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Why Brand Matters in Health Care

by Nancy Koehn, Historian at Harvard Business School and James E. Robison chair of Business Administration

Apple CEO Tim Cook recently came to Capitol Hill to defend his company against charges of tax avoidance. At stake was more than a whopping potential tax bill for the electronics manufacturer; the Apple brand, the most valuable in the world, was also at risk. In an age of both informed, empowered consumers and increasing competition, no company can afford to have its brand tarnished by questionable business practices—be they shoddy accounting, labor conditions, environmental management or customer relations.

According to a recent ranking of the world’s most valuable brands, Apple’s brand value is $185 billion; Google’s brand value is second at $113 billion; and at $112 billion, the IBM brand is close behind. Also included in the top 50 of the world’s most valuable brands were companies such as McDonald’s, Visa, Starbucks, Mercedes, SAP, ExxonMobil, and Hermes. (There were no health care brands in the top 50.)

How can a brand be worth $24 billion (BMW at #24), or $75 billion (AT&T, #6) or $185 billion? What constitutes such value and why should any of this matter to the leaders of hospitals and health systems?

To think about these questions, let’s consider what a brand is. Although as consumers, we tend to think about brands as symbols like the Nike swoosh or McDonald’s golden arches, the working definition of a brand is broader. A brand is usually defined as a name, logo, symbol, words, or combination of these, intended to distinguish a particular company’s offerings from those of competitors. (In this sense, the modern use of the word “brand” harkens back to its older meaning—a distinguishing mark or burn to identify wine, livestock or other commodities by their owner.)

Great brands—Apple, Samsung, Disney, Gillette, American Express—command awareness, esteem, and loyalty from consumers, employees and other stakeholders. Strong, relevant identities for specific branded offerings—including experiences—enhance a firm’s profitability (think about how an iPhone is priced relative to other smartphones) and influence the terms of competition its industry. Powerful brands also greatly facilitate the introduction of additional products and services—Starbucks’ Frappuccino, Pumpkin Spice Latte, Caramel Macchiato and so on.

As important, world-class brands serve as ballasts in turbulent times. In periods of rapid-fire change and proliferating choice, they guide consumers to consistent performers—institutions that deliver on their promises to customers over and over again. In moments of economic contraction, trusted brands—especially those that respond to changing consumer priorities—recover quickly and help sustain customer loyalty.

Strong brands can play such important roles, including creating strategic and thus financial value, because they serve as critical relationships between institutions and their stakeholders. To appreciate this more fully, consider one of your own favorite brands—Singapore Airlines, Audi, or Twitter, for example—and how your assessment of the brand and its products changes depending on a particular experience. Then consider how this assessment affects your behavior. If you had a lousy service experience at your Audi dealer, for instance, how likely are you to recommend the brand to a friend who is car shopping?

Suppose your experience as a business traveler staying at Ritz-Carlton hotels has been consistently first-rate, how willing are you to consider taking your family on vacation to one of the company’s resorts? (And the answer is more willing, by some measure, than if you had not already had such good experiences at these hotels). Or, to take a different tack, how likely is your daughter or son to apply for a job at Whole Foods, given their own knowledge of and experience with the food retailer? (Don’t forget that brands play key roles in attracting—or turning away—talent). As in all relationships, how the various parties interact around a particular brand in a given moment affects what they do—and thus the connection itself—going forward.

As health care leaders, you know most, if not all, of this about brands. You recognize the value of great brands in this sector such as the Cleveland Clinic, Kaiser Permanente, or Mayo Clinic. At some point, you may even have embarked on a campaign to burnish the image and patient awareness of your practice, only to find these efforts peter out before achieving their intended results. You can appreciate brands and their potential power and yet, chances are, you are not doing much about this in your own day-to-day work as a leader. Other, seemingly more urgent, important issues tend to crowd out sustained attention to brand building and management.

This is unfortunate because the changes happening in health care today will put a new premium on strong, trusted brands. As payment models shift to fee-for-value from fee-for-service, patients and referring clinicians are increasingly motivated to shop for quality care at the most affordable cost. The government is demanding and patients are expecting new levels of transparency in these areas. Hospitals are advertising their quality rankings and patient satisfaction scores on NPR and in local papers, in an effort to differentiate themselves in competitive markets. Against this changing landscape, the creation and curation of your institution’s brand must be a central component of your ongoing strategy.

A strategically powerful brand, carefully managed, exerts real, positive impact on many aspects of organizational performance—from employee motivation (no surprise, employees that work for companies with strong brands are more engaged than those who work for weaker brands) to new patient acquisition (because positive word-of-mouth from other patients plays such a big role in affecting which health care provider a given patient approaches) to regulatory negotiation (by the end of the recent Senate hearings on Apple’s tax situation, many of the senators were so busy raving about their iPhones and iPads that there was little mention of taxes.

Unfortunately, many of these same linkages work in reverse for weak brands. Employees in companies with poor or deteriorating images, for example, are usually less motivated (and turn over a lot faster); negative word-of-mouth from customers who experience shoddy products can carry destructive fallout; and all kinds of stakeholders, from regulators to journalists, are less likely to give weak brands the benefit of a doubt than they would a strong one.

The point here, of course, is that brands matter a great deal. As the world, more generally, and health care, in particular, grow more volatile and disruptive, brands will become even more important. This means that there is no time to lose in taking ownership of your organizational identity and trying to manage it—enhance it, invest in it, nurture it and exploit it—toward good ends.

This post originally appeared on the Health Leadership Forum

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