Why Brand Trust Is No Longer as Important as Innovative Value
The mistake many established companies make in keeping up with today’s consumers
Think back to the first time you heard about Uber. Do you remember your first impressions?
Before 2010, most people hadn’t heard of Uber. And most thought ride-sharing meant carpooling. The idea of getting into a stranger’s car for a ride to a restaurant seemed risky. And using your cell phone to pay them futuristic.
Do you trust it?
When Uber came to Los Angeles around 2012, I used it weekly to get to and from LAX airport. Uber saved me considerable time, stress, and expense of parking.
I remember trying to explain the Uber concept to my 70+-year-old parents, who lived in South Carolina. Before I could finish my description, my father belted out,
“There’s no damn way I’d get into the backseat of some stranger’s car! For all you know, they might be an ax murderer, tie you up in the trunk with duct tape and bury you in the desert.”
When I reminded my dad the taxi driver is just as much of a stranger as the Uber driver, he argued it was different because of the trusted signature yellow car.
“Ahh, the trusted brand theory,” I said.
The taxi/limo lobbies were powerful entities, often voting in large blocks for politicians. As a collective, they had a substantial influence on how taxi service worked in most cities.
So what was their first reaction to Uber?
Not all that different from my dad’s response.
When I asked an LA-based taxicab owner in 2012 what he thought about the new Uber app, he said,
“Good luck with getting that business off the ground. The regulatory issues alone will overwhelm you, much less getting customers to trust some ordinary car/driver.”
But trust they did.
Or perhaps it wasn’t “trust” as much as it was “value.”
A new growth market emerges
It didn’t take long for people to recognize Uber’s innovative “value” in terms of convenience, ease of payment, comfort, driver attitude, and attentiveness. The highest-rated drivers gave you bottled water and a cord to recharge your phone battery.
But there was also another new value that came with getting an Uber:
It was cool!
Showing up on a date in a yellow taxicab wasn’t that sexy, but arriving in an Uber looked like you had a personal driver.
As a new company, Uber had little trust to offer customers. But word about the innovative features spread to cities across the globe.
As obvious as innovation’s power is, this issue of brand trust versus new value is where many older, established companies get it wrong. They assume that loyal customers will keep coming to them — as they have for decades — because of the trust consumers place in their brand. But when presented with a breakthrough value, companies and industries can lose their loyal customers en masse.
In the past, consumers relied heavily on brand trust to influence their purchase decisions. But today, younger consumers have shown a much stronger preference for innovative value, and they’re increasingly choosing it over the trusted brand, which is upending industries.
The challenge of creating value
Many established organizations lose sight of the idea that a business is essentially a value-creating system. And customers are a value-seeking species. But what customers find valuable is a moving target.
These movements are initially imperceptible and beyond the industry’s borders. They can crop up seemingly out of nowhere, but they usually operate in plain sight. Netflix, Uber, Whole Foods, and Apple didn’t hide from anyone. Older companies should hang out on the fringes, but this is an area where they struggle the most.
Companies can no longer afford to keep cranking out the same old value and expect to stay relevant. (Although many companies attempt to do just that.) Nor can they allow their product offerings to fall behind on what their customers will value next. (Think Blockbuster vs. Netflix, Blackberry vs. iPhone).
But the trap many companies fall into is expecting the same leadership team they ask to maximize the old value system’s profits to explore new value creation opportunities as well where the costs and return on investment are unpredictable.
The type of linear thinking and cost-control skill sets required for maximizing profits differ vastly from the non-linear creative thinking of innovation, which is inefficient and experimental.
The inherent structural problem older companies have is a pyramid-shaped leadership team, comprised of a few chosen executives at the top that make all the decisions regarding strategy, resources, and bets on the future. But there is a built-in bias.
If those leaders at the top are money-makers and cost controllers — like Jack Welch was at GE or Jeff Bezos at Amazon — the leadership team will focus on efficiency, process, error-reduction, financial metrics, and risk adverseness.
However, if those leaders at the top are innovation-focused — like Steve Jobs, Elon Musk, or James Dyson — the leadership team will fall in line and bias most of their thinking towards innovation. Admittedly, this creative approach places efficiency and financial metrics as a secondary priority.
Neither approach is better than the other. Companies often deploy them at different points in their life cycle. However, most companies start with creativity and innovation first to break into an industry’s fortress. But when they encounter growth and profitability issues, they often shift their leadership towards operational excellence and efficiency.
But if they load up and oversteer on efficiency thinkers too much — which most mature companies do — they risk getting disrupted by smaller, more innovative, and experimental companies.
Companies often fluctuate between efficiency to innovation-focused leadership approaches. But most mature companies usually err on efficiency, with a secondary-level Research and Development (R&D) department of creative thinkers who struggle to get heard, much less breakthrough corporate policy layers.
In an ideal world, you’d have both types of leaders and teams at the top: a Steve Jobs paired up with a Tim Cook. But on his own, Steve Jobs was a bit unbearable, which is part of what led to his ouster at Apple in 1985. Elon Musk has flirted with the same line.
When Jobs returned to Apple in 1996 as a much more mature and seasoned-leader, he knew he needed an efficiency/process-minded thinker like Tim Cook by his side. Together they built one of the world’s most innovative and valuable companies.
However, now that Tim Cook is leading the charge on his own — without the iconoclastic mind of Steve Jobs or his senior-level design officer/sidekick, Jony Ive — many industry experts fear Apple’s products have become more conventional and not as groundbreaking as before.
But, of course, Apple’s profits are still there, as this is Tim Cook’s bias. Nothing wrong with that — in the short term. Wall Street and shareholders are happy. But we’ll see if the same “trust vs. value” dynamic plays out with consumers in the long run.
So what’s the solution?
I’ve worked in the innovation field for over 30 years with well-known consumer brands such as Whole Foods, Harley Davidson, Kroger, Kraft, Cadbury, Mondelez, and Coca-Cola.
And what I have found in that time is that most established companies don’t suffer from a lack of good ideas, but the inability to get them through their organizational committees and bureaucracies. Sadly, far too many game-changing ideas die on their way up the corporate ladder.
I recommend my client establish two strategic but equal teams: One focused on optimizing existing assets and maximizing profits. And the other charged with exploring new market opportunities and revenue streams.
These two teams should sit at the top of the organizational pyramid, like twin engines, and be at the table when companies make decisions regarding strategy, resources, and bets on the future.
These teams should have an open dialog and debate about winning strategies — just as offense and defense team members do on a football team — but their goals, objectives, and accountability metrics should differ.
Team 1 = maximizing profits of the existing product value and customer retention
Team 2 = exploration of new value-creation models that tap into emerging markets and create new customer growth opportunities
Where should CEOs focus their time?
Because of the pressure of quarterly earnings reports, stock price maintenance, etc., most CEOs focus their time on the profit maximization side, which is understandable.
However, this unequal focus frequently leaves the new value creation team out in the hallways, reporting up through a chain of management layers. This distance from the top is why most mature companies struggle to innovate and pioneer new market opportunities. And why most innovation-driven initiatives cannot gain traction.
Formerly inventive and pioneering organizations like the aerospace giant, Boeing, have tried this top-down approach to innovation. But over time, Boeing lost their innovative edge, culture, and reputation to entirely new upstarts like Elon Musk’s SpaceX.
Boeing’s losses to SpaceX are not only embarrassing but indicative of the different leadership structures, where the mad scientist, Elon Musk, sets the agenda around radical innovation first. Boeing used to have this same pioneering drive, but then it became more of a managerial holding company.
CEOs should spend more time with the new value creation team. Why? Because that mission will need more support, defense, protection, and championing to survive the inevitable gravitation pull and resistance that established organizations exert on new ideas and risky bets on the future.
New value beats brand trust
In past eras, the concept of “brand trust” typically won out over innovative value. But consumers today don’t worry about trust as much as our parents and grandparents did. They enjoy doing research and deciding what product solutions are right for them. And they’re much more comfortable taking risks with their dollars and life—whether it be getting into a total stranger’s car (Uber) or inside a rocket designed by a new upstart (SpaceX).
Ideally, companies should aspire to have both brand trust and value, but organizations should prioritize innovative value first and brand trust second.