How important is brand to a corporate board?
How do private equity firms include brand in the value of a company?
In this episode of Expert Opinion, we talk about insights and best practices from both a brand and a business strategy point of view. Our guest Fred Thiel has global CEO experience of both private and public companies, is a private equity principle, a strategic advisor and board member.
Trending topics on corporate boards and how it relates to branding (2:10)
Brand evolution and the challenge to stay relevant (8:38)
The crucial role of a well-thought-out purpose, vision, and mission (12:07)
Brand as a driver of value from the private equity firm’s point of view (16:04)
The benefit of customer research in building your brand (20:00)
Why is it important for a brand to tell a good story? (25:09)
Welcome to Expert Opinion, the BrandingBusiness forum where leaders share their views, insights and experiences from the world of B2B branding. And now here’s your host.
Ryan Rieches: Hello, welcome to Expert Opinion. I’m Ryan Rieches and today’s show is focused on how global corporate boards look at brand strategy. Today’s guest is Fred Thiel, a global experience CEO of private and public companies, private equity principle, strategic advisor and board member. Having built and sold a number of businesses, Fred is a senior advisor to prominent private equity firms in the US and Europe, primary experience in technology, IoT and digital transformation.
Ryan Rieches: Fred’s currently chairman of the board of five companies and also on the advisory board for six other companies. Fred started his career in marketing, and together with his global experience running and advising companies, I definitely place Fred as an expert in the space where business and brand strategy converge. So if you’d like to learn best practices from the corporate board perspective, you might want to listen to Fred’s insights. Fred, welcome to Expert Opinion.
Fred Thiel: Thank you, Ryan. Glad to be here.
Ryan Rieches: Well, let’s begin with a topic that you and I kind of spoke about before. I know we share a similar point of view on this and that a brand permeates the entire company. It’s not just a marketing tactic. It’s a corporate board and CEO led initiative. So, it’s not just an external promise distinction in our perception, used to just drive sales through relevance and differentiation, but also as a means to unite an organization under a common purpose and culture, giving people direction so they can perform at the highest level. So maybe you can kind of build upon that in the sense of what you’re seeing in the area of current trends from a global board perspective. What are the trends or topics that are on the corporate board agenda as it relates to branding?
Fred Thiel: Sure. I think, you know, brand is very important, both, as you said, externally and internally and boards look at branding from a variety of perspectives. You know, on the one hand, if you think about what a board’s real responsibility is, it’s the fiduciary responsibility to the shareholders. And more so today, obviously there’s a social responsibility to society, to the environment, to the employees, the customers, vendors, etc., all the key stakeholders.
Fred Thiel: And so boards look at brands as a key value driver. And this is really important for the private equity side of the world because they clearly view brand as a multiplier on enterprise value. So if you think about brand being so important for value, anything that enhances the brand adds value. Anything that detracts from the brand decreases value. Even though the business might be operating at the same level, if news comes out about the company not operating congruently with their brand, that value’s going to be taken away from the company in the stock markets or in the valuation markets or even in some consumers.
Fred Thiel: And even internally. If employees see the management team deviating from the mission, vision, values that are all wrapped up and support the brand, then that incongruency is going to drive people to want to leave, not be supportive. And this is especially important when it comes to the millennial workforce who are very much focused on aligning their time and energy with brands and companies whose mission, values and purpose are aligned with theirs. And anytime they sort of deviate from the promise of the brand mission, value, and purpose, the employee becomes less motivated, less satisfied.
Fred Thiel: And you know, this can be on one extreme, the equivalent of a whistle-blower possibly, you know, ratting out that behavior, which is typical in situations where you see corporate management behaving in ways that aren’t necessarily supportive and in alignment with the brand value. And whether it’s the Theranos case, which has this great HBO documentary about that story, where it was employees who realized they were being lied to and that the company was lying to the marketplace that caused them to report to the authorities that, “Hey, the management’s lying here, they don’t really do what they say they’re doing.”
Fred Thiel: Or whether it’s customers of companies like Uber when they didn’t like necessarily the behavior that was being reported about what senior management was doing, and companies in general. But brands are also tied up in people. The technology industry as you know, is one of these industries where the founder entrepreneurs brand is totally tied into the corporate brand. Steve Jobs and Apple, Michael Weinstein as a film production producer. He was totally tied to the brand of his production companies. Matter of fact, I think he was the company’s name, even though it was Weinstein was the name of the company. But this is a very typical, and the … we see this in Japan for example, with this Renault thing with the … the French CEO, Goshen and his reported … and he hadn’t been found guilty of anything yet, but he’s been accused of bad behavior and put in jail.
Fred Thiel: And you look at any of these companies that do things that are incongruent. Yeah, there’s that famous case with the battery manufacturer and the accident in India where lots of people were injured because of the chemicals that were used in this manufacturing process. And that dragged on the company’s value for years afterwards. So I think it’s critical that you know everything that a company does, and that the employees do is supportive of and congruent with the brand promise. Absolutely. And you know, for boards this is very important, that the CEO is managing the company in that way and that the promise that’s been made to the investors about what the company stands for and its brand and its mission, value and purpose, are all fully in alignment. And the board’s responsibility is to make sure that the CEO is running the company with that in mind constantly. So it’s very important.
Ryan Rieches: Okay, cool. Well let’s stay on the topic of these … we call them guiding statements. And as you know, we’re real passionate around this topic of the purpose, why we exist; the vision, what we aim to achieve; the mission, how we’re going to achieve it; values, what we stand for and how we behave. So, after we’ve gone through the brand development process, looking at the external value proposition, we often help organizations redefine those guiding statements. And typically, they’re mostly associated to internal statements: The ability to direct unite, align, inspire internal teams, but it also if done well, it gives clarity of direction to investors as well as a leadership team. In fact, we even recommend that leadership meetings, board meetings begin by looking at these guiding statements and saying, “If we’re not achieving, if we’re not talking about things that are going to impact these statements that are our vision and purpose, why are they on the agenda?” You have any thoughts around that and what, are you seeing that actually utilized at the board level?
Fred Thiel: Well, I think the … I don’t see at the board level, the value statements being read aloud, if you would, as a reminder to the board. What I do see, however is you know, corporate activities are always looked at through the lens of these value statements, mission value, purpose, because is it in alignment, should we be doing this? We shouldn’t be doing things that aren’t fully in alignment or supportive of what we’re trying to achieve because that’s a waste of corporate resource and could potentially damage the brand and the company. So I do see that lens being applied very often. I think the … one of the key challenges is as companies evolve and this is where, I know you guys do a lot of work, as companies and brands evolve, marketplaces evolve. You know, the company has to evolve with it.
Fred Thiel: And not that there are many companies that necessarily are a hundred years old and still large and viable. There’s not many companies that make it that long. But those that do, and even those that are around for 50 years or even 20 years, depending on the marketplace, you know, 10 years can be a life, a full life cycle. If you look at companies like Uber and companies like these, 10 years ago, where were they? They weren’t. So over time, brands definitely need to evolve as the marketplace evolves, and as the consumer evolves. Before in a world where media was four TV channels, a handful of newspapers and some weekly or monthly magazines, it was easy to get into the … get in front of a consumer, create a brand promise, if you would, create awareness.
Fred Thiel: And then, the product had to deliver on that. And I think, it was one of the Proctor and Gamble heads of marketing at one point said, “Advertising and marketing’s role is to sell the product the first time. After that it’s up to the product to do the rest of the work.” And I think, today there are infinite media outlets or infinite ways for people to interact with brands. People interact with their peers and rely more on their peers’ opinions of brands than they do on professional reviewers, if you would. Just look at the film industry. People focus more on Rotten Tomatoes and a sort of group think criticism and reviews, than they do what the major media outlets, film critics say. So it’s the world has changed and the ability for a brand to get a black mark has gone up dramatically today.
Fred Thiel: Where before a company, what a company did internally didn’t necessarily get exposed externally. Today there’s a lot more transparency because of social media and what people can post. A single consumer’s brand experience and what they post about it on social media today now requires brands to respond, reach out to the consumer, try and satisfy them. Because as you all know, one damaging statement is very expensive to repair and all the effort that it takes to build a brand can be destroyed with just some, a few damaging events or statements. So I think it’s critical today. Management, the board and employees in general are continually looking at how or what they’re doing juxtaposed against these stated value attributes and statements.
Fred Thiel: The other thing I think that’s important in that is also the fact that, a well-crafted set of values, a well-crafted mission statement and a well-crafted vision statement, in theory should reduce the amount of management required to run a company. Because if you craft those properly, people will always know what they should do, because they should know what is right. And if you hire the right people and you train them properly, then you know any decision they have to make, they should be able to juxtapose against those key attributes and know, “Is this in alignment with our strategy? Is it in alignment with our vision and mission? Is it in alignment with our values? Then let’s go ahead and do it.” And in a world where we measure everything to the Nth degree, you know, KPIs, OKRs, whatever you want to call them, a balanced score cards, etc., it’s easier today to, in theory, to live in alignment with a brand because there are ways to really measure that people are doing that, and that the activities the company is doing are fully supportive of that.
Fred Thiel: So, again you can look at net promoter scores, is one of those metrics for example. But there are lots more relevant, related to social media and how brands, social presence and how the marketplace is treating the brand that’s social. So I think it’s very important for brands to do it. I think investors are very focused on it. Money goes towards brands that have a great brand promise and that have a great reputation and money runs from brands that don’t, or the minute the change happens especially. And that has huge implications on shareholder value obviously for public companies.
Fred Thiel: But brands also have lasting value. An example is Sears, here’s a company with a brand that’s, a hundred year old brand that is irrelevant in the retail world today when people think about a store they go to shop in. But the brand still holds value and there are people still willing to pay for that brand, even though as a shopping venue or shopping destination, it’s not really relevant anymore. And so, a well-built brand has huge value even though the underlying enterprise might not.
Ryan Rieches: Well said. I couldn’t agree more with you in terms of the power of using brand, as well as these guiding statements to once again align, energize, empower people to deliver upon the brand promise. Marketing can make a great promise but it’s still the people that have to deliver it. So, yep. Completely agree with that. And also agree with your thought around the need to keep a brand current and you have to approach and revisit a brand and its value proposition at times of change.
Ryan Rieches: And kind of transitioning to the topic of private equity and how private equity looks at brands, it’s pretty clear that the organization or private equity firm wants to acquire an asset or multiple assets, build it, grow it and increase its value over a certain amount of time. And usually a fairly short-term window. It could be four, it could be seven years more, but relatively short. But, so the question sometimes we’re asked though is what, when is the right time for an organization? So let’s just keep it to private equity, to invest in branding, develop a brand that can clarify its unique value proposition?
Fred Thiel: And just to clarify, private equity as an owner of a company as opposed to the private equity firms’ brand itself.
Ryan Rieches: True, yeah. Glad you clarified that.
Fred Thiel: So a brand is a value driver and private equity is all about driving value in incremental value creation. And historically private equity firms would go buy a good company and then they would go in and look at the operations, and rationalize operations so they could increase the flow through of dollars to the bottom line. And that’s how they generated value. Then after a number of companies had gone through this, what’s called professionalization, it all of a sudden became important to grow the revenues of the company, not just fixed the bottom line. Because most of that playbook had already been executed by either a prior owner. And the majority of private equity acquired companies today have been owned by a prior private equity owner somewhere in their trajectory.
Fred Thiel: So they’ve had the opportunity to be professionalized. So all of a sudden, private equity says, “What types of things are going to grow the top line and bottom line, and what types of things act as a multiplier or a force multiplier on that valuation?” So as an example, private equity firm maybe pays 10 times EBITDA, or 10 times free cash flow for a company. Say a company has 10 million of EBITDA, so they pay 10 times, it means they paid $100 million to acquire this company. And over the course of the hold period, like you said, kind of three to seven years, they want to grow the value of the company. And so they have two choices. They can grow top and bottom line. So instead of it being generating 10 million of EBITDA, they can grow to 20 million over five years, and the company have an average of 200 million, if the holder’s still the same. But they can also increase the multiple by creating more brand value.
Fred Thiel: And if you can increase the value of the brand, then that multiple might go from 10, to 11, to 12 and so the top companies in their industry segment that have really strong brands can command significantly higher multiples than their peers. And if you can take a company that you take from 10 million of EBITDA to 20 million of EBITDA, and at the same time increase the brand value, not only have you doubled the profitability, which doubles the value based on the same multiple of 10, but if you can grow that multiple to 12 or 13, now all of a sudden you go from 200 million of value to 260 million of value potentially. So that’s, the value of that multiplier is huge. So, for private equity firms, it’s very important to do it. And the next kind of question is when do you start doing this? Well-
Ryan Rieches: Right?
Fred Thiel: Building brand value takes a long time. So as soon as you can.
Ryan Rieches: Along those thoughts, one of the areas that we get involved with and a firm belief of ours is the need for voice of customer research to understand how the company is perceived, or companies are perceived in order for them to be even more relevant and differentiated from the competition. And it seems that most of our clients really appreciate the ability of that insight as a key dataset to give them confidence to move the business forward, and once again aligning business and brand strategies together. So we believe in it. It seems like our clients do as well from a, once again, the confidence of being able to grow and invest in organization. But from board perspective, how do you guys look at this, this dataset, specifically the area of voice of customer research?
Fred Thiel: Sure. Yeah, it’s great question. Great topic. Because this touches on the concept of, you know, is the company focused on incremental or evolutionary value growth, or is it focused on transformational. And the distinction is very important because voice of the customer is really good as a rear-view mirror to understand the company’s current and former state in the eyes of its customers. What do you like about the brand and the company? What don’t you like about it? What do you wish they could do differently? Those types of things. And that’s all based on the customer’s perception of the company and brand through the filter that they have of the sum of their experiences with the brand, that are either firsthand experience, or second hand experience, or things they’ve read about, or things that their friends have reported about the brand. What becomes more challenging is when you’re trying to leverage voice of the customer to understand and gut check, if you would, a future strategy.
Fred Thiel: So you know you can, I think it’s very important to understand what characteristics, what aspects of … are important to a customer. So how important to you is it that a brand that you work with is socially responsible? What about equality of the sexes? I think questions like that are great for understanding the consumers, the types of brands and what a brand needs to do to have alignment with a consumers general perspective. However, I think when you start touching on products and services, it starts getting a little bit more difficult because you know, as Steve Jobs famously said, “Our customers don’t know what they want because what we plan to launch, they’ve never seen before so they don’t have a context for it.” I’m paraphrasing very liberally here. But basically, until a customer has a context for something, whether that’s a new brand you’re developing or a new product that an existing brand is developing, they don’t have a point of reference.
Fred Thiel: So if you ask somebody, “Would you like a self-driving car if you had one?” The customer might say, “Yes,” just imagining what it would be like to get in the back of a car that could drive them wherever they want. Until such time as they’re actually in the car going down the highway, and they realize there’s nobody behind the wheel. And then they might get scared. And so it might take them some time to get used to that. But without having had that experience, most customers don’t think through these types of questions well enough. They just answer kind of top of their mind, which on the one hand is good because you’re getting unfiltered output from the customer.
Fred Thiel: But on the other hand, without any context, the question then becomes, is it a relevant answer to the objective of the questions? So I think it’s really relevant if you’re trying to understand current or former state and what somebody thinks about a company today based on the sum of their experiences. I think from a future it’s relevant if you’re just trying to identify, what are key attributes that we will need to align ourselves with to be in alignment with our customers? Because the customer knows what’s important.
Ryan Rieches: Yes, well said.
Fred Thiel: Exactly. But it’s the product stuff, which is difficult.
Ryan Rieches: Yeah, I might to just add a little point of view on that. We believe that brand has to be built from within and utilizing the expertise and the potential that exists within an organization to develop a value, develop new value. So yes, we, the voice of customer, we understand how the brand’s perceived. So we understand how big the gap is between where we’re at and where we want to go. We have been successful in developing research that also then tests value propositions, and tests new opportunities, and utilizing metaphors and positioning statements, and big ideas in order to understand how the audience might perceive an evolution of a brand. But they rarely gives us the exact answer, but at least we understand the existing perceptions and the ability for customers to relate to the new offering.
Ryan Rieches: So yeah, very interesting point of view around using research in order to guide future decisions. How important as it relates then, once you have the value proposition, how important is the storytelling? That’s a big term that everybody’s using now in terms of how brands are experiencing, and how to get the word out there, whether it’s social media, or online, or branded content or video obviously is a big component, but what are your thoughts around storytelling?
Fred Thiel: So storytelling is a way for us to pack a ton of information plus emotion into a capsule that somebody can ingest and carry with them. If you just state facts or if you just tell somebody about a brand without rolling it into a story, you never touch the side of the brain that is driven by emotion. And the side of the brain that’s driven by emotion is the one that drives virtually all of our decisions. I’ve had this discussion with people in the technology industry hundreds of times and, do we make, do people make rational decisions or do they make emotional decisions? And what is the last thing people use when they make a decision? And you get a handful of people say emotional, and a handful of people say rational, but science has proven that it’s always an emotional decision at the end. If you have two equally good products, your choice of product A or product B is an emotional one. If you have differentiated products, you may choose the inferior product from a specs perspective because of emotional issues.
Fred Thiel: Then the product that might have better specs but doesn’t trigger your emotions in the same way. So storytelling is critical. And the, as you said, there’s been a lot of talk about storytelling. Every brand, every product, every business has to have its hero’s journey. It has to go through this, and you talk to an entrepreneur when they’re pitching to venture capitalists or the stock market, investors, whoever, even customers and vendors, they tell their heroes’ journey. Look at Uber for example. What’s the story behind Uber? Well, founder is standing on a Paris street at Christmas one year, trying to get a cab and is very frustrated, and is staring at their iPhone and said, “Gosh, wouldn’t it be cool if I could just push a button and a … I could order up a car, I’d know where it was. I’d know when it would show up and I wouldn’t have to have a credit card. Billing would be automatic.” And low and behold, they started experimenting.
Fred Thiel: Came up with Uber Cab, which was the first app, which then became Uber and, low and behold, you have this company worth billions of dollars today. And it’s a compelling story. And it draws you in. So storytelling is critical and it’s words, it’s emotion, it’s images, it’s video. And, but it’s kind of a promise, right? It’s like when you’re dating and you meet somebody for the first time, and they have a visual impression of you that they sort of form a person … a perception of you from, and then words come out of your mouth and you’d kind of tell your story. And that story’s either going to attract them or it’s going to repulse them, on the opposite extreme.
Fred Thiel: And so, but that’s an emotional … People want to engage with people who are vulnerable. They want to engage with brands that are vulnerable and transparent, and that they think are doing the right thing. A certain number of people love to interact with brands that are underdogs. And there’s a whole of unique storytelling methodology if you’re an underdog brand or a challenger brand. Other people who like more certainty in their lives, like to lead … deal with leaders and they want a brand that has a strong leadership sort of promise and perspective about their position in the marketplace and their products and they’re reliable. Brands have these attributes that elicit emotions. And the place where you find the most typically, is in luxury brands. A Rolex watch for example, versus a Swatch. I think a Patek Philippe, this is the watch for generations.
Fred Thiel: Brand value is critical and how you tell the story is so critical. BMW and this is the car for people who like to drive, things like that. So I think it the emotion and the storytelling is critical. And as you know, trying to create a new brand or modify and sort of renew a company’s brand, it really comes all the way down to a well-executed story. If you can’t execute that story well all the work you did beforehand is for naught.
Ryan Rieches: Very well said. Clearly, you understand the world of branding and the value a brand can provide. So still, we find that some people aren’t … get mixed up and just think the brand is a logo. Obviously it’s everything that the company stands for, and the experiences are critical. There are literally hundreds of touch points for a brand to be experienced and, everyone needs to be managed. So sometimes we are asked the question of, “Who’s responsibility is it, the brand? Is it just marketing, or is it sales, or is it operations or is it the CEO?” So I just want to ask you your opinion. And unfortunately we’re almost out of time, we could spend hours and I love this, but might be one of our last questions.
Fred Thiel: It’s the board who controls the CEO, and so it’s the board and the CEO at the end of the day, that’s where the buck stops. It’s, yes, the chief marketing officer’s responsible for executing tactics and strategies around the brand. But who owns the brand? It’s the board and the CEO. They own it and they need to make sure the organization is doing everything in full congruence and alignment with the brand promise, and make sure that the company and its employees act in ways that are fully supportive of the brand, so that the customers feel that what’s being promised to them by the brand is being lived up to. And if that happens, then you accrue brand value and when it doesn’t happen, you lose brand value.
Ryan Rieches: Well, Fred, I literally have a half dozen other questions to ask you, but we’re almost out of time. Any final thoughts or insights you’d like to share with our listeners?
Fred Thiel: Yeah, I think the key thing is … yeah, two key points. One is, personal interactions with brands are more and more important today. Before you were a little bit dis-intermediated from a brand other than the product experience that you had, a product or service experience. But today, with the media and all that, you interact with a brand on all sorts of levels, and that personal interaction that a brand has with its consumers and its investors is critical. The other thing is, not all industries and markets move at the same pace. And so where a consumer product in the technology industry might have a life of nine months, look at cell phone upgrade cycles as an example in the industrial markets, a factory machine might have a useful life of 30 years.
Fred Thiel: And so the opportunities you have to interact with your customers in the marketplace to build, enhance and refine your brand, are really driven by the opportunities you have to interact with your customers. And if it’s kind of, “I buy it and then I forget about it for a lot of years,” then that’s a lot harder than if you’re constantly in the marketplace looking at something.
Ryan Rieches: Perfect. Well Fred, thank you for being a guest in Expert Opinion. I really appreciate your insights. I know our listeners will as well, and that unfortunately concludes our show for today. Wish we had more time. This is Ryan Rieches and you’ve been listening to another edition of Expert Opinion, the BrandingBusiness forum where thought leaders share their point of view. If you’d like to listen to past shows or read our blog series, visit brandingbusiness.com. And until our next show, grow your business by living your brand promise.