Entrepreneurial Branding and the Virtue of Foolishness
By: Yanto Chandra, Ph.D.
How do expert entrepreneurs1 make decisions concerning brand choice amid inexistent markets? Unlike marketers (who work for firms whose market is already created) , entrepreneurs face more challenging decisions as they have to deal with two challenges: creating new ventures and new markets that do not yet exist. The question is, in the face of inexistent markets should decision makers rely on technologies of rationality (using formal models of rational choice) a la the MBA style or technology of foolishness (using strategies or heuristics to deal with goal ambiguity) in making their branding decisions? While branding is one of the core issues for marketers and marketing scientists, it has received little attention in the entrepreneurship domain. This is the challenge at the interface of entrepreneurship and marketing. It’s a question of ‘entrepreneurial branding’.
A century ago Coca Cola was a cough syrup and looked green. Imagine that someone who tried to create a market for it was thinking of the branding decisions. Today’s brand managers at Coca Cola will find the task of planning to create and launch “satellite” markets like Coke Diet or Zero (surrounding the “core” market called Coke) much easier, simpler and has a lower probability of failure compared to creating an entirely cola market from ground up – a big task facing the founder of Coca Cola long ago. The founder faced true uncertainty, a situation that is unknown and unknowable, while the marketers face a situation called risk, unknown but knowable like calculating the probability of a ball from a jar in which the person knows what’s inside it via experience and trial and error or Bayesian updating. For nearly a century of entrepreneurial and marketing efforts, Coca Cola has successfully legitimized the taste of cola as a new dominant design of soft-fizzy drink and Coke as a brand that stands for it. Coca Cola has defeated the Liability of Newness associated with new venture, product and brand. A new brand like Coca Cola in its early days was being punished twice; first for being small and second for being unknown or so-called Double Jeopardy. What a contrast with Coca Cola that is currently ranked as one of the world’s most legitimate brand.
When facing the decisions to create an inexistent market, the goals (of the entrepreneur) are often ambiguous and preference (of the founder as well as consumers) unknown. How did one know if there was a market for cola brand a century ago? This was difficult to fathom at ex-ante – and can be known after it happens. Recent advances in the research on entrepreneurial expertise suggest that when goals are ambiguous, entrepreneurs often explain their actions and decisions in terms of their identities rather than their preferences. Professor Sarasvathy of Darden Business School describes this as the Logic of Identity (as opposed to the Logic of Preferences). This logic is part of the so-called Effectual Reasoning – the kind of reasoning that entrepreneurs use which is the inverse of Causal Reasoning that most managers with MBA degrees use – to deal with uncertainty and the problem on inexistence.
Each of us has identity of some sort. Identities may have something to do with being an entrepreneur or other areas of their lives – religious faith, city of origin, political affiliations, childhood traumas, environmental awareness, aesthetic pursuits, or even loyalties to favorite sports teams. Identity may be fictive or real, freely chosen or socio-culturally constructed, good or evil. Using identity-based decision criteria frees entrepreneurs from having to order their preferences for specific consequences of their choice and allows them to take decisive action even in the face of true uncertainty. Research on entrepreneurial expertise shows that when outcomes are predictable, it makes sense to use preference orderings for particular outcomes as our decision criteria. But when outcomes are unpredictable or our preferences are ambiguous, it serves us well to have a strong sense of identity (who we are rather than what we want) and of process (how to make decisions rather than what decisions to make).
In the case of Google, the logic of identity appears to have influenced co-founders Larry Page and Sergey Brin’s decision on branding. ”Googol" is the mathematical term for a 1 followed by 100 zeros. The term was coined by Milton Sirotta, nephew of American mathematician Edward Kasner, and was popularized in the book, "Mathematics and the Imagination" by Kasner and James Newman. This is one of the books that fascinated the co-founders and help shape the firm’s identity. This identity is related to the founders’ passion for maths. It would be interesting to know what the market response today would be like if “BackRub” – the predecessor of Google - brand was used instead. Would it grow with many 100 zeros in revenue as opposed to when Google brand is used? There was only a small demand for search engine prior to Google’s era. Google came into the market and established an almost inexistent market into a large market. It converted a third person opportunity (opportunity that many people can see) to first person opportunity (opportunity that Google alone can see and act upon). The strong sense of identity helped the founders in creating a new market for itself. Google also means “No Evil”- a philosophy that the founders would like to share with the world as a mission of the firm and how they would like treat its employees. From a brand, the founder created an entirely new organizational concept called Google – one that offers free lunches, free laundry, table tennis in the office, to free time to do something innovative on your own without worrying about becoming unproductive. This identity is real, socio culturally grounded, means good and propels Google into one of the most innovative firms in the world. Later, Google AdWords and Adsense emerged as new variant brands as the firm has a better idea about what decisions to make in the face of existent market. The Google’s identity makes much sense and credibility as it attempts to enter a whole new industries from healthcare (e.g. DNA) to telecommunications.
The logic of identity is a useful platform that any would-be entrepreneurs and entrepreneurial marketers may use instead of relying on standard formal decision making criteria where goals are clear and preferences can be found inductively. When markets do not exist yet, surveying customers to assist branding decisions could easily lead to either one of the two errors: Type 1 (that one concludes a market for a new brand exists but actually it does not) or Type 2 (that one concludes that a market for a new brand does not exist but eventually it does). Instead, the logic of identity is a cheaper strategy and tends to “burn” less resources during the critical periods of a new venture. The logic could influence the “design” of a firm’s entire organizational and technical processes that set the firm apart from the competition.
The logic of identity is a game of persuasion as entrepreneurs create a growing network of people (or stakeholders) to buy an idea or a cause be it financial, political or social. Certainly, entrepreneurs may need to think of the logic of identity in relation to the “blue ocean strategy” for their new brands. Obama is a great brand that was created from ground up. His campaign and post-campaign teams were very entrepreneurial and were successful in creating a market for presidency that never existed for non-White candidates in the US political market. Emphasis on Obama’s new perspective on global politics, what he did for the grassroots communities in Chicago, his visions for America, and his trademark slogan “May God Bless You and May God Bless The United States of America” are some of his blue-ocean identity moves that proved to work. Obama becomes one of the strongest political identities in the US history. A new identity that shields the US amid the rise of new kind of superpowers and challenges that undermine the US position.
James March, the celebrated Stanford organizational scientist, explicates that our current decision making logics are fueled by goal-driven formal techniques that leaves very little room for the playful foolishness that engender new meanings and imagined possibilities. The logic of identity is a form of technology of foolishness that is applicable to entrepreneurial branding decisions amid true uncertainty and ambiguity. It has never been more important a tool after the recent global economic recession that shocked the world. Foolishness, when applied to the right context, is a form of rationality not real foolishness.
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Yanto Chandra, Ph.D. is Assistant Professor of Marketing and Entrepreneurship in Amsterdam Business School, University of Amsterdam, Netherlands. Email: y.chandra@uva.nl
1 Expert entrepreneurs here refer to those who have created million to billion dollar business venture.