Is the Culture of Business Schools Bad For Brands?

As a foreigner living in the United States, I am often awe-struck by the power of the entrepreneurial spirit that seems to drive Americans. Neither the rigidity of a formal class structure nor the motivational numbing of socialism has ever gripped American culture. It is a country where patriotism is often based on pride in having invented a ‘better way’. Independence Day is celebrated because it marks the birth of a country based on an idea. Newness and originality have far more sway than rusty old traditions. The American Dream is not about a new house or two cars, it is a belief in an idea of how things could be better.

Contrast the country’s culture with the culture within US corporations. In corporate America, ideas are suspect and process is king. In fact, ideas, and the people who have them, are often considered far less important than the tests and test-givers who evaluate them. It is shocking to see companies value their quantitative testing suppliers more than the individuals who develop the ideas being tested. Somewhere along the line the power of process has become more valued than the power of originality.

This is especially evident in marketing. Over the last 30 years, the practice of marketing has become increasingly ‘scientific’. You can pay research companies to give you a quantitative (and therefore presumably ‘true’) measurement of virtually anything. Even the language of marketing has changed to reflect the logical, disciplined process that has been developed to produce brand strategy – we come to strategic conclusions rather than daring to have strategic ideas.

Business schools must be credited for creating better, more productive businesses. But marketing – brand-building in particular – fails because the culture of business schools works against the most fundamental necessity in this field: originality.

Today’s corporate managers simply do not reflect the entrepreneurial zest of their country or their predecessors, and they seem strangely impotent when it comes to innovation.

It seems odd that corporate America would have a culture quite separate and distinct from the ethos that originally created both the country and the companies themselves. Where might a process-oriented culture that celebrates the test grader over the idea generator originate?

Cultural beliefs

On my first day at business school, the dean told us we would probably have new friends when our two years were over. This was not because the camaraderie we would share as students would make our other friendships pale in comparison, but because we would think differently from here on. When someone asked us for the time, we would respond with a treatise on how to make a clock. He was really saying that our old friends would find us overly analytical, tiresome and perhaps a bit arrogant. In our glee to be accepted into a programme recognised as the best in the country, we looked on this as a good thing.

The dean’s prediction was somewhat true. We were broken down and put back together again. We came out of business school with a new way of thinking and an ability to cut through the clutter to find the important facts. We felt we could run a business in any category because the science of management applied equally well in all fields. The language of business was no longer mysterious to us and we were prepared to take on the world.

Of course, what we really learned was focused on process – a general process for solving problems and specialised processes in specific fields such as operations, finance and marketing. Overall, this set of processes, along with some fundamental principles, was called management. For all tasks, we learned the ‘correct’ process. The resulting degree of certainty this process created helped you make decisions. Much of this learning has served us – and our employers – very well. I credit my business school experience with much of my early career success – and I even managed to keep a few of my former friends.

But there was something else taking place over those two years that I believe is an unintentional outcome of a business school education. While never stated explicitly, the belief system implicit in a business-school education has a profound effect on the students. At the same time as we learned how to manage, we were absorbing a culture from the professors and academic institution. This culture had several key tenets:

1. The manager is above the ‘doer’ who has ideas.
We were not taught to be experts in any particular area, but how to manage people who were experts in particular fields. An implicit message comes across over the two formative years students spend in business school: ‘doing’ is beneath ‘managing’. If you are a good ‘doer’, you become a manager and can be free of having ideas. As a manager, you are the ‘grader’ of other people’s ideas.

2. Numbers are powerful allies.
Students become quite numerate in business school, certainly as much as necessary to prove a point about distribution or to clarify whether a company should make a particular component or buy it from a supplier. We learned that sticky, difficult tangles of information could be reformulated to make decisions obvious and smart. We held the keys to solutions that were defensible and forthright if we had clear and obvious numbers to prove our point. Management accounting was an elegant world indeed.

3. Conclusions beat ideas.
Because we relied on a series of proof points that were quantitative in nature, it seemed silly, irresponsible and immature simply to jump to an ‘idea’. In fact, a lateral step was seen as messy and confusing to your decision-making process.

4. Rigorous process reduces errors and cuts costs.
This is a fact. For example, General Electric saved billions with a process called Six Sigma. Process was made glamorous through sought-after designations such as ‘black belt’. Over time, the power of process is intoxicating, because in many areas of business it works extremely well.

None of these cultural tenets is particularly wrong. In fact, business schools must be credited for creating better, more productive businesses in many respects. But perhaps one area of business seems to suffer under these cultural tenets. Marketing – brand-building in particular – fails because the culture of business schools works against the most fundamental necessity in this field: originality.

Brand failure rates are shocking

According to a 1997 US study by Ernst & Young, there is a 67% failure rate among truly new products (meaning products that actually create a new category). New brands entering an existing category experience a 50% failure rate, but, perhaps most surprising, brand extensions suffer an 84% failure rate. To explain this high failure rate among brand extensions, Ernst & Young cited a fundamental lack of competitive differentiation (read a lack of originality in brand strategy).

The problem is not solely with new brands. The strain is evident as once great brands labour with undifferentiating brand strategies. K-Mart, Plymouth, Oldsmobile and Levi’s are all giant American brands that are in big trouble. Managers at Plymouth and Oldsmobile have marked those brands for extinction in the next few years. K-Mart recently filed for Chapter 11, and Levi’s lost nearly $2.5 billion in sales between 1996 and 2000.

Is the culture of business schools compatible with branding?

Let’s step back and consider the fundamentals of what a brand should do. It needs to touch consumers with a relevant, compelling thought about a particular product or service. It also needs to differentiate that compelling thought from all other brand choices available.

In order to develop a truly differentiating brand positioning, you need to be original. To come up with an original brand positioning idea, you need to apply creativity. That is why creativity in brand strategy is the lifeblood of branding. Brands like Saturn and Virgin forged unique positioning strategies in categories (multiple categories in the case of Virgin) that were full of undifferentiated brands before their arrival.

The great brands – those that provide superior financial return – are very relevant to their target and they have a sustainable, differentiating idea that protects them from the eroding margins of commoditisation. Apple is a great example of such a brand. It is positioned around the idea ‘Think different’, a concept extremely relevant to its target group and unique in its category. Importantly, it demonstrates this positioning in all aspects of its business – advertising, design, product capabilities, culture, and so on. It is easy to argue that the brand’s appeal has kept Apple alive in a world where the PC has become the standard platform. Last summer, BusinessWeek reported that 80% of Apple’s total value as a company could be attributed to the value of its brand.

Many brands seem to push the relevant consumer hot-buttons in their category, but they do not seem able to turn this insight into a differentiated positioning idea. The culture of American businesses makes it nearly impossible for even the best marketers to be original. Look at Surge, Coca-Cola’s caffeinated beverage for teens and young adults, which has never had a differentiated strategy. It tries to emulate Mountain Dew’s ‘extreme soda for extreme dudes’ approach, but such an undifferentiated strategy just does not cut it. Even with Coke’s distribution strength, Surge’s share is reported to be only one-seventh of what it was after launch in 1997.

Pepsi is little better. Lately it has been lauded for being ahead of Coke in the new-age juices and teas sector. But it had to buy those brands from small companies such as SoBe that were not driven by business-school culture and were able to invent new, meaningful brands and products.

The quantitative trap

Professor Robert Sutton of Stanford University wrote in the September 2001 issue of Harvard Business Review: ‘Organizations use all sorts of methods, such as “gates” in the product development process, to try to improve their odds of success. But there is little evidence that such practices actually reduce the proportion of flops.’ While he was referring to product development, the same problem applies to brand strategy development. Yet we keep using these quantitative processes because a belief in process is baked into the culture of business schools, and therefore the management at most big corporations. Here we have an example of how the subconscious belief system picked up in business school is actually overriding empirical evidence about these processes’ lack of success.

Apple is positioned around the idea ‘Think different’, a concept extremely relevant to its target group and unique in its category. It is easy to argue that the brand’s appeal has kept Apple alive in a world where the PC has become the standard platform.

Original ideas and quantitative testing do not usually mix well. Studies done by psychologists such as Robert Zajonc at Stanford show that on initial exposure, rare and unfamiliar things provoke negative evaluations – simply because they are rare and unfamiliar. Conversely, the more often you show someone something unfamiliar, the more he or she will like it. This principle is hard to work into any kind of quantitative testing methodology, so this important fact of human psychology is largely ignored as an inconvenience to our ‘scientific method’. Unsurprisingly, many original strategic ideas fail to survive quantitative tests simply because they are original.

Consider the implications. We know original brand positioning is vital to long-term success, but we use testing methodologies that systematically kill off all the original ideas! The best-case scenario becomes a small, incremental improvement in a brand (or a mildly successful new brand), not the exponential change possible when a truly original, differentiating brand strategy is in place. When using these tests, managers find themselves in an uncomfortably familiar (though statistically defensible) position in which they must ask designers and agency creatives to differentiate an unoriginal strategy through execution. But if their fundamental brand premise – the positioning – is not original, then an ad that reflects that positioning is not likely to be original or differentiating either.

Logic vs. cultural beliefs

Obviously, there is no reason to throw out all the discipline of good marketing thinking. However, as we have discussed, if you integrate more creative thinking into a disciplined process, your chances of success dramatically improve. Strategic brand thinkers need a rallying cry to take back the creative high ground that marketing once held in organisations. They need to fight the cultural forces that are unconsciously killing brands.

For years, articulate arguments (most of them British) have been put forward to demonstrate the pitfalls of using black-box testing and rigid processes for developing brand strategy. Yet they are marginalised or ignored in the USA. I used to think that giving someone a copy of Hedges’ Testing to Destructionor one of Paul Feldwick’s articles would alter a lot of fruitless behaviour. It was as if the piece were written in a foreign language, since it did not work within the cultural belief system held by the reader.

We have been fighting the wrong enemy. No amount of logic or empirical proof about the pitfalls of rigid processes and quantitative testing will change American business culture (whether you encounter it in the USA or the UK). It is the source of this culture that needs to be addressed. Enlightened business schools need to change the implicit cultural messages they send to students. While process is powerful and useful, more respect needs to be engendered for originality and ideas.

Perhaps branding, because of its unique nature, needs to become a unique area of study with different rules. Most US business schools do not even have a separate courseon brand theory.

Business schools are not going away, nor should they. But great brand strategy requires a great idea, not just a logical conclusion. US business culture must let brand strategists get back into the game. As Dean Stanley Teele of Harvard Business School was quoted as saying: ‘The art of management is the art of making meaningful generalisations out of inadequate facts.’ So true.

Developed from a presentation given at Richmond Event’s American Marketing Forum, May 2002.