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Issue Date: July 2004

Why technology companies need branding

July 2004
Paul Temporal

Since the late 1980s, branding has become one of the most talked about subjects amongst managers, and it now features on the boardroom agendas of nearly all the major companies of the world.

Branding has evolved mainly in the fast moving consumer goods industries, where substantial profits accruing from brands have attracted a great deal of attention. Brands are now treated as strategic assets in their own right by many firms, and brand valuation is a rapidly emerging business.
Slow to catch on to the benefits of branding, have been those companies that are steeped in technology. Even if they have been producing goods for public as opposed to business consumption, they have showed some reticence in embarking on brand investment. Where it is commonplace to spend large amounts of money on plant and capital equipment in technology-based industries, investing in brands has been relatively ignored. As a result, there are few powerful technology brands, and yet they would seem to be in desperate need of branding as a major tool in order to differentiate themselves from all their competitors.
The world of parity
Perhaps one of the reasons why technology companies have not given branding a high priority, is that technology product and service markets have not been very cluttered until the last decade of the twentieth century. Whereas consumer goods markets had by the beginning of the 1990s in many cases reached the stage of maturity where they were at bursting point with a proliferation of products, technology has only recently become so.
But now the world of parity has hit technology markets as well. And it is technology itself that has hastened this adverse situation. In the 21st century, it is so much easier to copy a competitor's products, services, systems and so on, that the name of the game has now become how to stand out from the crowd. Technology is becoming a commodity business, and the relatively established hi-tech companies that find themselves being sucked in to the commodity trap, such as Sun Microsystems, are now realizing the role branding plays in staying out of it.
Shorter life cycles
Another factor that has awoken technology companies to the fact that branding is important is the relentless decline of product life cycles, which have now reduced to a matter of weeks from what used to be years. In fact, some Japanese companies are now working on product life cycles of 6-8 weeks. Faced with such frightening product change, and with competitors continuously bringing new products to market and enhancing others, brands are literally the only thing that represent stability to both companies and consumers. In fact, there is a dawning realization now amongst technology companies that brands need not have life cycles - that they can last indefinitely. This is a massive attraction.
Converging and new technologies
As if product proliferation and life cycle decompression were not enough, technology companies now find themselves surrounded by collapsing market boundaries, driven by the convergence of technologies. Companies can leap industries by simply acquiring the necessary technology, and where companies thought they understood the nature of the competition, they can be astonished by how quickly things can change. Ten years ago, companies such as Time Warner would never have envisaged merging with Internet-based companies such as AOL. The Internet was just not in the public domain then. But it is the powerful brands that always win the battle for market dominance in this fast changing world.
Return on investment
Pouring money into technology can be the wrong move unless you have a brand that really stands for something in the minds of consumers, and technology investment demands high returns. The powerful brands provide both consumer trust and high returns. Consumers will not buy from companies that do not have a good brand image, particularly in technology markets where the products are relatively complex and often not fully understood. They will only buy trusted brands. Developing a brand is not cheap, but the returns can be spectacular. Strong brands can command premium prices wherever they choose to go, and can often be worth more than the net asset value of the business enterprise.
Branding is more important for hi-tech companies
The accelerating and turbulent nature of technological change poses problems for those trying to establish, develop and manage their brands. Technology-based companies are faced with perpetual change, and this seemingly goes against the whole basis of branding, which is consistency. So one of the dilemmas for hi- tech companies is how to balance the two. An additional problem is product parity. In a world where anything physical can be copied with amazing speed, there is little room for the traditional unique selling proposition. Launch a new product on the shelves, and your competitors will have a similar one, possibly improved, in a relatively short space of time. Lastly, the cautious nature of consumer decision-making with regard to technology products makes life more difficult when trying to persuade them to buy. In these circumstances, which appear to be intensifying, branding becomes even more important. A good brand will help overcome all of these problems, whilst poor branding will only make things worse.
So it is time for technology companies to venture into branding in a significant way. With a strong brand comes market power. It is all very well to have a good quality product or service (in fact it is essential to survival), but it is your brand that will make your company stand out from the crowd in what are now very congested markets. It is as well to remember that quality can be copied too, and that, whilst you will never develop a powerful brand without the quality element, this alone will never be enough to differentiate your company, product or service from the competition.
As far as the Internet is concerned, with 50 to 60 software companies starting up each month in Silicon Valley alone, and over 10 million websites out there in cyberspace, the hi-tech marketplace is becoming like a busy main road in the rush hour. Not only does branding matter in the new hi-tech world, it is even more important than in the traditional consumer products markets. For the Internet and software businesses, branding is an essential pre-requisite for market entry; gone are the days when a company could take its time to develop a brand. Only a strong brand will help hi-tech companies to survive through immediate and lasting differentiation.
Source: excerpted from Hi-Tech Hi-Touch Branding by Dr Paul Temporal, http://www.brandingasia.com/columns/temporal6.htm


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