Opinion

The existential threat facing big business in the West

07 January, 2019 Share socially

Behind the tectonic shift of macroeconomic power from West to East there’s something interesting going on that poses an existential threat to some of the biggest companies in the West.

Our recently-published 2018 FutureBrand Index reveals a fundamental values imbalance between Western and Eastern companies. I think this imbalance will have a huge impact on all companies’ prospects – but it’s Western companies that need to take the most urgent action.

Successful Eastern companies – especially those from China – are built on three pillars: technology and innovation, craft and quality, and traditional values that prioritize the long-term over the short – constant evolution, respect, harmony and wellbeing. To me, these values feel innately human.

By these measures, leading Western companies often fall short. Look at the big players in the US tech sector, whose tendency to prioritise profit over people, and to flirt with unethical practices such as avoiding tax and playing fast and loose with customers’ privacy has dealt their reputations some significant blows.

US still on top – but China on the rise

The FutureBrand Index looks at PwC’s Global Top 100 companies and reorders them in terms of how strongly positioned they are for the future. Just as they always have, US brands dominate the list. But it also features more Chinese firms than ever before.

There are eight Chinese companies seen as strongly future-proofed (TSMC, Kweichow Moutai, Tencent, Sinopec, Ping An, Alibaba, China Life, and China Merchants Bank). And no Chinese brand is perceived to be falling behind in the next three years. Also, for the first time, a Chinese company is right at the top of the rankings – luxury spirits brand Kweichow Moutai enters at number two.

Purpose and experience – not location

What does all this tell us? I think it’s this: that the story of China is not just about relentless growth; it’s also about increasingly sophisticated Chinese brands building a sustainable future in ways that elude many established players in the West.

But does this mean Western companies are doomed to fail – swept away by a tsunami of Chinese brands? In the West, we like looking nervously to the East and fearing the worst.

I would suggest that the truth is a little more nuanced. There’s one factor that’s much more significant than geography uniting the best-perceived companies. The most future-proofed brands are those that connect the experiences they create with their wider corporate purpose. These are the brands that foster trust, build a strong emotional connection with their customers, drive innovation and make themselves indispensable.

There are undoubtedly some interesting regional themes in our research, but the top scorers are a mix of US and Chinese names. US brands such as Walt Disney, Nvidia and Netflix already do a great job of balancing why they exist with the products and services they offer. And some Chinese brands, including the China Construction Bank and the Agricultural Bank of China, fell back because they failed to do this.

Banality kills brands

Rather than looking fearfully eastward, I would urge Western companies to learn lessons from their Chinese counterparts. Among the principal reasons for moving up this year’s Index are innovation, caring about people, promoting health and wellbeing, and delivering consistent share performance. All these attributes are seen consistently in Chinese brand perception scores.

To improve their long-term prospects, US tech sector firms must do more than come up with technology – they must ensure it creates experiences that genuinely improve the lives of their customers. And the tech firms – along with those in every other sector – should end their preoccupation with cost and focus instead on rediscovering their humanity and delivering meaningful, positive experiences.

No one’s suggesting we can simply transfer Chinese values to the West and hope for transformational results but thinking more about long-term brand strength and less about short-term performance measures such as sales and cost-cutting might hugely benefit Western brands.

Because that kind of short-termism makes brands banal and banality breeds indifference and can even kill brands. Ultimately, it’s banality that’s the enemy, not China.

This article first appeared in Business Chief on 6 January 2019.