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Family Business Brands

Patrick StalSenior Consultant

Interbrand

Throughout history, family businesses have played a significant role in shaping the commercial offer

of markets across the world. Globally, 60 to 95 percent of businesses are family businesses; there are but few regions in the world where this statistic is as high as in the Arab world where, for example, research has shown that over 90 percent of all commercial activity in the GCC is estimated to be controlled by family businesses. Family businesses, are the driving factor behind most Arabian economies and account for a large portion of the brands from which consumers choose. In this article, Patrick Stal, Senior Consultant at Interbrand, discusses the particularities of family business brands and sets benchmarks through those that have failed and those that made it and became integral parts of our lives.

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Family businesses are not like other businesses; anyone who has ever worked with, or for, a family business will know that there are unique forces at play. It is a unique environment that has benefits and pitfalls all of its own.

Family business brands face challenges of their own that, if not addressed, could create a critical competitive disadvantage. Remember the catastrophic demise of Gucci in the 1970’s and 1980’s, the recent floating of Hyatt hotels that was rumored to have resulted from a family feud within the Pritzker family, or the widely publicized family feuds within the C&A owner family?

Mohammed A.J. Al Fahim, honorary chairman of the UAE’s Al Fahim Group, stated in 2007 that “Increasingly, family businesses will have the opportunity

to take a larger share of commercial business, and we need to be prepared to react quickly and effectively.” Part of this preparation is a thorough

understanding of what it takes to create and manage strong brands that leverage and protect the “family factor”.

Unfortunately, the role of branding

within family businesses has been chronically under-examined. By their nature, family business brands are less media-savvy and often don’t publicly reveal results or inner workings, making them harder to study. But considering the importance they play in shaping our economies—and specifically in shaping the commercial playing field in which all brands compete—brand owners should be eager to learn from them.

Family Businesses and Branding in Arabia

Numerous globally recognised and respected brands have come out of Arabia in the past 10-20 years. Besides the internationally renowned airline brands such as Quatar Airways, Emirates, and Etihad, brands such as Jumeira, Aramex, Aramco, Al Futtaim, Al Jazeera, Emaar, Orascom, Etisalat,

On the other hand, many international brands can attribute their success in the region to being linked to a family business that is held in high esteem by the community.

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and others have become symbols of quality, dedication and stability from and for the region.

As has happened elsewhere, many of the brands that are currently leading within Arabia and beyond, have made a steady progression from being a seal of quality, to delivering a consistent experience across all touch points with their clients. As consumers across Arabia are adjusting to increasing purchasing power and breadth of choice, we are seeing that behind many of the most successful brands can be found a family business.

Interestingly, we can identify some unique factors and models across family owned businesses in Arabia. Many of the most successful Arab family businesses are characterised by some of the following traits:

• Deeply rooted in their communities.

• Oriented towards longevity and cross-generation survival.

• Extreme reputational awareness; family members are aware that they represent the name of their business whether they are active within it or not.

• Strong and active management of goodwill.

• Defined involvement in the business by large portions of the family; a sense of common dedication and commitment and a family structure often reflected in the business structure.

These traits are reflected among family businesses outside of Arabia and some of them can be both an advantage and a curse.

Many of the larger Arab family businesses, especially in the Gulf, began their operations as agents or joint ventures with Western brands. This dynamic has brought a steep learning curve in branding practices to Arabia.

Arab families were able to apply the lessons learned from Western brands to their family holding brands. They have been able to transfer important equities from the brands they host to their family brand (leadership, quality, innovation, etc.). On the other hand, many international brands can attribute their success in the region to being linked to a family business that is held in high esteem by the community. Across the Arab world we can find holding brands

that carry the family name, which provides the quality guarantee of the brands they own across the region (eg. Al Futtaim (UAE), Nasser Bin Khaled (Qatar), Kanoo Group (Bahrain)).

Besides the agent model mentioned above, a large proportion of strong Arab family businesses were born out of the trader history of the region. These businesses have traditionally been more focused on business-to-business activities and currently run extensive industrial conglomerates. These families are building powerful businesses but have not always had the benefit of the branding lessons from close alliances to Western brands mandating certain practices. Though they have traditionally performed well, these family businesses will need to further develop towards expertly managing their family business brand in the future.

For both these general models, as well as a myriad of other models of family businesses across Arabia, we here illustrate some of the most important branding learnings and best practices from across the world, applied specifically to family businesses.

Branding Best PracticesWhile branding is a complex science,

there are key lessons that can be

As consumers across Arabia are adjusting to increasing purchasing power and breadth of choice, we are seeing that behind many of the most successful brands can be found a family business.

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learned from some of the world’s leading brands. Below are some factors to consider.

• Strong brands have a clear purpose or reason for being. This clear purpose acts to differentiate them from the other brands and creates a sense of authenticity about the brand. Often, a brand’s internal core purpose is not widely published, but drives business success on a daily basis. Nike and their brand idea of “winning” is a great example. This idea is brought to life via the “Just Do It” tagline, and serves as a powerful umbrella concept extending

through every product and service that the brand creates.

• Leading brands know their customers and endeavor to stay relevant. Strong brands show a level of devotion to customer insights that is elevated in comparison to their competitors. Philips and their focus on continuous customer insights and brand tracking to ensure that “Sense and Simplicity” stays relevant across a multitude of products and regions is a great example of this.• The best brands are consistent in the way they present themselves. They deliver a brand experience that

meaningfully communicates what the brand is about, over and over across various touch points. A great example is the Apple brand; Apple has become so consistent that products no longer need to carry the iconic logo to be recognised by consumers. All experiences with and touch points of the brand are consistent, and new product innovations carry forward the core mission of the company.

• Leading brands include their employees as a means to deliver the brand. Besides family members being ambassadors of their business,

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strong brands spend significant effort to ensure their employees are truly brand ambassadors when dealing with customers. Nordstrom’s, the leading luxury department store in the US, is a good example of this. Employees

are brand ambassadors, empowered to take any means necessary to deliver on customer demands and the brand’s core value of providing outstanding customer service.

• Yesterday’s leading brands have remained the leading brands of today by being prepared to lead and evolve. McDonalds’ move from a brand that was all about size and prize to a brand that is all about fun, creating room for celebrating life, youth, and health, is a prime example of a brand that has successfully been able to lead and evolve.

Passion for a Core IdeaMost family brands are lucky enough

to be conceived out of a passion for a core idea. A patriarch, who has a supreme vision of what the company can be to whom, where, and why, often drives a family business’ success.

Henkel, the iconic German family business brand thrives on being a “leader with brands and technologies that make people’s lives easier, better, and more beautiful.” This core idea has remained central to the company

for over 133 years, since Fritz Henkel founded the company in 1876 with the idea of creating products that made peoples lives “simpler and easier.” As exemplified by Henkel, family businesses are at an advantage in that they can naturally bring authenticity to brand ideas. This can help differentiate them from competitors.

Stay in Touch with Customers - Ensure Relevance

Even before the birth of advanced research and brand analytics, family business brands have been renowned for truly knowing their customers. A unique level of involvement and commitment by family members characterises and structures family businesses. As maintaining the business by satisfying customers is a matter of personal pride and family responsibility, great attention is paid to getting it right.

Mars is a family business that has

As maintaining the business by satisfying customers is a matter of personal pride and family responsibility, great attention is paid to getting it right.

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On the other hand, many international brands can attribute their success in the region to being linked to a family business that is held in high esteem by the community.

prioritised customer focus. A core principle within Mars is “Mutuality”—creating mutually beneficial relationships with all stakeholders, especially customers. By integrating this idea into the corporate philosophy, Mars ensures that the focus on mutually beneficial relationships, and what it takes to remain relevant, is never lost.

And yet, just as the passion behind family businesses can be an asset, it can also become an obstacle; the focus lies on emotional relationships

between family members rather than the customers. Remember when Gucci was still a family business? The Gucci brothers, Rodolfo and Aldo, each owned 50 percent, but their personal rivalry detrimentally impacted how the business was managed. Under their tenure, the Gucci brand idea was neglected and the real needs of luxury customers ignored. The brand was used to produce an array of questionable products. It took the purchase by

an external company and years of dedicated re-positioning by Tom Ford and Domenico de Sole to get the brand back on track.

ConsistencyRather than being governed by

reporting deadlines or shareholder pressure (as is the case with many brands), family business brands are managed by the accountability towards generations. This unique long-term perspective sets the stage for family businesses to focus on brand consistency.

There are several family brands that provide a benchmark for consistency. Chanel might just be one of the more emblematic examples: The brand has always been a family business, controlled by the Wertheimer family. Though Coco Chanel has consistently been the brand’s illustrative icon, it is through the consistent family ownership that the brand has been able to continue to steer its course.

Barilla is another good example of a consistent global family business: After 130 years in business, the current, fourth-generation leadership is maintaining the tradition of the original

family brand, which has now grown to be the leading Italian food group and international market leader for wheat products. Most of us know the brand through their renowned pasta products in blue cartons.

Though the company currently employs over 18,000 employees and creates over € 4,2 billion in revenues, it does so in products that are all related to the original brand’s purpose. The visual identity of the brand has also stayed surprisingly consistent over the years, communicating core values and building equity over time.

Include EmployeesFamily business brands are at a

particular advantage in terms of engaging and including employees. They naturally enjoy a situation where family members often serve as exemplary brand ambassadors. Yes, they often stand apart and/or above the rest of the business, but more often than not, employees look to them for guidance on how to behave and what is

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expected of them. As a family member your actions within and outside the business reflect on the business. For employees it is important that they know how they can be ambassadors for their business.

In the Arab world, family businesses are often significant job creators within their community. For consumers a strong symbolic value is often attached to the family leadership.

Though patriarchs, and active family members throughout the business, can create a strong sense of engagement, the family factor also presents family brands with a unique challenge: nepotism. Because family businesses are intended to span generations, employees are at danger of feeling that the top is unattainable and that the success of their brand is not in their hands. Family businesses need to actively manage the career paths of family members to reduce employee disengagement due to perceived nepotism. Expectations among family members, and employees, have to be perfectly clear - if a family member is being prepared for a leadership role, employees need to know - and active family members need to prove themselves more than other employees at their respective levels. We have often heard family members say: “I was made an example of, had to work harder, and go farther to prove to myself, the family, and

our employees that I earned the leadership position”.

Succession issues are a threat to any family business, and their brand. Clarity is crucial, and in some instances tough decisions to not allow family members into leadership positions might need to be taken to ensure that employees remain engaged and involved.

A strong global brand widely recognised as best in class in regards to employee engagement is IKEA. Though not many people know it, IKEA is a family owned company. It remains, indirectly, in the hands of the Kamprad family. Ingvar Kamprad, the original founder, remains intimately involved, visiting stores and facilitating employee engagement with the IKEA brand.

In addition, to personal family involvement, IKEA invests significant time and resources to training its employees throughout the world in everything from discovering the IKEA concept and “the IKEA way” to IKEA store design architecture and in-store logistics. In doing so, it not only includes employees in the culture, but also enables them to be pro-active brand ambassadors.

Be Prepared to Lead and EvolvePerhaps the most difficult challenge

for family businesses is learning to evolve effectively. The paradox is that

what often makes family businesses strong (e.g. heritage, supreme vision, and personal involvement of family members) can also contribute to a certain level of inflexibility. Family businesses brands are often emotionally charged and intertwined with the family heritage. Because of this, emotional decision-making can happen, out of misguided motivation (e.g. good for the family name but not the business brand) or sometimes, evolutionary decisions are not taken at all.

In the Arab world, this may well be one of the most important factors for family owned businesses. The economic crisis has had an impact

on the region and businesses have to be nimble in adjusting to new economic realities. Customers are adjusting to a wider range of choice as low-cost alternatives are entering markets, and existing brands will have to fight to maintain competitive positions. It is now more important than ever for family businesses to identify what equities their brands own, and what strategies they must employ to compete effectively in the future. Some of these decisions may be tough to make, but if taken with

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the right level of insight, they will guarantee the businesses’ success.

Family businesses must leverage insights and find tools to take brand decisions. Tools such as brand valuation, value driver analysis, “role of family” analysis, along with brand positioning and strategy investigation, can help a family take much needed decisions to continue to lead and evolve the brand into the future for the next generation.

A Potential Competitive Advantage: The “Family Factor”

By their nature, family businesses have something that other operations do not have – the “family factor.” Whether based on heritage, celebrity, a promise of quality, or longevity, it is of the utmost importance to know the role that the family plays in the value-generating activities of the brand in order to optimise value.

While the “role of brand” metric informs on brand valuation, for family businesses a “role of family” factor should be considered. This means identifying what values the “family factor” can contribute and with what values the family aspect is currently associated. With complete insight into these factors, a family business can intelligently decide on how the family structure can be used to best drive value for the brand.

For example, as trust has recently deteriorated in global banking

sectors, the role of family may have just grown within private banking. In this business, family assurances to clients can have a significant impact on the customer’s sense of security and trust.

In Summary, Key Steps for (Family) Brands Include:

1. Define a clear, core idea for the brand, and document it in an inspiring and instantly understandable way. It may have been out there for generations already, but it is important to ensure that the idea, the internal passion, and external benefits that spring from it, are clear internally and externally. This will ensure that the core idea will last beyond current generations.

2. Ensure that the needs of the customer, not the inter-relationships of the family, are the focus. Temper “gut feel” decision making with fact-based insights.

3. Express the brand consistently. Protect it from misuse, but also consider that quick, responsive actions may sometimes be required.

4. Leverage the deep feelings of family members to set the tone for how employees should bring the brand to life. Invest in employees and enable them to be brand ambassadors too.

5. Leverage the “family factor.”

Understand how family fits into the overall proposition and can best be leveraged to drive the value of the brand.

For family businesses, these are five key things to keep in mind while managing for the future of the brand. While not a generation worth of plans, these actions can help ensure that the brand will still be around for the next generation to manage, and that the next generation will continue to add value.

Strong family business brands resemble other strong brands across the world. They compete in the same market and because this is the case, family business brands should have the same tools and processes at their disposal as other leading brands. Although they may be uniquely structured to deliver stronger brands, they often leave value on the table by letting emotion lead over fact, and not being organised to create change when it is truly needed.

Across Arabia family businesses represent such a critical amount of the commercial activity that the region needs to focus on family business branding. The family factor, for many businesses, has long been communicated with sub-brands. Gaining further insights into the dynamics of the family factor will enable nimbler and better decision making to guarantee the business will continue to compete across future generations.