Old-school brands like GE and Sears have struggled in a changed economy where too much focus on the short term can be a liability. Building a modern legacy company requires a different approach to management and customer relations. “As counter-intuitive as it may seem, we’ve found that brands guided by long-term ambitions make faster, better short-term decisions than their nearsighted competitors,” write Mark Miller and Lucas Conley in this opinion piece. They are the authors of Legacy in the Making: Building a Long-Term Brand to Stand Out in a Short-Term World. Miller is the founder of The Legacy Lab, a research and consulting practice, and the chief strategy officer at Team One. Conley is the executive editor of The Legacy Lab, and a former researcher for The Atlantic and staff writer for Fast Company.
This past month, General Electric — the last remaining member of the Dow Jones Industrial Average’s original 1896 index — was removed from the world’s most prestigious equity benchmark. News of the venerable brand’s dismissal from the Dow, the index of 30 large, publicly traded U.S. brands reflecting the health of the financial markets, was somber but not entirely surprising. Down more than 80% from its all-time high in 2000, GE had come to account for less than 1% of the overall weight of the index. Under new leadership and in the throes of a massive reorganization, the question in the wake of GE’s delisting is not so much whether it can return to the Dow someday, but whether it will survive and, if so, what it will look like in the years to come.
GE is only the latest in a long line of fallen bellwether brands to make headlines for the wrong reasons. In recent months, Toys “R” Us, Necco and Gibson Guitars — culturally significant icons with more than 293 years of combined history between them — all filed for bankruptcy protection. RadioShack, founded in 1921, has filed twice in the past two years. If media accounts are to be believed, a procession of brands — household names like Sears, Guitar Center, J.Crew, J.C. Penney, Cole Haan, and Neiman Marcus — may be poised to join them.
While anecdotal accounts like these might make it sound like longstanding legacy brands are on the brink of becoming endangered, the statistical evidence reveals a full-blown mass extinction event is well underway. In the 1920s, the average lifespan of a company on the Standard & Poor’s 500, a list of the 500 most valuable companies traded on the U.S. stock market, was 67 years. Today, that number is 15 years. On average, an S&P company is being replaced every two weeks—meaning that, by 2027, an estimated 75% of the S&P index will have turned over. We now live in a short-term world, an era where the products we buy often outlast the brands that made them.
The Short-term Trap
No one is more alarmed by the trend toward “short-termism” than the leaders of the mainstay brands themselves. Speaking on behalf of some 200 CEOs of major U.S. corporations, Warren Buffett, the chairman of Berkshire Hathaway Inc., and Jamie Dimon, the chairman of JPMorgan Chase, authored an op-ed in the The Wall Street Journal last month titled “Short-Termism is Harming the Economy.” Lamenting the market’s “unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability,” Buffett and Dimon advise weaning off short-term targets, like quarterly sales estimates, in order to “strengthen the U.S. economy, benefit America’s workers, shareholders and investors, and leave a generational legacy we can be proud of.”
Lifting our collective gaze from the quarterly horizon is a great start, though we should not stop there. In order to revitalize longstanding icons like GE and build the next generation of bellwether brands, it’s time for a fundamental shift in how we think about building legacy.
In today’s short-term world, the traditional rules for building and maintaining long-term brands are losing their power. In their place, we propose a new, forward-looking approach to building legacy that we have observed at pioneering brands like Patagonia, The Ritz-Carlton, Taylor Guitars, The New Yorker, and a rare group of others we profile in our new book, Legacy in the Making: Building a Long-Term Brand to Stand Out in a Short-Term World.
“Leaders with the modern legacy mindset consider their social influence and invite customers to help tell their story because sales follow saliency.”
Traditionally, building a brand has meant focusing on short-term measures of conventional success like quarterly profits, growth, capturing consumers and dominating categories. In contrast, modern legacy builders ask more of their brands, resulting in five far-reaching transformations in the way enduring brands are built in the modern age. Together, these five transformative perspectives on brand building constitute what we call the modern legacy mindset:
- From institutional to personal: Traditional brand leaders buy in to management systems and institutional processes with the goal of following market trends. Leaders with the modern legacy mindset invest in individuals who are seeking to make a meaningful contribution, beginning with their own long-term personal ambitions. If brands like GE are to thrive, not just survive, they should be committed to making a social contribution deeper, and more lasting, than simply their next dividend.
- From attitudinal to behavioral: Traditional brand leaders imagine their brands first from the outside in, believing that attitude — what they say and how they posture –matters most. Leaders with the modern legacy mindset build from the inside out in accordance with beliefs that drive behaviors because actions matter more than words alone. For long-established brands like GE, this requires clarifying their beliefs and inspiring their employees to bring them to life.
- From commanding to influential: Traditional brand leaders hoard information and tell customers what to do, striving for category dominance and sales superiority. Leaders with the modern legacy mindset consider their social influence and invite customers to help tell their story because sales follow saliency. Iconic brands like GE can succeed by treating customers like owners, rallying them behind the brand’s ambition and encouraging the adoption of products and services the world really needs.
- From orthodox to unconventional: Traditional brand leaders focus on mastering rules – “business is about making profits” — and take conventional wisdom for granted –“there are no profits in altruism” — all in the interest of maintaining the status quo. Leaders with the modern legacy mindset forge extraordinary and lasting change by breaking rules, including reconciling paradoxes – “business can make money and be a force for good.” Brands like GE have long aspired to be the best at what they do. To build unconventional modern legacies, they need to be the only ones doing what they do.
- From episodic to perpetual: Traditional brand leaders tend to grow stale by repeating the past or lose their identity by renouncing it. Leaders with the modern legacy mindset find a new way, cultivating enduring significance by bringing the past forward and reinvigorating their brands each day. Founded in 1892, GE has more than a century of history to draw on. To stay perpetually relevant, longstanding brands like GE need to find new ways to use the past as a bridge to the future, making legacy every day.
Given this new perspective on brand building, can GE make the transformation from traditional to modern legacy? There are some glimmers of hope. CEO John Flannery, appointed in August 2017 after more than 30 years with the brand, is personally committed to streamlining the conglomerate and preserving its innovative “center of gravity” — aviation, power and renewable energy.
To realign the company’s beliefs and behaviors, he’s revamping the board and the management, building a leadership team of “fresh eyes and people with institutional memory.” In the process of selling off more than $20 billion in assets, he has sharpened the unique identity of the brand, cut the quarterly dividend, lowered short-term expectations, and made difficult commitments in the name of long-term success. “We’ve changed many things,” Flannery told investors on June 26, the day the brand was delisted from the Dow. “But the essence of GE endures . . . We are motivated first and foremost by making a positive difference in the world.”
Though GE’s impatient investors might think otherwise, our research shows that it’s in the brand’s best interests to think long-term. As counterintuitive as it may seem, we’ve found that brands guided by long-term ambitions make faster, better short-term decisions than their nearsighted competitors. And in today’s rapidly evolving market, brands like GE must do more than bring good things to life at the end of each quarter. To build modern legacies, they must find ways to keep those good things alive and thriving for years to come.