For the half-year to 31 December 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Rebecca Gulbul, Lucas Michels and Marie-Andrée Weiss.

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Friday, 30 November 2012

Apple and HP: How Much Does the Brand Matter?

How much is a brand worth to a multinational hi-tech company? In particular, can a noteworthy brand be of material value to a company, especially as it seeks to remake itself in the marketplace? Surveys indicate that businesses in the aggregate rank trademarks as the most important form of IP protection (see "Business Use of Intellectual Property Protection Documented in NSF Survey", by John E. Jankowski here. Presumably the thinking is that, at the end of day, it is the purchaser's affinity for a company's name and brand that ultimately accounts for the purchaser's repeated custom.

But how far can a business expect its name and brand to drive business in its direction rather than to a competitor? There is no better way to explore the question than to consider the brand position of two hi-tech giant s-- Apple and Hewlett Packard (or, as it is more commonly called and branded -- HP).

The Apple success story is well known to all. From meteoric success in the 1980s to a near death experience in the 1990s to unprecedented success since 2000 (excuse this Kat for a moment as he finishes synchronizing his iPod Nano), making it, by some metrics, the most valuable company in the world. Keeping its product lines few and not straying much beyond the consumer electronic space, the mark and brand have come to embody a unique product ecology (indeed this Kat wonders whether the word "ecology" was much used in the hi-tech world before Apple's success). If there is a current world-champion brand, then Apple is most certainly it. As one of the young kittens in this Kat's office lair put it, "Apple is a cult".

But how far can the brand-driven Apple cult go? There are two major aspects to this question. The first addresses the issue of whether the brand will continue to give the company a competitive advantage in its two current major product spaces-- the iPhone and iPad. Will consumers continue to prefer the Apple products, even if he has to pay a premium and even if the features of each new model are more incremental than revolutionary, just to so that he can say that he owns an Apple-brand product? (For the record, this Kat owns a Galaxy smartphone and he has no tablet.)

Much of the business press seems to think so, appearing to reflect the view that the Apple brand remains all-conquering. But this Kat heard this week a sobering word of caution expressed by Professor Clayton Christensen of the Harvard Business School and the author of the iconic book -- The Innovator's Dilemma, here. The thrust of the book is describing the dynamic by which the best companies often ultimately decline, having failed to appreciate the challenge of a disruptive technology posed by a derided down-scale competitor. For Christensen, Android-powered devices are more of a threat to Apple in this regard than may be appreciated. In such a situation, the mighty Apple brand will be of little value. (This Kat proudly owned a Sony Walkman 30 years ago; he owns no Sony product today.)

The second aspect addresses the question of what happens when and if the company moves a bit more further afield in its product line. There is frequent talk about the company coming out with an "Apple tv". Should this occur, how much of the success, should the product flourish, be attributed to the strength of the Apple brand? Does the mere anticipation of a new Apple tv product raise the bar on customer expectations, or will the strength of the brand allow the company a bit a slack on the extent to which the tv will have to contain feature of world-beating new functionality?

The HP story is sadly the mirror opposite of Apple's tale of success. Since Hewlett and Packard made their first development in a Palo Alto garage in the 1930s, the company has succeeded in remaking itself and product line several times here. The sine qua non of the HP brand was technological excellence and the brand came to be associated with world-class technology, especially in the enterprise, as opposed to the consumer, area. But over the last decade or so, the company has taken numerous mis-steps that have ravaged the value of the HP brand. The company acquired the computer company Compaq and thereby entered the home computer market (this Kat owns an HP desktop computer.) But that market is shrinking. The company has a significant position in the printer market, but that is a highly competitive area. Moreover, the success of the company in printers is not like Apple in smartphones -- HP is not a cult. There have been four CEOs of the company since 2000 and the company's commitment to R&D (being the historical heart of the company) was severely compromised for a number of years. The company has increasingly tried to buy its way to new technologies. Other examples can be given, but the take-away is that HP brand seems to have significantly lost its lustre. The HP brand is respected at best, but it is not feared. This is especially crucial when one considers the challenge before the company. The decision is not whether or when to come up with a new digital tv to be added to an existing product line, as with Apple. Rather, the question is exactly what value and product propositions the company stands for going forward.

Talk is heard about HP migrating into services and software (like IBM in the 1990s). Assuming that this is viable, will the value of the HP brand contribute much to the company's ultimate success in this area? The sense of this Kat is that, at the most, the strength of the brand will give the company a generous hearing with prospective customers, but no one will sign up simply because these are new HP products. This Kat wishes HP well (in part because he grew up with the brand as such an icon of technological prowess). But its future, and the future of its brand, is far from assured.

1 comment:

Anonymous said...

Autonomy Fiasco?

HP at its peak was valued at over $130 billion. At point of acquisition of Autonomy it was valued at around $95 billion. Today is valued at $25 billion. Now Autonomy is no longer the great hope. I think we can see where this is heading. Soon HPs brand will be so badly tainted to be worthless and it will be worth less than the open market value of it's 37,000 patents.

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