July 13, 2016 • Tim Schantz
More than 115 years ago, the Ford Motor Company received orders for the first three Model As to roll off the company’s iconic assembly line in Detroit. The $1,320 generated by the sales came not a moment too soon. The fledgling company had just $223.65 left in its bank account after burning through its entire seed capital of $28,000 trying to bring the car to market.
While Henry Ford undoubtedly breathed a tremendous sigh of relief at the time, it’s unlikely he grasped the far-flung and transformative nature of the enterprise he was launching. Within months, the company had sold enough Model A cars to turn a profit of $37,000, setting up Ford for even greater success with the Model T, one of the best-selling cars in automotive history — even considering that it hasn’t been produced in nearly 90 years.
Since that first Model A, Ford has manufactured more than 350 million vehicles and generated hundreds of billions of dollars in sales. It’s almost impossible to imagine what those first three cars would be worth to Ford today. Luckily, we don’t have to wonder. The first and second Model As produced in 1903 are no longer in existence. But, the third car, originally sold to Herbert L. McNary of Britt, Iowa, resurfaced in 2012 when it was purchased at auction by none other than William Clay Ford Jr., executive chairman of the board for Ford Motor Company and Henry Ford’s great-grandson.
The winning bid of $264,000 reflects the vehicle’s book value, but Ford’s use of this car as the centerpiece of a year-long celebration of Henry Ford’s birthday demonstrates the heritage value it brought to the Ford brand beyond the six figures. Forward-thinking companies and their iconic products or symbols — like Ford and its Model A, Wells Fargo with its stagecoaches and Coca-Cola’s Santa figure — are examples of organizations that have come to recognize the brand value that historical artifacts can bring to a contemporary enterprise.
InterBrand is a well-known brand identity firm that annually determines the brand asset value of the world’s leading brands. Its database evaluates a wide range of variables to ascertain a monetary value that often is in the billions. The Ford brand is valued at $13.643 billion, making it #33 on the list of the most valuable brands. For a company with a history like Ford, heritage is undoubtedly part of that valuation. But how much?
We could, as an accounting practice, work out the enduring value of various marketing investments over the years to determine that figure. For example, an innovation Ford implemented in the 1930s could have huge repercussions for the value of Ford (and other car brands) today. Undoubtedly there are other methods.
As a theoretical starting point, suppose heritage amounts to a modest 10 to 15 percent of a brand’s overall valuation — in some categories (e.g. spirits) it may be substantially higher, as heritage plays a leading role as a brand differentiation tool. In the case of Ford, this might amount to valuing the heritage component of the Ford brand at somewhere around $1.5 billion. This raises an interesting question:
If heritage is a $1 billion-plus asset, then it would make sense that Ford and companies with similar brand valuations in the millions or billions not just acknowledge their history, but leverage it for competitive advantage like any other brand asset in their playbook. From an archival perspective, it means not just building a corporate archive simply for safe storage but also using that archive to achieve branding goals.
If more brands viewed their heritage in dollars and cents, it would change the urgency they put into developing an actionable or living archive. The figurative value of heritage should be enough to encourage some exploration of this topic.
Brand valuation is in need of deconstruction and determination of how much of it is accounted for by the heritage. Then, investment decisions for that high-value asset should be made, and the potential of this asset unlocked. Of course, if you’d like to learn more about how we do that, let’s talk.
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