David Haigh, founder and CEO of Brand Finance – the world’s leading independent brand valuation and strategy consultancy – in this interview introduces us to the meaning of nation brand value and soft power, and the methodology his firm uses to measure both. He also discusses how the handling of the current health crisis by countries and their leadership teams impacts the overall reputation of nations.
Our interview with David is part of a special series of contributions from Brand Finance as a TPBO Knowledge Partner sharing insights into the fascinating field of nation brand valuation and soft power. More about Brand Finance also in our directory.
David, do you remember the first time you heard about the idea of nations as “brands”? Who or what got you interested?
The first time I heard about nations as brands was when I spoke to a man called Simon Anholt. As far as I’m concerned, he singlehandedly put nation branding on the map about 20 years ago.
How did Brand Finance first get involved in the world of nation branding?
We got involved because Simon Anholt produced a report every year which was a market research study of perceptions of nation brands. He was very keen to see whether or not he could apply it to economic values and to demonstrate the value of having a nation brand. So, he asked Brand Finance to produce the first league table of nation brand values, which we did about 15 years ago.
As CEO of Brand Finance you have been advising numerous places on their branding strategy and are helping to determine the value of nation brands. How has the field changed over the years?
Well, 20 years ago, when Simon Anholt started talking about nation brands, I think very few governments or businesses took it seriously. However, over the last 20 years, the C-Suite has increasingly begun to realise that brands are proper assets that do add value and that they need to be properly managed and invested in. Within the corporate world, branding is now far more important than it ever was before and even finance directors now take it seriously.
On the governmental side, looking at nations and nation brands, they’re now looking seriously in two directions.
- Firstly, the way they are looking at the branding of their nation as a whole – many have departments that promote their nation brand because of the benefit that it brings to tourism, the sale of products and services, geographic indications, and other endeavours where nation branding helps the output of that particular country. Many countries – particularly developing countries – are using nation branding as a means of strengthening their economic performance.
- Secondly, a lot of governments are creating policies to stimulate the development of individual corporate brands in their economies because they perceive it to be something that will generate higher overall economic GDP.
So, national governments are engaged in two policies – nation branding at the macro level and individual product branding at the micro-level.
What is so special about Brand Finance’s approach to nation brand valuation?
Well, where it comes to nation brand valuation, I think it’s fair to say that Brand Finance is the only firm that is doing it and has been doing it consistently for the last 15 years. Within our long track record, we have adopted the approaches that have been pioneered by Simon, where we look at the 4 key areas: Tourism, Products & Services, Foreign Direct Investment, and Individual Perceptions of nation brands.
For example, Singapore has invested heavily in the reputation of its citizens – they are very well educated, speak excellent English, and have high ethical standards. Worldwide, there is a very strong preference for Singaporeans, who are known as being excellent employees and model citizens. Furthermore, Singapore is an excellent place for foreign direct investment, tourism, and people buy products and services from Singapore because they believe they can trust them.
We have always looked at those 4 dimensions when measuring the performance of economies, and we then segment the brand value according to primary, secondary, and tertiary elements.
- Primary is things like agricultural products, where both product and nation branding on those products tends to be quite low.
- Secondary economic activity refers to a specific industry, like car manufacturing.
- Tertiary is service-based, such as education services and so on.
The truth is, I think this is the one that adds the most value – if your economy relies on services such as accountancy, law, or strategy consulting, a very high added value arises, and the further up that chain you go, the more important branding becomes.
For individual companies, branding is the company’s branding and also the country’s branding.
This is one of the challenges that China has had – they have been the workshop of the world for 20 years, with most things being made there, but they’ve always been very reluctant to put “Made in China” on products. And yet, many of the world’s best technological products, such as Apple devices, are made in China.
What is the link between nation branding and soft power?
According to our definition, soft power is a perceptual and attitudinal measurement of a country. We ask questions such as: how well do people know a country? Do they think it’s influential? Does it have a good reputation?
Those are the 3 key measures, and under that, we ask around 30 questions across 7 pillars to gauge whether people think the country is strong in each pillar, which are:
- Business & Trade
- Governance
- International Relations
- Culture & Heritage
- Media & Communication
- Education & Science
- People & Values
The stronger you are on individual pillars, the more your overall reputation will rise, but you also might be very strong on certain pillars, meaning that your economy will be better off in that particular area. If you’re known as a cultural icon, people will be coming to your museums and galleries, but may not be necessarily buying your cars.
Therefore, the research that we do in soft power is diagnostic for how the world thinks about this particular country, and we then connect it through depending on how healthy the GDP of that country is. We would expect the GDP to grow in those areas that the country is seen to be outperforming everyone else.
Soft power being a key area of interest for Brand Finance – why does it matter so much to nations around the world?
When we are looking at individual countries, we look at 3 dimensions of their power – economic power, hard (or military) power, and thirdly, soft power. The definition of soft power is a country’s ability to persuade others to do things in their favour rather than using hard force.
If you take a country like the US, which is extremely strong in both economic and hard power, this does not translate into soft power. While it used to be extremely strong in this area, it has gradually declined as a result of policy errors, and in the current election, we see some of the Democrats, such as Barack Obama, suggesting that its soft power has declined under President Donald Trump because it has not been a good global citizen.
In China, which has been rapidly developing its economic and hard power as part of its foreign policy, soft power has historically lagged, but the country is now becoming very conscious that it needs to catch up in that area.
Having strong soft power can be very helpful for a nation, as small countries like New Zealand and Ireland have demonstrated.
How can soft power be measured?
While our measures of soft power are pretty comprehensive, we would like all countries in the world to buy into our research so that we are able to increase our sample size – last year our study spanned 55,000 people, which will increase to 75,000 this year, but we are researching in over 100 countries.
If we want a wholly comprehensive view into what people think about countries – which can then be fed back to them to help with their policy-making – the bigger and more robust the study is, the better.
Which nations do you find especially remarkable in how they have improved (or damaged) their soft power?
New Zealand definitely stands out as the star of improving its soft power. The international viewpoint on their Prime Minister is extremely positive, and this will undoubtedly increase further with the manner in which the country has dealt with the Covid-19 pandemic.
Ireland has also done extremely well and punches way above its weight. Now that the UK has left the EU, Ireland is the only English-speaking country in Europe, it is not militaristic, it’s very well represented in all international bodies, and there is a huge diaspora.
I think it’s also fair to say that soft power in China is much stronger than it used to be and that some in the developed world would think. There may still be some suspicion about China in the West, but in a lot of other countries, people are just grateful for the good things China does for them.
I would also say that in the Middle East, the UAE is strong and is consistently getting stronger with things like the mission to Mars and its engagement with many other institutions such as the World Government Conference.
While I don’t particularly want to talk about the ones that are doing quite badly, I think it’s quite widely trailed that, due to Donald Trump’s extremely isolationist view of the US, their soft power is declining.
How will countries’ response to the coronavirus pandemic impact their soft power?
For one, it is important to look at how individual countries have dealt with the crisis domestically. The US and UK are not seen to have done a particularly good job, whereas New Zealand has. If countries are seen to have looked after their citizens and been responsible, it will boost their soft power.
On the other side, whoever develops the cure or is seen to have good policies against COVID-19 will have a very significant benefit to the perception of their country medically and scientifically. What we are witnessing now is a race to who will develop the cure first – whether it will be the US, Britain, Russia, or China.
While Russia has just released something that appears to work, it has not been fully tested, which makes other countries quite skeptical. If British scientists were to discover the cure for COVID-19, that would have an absolutely massive effect on our soft power where it comes to the Science & Technology pillar.
As a TPBO Knowledge Partner, Brand Finance will be contributing insights into nation brand evaluation and soft power over the next twelve months. Which topics will you focus on?
Over the next 12 months, we will have one feature on each of our 7 pillars of soft power, which are – Business & Trade, Governance, International Relations, Culture & Heritage, Media & Communication, Education & Science, and People & Values.
Towards the end of the year, we will focus on overall perception and how well countries are doing.
Thank you, David.
Connect with David Haigh on LinkedIn or visit the Brand Finance company profile for details on how you can benefit from the firm’s expertise. Examples of work and much more to be found on brandfinance.com.
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