Davis founder brands 091812

Founder Brands
From Original Vision to
Sustained Value
Davis Brand Capital
Clarity. September 2012

What do some of the world’s
most valuable and well-known brands
have in common?

Copyright © 2012 Davis Brand Capital 2

3

Copyright © 2012 Davis Brand Capital

They are all founder brands.


What does this mean?


A founder brand is most easily defined as
a brand where a founder or founding
family exercises significant influence over
the business.

Source: International Finance Corporation, “Corporate Governance,” 2007, p. 1 6


That “influence” is manifested through
ownership, effective voting control,
management or history.

Source: International Finance Corporation, “Corporate Governance,” 2007, p. 1 7


Why do founder brands
matter so much?


Founder brands make enormous
contributions to the U.S. economy.


35 80+
more than 35 percent of Fortune 500
companies are family owned or controlled
60 244
Source: Conway Center for Family Business, “Family Business Facts, Figures and Fun,” 2012 10


35 80+
eighty to 90 percent of all U.S. businesses

60 are family owned or controlled
244


60 244
sixty percent of all public companies in
the U.S. are family controlled



60 244
the founder brands* on the
2011 Davis Brand Capital 25 had a market
capitalization exceeding $244 billion…
* Apple, Microsoft, Google, Toyota Motor Corporation, Volkswagen, Samsung Electronics, Wal-Mart 13


… and outperformed the S&P by 13.53 percent in 2011
DBC25 (+9.32%) FOUNDER BRANDS (+13.53%) DOW JONES (+5.53%) S&P 500 (0.00%) NASDAQ (-1.80%)

14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
- 10 %
- 12 %
-14%
JAN. 2011 ARPIL 2011 JULY 2011 OCT 2011 DEC 2011

JANUARY 9, 2011 – DECEMBER 30, 2011

Note: Based on a hypothetical stock portfolio comprised of the 25 companies on the Davis Brand Capital 25, with holdings proportionately allocated according to each company’s position in the ranking.


Surprisingly, even when family businesses
grow into major brands,
they are neither well understood
nor well studied.


Think

16


Founder brands are often
the product of a
supremely charismatic and
motivated individual.


Consider

18


The brand and the individual
become one in the public’s mind.


Think

20


Separating founder and brand to ensure
the brand’s growth and longevity is one
of the core issues founder brands face as
they grow.

21


However,
sometimes the founding influence
gets eclipsed over time.


Consider

Who would you name its greatest leader?

Thomas Edison or Jack Welch?
23


No matter the scenario,
founder brands are unique brands …


… facing unique challenges and
opportunities for growth – everyday.


Founder brands share five common
challenges and opportunities …


1.
For founder brands, image and reputation
are not abstract concepts.


Managing a personality-focused equity
can be a major challenge and
how a brand handles it, can be the
difference between
short-term success and sustained value.


How to solve this conundrum?


For example, convey a brand promise
that lives beyond a personality

Steve Jobs effectively prepared the company and his successor,
Tim Cook. Apple now is the world’s most valuable company, nominally.
30


Or, define a higher ideal that both
honors the legacy and shapes the future

IBM has evolved into an iconic, global brand, honoring not its
powerful founder, but the more universal power of “thinking.”
31


So, what will Martha Stewart
do next?

32


2.
Founder brands must consider that
what is best for the brand may not be
what is best for the founder. This is
an essential consideration for keeping
competitive position and consumer trust.

The road from founding garage to
founder brand is not always clear,
nor free of potholes and u-turns.


Think
Jerry Yang’s attempt to right the long-suffering Yahoo,
the company he co-founded.

The result?
One of many executives dismissed by a board without a roadmap.
35


Consider
Wall Street’s pressure on Mark Zuckerberg’s Facebook.

The result?
Too early to tell.
36


3.
Founder brands often struggle with
how best to manage and leverage
past achievements in a meaningful and
future-focused way.


To protect the equity in the
founder brand, a portfolio strategy
is essential to its longevity.


Allowing the brand to evolve …

Hermes, contemporary artisans since 1837
39


… and connect with a new generation of
customers with different needs and habits.

petit h, a new Hermes collection, made from up-cycled studio
scraps but with the same level of artisanship
40


Founder brands also tend to undertake
innovation with extreme due diligence,
which can be a positive and a negative.


Case in Point

Kodak’s auction of intellectual property has yet to produce a sale. But it has
had one unlikely result: turning the fiercest rivals in the global patent battle into
potential collaborators.

In recent days, the rival technology giants and patent-hoarding firms that had mounted
competing bids for the portfolio have joined forces, people with knowledge of the
negotiations said – a move that could take the patents off the market at a price below
what Eastman Kodak Co. had hoped to raise in a competitive auction.

The bidding group brings together a raft of strange bedfellows. It includes Apple Inc. and
Google Inc., …

Source: wsj.com, August 22, 2012
42


4.
Founder brands are often synonymous with
a strong company culture.


Founder brand cultures rise
and may fall
on the vision and spirit of those who
brought them to life.


Consider
Southwest Airlines’ founder and chairman emeritus, Herb Kelleher

He serves as an adviser and teaches in the company’s learning and
development center. Southwest has also created a video archive
featuring interviews with Kelleher and the company’s founding
employees, “so people won’t lose that connection with the founder.”
45


But, the intensity of founder brand
cultures can end up creating insular
environments and blind deference to the
founder’s ideals as well.


Consider
News Corporation’s phone hacking scandal

It took a grieving mother and the government of the
United Kingdom to expose what was likely clear to many on the
inside: Murdoch and his children might not be the best choices
to run the global media empire he had created.
47


5.
Historically, founder brands excel at
social responsibility and some have even
spearheaded new notions.


Founder brands are in a particularly
good position to extend the
trusted relationships they enjoy with
their customers.

They can further cement their brand’s
future success by institutionalizing
the implicit contract they entered with
early supporters.

Think
Patagonia

Under founder Yvon Chouinard’s vision, Patagonia
became one of the first B corporations.
50


Consider
Chipotle

Steve Ells redefined fast food and introduced the notion of
“food with integrity.”
51


Think
The Bill & Melinda Gates Foundation

While separate from Microsoft, the Foundation reveals
the Gates mind at work in familiar ways:
finding and deploying solutions to global needs.
52


Taken together…


Founder brands are subject to
unique opportunities and challenges
throughout their lifetime.

To manage them for full value,
a keen understanding of
their particular nature is paramount.


For ongoing updates and perspectives on
founder brands, follow:

#founderbrands on Twitter
#FounderBrands on Unbound Edition

Or, request a copy of the white paper:
founderbrands@davisbrandcapital.com


Davis founder brands 091812

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