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What would you rather lose?

Ramesh Jude Thomas
President & CKO, Equitor Consulting

Last month two defining headlines caught my eye. The first was about the venerable State Bank of India granting a USD 400 million loan to Kingfisher Airlines (ET). The second was the insuring of Christiano Ronaldo’s legs for 90 million dollars.

What attracted my attention about the first was not the generosity of SBI to an airline in the current turbulence, as much as the fact that the loan was secured against the Kingfisher brand. And then the SBI were willing to go out and actually speak about it.

The case of football’s most prized hoofers reminded one of another famous Latino asset that was reported insured a few years ago for over USD 300 million (although her spokesperson chose to finally neither confirm nor deny it).

Why did Ronaldo and Jennifer Lopez decide to insure what they did? And what does this have to do with Kingfisher’s loan?

Let’s begin with the prima donnas. Ronaldo, Jennifer and their respective commercial brains simply focused on those assets that had the highest impact on their value to the world. (For Ms Lopez it certainly wasn’t her voice or her face!!)

Now think of why it made perfect sense for State Bank to safely dole out USD 400 mn against the Kingfisher brand name. Like for Ronaldo and Lopez, this was about the company’s most prized asset. The one that Mr. Mallya would most hate to lose. More than his planes or his breweries.

Companies (and regulators) often miss the point about how value is created and captured. That it is best served by the most valuable assets in their possession. And to find out what these really are, just ask owners what they are most afraid of losing. Malaysia’s oil, Apple’s unique design capability, Coca-cola’s brand name…you get the drift?


MandeepK said...

Well Kingfisher example I do believe is a very innovative thought of SBI...however, the JLO's insecurity is more a publicity stunt, well which has definitely drawn the desired attention to her though as an icon and not as a singer. Well that's what a recall value is all about...Anyhow, This has already set my mind thinking and i know what we need to invest in, knowing what we are most afraid to lose.

John david Lazaro said...

As a researcher who is formulating a new stream of leadership theory - that's highly relevant in the Indian vis-a-vis Global context today. I would like to throw some light on the huge impediment that's prevalent across most Indian entrepreneur's mindset , and the resultant constraining forces that restrict how much value they can objectively create and capture.

When it comes to most of them understanding anything to do with the potential of a world-class brand; they categorically miss the point about how much value can be created and captured by this concept - of a brand. The impediment arises from an inherent "Jameendhara Attitude" prevalent in most Indian leaderships which restricts their comprehension of the scale of value earning that's possible and skill acquisition that's necessary to steward a brand. It is this very attitude and lack of humility to seek the professional counsel of a strategic brand consultant that keeps them in the narrow confines of a "Desi Company"; negating their chances ever evolving into a "World-Class Brand" . A brand with a capacity to generate the phenomenal value that only a professionally stewarded brand can generate. Value that's way, way beyond what the "Jameendhara Attitude" can scrape up - which is invariably only on a mediocre value scale.

I end on this note ,I am actively working towards India producing great brands and consequently great products, and therefore suggest that we need to lose this "impediment" and drop it like a hot brick in order to funnel in the scale of value that India strategically needs to earn from global markets - out there in the FLATWORLD.

John D Lazaro
email : john@lazaro.in

Unknown said...

Ramesh, you sold this to me some years ago and I'm still very much bought out on it.

Anonymous said...

This is a very interesting observation.. And knowing you i'm not surprised ;) I confess the article has caught me thinking what i'm afraid to lose.. Well good one RJT.. waiting for more..


Sunil-IIFT 09-11 said...

The most important aspect for an organisation in today’s competitive environment is the way it is perceived from the outside. The most relevant aspect of being recognised is its BRAND.
Companies associate Prestige, Pride and Ownership in terms of how their brands are positioned.
It comes as no surprise that SBI and The insurance firm went ahead with non common sense decisions to dole out an airline which came into existence to create nuisance value for another airline and succeeded in doing so while shooting itself in the foot and a footballer and a Latino who have nothing better to offer other than a leg and a hip respectively.
The very reason we are here talking about these items of news is due to the buzz they have created and it should come as no surprise that buzz generated is an important quotient of Branding as it creates a temporary space in the minds of the consumer.
Temporary is a very important word utilised here. Even diamonds are not forever as De beers discovered with the opening up of its industry. But companies are ready to pay a premium for the sake of being associated with other brands. A new culture of MULTI BRAND ASSOCIATIONS is rapidly evolving and leaving by the way side all conventional wisdom.
In the golden days business decisions such as the ones above would be laughed at and shoved aside; not any more. With business dynamics changing by the minute companies have become more adept at stealing the limelight at every given opportunity and will continue doing so in the future as well.
It has become important for companies to leverage BRAND equity of all associations it can make and it makes good business sense in the long run.
Conventionalists would disagree as they still believe business decisions were better left to the informed and orthodox, but the trend sure seems to have changed.
BRAND awareness quotient seems to have tilted the balance in favour of the unorthodox. Nothing in the future from businesses should surprise an investor/a consumer it seems; or can things get weirder??We will just have to wait and watch and I for one don’t have my fingers crossed about the outcome.

Sankalp Rohatgi said...

If big companies are spending so much moolah to sustain and consolidate their brand name then insuring your brand (or your most valuable asset!) sounds just like a next logical extension.

However, I feel, companies shouldn't rush to use this option as it may snowball into a big corporate faux pas in turbulent times.

DJ said...

A Brand in my belief is a known value proposition- in terms of the customer, a set of expectations which are satisfied to a certain degree. Since there are many brands of the same product category in this world, the differences lie only in these degrees of satisfaction. Thus, in the case of JLO or Ronaldo, it is not a brand development as such as it focuses only on one aspect of the various components of a brand, that of their persistence in the viewer's mind. In the case of Kingfisher however, the investment by SBI is towards acquiring an asset portfolio. To understand this lets me just point out the few facts:- Carlsberg has entered India in a big way, so has Budweiser, or Tuborg, or Peroni. Sab Miller is already here, and pernod ricard has been trying for sometime to get a lion's share; add to this that diageo has already formed financial relations with Mr. Mallya and the entire picture is complete. Any of these companies might be willing to buy out both products and brands under kingfisher's umbrella to gain a solid foothold in the Indian market. However, Mr Mallya intelligently has never chosen to part with his brands for extra cash, its always been ownership that he has parted with. But how far is it when he would hold so little that any incremental sale of ownership would put his ownership itself in danger? And what would be of value most then? SBI has known the answer of this question, and it knows that the Pernod Ricards are watching.