AT&T: Lessons from the Crypt #8: The Brand Bank

Old corporations that want to survive in new times need to use capital in their brand bank at least as efficiently as they use their balance sheet assets.  Even new corporations need to respect their brand banks once they have them.

A lot of the lessons I learned at AT&T and have blogged about are negative – what not to do.  But I learned lots of good stuff there as well.  Probably most important was the concept of a brand bank and how to use it.

The concept is simple enough: the recognition and reputation of a brand are assets.  These assets can be an essential advantage in launching a new product or service.  Not so clear but equally important: each proposed product which is going to borrow from the brand bank needs to be able to project how it will eventually repay the brand bank with interest. 

Products shouldn’t be launched if they will only draw down on the brand bank just as they shouldn’t be launched unless there is a prospect of them eventually repaying the cash that goes into them plus a profit.  Products which don’t meet brand expectations or look like they are going to damage the brand should be killed just as those which disappoint profitability expectations.

I touched briefly on AT&T WorldNet Service – AT&T’s first ISP – and the brand bank in a recent post here.  As we drew close to the release of WorldNet, many people worried legitimately that it would damage the brand – in other words, draw down too much from the brand bank.  “The brand stands for six nines of reliability,” they said.  “Internet service is just not that reliable yet.”

“True,” I had to concede. “We’ll be lucky to deliver one nine of reliability.” But I argued that the brand stood for something else: it stood for delivering the best possible communication services to our customers AND for delivering them the services they needed.  It stood for a certainty that they would be told the truth about the services they were getting.  It stood for excellent customer service.

In practice this meant that we had to deliver the best available Internet service but didn’t mean we had to deliver service as reliable as the dial tone.  It meant that we had to be honest and not CLAIM that this service was going to be as reliable as AT&T long distance; an unfounded claim like this WOULD damage the brand.  We had to overstaff customer support so that wait times were no longer than for phone service support – certainly not the half hour or more that AOL (then sometimes known as America-on-hold) was providing.  It meant we had to over-provision PoPs and come up with a load-sharing scheme so our customers were not plagued by busy signals during busy hour.

In the end, after insisting that we be very specific about the metrics for good customer service and have ways to measure what we were providing, the powers-that-were at AT&T decided that this was a risk worth taking with the assets of the brand bank.  Our promise to repay was that we would keep the brand relevant as the world moved to the Internet.  Again to the credit of AT&T management, they realized that this was a addition to the brand bank worth taking some risks in order to obtain.  Of course, we had a business case that showed how we would repay the dollars invested in us; but we couldn’t go ahead until we showed that we would use brand assets well and earn a “profit” on them as well.

Especially in times of rapid change, you can’t hide brand assets under a bushel basket any more than you can afford to let stockholder capital languish unproductively.  Cash can be distributed to shareholders if there’s no better use for it.  Brands will die if they’re not refreshed.  Have you bought a Buick lately?

But brand can’t be invested promiscuously either.  AT&T tried to invest its brand in content.  Didn’t work because the brand, credible as it was for communication services, was not credible for content.  Waste of brand equity.

The AT&T brand had a great reputation for integrity; much (not all) of this was eventually squandered as it became clear that the most long term and loyal customers were overcharged the most.  Those who switched to carriers with better rates were offered cash incentives AND lower rates if they would only come back.  Those who never questioned their rates just got screwed.

AT&T was a great brand.  Much of the reason it was is that there were people at AT&T who knew how to invest the assets of the brand bank to build brand equity.

Lesson from the Crypt #1 is don’t manage for quarterly results.

Lesson from the Crypt #2 is you can’t innovate flawlessly.

Lesson from the Crypt #3 is vertical integration doesn’t work anymore.

Lesson from the Crypt #4 is don’t send your losers to heaven.

Lesson from the Crypt #5 is navel gazing is a bad culture.

Lesson from the Crypt #4 (sic) is the emasculation of Golden Boy (yeah – I know – I recycled the number).

Lesson from the Crypt #7 is don’t outsource thinking.

Comments

[Tom Evslin]

Mr. Floyd:

Most of WorldNet was homegrown but I don't think that had any effect one way or the other on the brand bank. Eventually the insistance on doing everything with AT&T resources hurt the service and didn't help the brand. We should've used outsourced PoPs from UUNET but weren't "allowed" to.

I think the brand is helped by whatever mix of inside and outside results in the best product. However, if the product has a fault, the brand can't escape blame by pointing to a supplier.

[Mr. Floyd]

Tom,

I have a question for you, although it may spawn a separate post.

Was WolrdNet "homegrown", or were elements of it purchased, much like the delicious / Yahoo union you've blogged about? Or, in the old days, was everyting internal prior to being rolled out, and are acquisitions a new liablity to a brand's bank?

How much of an impact does homegrown have on the bank, compared with acquisitions?