A Truly Living Company

There is Warren Buffet, and then there is Berkshire Hathaway.

Or is there?

It’s a commonly accepted - and commonly used - marketing strategy to utilize the ‘star power’ of one person to build up a brand. The genesis of this can happen in two ways. In some cases, the making of a brand via an individual is natural and directly performance-based, as in Berkshire Hathaway. In other cases, a brand is created around an individual, but the individual is not the only measure of performance for the firm, such as Steve Jobs at Apple Computer. Both of these cases have different repercussions for business disruption.

Let us begin by considering Warren Buffet, a classic example of a performance-based individual brand. When Mr. Buffet began Berkshire Hathaway, it was a textile company. Nothing more, nothing less. While textile production occurred until 1985, Mr. Buffet used Berkshire Hathaway primarily as a holding company for his diversified investments.

As the years went on, and Mr. Buffet made profitable investment after profitable investment, the value of Berkshire Hathaway grew and shares grew dramatically – into the six figures by 2006. While the value of Berkshire Hathaway stock is based partially in the firm’s holdings, a large part of the value is also based in the faith of investors in Mr. Buffet’s value investing principles.

Performance-based individual brands are extremely vulnerable to extreme business disruption in the event that the individual the brand is based upon is no longer able to personify that brand. The reasons for this could be numerous – death, disability, or retirement, to name a few. In any case, however, the lack of the central performer will dramatically impact the value of a brand.

While Berkshire Hathaway is an extreme example – few people could replace Mr. Buffet – it illustrates the principle flaw in performance-based individual brands quite well. Much like a poorly diversified investment portfolio, there is no cushion for disruption in these types of firms. Once the individual behind the brand is gone, the brand is at dire risk of being at risk as well.

At Apple Computer, Steve Jobs is credited with being a driving creative force behind many of the company’s successful products, from the iPod to the iMac. As a co-founder of the company, Mr. Jobs has long had a stake in Apple, and his name has become popularly associated with the brand by mainstream consumers.

Furthermore, recent concerns about Mr. Jobs’ health have wreaked havoc on Apple Computer’s stock prices. Much like with Mr. Buffet at Berkshire Hathaway, a negative announcement on Mr. Jobs’ health – or even a frail-looking appearance at a conference - are enough to send Apple Computer’s shares plummeting. It would seem, then, that the brand of Apple Computer is inextricably linked with the brand of Mr. Jobs.

However, there is a major difference between Apple Computer and Berkshire Hathaway. The sales of Apple Computer are based upon the work and engineering of thousands of people, whose communal talent fulfills Mr. Jobs’ vision. It is not clear exactly how much of the creative process would be lost if Mr. Jobs were no longer able to work for Apple Computer, but there would certainly be a dip in the company’s stock price.

The ultimate fate of Apple Computer, however, would lie in the ability of the company to quickly engineer innovative and profitable products in the wake of Mr. Jobs leaving the company. If Apple was able to perform, there would be markedly less of a blowback in share price compared to an analogous situation at Berkshire Hathaway. This is because despite Mr. Jobs’ influence at Apple, the bottom line of Apple is determined by the company’s performance and product record, not on the performance of one person (or at least what is widely, if perhaps incorrectly, perceived as the performance of one person).

What, then, does this means for executives at companies whose brands are strongly linked to one person? The answer is simple: stress the performance of your company as a whole over the performance of the individual. While the value-creating effects of a human brand can be powerful, in the long term they are not worth the risk that performance-based individual brands create.

With the exception of brands based off of irreplaceable characters – such as Mr. Buffet – it is possible to distance your brand from the individual. By focusing on company-wide performance, executives can be sure that their firms can live their own life, separate from that of their star performer or individual.

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