the economic role that the brands play in the success of their respective organizations. Now think about what the latter mean in terms of people, technology, research and development. It’s easy to see how the value generated by these brands reverberates tangibly across other businesses, families and institutions. The combined economic impact is nothing short of enormous.
For all these reasons, incentivizing and creating accountability for the development of strong brands – not just new or larger businesses – should be at the top of any policymaker’s agenda.
However logical this may appear, it is, in many ways, a Copernican revolution. In the 20th century, it made perfect sense to focus efforts, incentives and subsidies on the creation of supply efficiency and capacity in specific industries. After all, sectors were very well defined, and there was a deterministic view that by making production more competitive, demand would react mechanically.
The world is different today. As you read this in 2015, the lines between sectors are blurred. The old question, “What business are we in?”, is increasingly difficult to answer. For a company like Deutsche Telekom, it is less relevant to define itself in terms of fixed and mobile telecommunications, and more interesting to think in terms of ‘sharing’ – whatever that may imply. For companies such as Audi or BMW, it is no longer a question of engines, dealerships and parts, and more a question of mobility – again, whatever that may imply.
The truth is that while yesterday a company’s strategy was defined by a what - a supply-side concept – today it is increasingly defined by a why – a demand-side construct. The why, encapsulated in the brand, drives the what (for instance, technologies and skills), which may change very quickly.
The brands in this study have understood this. The challenge now lies in orientating policymakers in a similar direction. Heavy public investments on specific sectors and/or tangible assets will still be needed, but in isolation they run the risk of being myopic. These traditional measures should come as a short-term means, not a long-term end.
As the Best German Brands show us, the most far-sighted priority that authorities can set for themselves is to provide structured support for the development of strong brands – ultimately, the (new) wealth of nations.