Global 2015: CATEGORIES | TECHNOLOGY // CONSUMER & BUSINESS
DEFINITION: The technology category includes business-to-consumer and business-to-business providers of hardware, software, portals, consultation and social media platforms. The diversity of the technology category reflects the convergence occurring as brands develop integrated systems of products and services.
TECHNOLOGY // CONSUMER
Monetizing keeps investors happy
With a 24 percent rise in value, technology tied with retail as the fastest growing category in the BrandZTM Top 100 Most Valuable Global Brands 2015 report.
Brands sought a delicate balance between satisfying customers with new products, services, and mobile apps, and satisfying Wall Street by monetizing their offerings. In a competitive and volatile category, brand became even more important to reassure customers and inspire loyalty.
On the strength of the iPhone 6, Apple returned to first place in the BrandZTM Top 100 Most Valuable Global Brands in 2015. The numbers spoke volumes, literally. For its first quarter, Apple reported profits of $18 billion, the best performance of any company ever, driven by sales of almost 75 million iPhones.
The success of iPhone 6 and iPhone 6 Plus mirrored the decline in the rate of tablet sales, suggesting that tablets are being squeezed, as consumers increasingly use large-screen phones for mobile computing needs.
Apple, the world’s most valuable brand as well as its largest company by market capitalization, became part of the Dow Jones Industrial Average, an achievement that recognized both Apple’s success and the impact of technology brands generally.
In addition, Chinese technology brands increased in brand value, despite the slowdown of China’s economy. Telecom equipment provider and mobile phone maker Huawei entered the BrandZTM technology ranking for the first time. With the record IPO of Alibaba (please see the retail category story), the impact of Chinese brands became even more apparent in the West.
Slight rankings shifts
Google dropped to second place in the BrandZTM technology ranking, as heavy investment spending increased costs and revenue slowed, in part because of the strong dollar.
Microsoft rose one slot, to third place, on the strength of three things: a shift in focus to the cloud, a more collaborative corporate philosophy, and an aura of optimism surrounding the installation of a new CEO. (Please see the B2B story.)
Number five in the BrandZTM technology ranking is the Internet portal Tencent. Often compared with Facebook, Tencent became China’s most valuable brand. Baidu, China’s leading search engine, grew 35 percent in Brand Value, while for the first time, Chinese consumers conducted the majority of their Internet searches on mobile devices.
In sixth place, Facebook almost doubled in Brand Value. It acquired WhatsApp and continued to monetize its audience, successfully increasing revenue from mobile advertising sales. Although membership growth slowed, the user base of about 1.4 billion, plus the users of WhatsApp, Instagram and Messenger, kept the brand relevant to a younger audience.
The iPhone success, paired with the related rollout of Apple Pay and the subsequent launch of Apple Watch, quieted the debate about whether Tim Cook could sustain the Apple of Steve Jobs’ eye.
In a separate and portentous move, Apple collaborated with IBM, opening up an enormous opportunity to sell its phones, laptops and other devices to businesses without having to create its own enterprise sales force.
Having always sold premium products, Apple became more explicit about its luxury positioning with the introduction of the Apple Watch, and announced plans to refurbish Apple stores with sales counters and displays suggesting department store exclusivity.
At the same time, premium positioning also presented Apple with one of its fundamental competitive challenges, as Chinese brands such as Huawei and Xiaomi and Indian makers like Micromax offered quality smart phones at much lower prices.
Apple’s Brand P ower remained a major advantage. Consumers were drawn both to the efficacy, ease of use and design of Apple products, and to the allure of the brand itself.
Google positions for future
Based on its advantages in consumer data and analytics, Google also pursued business-to-business initiatives. In addition, the brand continued to develop a driverless car and Google Fiber, while pausing its Google Glass effort.
The company announced that it would create its own Google-branded telecom network for its Nexus phones, using third- party Wi-Fi capacity from T-Mobile and Sprint. The deal followed by about a year Google’s purchase of Nest Labs, makers of thermostats and other devices that learn to predict settings based on consumer use.
These initiatives positioned Google for the emergence of the connected home, as a brand that owns the portals that distribute data and the devices that collect and analyze it.
In a synergistic way, this information about how people live in their homes could
help Google’s online advertising business, enabling the brand to further personalize messages.
Samsung was also well positioned to benefit from the connected home and the Internet of Things because of its broad product range, which includes mobile devices as well as TVs, refrigerators and other appliances.
Samsung introduced its Galaxy S6 smartphone with a curved screen to compete with the iPhone 6. It followed the S5, which received a mild reception from consumers and Samsung found itself competing both with Apple at the premium end and the price-driven brands like China’s Xiaomi.
Amidst the rapidity of change, young brands such as Instagram, Snapchat and Tumblr challenged relatively youthful brands like Facebook; Facebook met this threat by acquiring Instagram and WhatsApp. In another effort to engage young users, Facebook enabled developers to create clever apps for using photos, video and audio.
Twitter ended 2014 with 288 million users as user growth slowed, but revenue growth increased. With around 330 million users worldwide, LinkedIn continue to exceed revenue and profit projections.
TECHNOLOGY // BUSINESS
Business-to-business brands reinvent, reorganize, and begin to recover
Cloud transition continues but shows results
Business-to-business technology brands showed financial improvement following several years of playing catch-up, transitioning enormous, complicated global enterprises to the cloud from business models based on hardware and devices.
Many of the initiatives seemed more iterative than innovative, but they were part of a long-term business reinvention process that included workforce reduction. Brands competed fiercely on price but also collaborated when necessary, sometimes blurring the boundary between consumer and business.
These efforts to reposition companies for the cloud and restore sustainable growth helped drive sharp rises in value for some brands, with Intel up 58 percent, Microsoft up 28 percent, and HP up 18 percent.
Intel’s chip business had weakened with the decline of the PC market. Regardless of this, their share price recovered sharply with strong sales of server and PC chips. Cloud providers, which are a growing Intel revenue stream, may have driven server chip demand. Intel also developed chips for mobile phones and focused attention on the emerging Internet of Things.
The Microsoft improvement reflected a change in leadership, corporate culture and business model. In a dramatic effort to sharpen focus, HP split the company into two new public corporations - one focused on the cloud and infrastructure, the other on devices.
Two brands entered the BrandZTM Technology Top 10: Huawei, the Chinese telecom equipment provider and mobile phone producer, and Adobe. A maker
of graphic design software and a digital advertising solutions provider, Adobe rejoined the Global Top 100, having ranked in the Technology Top 10 in 2008.
Huawei enjoyed strong profit growth as it continued to provide economical telecom solutions to governments and enterprises around the world. Adobe boosted profits
by providing cloud subscriber-based digital marketing solutions, from design to channel optimization.
Culture change brightens brand
Microsoft announced plans to distribute the next version of its Windows 10 as a free upgrade for the first year to people who already own Windows. The initiative ensures a high adoption rate and the Microsoft brand looks more generous.
Microsoft also made other free software available and released Windows for iOS, the Apple operating system. These initiatives depended on having desirable products, cultivating customer relationships, and then finding opportunities to sell customers more premium products to improve their businesses or enrich their lives.
This business model may not seem radical, but it is a departure from Microsoft’s former culture, which was more sales driven and protective. It is indicative of the company's more flexible and collaborative approach under its new CEO.
Microsoft’s initiatives reflect a wider B2B trend, as customers chose to pay to use a technology product, rather than pay to own it. SAP, for example, took a major step in its transition to the cloud from its business model of earning revenue from long-term licenses for software.
SAP introduced redesigned software for managing management functions, like finance and logistics, in real time. Called S/4 HANA, the software can be installed on client computers, or it can be accessed from the cloud, or used in a hybrid of both options.
Oracle also continued its transition to the cloud with the purchase of TOA Technologies, and the company introduced a server designed for compatibility with
its software, but at a competitive price. Cisco's rebound was based on its switching business, which drives almost one-third of the company’s revenue. (Switches are the hardware devices that connect devices to a network.)
Cisco’s share price improved based on the company’s business evolution and the perception that the brand is well positioned as a provider of network and Internet infrastructure as enterprises transition to the cloud and the Internet of Things. Cisco collaborated with many companies, including Microsoft, on a cloud project.
As part of a five-year turnaround effort, HP split the company into two businesses. One of the new businesses, Hewlett-Packard Enterprise, will focus on some of the growth areas of B2B technology, including: cloud, big data, security and mobility.
The other business, HP Inc., will leverage the company’s traditional manufacturing strengths, in PCs and printers for example, to develop business in related emerging technologies such as 3D printing.
By splitting the company into two brands, HP intends to compete with more agility and sharper focus. Hewlett-Packard Enterprise primarily will be a B2B brand, facing competitors such as IBM and Oracle, while HP Inc. is more consumer focused.
Both companies will operate with a “Playing to Win” strategy adapted from P&G, in which the companies compete only with the products and in the markets where they’re well positioned to succeed.
IBM links with Apple
IBM announced massive investment in cloud, analytics, mobile, social and security technology. It made several important acquisitions, and as part of its shift to the cloud, sold its mainframe business to Lenovo. Revenue from new businesses increased substantially, but during this transition, not surprisingly, net income declined for 2014.
IBM entered a partnership with Apple. The linkage of these two iconic brands enables IBM to design business applications for Apple devices. Apple gains a strong inroad into B2B and an opportunity to sell more devices.
Apple is not the only consumer-facing brand active in B2B. Businesses look to Google for analytics. Using Gmail or Google Analytics
is free or less expensive than a package of solutions from a traditional B2B brand. Using Google also creates seamlessness between the technology used at work and home.
Amazon leveraged the enormous computing power used for its online retail business to provide cloud services for business. Chinese e-commerce leader Alibaba opened a data center in the US that will provide B2B cloud services. Both Amazon and Alibaba appear in the BrandZTM retail category.
BRAND BUILDING ACTION POINTS
1. Focus on consumer needs and wants. Technology is most successful when it enhances outcomes rather than trying to change consumer behavior; when it makes our everyday activities faster, smarter, bigger, more enjoyable or immersive.
2. Make yourself as agile as possible. You’ll need to react faster than ever to remain competitive. Ensure you offer routes into your brand that are channel- and platform-agnostic. Make it easy for consumers to research you, find you, try you and buy you.
3. Work harder to create an ongoing dialogue with your customers. Give them plenty of reasons to stay with you, and to repurchase, renew and upgrade.
4. Give customers reasons to say positive things about you. Enable them to co-create solutions with
you for new products, renewed products or improved approaches for interaction of brand and consumer.
Being different drives value
The technology category was a primary driver of the BrandZTM Global Top 100 Brand Value rise over the past 10 years. Technology grew 175 percent in Brand Value, compared with 126 percent for the Top 100 brands over all.
Technology brands comprise almost one-third of the total value of the BrandZ Top 100 Most Valuable Brands in 2015, compared with one-fourth of the value 10 years ago. The average value of a technology brand is $57 billion, about twice the $27 billion average value of a non-technology brand.
Business-to-consumer brands grew 328 percent in Brand Value, while business- to-business brands grew 81 percent. Brand churn, with the entrance of new, high-value consumer brands, explains the contrast in growth rates. Brand churn also points to the need to constantly innovate to remain a contender in the technology category.
These six business-to-consumer brands from the BrandZTM 2015 technology ranking are new since 2006: Facebook, Twitter and LinkedIn, along with Chinese entrants Tencent, Baidu and Huawei.
No new business-to-business brands appeared in the ranking, but a few dropped out.
Differentiation was a key growth factor. Apple, which had promoted the brand with the phrase “Think Different,” substantially increased its Difference score over the past 10 years, when its innovations included smart phones and tablets. Google’s Difference
score declined slightly; apparently the brand’s innovations aren’t as obvious to consumers.
It is no coincidence that the two brands rated highest on Different, Apple and Facebook, are also the brands that have seen the greatest increases in Brand Value, not only in 2015 but since the beginning of the BrandZ Top 100 Ranking.
Differentiation is a key value driver
Apple substantially increased its Difference score over the past 10 years, when its innovations included smart phones and tablets. Google’s difference score declined slightly. The brand’s innovations aren’t as obvious to consumers.