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CHAPTER EIGHT

Find Out What Schismogenesis Means (Because It Will Save Your Relationships)

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Chapter Overview

The word schismogenesis does not trip easily off the tongue, but you should know what it means and how it applies to you. It is a term from anthropology that refers to relationships that are not stable. In the context of brands, it describes the fact that they are inherently unstable: strengths can become weaknesses, and weaknesses can be converted into strengths. Every brand has the potential to cycle up or cycle down. If it’s not cycling up, then it’s contracting.

When things are going well, it is easy to forget the laws of schismogenesis. Who can predict that a fall is lurking just around the corner? Equally, when things are going badly, it is easy to forget that sparks can fly and a turnaround is possible. When you’re at the bottom of the “V,” it almost always feels impossible to recover. But remember: there is almost always a way back from the brink.

Headline: Confront a Crisis

What happens when a crisis strikes a company? How do the company’s leaders react? How do they treat customers and suppliers? What do they do when government agencies attack their reputations and their values? What do they do when the competition circles them, offering large rebates, incentives, and glorious promises if consumers switch brands?

In this chapter, we tell the postrecall story of Toyota in the United States. It is a case study in courage, conviction, and reliance on values. It is a story about leadership from the top and commitment to a dealer network that is the backbone of the consumer brand. Toyota is a textbook story of recovery and prosperity. We also tell the story of the National Football League. Right now, it is in the middle of a crisis. No matter how exciting any NFL championship game may be, there are deep wounds inside the league. These wounds have to do with values, value, and human weakness. The crisis is about the clash of characters and the clash of character. We offer these two contrasting stories as proof that schismogenesis is alive and well.

You are never stable as a brand. You are either moving up or moving down. When you move down, it is often with accelerating velocity. When that happens, many brand owners panic. That’s the equivalent of buying high and selling low. When you are in a tailspin, don’t panic. Take the time to do a holistic assessment. What are the roots of your original success? What do your original brand advocates think now? What is true in your core that can be your salvation? What was your original point of light and good? What is the truth about the competitiveness of your offering? Do you still win on technical and functional benefits? Do you have an emotional claim that is now covered with error and confusion?

Toyota

Toyota entered the U.S. market in 1956.¹ Back then, its cars sold for less than $2,000. Branding was primitive. The first model was called a Toyopet. It had a reputation for shaking, overheating, stalling, and guzzling gas. In those days, “Made in Japan” was often a term of scorn.

But over the next two decades, the company invested in world-class manufacturing, product improvements, and claims-based advertising. It continuously gained share against the Big Three in the United States—Ford, General Motors, and Chrysler. In 1965, Toyota was awarded the prestigious Deming Prize for quality. The company’s growth accelerated after 1968, when it introduced the Corona and Corolla models, cars that took volume from the high-selling Chevrolet, Pontiac, and Buick brands. In its original advertising, Toyota was positioned as 40 percent less expensive, delivering perfect reliability, and inviting conversation and engagement. “Invest $1,726 in a Toyota Corolla 2-door and see what happens,” according to the print version of the advertisement. This hard value positioning allowed Toyota to take 15 percent of the market between 1965 and 2010. GM lost 31 share points during this period.

By the 1980s, U.S. consumers consistently rated Toyota cars as having better value, getting a better resale price, and being substantially more reliable than American cars. It was a heady time to run Toyota USA—dealerships were bigger and better financed than the competition’s and had higher inventory turns. The company needed order takers, not skilled salespeople, on the dealership floor. Cars sold on a Toyota lot delivered a higher dealer margin per car than those made by GM, Ford, or Chrysler. In addition, we estimate that, at the peak, the cars had a $1,500 per car cost advantage over equivalent American models. They also packed in more features, had better reliability and safety, and had a much higher resale value. By the time of the first crisis, Toyota had 39,000 employees in North America. It had invested an estimated $24.5 billion in plants in Kentucky, Mississippi, Indiana, Ontario, Texas, and Mexico.² It was a leader in hybrids and electrics. In fact, Toyota worldwide sold more hybrids and electric vehicles than all others combined.

The combination of lower cost, higher price realization, and momentum made the U.S. auto business look like a chess game at checkmate—winner, Toyota.

Headline: Create Some Core Guiding Precepts That Can Endure Trying Times—The “Toyota Way” Led to Sustained Brand Leadership and Heritage

Toyoda, later renamed Toyota, was founded as a car company in 1935. The founders had sold the patents and equipment for their original family business, a textile loom operation, and decided, with encouragement from the Japanese government, to become a leader in the Japanese car industry. At the outset, the Toyoda company developed a very modern set of operating principles, written with foresight and gumption. Introduced during the company’s first year, the Toyoda Precepts, according to the company archives, consisted of five tenets:

1. Be contributive to the development and welfare of the country by working together, regardless of position, in faithfully fulfilling your duties.

2. Be at the vanguard of the times through endless creativity, inquisitiveness, and pursuit of improvement.

3. Be practical and avoid frivolity.

4. Be kind and generous, strive to create a warm, homelike atmosphere.

5. Be reverent, and show gratitude for things great and small in thought and deed.³

These appear to be precepts that a modern humanistic enterprise would use, although with somewhat old-fashioned word choices: collaborate, innovate, deliver technical advantage, create a positive work environment, and be grateful.

There was no immediate impact. In its first year of business, the company sold only 21 cars. So its move into the United States was a bold decision. Imagine for a minute what it must have been like for Toyota in the year it launched in America. In 1956, GM’s market cap was $104 billion in 2014 dollars. It was the largest market-cap company in the United States, and its influence, reputation, and power were great. By contrast, Toyota had a market value of well under $500 million. It produced 46,716 cars in 1956—all made in Japan.⁴

In just 54 years, this pecking order was reversed. By 2010, GM’s market cap was zero and its largest shareholder was the U.S. government. The Obama administration inherited and accelerated a car bailout plan for GM, aiming to keep the company alive. Today, Toyota is the twelfth-largest company in the world by revenues. It has produced 200 million vehicles and has the highest market cap of any company in Japan. In 1968, it sold 1 million cars. In 2008, it sold 10 million units worldwide.

The root of Toyota’s success was the Toyota Way⁵—the modern interpretation of the 1935 Precepts. The five updated principles are as follows:

1. Challenge

2. Kaizen (continuous improvement)

3. Genchi genbutsu (go and see)

4. Respect

5. Teamwork

The principles are aimed at affecting daily behavior on every level. Genchi genbutsu means “go find the facts needed to make correct decisions, to build consensus, and to develop achievable goals.” Kaizen indicates that no process is perfect and that there is always room for improvement.

Together, these two principles, when applied to Toyota’s modern crises, would prove to be pivotal.

Headline: What Went Wrong?

Beginning in 2008, three crises appeared, one after the other. At Toyota, it felt like three sucker punches in a row.

First, the Great Recession hit. Suddenly the U.S. new-car market fell by nearly half. This was Toyota’s largest and most profitable market. The company had invested in six major production facilities in North America. When volume plummeted, profits disappeared.

Then, two years later, reports of “unintended acceleration” were tied to Toyota cars. And a year after that, the third crisis was the earthquake and tsunami in Japan, where most of the company’s parts suppliers suffered devastation. Around the world, production ground to a halt. Profits in the U.S. market swung from a $2 billion positive to a $2 billion negative, according to the company’s financial reports. This was the greatest crisis in the company’s 75-year history.⁶

We can distinctly remember a conversation about Toyota with a lifetime customer at the time of the unintended acceleration problem. “I’ve never been so fearful,” said Elizabeth a 63-year-old retiree. She drove a Lexus SUV. “I always believed in Toyota. I always thought their cars were the safest, most reliable. I drove Camrys for years, and then my husband traded me up to a Lexus. I love the car, but is it safe?” she asked. “Is it safe?” was the question on the minds of millions of Americans.⁷

In the 1980s, claims of sudden acceleration had struck the Audi brand, and it had taken more than a decade for the German automaker’s reputation to recover. Toyota could not afford to take a decade to recover.

What made things worse was the government and media frenzy surrounding the problem. The U.S. National Highway Traffic Safety Administration said that the accelerator pedals on a wide variety of Toyota models caused sudden acceleration.⁸ The words and phrasing were often misunderstood and misinterpreted. Toyota says that it disclosed the sticking pedals and that the condition did not cause high-speed acceleration. Nevertheless, the full force of the U.S. government shattered Toyota’s image of safety and reliability. There were media reports on the nightly news. Many of these are now widely seen as having exaggerated the severity of the problem.

According to several automotive industry journals, competitors reacted to Toyota’s throttle-pedal and floor-mat recalls by offering current Toyota owners incentives to purchase their cars. Chrysler offered a $1,000 cash trade-in offer. Ford offered a $1,000 rebate. GM offered $1,000 toward a down payment or lease termination. Hyundai offered $1,000 to Toyota owners. These were bounties aimed at breaking loyalty.

The definitive account on the problem was published by Popular Mechanics⁹:

To judge by press accounts and statements from government officials, those innocuous-looking Toyota sedans and SUVs in millions of American driveways are somehow kin to the homicidal ’58 Plymouth Fury in the Stephen King novel Christine—haunted by technological poltergeists and prone to fits of mechanical mayhem. In the midst of three major recalls, Toyota has been hammered by daily newspaper and TV pieces suggesting it has been slow to address safety problems. U.S. transportation secretary Ray LaHood announced that anyone who owns one of the recalled vehicles should “stop driving it.” (He quickly backpedaled on that pronouncement, but warned, “We’re not finished with Toyota.”)

Does Toyota—or any car company—deserve this? Well, if they are knowingly selling an unsafe car, yes. But is that what’s going on here? Not so fast.… Every major carmaker receives occasional reports of sudden unintended acceleration (SUA). In the last decade, the National Highway Traffic Safety Administration logged some 24,000 SUA complaints. Less than 50 of these red flags were investigated. Why so few? The main reason is the nebulous nature of SUA. Often the problem occurs once, never to happen again. It’s tough to fix a defect that can’t be replicated.

Amid the turmoil, Toyota adhered to its enduring precepts. “We held our position and our values,” says Bob Carter, senior vice president of automotive operations at Toyota. “We were looking up from the bottom of the valley and knew if we did the right things, we could recover. But it was a very frightening time. We were not sure if there would be another crisis that would flatten us.”

Headline: Don’t Panic—Develop a Clear-Cut Work Plan

Carter is a Toyota lifer—an American employee who started in sales and worked his way up through the company hierarchy. As the crises erupted, he decided that he needed a complete diagnostic and a total review of the options. This diagnostic concluded that Toyota’s problems could not be attributed solely to the recall or the tsunami. Instead, competitive advances by Ford and Hyundai were the major cause of Toyota’s share loss. It was a technology war, and Toyota was losing the battle. The big differentiators were miles per gallon and the costs of ownership and operation. Advantage was shifting to what the industry called telematics—telecommunication access and driver information in the vehicle—as well as to fashion interiors, colors, and trickle-down luxury.

Companies that were poised to succeed in the U.S. automotive market were delivering technical, functional, and emotional benefits to target consumer segments. They were highly focused on product development and the positioning of car models, zeroing in on age, income, gender, and demographics. Toyota could not take for granted the assumption that it would sustain its advantage in resale value, reliability, and durability. The domestic competition had caught up. The European luxury brands were siphoning off volume from the vast middle market that Toyota served. Toyota had a massive R&D and marketing budget, but it could not afford to play in every segment.

Headline: Your Loyal Consumers Can Show the Path to Recovery and Growth

We knew that Carter’s plan was going to succeed when we met with a customer in her home in Arlington Heights, Illinois. Jenny was 48 years old at the time of our interview. She is the mother of two and a schoolteacher. Her husband is an accountant. Their children were ages 14 and 16. She and her husband, Bob, had owned six Toyota Camrys during their 20-year marriage.

“These cars last forever. They are cheap to repair, and when we trade them in, we always get more than we think they are worth,” she explained. “When we think 100,000 miles is enough, we can get half of what we paid for it and the new owner thinks they can get another 100,000 miles. They are practical cars for practical people.”¹⁰

Jenny took us outside into the windy, cold Chicago weather to admire her new Camry. “I bought it from my same dealer,” she said. “I know Toyota is going through hard times. I know everyone says they are down and out. I got a phone call from the Chevrolet dealer asking if I wanted to trade in my Toyota for a Chevy. I told them, ‘No way.’ A Chevy is never going to deliver the reliability, safety, and economy of a Camry.”

We discussed the recall, the accelerator problem, and all the bad press that Toyota was receiving at the time. “It’s not fair,” she said. “Why don’t they talk to me? I’ll set them straight. Toyota makes fine cars and sells them at reasonable prices. They make them here in America with American workers. You can’t pile carpets and mats on top of each other and expect the pedals to work. Stupid and sad. Toyota is like onions—you like them and you want them, but you are hesitant to cut into one because you know it’s going to make you cry.”

Jenny says her next car should have even more miles per gallon, easier music access, a no-hassle dealer experience, and storage for her purse. “I have strong emotional ties to Toyota. They are really up there on my list. Now that the recall happened, I have a little broken heart.” In the consumer research, we asked her to make a collage expressing her feelings about Toyota, her Camry, and the recall. She found a headline that she pasted above the Toyota logo: “How bad are your past sins really?”

She remains committed to giving Toyota a fair chance. “Camry people are practical, down-to-earth people that don’t have to be showy,” she said. “Toyota is not the biggest mansion you can buy, but it’s comfortable. I’ll give them the benefit of the doubt. But, of course, actions speak louder than words.”

Headline: Take Responsibility, Stand Up and Be Counted, and Put Your Name on the Nameplate

The best defense is a strong statement by the leader. In the middle of the hailstorm, the new CEO of Toyota stood up bravely. Akio Toyoda is the grandson of the founder. He joined Toyota in 1984. He holds an MBA from Babson College.¹¹ He is widely described as a “car guy,” deep into engineering and safety improvements. He was willing to step forward and go in front of the congressional committee investigating Toyota safety. This is how he began his opening testimony:

I myself, as well as Toyota, am not perfect. At times, we do find defects. But in such situations, we always stop, strive to understand the problem, and make changes to improve further. In the name of the company, its long-standing tradition and pride, we never run away from our problems or pretend we don’t notice them. By making continuous improvements, we aim to continue offering even better products for society. That is the core value we have kept closest to our hearts since the founding days of the company.

Toyota has, for the past few years, been expanding its business rapidly. Quite frankly, I fear the pace at which we have grown may have been too quick. I would like to point out here that Toyota’s priority has traditionally been the following: first, safety; second, quality; and third, volume. These priorities became confused, and we were not able to stop, think, and make improvements as much as we were able to before, and our basic stance to listen to customers’ voices to make better products has weakened somewhat. We pursued growth over quality.

I have personally placed the highest priority on improving quality over quantity, and I have shared that direction with our stakeholders. As you well know, I am the grandson of the founder, and all the Toyota vehicles bear my name. For me, when the cars are damaged, it is as though I am as well. My name is on every car. You have my personal commitment that Toyota will work vigorously and unceasingly to restore the trust of our customers.¹²

He echoed these comments in the Washington Post. They are worth repeating at length. In an essay published on February 9, 2010, he wrote:

Toyota has not lived up to the high standards we set for ourselves. We have not lived up to the high standards you have come to expect from us. I am deeply disappointed by that and apologize. As the president of Toyota, I take personal responsibility. That is why I am personally leading the effort to restore trust in our word and in our products.

For much of Toyota’s history, we have ensured the quality and reliability of our vehicles by placing a device called an andon cord on every production line and empowering any team member to halt production if there’s an assembly problem. Only when the problem is resolved does the line begin to move again.

Two weeks ago, I pulled the andon cord for our company. I ordered production of eight models in five plants across North America temporarily stopped so that we could focus on fixing our customers’ vehicles. Today, Toyota team members and dealers across North America are working around the clock to repair all recalled vehicles.

But to regain the trust of American drivers and their families, more is needed. We are taking responsibility for our mistakes, learning from them and acting immediately to address the concerns of consumers and independent government regulators.

The issues that Toyota is addressing today are by far the most serious we have ever faced.¹³

He went on to talk about a top-to-bottom review of global operations. This involved investigating complaints and increasing outreach to government agencies. He promised to build the “highest-quality, safest and most reliable automobiles in the world.” It was a clear statement of apology, a clear statement of responsibility, and a clear vow to correct any problems. Within the company, his message was unambiguous: “We will build safe, reliable cars and return to our roots and there will be no excuses.”

The Department of Transportation enlisted NASA engineers to review the problem. Late in 2010, the department’s report concluded: “Driver error, not defect to blame in Toyota Sudden Acceleration.”

The worst was over.

Headline: Kick-Start Growth with an “Action Plan to Win”

The recall crisis had a significant impact on the core health of the brand. In addition, competitors had significantly improved their brand equity over time. The gap in opinion between Toyota owners and nonowners posed a large challenge to future “conquest growth,” or the sale of Toyota vehicles to nonowners. Bob Carter and his management team needed a holistic plan to win—a truthful assessment of the state of the brand, a clear set of target consumers, a defining message, a plan to execute to those segments of consumers, and a way to bring along his powerful brand network.

How do you do this?

It starts with data: a comprehensive baseline of the current state of the Toyota brand and the opportunity. In car marketing, this is called the brand funnel—awareness, interest, shopping, inquiry, and sale. The team needed an independent assessment of the competitive position of the brand, plus clarity concerning the gaps in product, features, and delivery. To create the data, you have to get a qualitative and quantitative understanding of the consumer view. We do shop-alongs and in-home in-depth consumer interviews to understand needs, dissatisfactions, and barriers.

For each high-priority consumer segment, the company had to craft a brand value position—the specific technical, functional, and emotional benefits that would turn homogeneous groups of consumers on. It needed to develop a creative brief for its agency and then work out an activation plan. For each segment, it needed a product and feature “change map,” and it had to hit on the hard messages about the quality required. The efforts all needed to fit together into a multiyear, comprehensive plan to win. That meant segment-specific win plans across all segments and the rollout of timelines. This needed to be communicated succinctly across the organization. Toyota needed to develop clear accountabilities, and teams had to be launched to deliver the initiatives.

Carter and his head of marketing, Bill Fay, embraced the new strategy fully. He vowed to spend with conviction, focus, and target; build consumer-centric products; and improve the selling experience. He also vowed to spend his more than $2 billion marketing budget better.

Toyota was staged for recovery. But to succeed, it had to synchronize marketing, sales, and product development. It would subsequently unleash a product improvement program across its four primary series of cars that delivered an ownership and operation cost advantage, value, safety, color, fit, and task accomplishment. It was going to be the highest level of new product activity in Toyota’s history. It was the end of complacency and a call to action for the dealers. The company would measure the consumer experience, improve engagement and time to a sale, and provide flawless delivery.

Carter and his team would reallocate current spending on low-effectiveness activity and invest more in Toyota’s “Core 4” brands: Camry, Corolla, Prius, and RAV4. They would eliminate brand campaigns that did not provide clear technical, functional, and emotional benefits. They would reduce or reformulate spending on events with low return on investment. They would reduce spending on nonpriority series. The new Camry message would emphasize miles per gallon, hybrid technology, lowest ownership and operating costs, best navigation, best audio and communication, and so-called fit and fabrication improvements.

Consumers like Jenny were very clear about what they wanted. They wanted cars that held their value and were safe and worry-free. They did not care if the cars were cool or feature-laden. They cared about miles per gallon, driver comfort, convenient and clever storage, high-quality materials, and visibility from the driver’s vantage point. They appreciated the quality of service—fast, low pressure, no gender discrimination, and fair or preagreed pricing. Toyota could achieve this with segmentation, targeting, focused advertising behind its most important products, and skillful use of PR and digital media.

A turnaround was possible if management could develop a very focused program. In this case, leadership vision was critical. The management team needed to avoid incremental improvement, force cross-functional alignment, and use the power of the Toyota dealer network to drive consumer trial and visits. Toyota dealers sell twice as many cars as most other brands’ dealers. They are highly synchronized with the company and would be pivotal to the recovery.

Carter and the rest of the leadership team needed to provide a complete change agenda: product improvements, clarity around the safety message, and the targeting of women, Hispanics, and economically oriented baby boomers.

The team created a one-page strategy that could be shared throughout the organization. It answered the four key questions: Where do we want to go? How do we plan to get there? What actions will we take now? How will we measure success?

Toyota was once again focused on a sustainable win.

*****

Toyota in the United States is not a flawless case study in recovery. But it has resulted in a strong win: share gain, profit recovery, and image recovery.

When we caught up with Bob Carter at the end of 2014, he said that Toyota can’t build any more trucks and SUVs. “We are producing at 110 percent of capacity.”

He added: “At the bottom of the recall, we didn’t understand the power of our brand. We have 25 million satisfied consumers. The most valuable conversations were the ones between neighbors talking about cars, where our customers would say, ‘I’ve had seven Toyotas, and they are the best cars I’ve ever had.’ That’s what drove a spectacular recovery. We had one study that said it would take 10 years for us to get back. The consumer shortened that time.”

Toyota took particular care to look after the car dealers. “Our direct customer is the dealer. They are the ones that sell and demonstrate confidence,” says Carter. “Most of our dealers sell more than one brand. They tell us we are different. We are partners. During the crisis, we paid the dealers to invest in their consumers. They opened 24 hours for repairs. They gave extra terms and conditions on new sales. Today we are all benefiting. Our dealers have record profitability.”¹⁴

Carter sent his dealers $30 million with no strings attached. He made a point of sending the money as checks rather than as electronic transfers. He wanted the dealers to physically receive the money. The arrangement was not contractual. It was a gift to support the dealers during a tough time. It worked. “We are still hearing about the check five years later,” he says. “Dealers were very creative with that money. They added technicians, they sent flatbed trucks to pick up cars, and they provided consumers with lunch while they waited for their cars.”

“We did have a design-problem issue with floor mats,” he says. “We trimmed three-eighths of an inch from the mat. From a media perspective, dangerous floor mats are not a very sexy problem. But unintended acceleration is.

“Following the crisis, we went to more distinct North American autonomy. We are hitting the mark with new products. Current share is 14.5 percent. We are capacity restricted and could be at 15 percent. We had fallen to 11 percent in the crisis.”

He continues: “There is a new energy with this company today. We had gotten arrogant. There is a fine line between confidence and arrogance. We want to stand on the line.”

Compare GM and Toyota today. GM has global revenues of $156 billion and net income of $2.6 billion. Toyota has $219 billion in revenue and net income of $16.3 billion. Toyota’s operating margin is 9.15 percent, whereas GM’s is 1.17 percent.¹⁵ The difference comes from price realization through brand strength and manufacturing cost advantage.

According to Jack Hollis, the head marketer at Toyota USA, it is a difference in philosophy.

“Toyota is successful because it is not driven by a sense of the profit margin,” Hollis says. “Profit is only part of the business. I’ve been with the company for 23 years. We ask, how are we benefiting society? Are we making transportation safe and reliable? We respect the land. We safeguard the resources of the earth. We build cars for the benefit of society. One of the pillars of Toyota is kaizen—we can always be better.” Hollis adds, “Our recovery outperformed most people’s expectations. But we will never be finished. There is always a next element. This rapid recovery comes from looking in the mirror to challenge our processes and from the humility to say ‘It’s not as good as it could be and we must do better.’ Our CEO said we must become a new Toyota. It was a turning point for the whole company.”¹⁶

Hollis is aiming the company’s advertising at more emotional elements. He says, “Our new tagline, ‘Let’s go places,’ is aimed at inclusivity, bringing us into the transcultural mainstream that includes African Americans, Asian Americans, Hispanics, women, and progressive youth. We are moving faster now, [using] online video, targeted placements, and social media. It is a pretty significant shift. We will be 50-50 digital [and] conventional media soon. I want to bring enjoyment and inspiration to the brand, beyond quality, durability, and reliability.”

Bob Carter says that 80 percent of all Toyotas sold in the United States over the past 20 years are still on the road today. The cars are still perceived to have the “QDR” advantage: quality, dependability, and reliability.

But Toyota isn’t resting there. It is spending hundreds of millions of dollars to build a new U.S. headquarters in Plano, Texas. Before the crisis, sales and marketing were in Torrance, California; most product engineering was in Japan; and most of the manufacturing was in the various plants across the United States, notably Ann Arbor, Michigan. These will all come together in Plano and create “combinations” not seen before, aimed at generating the next 50 years of growth.

Headline: Lessons from Toyota

Toyota looked doomed, but now it’s number one. (Volkswagen is number two.) This shows that no game is ever over. That’s the nature of schismogenesis. That’s the first lesson.

And, having rebounded, Toyota’s prospects look good. Consider this: in the most recent year, Toyota delivered $17.7 billion in operating profit and had a $201 billion market cap.¹⁷ Volkswagen—with its Audi, Porsche, and VW divisions—delivered only $12 billion in operating profit and had a market cap of $106 billion. Upstart Tesla had a speculatively high market cap of $29 billion—a price-to-sales ratio of 10. It is forecast to produce only 40,000 units in 2015. Toyota is set to introduce its hydrogen vehicle in 2015. This vehicle emits only water vapor—no CO2. It has a top speed of 111 miles per hour and goes from zero to 60 in 9.6 seconds. It has a range of 300 miles. Reviewers describe it as the future brought forward. A small number of refueling stations are being built in California and Rhode Island. If this is successful, it has the potential to leave Tesla in the dust.

Another lesson is that great companies stay true to their core values. They will sacrifice a little bit of growth and share for products that do not cut corners. When you are confronted with health and safety issues, you must use both your heart and your head. You need to consider every single decision in the context of loyal consumers. You also need to recognize that 70 years of integrity do not go up in smoke in one incident. In most major recoveries, the top guy takes the rap. As Harry S. Truman said: “The buck stops here.”

A third lesson is that you need to keep communicating during a crisis—to all constituents at all levels, with empathy, kindness, and an appropriate recognition of responsibility. You must personify the problem and explain many more times than you think is necessary. You can use the crisis to get to the root cause of the problem and correct the full range of elements that caused it. You can also use the crisis to speed change and get beyond the short-term problem to a range of advantages that include accelerated innovation and stronger, higher-return marketing investments. You must focus on the core customer and reinforce all the elements that create loyalty and advocacy.

National Football League

The National Football League is the world’s richest sporting brand. Soccer, baseball, basketball—these pale in comparison to the value of NFL teams, franchise revenues, and television contracts. In 2014, the NFL generated revenues of approximately $10 billion—more than the GDP of 50 countries. More than 200 million people, or two-thirds of the U.S. population, watched any given game.¹⁸

Yet the NFL is facing enormous challenges and is a brand that can go farther up or drop like a football spiked into the ground.

Hardly a day goes by without some bad-news story about the NFL. At the heart of the problem is a cultural clash that divides the powerful owners of the 32 teams from the 2,000 or so athletically gifted players from diverse backgrounds. For 50 years, there has been an uneasy truce between them, as each has collaborated with the other to achieve their quite different dreams. The owners dream of Super Bowl glory and a substantive return on their investment. The players dream of money, fame, women, and freedom from their impoverished roots.

It’s not all about themselves: they both also dream about changing the trajectories of others. For the owners, it’s their cities. For the players, it’s their families and their hometowns, the people who supported them on their way to the summit of the sport.

American football is gladiatorial. Fans watch because of the battle between two teams: the precision throwing and decision making of a quarterback; the explosive leaping and instinctive cutting of a running back; the pain-inflicting tackling of a 250-pound linebacker. No one is under any illusions about the violence of the collisions—not the players, not the proprietors, not the fans.

The helmet was made mandatory as far back as 1943.¹⁹ But these days, helmet-to-helmet collisions have escalated, causing concussions on a massive scale. Nearly 30 percent of players, according to the NFL’s own calculations, will ultimately suffer from “accelerated cognitive impairment.” In protest against the spiraling incidence of head injuries, 5,000 players joined a class action lawsuit against the NFL. In 2013, it was settled out of court, with the NFL paying out hundreds of millions of dollars.²⁰ But there is continued evidence that American football—a sport that, according to the New York Times, “grooves on manliness”—shows blithe disregard for the safety of its players.²¹

The concussion issue has reached the White House. In 2014, President Barack Obama told the New Yorker, “I would not let my son play pro football.”²² Obama, of course, has no son. But some other parents who do have sons are taking the same view. A big tackle used to be shrugged off as another case of a player “getting dinged.” But not anymore. Figures released in December 2014 showed that youth participation in tackle football at the junior and high school level has fallen over the past five years, dropping 27 percent since 2008.²³ In baseball, the drop was 19 percent; in basketball, it was 14 percent; and in soccer, it was 9 percent. Given that a 2012 report from the Annals of Biomedical Engineering showed that even a seven- or eight-year-old typically receives more than 100 head impacts in a season, this drop-off is not surprising.²⁴

The crisis for football is deeper than just physical injuries, broken bones, and fractured lives. There is a moral issue, too. The NFL players seem to live in an environment in which anything goes. Most of them grew up dirt-poor and were the first in their families to attend college, albeit for their sporting ability rather than their academic ability. At young ages, they become celebrities. But there is no guidance counselor attached to them. Often, they get into trouble. Rape accusations, assaults, possession of weapons—these are not uncommon. Think Ray Rice or Michael Vick. When you consider that more than 40 percent of the fans are female,²⁵ this is a critical issue for the owners. But even the most die-hard fans do not give the players license to commit crimes.

Will the NFL come through the crisis? Or will football end up being a pantomime sport like wrestling? It could go either way. But there is reason for optimism. The owners who preside over the sport do have a genius for knowing how to create a powerful and enduring brand.

Back in the 1960s, American football was an underresourced sport that was struggling to thrive. People liked it, but they didn’t really love it. Now, that’s all changed. For 20 million Americans, mainly men, it is their life. They put it first, ahead of family and friends. As one fan of the Chicago Bears told us, if there were no NFL, “I wouldn’t have anything to do.”²⁶

For the past 30 years, it has been the most popular sport in the United States. Some 35 percent of Americans say that it is their favorite sport, ahead of its nearest rival, baseball. “Football simply has an iron grip on our collective psyche,” said J. R. Moehringer, a Pulitzer Prize–winning journalist. “We love it. God help us, we love it.”²⁷

The secret of the NFL’s success has been the way the owners have created an emotional bond that connects rich and poor, north and south, moms and hard-nosed businessmen. They have found a way to keep the equilibrium between different stakeholders: owners, players, and fans. In many ways, American football has become emblematic of the United States. People from disparate communities come together with a shared passion, a shared dream: success in the NFL, victory at the Super Bowl, life-changing fame and fortune. It is a case study in branding excellence: tight emotional connections; unique benefits; increasing time exposure and content.

It starts with the proprietors and the players.

Headline: Harness a Dream: How to Build an Emotional Connection

Madison Avenue and Muck City, the nickname for a city in Florida—these two places reflect two very different sides of America. In so many ways, they are worlds apart. Yet during the winter months, they come together every weekend when the gladiators of the gridiron take to the field to play in the NFL, purveyor of the world’s richest sport.

It is along Madison Avenue in New York that the NFL has its headquarters. Around the boardroom table are 33 chairs: 32 for the owners of the 32 teams in the NFL, and one for the commissioner. When they all gather together, they constitute the wealthiest corporate club in America.

Every owner is a billionaire. They have to be: the cumulative value of the clubs is more than $34 billion. The Dallas Cowboys, owned by Jerry Jones, is the most valuable, at $2.3 billion. In 2013 it generated revenues of more than $500 million.²⁸ Other famous owners include Paul Allen, the cofounder of Microsoft, who controls the Seattle Seahawks, and Martha Ford, of the automobile dynasty, who controls the Detroit Lions.

When the Buffalo Bills were put up for sale in 2014, there was a race for a coveted seat around the boardroom table on Madison Avenue. In the end, Terry Pegula and his wife, who made their fortune in the oil industry, beat Donald Trump, the real estate entrepreneur, and Jon Bon Jovi, the rock star. Their winning bid was $1.4 billion.

If the NFL is owned by billionaires, then it is played by millionaires. And the promise of riches beyond imagination is what connects Madison Avenue with Muck City.

Muck City isn’t a real name. It’s a nickname for Pahokee and three other towns in the sugarcane fields of the Everglades, roughly 1,200 miles south of New York. All told, these towns have just 40,000 people. Yet, over the years, they have sent 48 players to the NFL. If you live in one of these towns, you are more than a thousand times more likely to make it to the NFL than anyone in any other city in America.

Pahokee is hot, dry, dusty, and dirt-poor. When Bobby Bowden, the legendary head coach of Florida State University’s football team, was asked to describe the place for an ESPN film, he thought for a moment and then chose his words carefully. “Blue collar,” he said. But, as the narrator commented, “When Coach Bowden says ‘blue collar,’ he’s being nice.”²⁹

For most people from Pahokee, there is nothing to do and not much hope. “It’s in the middle of nowhere,” said Santonio Holmes, a former wide receiver for the Pittsburgh Steelers. “There are no shopping malls to go to. There really aren’t any restaurants. There’s not a lot to do, man.”³⁰ No Walmart, no JCPenney. The nearest supermarket is a Publix, and that’s 15 miles away.

What there is, however, is football. And for superfast athletes such as Holmes, there is a way out to fame and fortune. In 2009, Holmes was named Most Valuable Player of Super Bowl XLIII, after catching nine passes for 131 yards, including a game-winning six-yard touchdown pass from Ben Roethlisberger with 35 seconds left in regulation time.

Every kid from Pahokee dreams of making it to the NFL—and doing what Holmes did. Every mom there dreams that her son will star in the Super Bowl, the end-of-season game when the best teams compete to be champions. It is a dream that they share with the owners on Madison Avenue. To improve their chances of making the grade, the boys from Pahokee turn to an unusual pastime that has its roots in the grinding poverty of the region. For decades, the boys have chased rabbits—for food, for money, and for conditioning. Chasing a rabbit is tough. It requires speed, mobility, and agility. These days, a Muck rabbit goes for $2. The quicker, nimbler cottontail carries a premium—it goes for $3. But that’s not why boys chase rabbits today.

When they chase rabbits, they are really chasing their NFL dream.

“We chased rabbits in order to get faster,” said Holmes. “Rabbits are a lot faster than humans, and in order to catch them, you have to chase them.” This strengthens the leg muscles and sharpens speed and agility. “You’ve got to be athletic because they are going to zigzag many times.”³¹

The raw athletic ability of players from places such as Pahokee provides the foundation for the popularity of the sport. But the phenomenal success of the NFL as a business and as a brand is largely attributable to the entrepreneurial genius of the 32 billionaires. They know how to connect with consumers; that is, after all, how they built their own individual empires. We have analyzed their strategies, and we have found that they deliver on four customer emotional spaces: loyalty (“this is my team, no matter what”), hopefulness (“we can still win this game”), connection (“I know these players”), and anticipation (“I can’t wait until the game on Sunday afternoon”). Go to a gym or a bar on game day. You hear comments that support each of these.

To cultivate and strengthen these emotions, the owners did five things, in particular: (1) they created a common mission and what they call league think; (2) they transformed the NFL into a property with a carefully controlled brand image; (3) they built an emotional connection through NFL Films; (4) they targeted the superfans; and (5) they took care of the needs of the next generation—the kids—and their moms.

Let’s look at each of these strategies in turn.

Headline: A Common Mission

The NFL, launched nearly 100 years ago, started small. In its early days, it endured some rocky times. During the Great Depression, the number of teams fell to its lowest level: just eight. Such up-and-down fortunes prompted the owners to think differently about how they ran the league. There is no question but that they are fearsome rivals on the field. Off it, however, they come together for their greater good.

The NFL is not organized to make a profit—at least, that’s what its constitution and bylaws say. On the other hand, its primary purpose is “to promote and foster the primary business of League members,” with the members being the 32 owners. In recognition of this, they have signed up for a series of initiatives that have been dubbed league think. As the late Art Modell, owner of the Cleveland Browns and the Baltimore Ravens, once said, they are “32 Republicans who vote Socialist.”³²

For instance, they have agreed to a revenue-sharing system that means that the poorest teams, such as the Oakland Raiders and the Jacksonville Jaguars, can stay competitive with the richest teams, such as the Dallas Cowboys and the New England Patriots. Likewise, they have set a cap on the number of active players each team can have: 53. Also, during the annual draft, when teams select players from the college leagues, the worst-performing team has first choice of the best players.

There is still a gulf in the financial power of the teams. In 2013, the Cowboys, the richest team, with a valuation of $2.3 billion, was three times as valuable as the Raiders, the poorest team, with a valuation of $825 million. Revenue for the Cowboys was twice as much as that for the Raiders ($539 million as opposed to $229 million), and operating income was 13 times as much ($251 million as opposed to $19 million).³³

But the sense of common purpose means that there is every chance that the Raiders can defeat the Cowboys whenever they meet. The NFL treasures the hope that teams can go from “worst to first” in a season.

Headline: A Property—Not Just a Game

As successful business leaders, the proprietors understand that the sport needs promoting and protecting like a business. They talk about professional football being “America’s game but NFL’s property.”

To promote the game, and to maximize profits, they established NFL Properties, which is responsible for licensing, merchandising, and publishing deals. In this, it is very effective. Of the $10 billion in revenues raised in 2013, just $2 billion came from ticket sales for the games. The rest came from several other sources. The biggest source is broadcasters. In 2013, the NFL received $5 billion—half of its revenues—from them. Overall, NBC, CBS, Fox, and ESPN have paid more than $40 billion for the broadcasting rights from 2014 through 2022. Then, there are the major sponsorship deals with big-name companies. Altogether, in 2013, the NFL received $2 billion from these deals.³⁴ Verizon has paid $1 billion for a four-year deal. Pepsi has paid the same for a 10-year deal. Finally, there is the merchandising and licensing of products, worth $1 billion in 2013. More than 70 licensees generate products with the names of around 2,000 players. In the 2013–2014 season, Russell Wilson, quarterback for the Seattle Seahawks, had the number-one-selling jersey.

To protect the brand, the NFL established a PR department and pioneered policies relating to player behavior on and off the field. These, of course, are now under great scrutiny. But there is no question that, over the years, the NFL has been at the forefront of efforts to preserve the integrity of the game.

The NFL was the first American sport to introduce a leaguewide drug-testing program. It also has a tough alcohol abuse policy. In their contract, players are required to recognize “the detriment to the League and professional football that would result from impairment of public confidence in the honest and orderly conduct of NFL games or the integrity and good character of NFL players.”³⁵ Failure to abide by this rule can lead to fines, suspension, and, in egregious cases, termination of contract.

Some observers have nicknamed the NFL the “No Fun League.” But the reassurance that fans got from these rules helped the NFL build football’s enormous popularity as a family sport.

Headline: Let’s Make a Movie: Creating a Hollywood Image of the Brand

NFL sports stars are glamorous gladiators: almost every boy wants to be one, and many girls want to marry one. Much of the reason for this is NFL Films, the NFL’s very own Hollywood studio that produces enough film every year to stretch from Madison Avenue to Pahokee.

It was back in 1965 that the NFL, looking to its future, acquired Blair Motion Pictures, a small studio founded by Steve Sabol. The following year, it released the film They Call It Pro Football, which documented the highs and lows of the season: slow-motion replays, magisterial musical scores, and a deep baritone narration that was quickly dubbed “the voice of God.” The films that followed raised the status of an everyday football game to the level of a Shakespearean drama or Greek tragedy. On display were “ballet and brutality,” beauty and the beast.³⁶

And it worked. Road to the Super Bowl, first broadcast in 1974, is now the longest-running and most-honored sports special. In all, NFL Films has won more than 100 Emmys, the TV equivalent of the Oscars. It has redefined sports cinematography.

The archive of NFL Films, dating back 50 years, is the largest sports-film library in the world. It has allowed the NFL to reach the broadest possible audience and, at the same time, control the image of the sport with carefully edited clips of the games. The archive gives an insight into how the NFL thinks about its mission to create an emotional connection. It is cataloged in an extraordinarily detailed way. There are the product shots (for example, Adidas, Nike, Puma, and Reebok), and there are the personnel shots (for example, celebrities, coaches, “funky fans,” and cheerleaders). But what is most interesting is that NFL Films catalogs the films according to defining emotions or vivid imagery: “angry,” “blood,” “dejection,” “frustration,” “patriotic,” “praying,” “sun,” and “sweat.”

It is not surprising that Sports Illustrated has described NFL Films as “perhaps the most effective propaganda organ in the history of corporate America.”³⁷

Headline: Target the Superfans: They Spread the Word

The NFL’s fans are its customers, and they are segmented into very different groups so that the NFL can target them with appropriate products and services. At the top of the list are the 25 million superfans who make the NFL—and their team—their number one priority in life.

One such superfan is Anthony, a well-spoken 26-year-old financial analyst who supports the Chicago Bears. He can’t remember a time when he didn’t follow the Bears. His dad is a die-hard Chicago sports fan who refereed football games and has “a good eye” for the game. When he was a kid growing up, the house was strewn with team memorabilia. He recalls the thrill of going to Soldier Field and being part of the 50,000-plus crowd.³⁸

Anthony is physically small: just 5 feet 8 inches. As a player, he was dwarfed by the linebackers on his school team. But, despite the bruises he got from playing, he always wanted to play because “it was an opportunity to prove my toughness.”

His on-field experience has enhanced his understanding—and enjoyment—of the game that now dominates his adult life. He goes to almost every home game. “I plan my fall travel schedule around the Bears,” he tells us. “I can’t remember a Sunday in recent memory that the NFL didn’t dominate my day.” On one occasion, he left an engagement party early in order to get back for a Bears game. His girlfriend has learned that she rarely gets to see him during NFL season. The Bears take priority in his affections.

The home games are all-consuming. “It’s always a full-day event,” he said. Before the game, there is a “tailgate” party—fathers, sons, and friends celebrating in the parking lot, sometimes starting as early as 9 a.m. Then there’s the game. Then there’s the postmatch analysis and, it’s hoped, more celebration. Anthony is a season ticket holder, so his tickets cost $152 per game. If he were to buy tickets on a one-off basis, he would have to pay as much as $1,000 for each one.

But he thinks the entertainment is worth every cent. And when there is an away game or he can’t make the home game, he watches everything on TV. He pays a $10 monthly subscription to the NFL RedZone, a league-sponsored TV channel that allows fans to keep up to date on all the games across the league. “You can watch all the games at once,” he says.

Overall, Anthony spends around 20 hours every week following the NFL: watching a home game; following matches on TV; playing Fantasy Football, where fans create teams of real-life players and score points based on their actual performance on the field of play; seeing the televised draft, where new players are recruited from U.S. colleges; and catching up on news and gossip about teams and players.

Talking to him is like talking to a football encyclopedia. He can reel off the names of 50 percent of the players in the league—about 1,000 people. He is already instilling the next generation with a love for the Bears. “Just the other day, I bought my godson a Bears ‘onesie,’” he says. “And the second my nephew is old enough, I will take him to a game.” But his proudest achievement is the influence he had on an ex-girlfriend. “After spending time with me, she turned from not knowing what a first down was to knowing the names of all the Bears’ players.”

Anthony shows all the emotions that we have identified as being central to the success of the NFL: anticipation, including the tailgate parties, the hopefulness, and the belief that the draft can help revive the Bears’ fortunes; loyalty, with a commitment to the team even when his family moved to Texas for a few years; and connection, as shown in the camaraderie of the crowd and others who wear the Bears jersey.

He also likes the brutality. “I like the hitting aspect, the contact. I love that a 200-pound guy can take on a 300-pound guy.” In this respect, he and other superfans are different from another important group of consumers, the moms and their kids.

Headline: Target the Moms and Their Kids: They Hold the Future in Their Hands

The NFL has long understood that kids and the moms who decide whether they participate in the sport while they are in high school are the future of the game. As long ago as 1961, the NFL introduced its Punt, Pass & Kick program, designed to entice youngsters into the game. Since then, it has introduced NFL FLAG Football for boys and girls. Today, more than 5 million kids, including 1 million girls, play this softer version of the game.

Women are also targeted as fans in their own right. The NFL calculates that 44 percent of its fan base is female. In particular, the NFL for Her apparel line is especially popular.³⁹

But the NFL may need to do more to woo its female fans. Women are increasingly being seen as the demographic that will make or break the NFL. As the New Yorker noted: “The death of football, according to the declinist scenario, would have to originate with women—mothers who, having read the medical findings, would forbid their sons to play Pop Warner, which in turn would reduce the teen-age ranks aspiring to play under the lights on Friday night, and so on up the chain.”⁴⁰

Headline: Prevent the Downward Cycle of Schismogenesis: Striking the Right Balance Among Customers (the Fans), Employees (the Players), and Owners (the Billionaires)

The NFL has bold plans for growth. It wants to generate $25 billion in revenue every year by 2027, up from nearly $10 billion in 2013.⁴¹

But it faces a tough test.

For most brands, there is a fine line between success and irrelevance. Once you’ve crossed the line, it’s hard to go back. The problem is this: How do you know when that’s happened? Schismogenesis is the ever-present but hidden force that is ready to pull you across the line, to rip you apart.

Even the strongest brands are susceptible to its cataclysmic centrifugal power. This is because there is an essential fragility at the core of every brand: each is created with an invisible magnetism that emotionally connects owners, employees, and customers. These stakeholders are held together through a constantly managed dynamic equilibrium. But the moment you lose focus, you risk unsettling this equilibrium, and you risk breaking the bonds that define the brand. Things spiral out of control. The impact of this can be devastating, similar to that of the splitting of the atom.

Is this what is now happening to the NFL?

For a long time, the owners have gotten pretty much everything right. They have found a way to strike the proper balance among the contrasting—and, in some cases, competing—interests of the fans, the players, and themselves as custodians of treasured brands.

Now, however, they seem to have taken their eye off the ball. The NFL is being dubbed the beleaguered league. A glorious future is also being put in jeopardy by the way the NFL is responding to some features of the modern game.

One is the way it is trying to squeeze even more profit out of the game. The charge is that the NFL is becoming too greedy. Already, 45 of the 50 most-watched sports programs are NFL games.⁴² Yet the NFL now wants to broadcast games every night of the week. According to Mark Cuban, the owner of the Dallas Mavericks, a basketball team, this spells danger for the NFL. “I think the NFL is 10 years away from an implosion,” he said in an interview with journalists. “When you’ve got a good thing and you get greedy, it always, always, always, always, always turns on you. That’s rule number one of business.”⁴³

His point is that if the NFL becomes ubiquitous, it will contravene one of the core emotional bonds that tie the stakeholders together: anticipation. For fans like Anthony, this is a core emotional need. What would happen if there were games every night of the week? Yes, there would be short-term profits for the NFL. Anthony would certainly watch. But what would happen in the long run?

A second issue—one that is far more serious than the frequency of NFL games on TV—is the growing incidence of domestic violence among players, their unforgivable mistreatment of their wives and girlfriends off the field. When a video was released showing Ray Rice, the Baltimore Ravens running back, knocking out Janay Palmer, his fiancée, in a casino elevator, he was handed only a two-match suspension. This shocked America.

In the past, the NFL has anticipated controversial issues. It has been one step ahead and has pioneered on many fronts, including alcohol and drug testing. On the issue of domestic violence, however, it has been too slow to react in an appropriate way. Even though domestic violence is a real and growing scourge across America, the NFL did not have a position on how it would respond in a crisis. Part of the problem is the NFL’s failure to move with the times, to react quickly enough in the digital age. With NFL Films, it could control the images that fans saw. But it is powerless to stop the security camera video on YouTube showing Rice’s assault on his fiancée.

The result has been that it has acted in the short-term interests of the owners and the players rather than in the long-term interests of the brand. It has exposed the NFL’s values, and these values were not relevant to and aligned with moms and the rest of America.

The third issue, as we’ve seen, is the spate of serious head injuries that have left players paralyzed and suicidal. Here, the interests of the players seem to have been placed behind the interests of the superfans, who want to see a hard-fought contest.

So what will happen next? There are two scenarios.

One is that hubris reigns. There is no reform, no serious advocacy for player health, and no policing of players’ behavior on and off the field. Everything is focused on exponential growth. If this happens, the NFL will become like the governing body of wrestling. And fans will turn to other sports.

The other scenario is that common sense reigns. There is reform. The game turns over a new leaf. Players are protected. There is proper policing of behavior. Players who maim or injure fellow players are thrown out of the game—forever. Also, players who are guilty of “ungentlemanly behavior” are thrown out of the game—forever. The NFL goes global, expanding beyond its American roots, and is no longer based on busted brains, broken backs, and beaten women.

There are already signs that the NFL is addressing the question of domestic violence. In the wake of the Ray Rice affair, Roger Goodell, the NFL commissioner, acknowledged that he had let down the game’s fans when he gave Rice a two-game suspension. “I didn’t get it right,” he admitted. “My disciplinary decision led the public to question our sincerity, our commitment, and whether we understood the toll that domestic violence inflicts on so many families.”⁴⁴ He issued a new memorandum to players, increasing the penalty for those who commit domestic violence or sexual assault. If they commit one offense, they get an automatic six-game ban, with no pay. Two offenses, and they get a lifetime ban.

The NFL has introduced some measures that seem to show that it is taking the concussion issue seriously. For instance, it has helped establish a series of so-called Moms Clinics, where worried mothers can get the latest information on the science of head injuries. It has also introduced new rules to ensure that players receive adequate treatment after a serious collision.

But these steps may not go far enough. Some fans are prepared to see more fundamental changes.

What will the moms in Pahokee think? They, and the millions like them in the Pahokees across America, are the people who the NFL needs to be most worried about.

As we found, many moms feel embittered and betrayed. The emotional connection that they once had with the NFL has been shattered. The memory of Junior Seau, the just-retired star of the San Diego Chargers who committed suicide in 2012 and was later discovered to have suffered from chronic traumatic encephalopathy, haunts the game.

There may be a way for the NFL to counter the relentless power of schismogenesis.

We shall have to wait and see what happens next.

Headline: Lessons from the NFL

No matter how strong your brand may be, it is always subject to the laws of schismogenesis: breaking up and dividing into pieces. No sporting brand is stronger than the NFL. Yet it is facing a crisis that threatens to overwhelm the guardians of the brand, the 32 owners.

There are three principles you need to observe if you are to counter the ravaging effects—the down cycle—of schismogenesis.

First, you need to restore the equilibrium among the various stakeholders—in the case of the NFL, among the owners themselves, the players (the employees), and the fans (the customers). If this equilibrium can be carefully managed, the NFL can enjoy success far into the future.

Second, you need to give priority to the long term if you want your brand to endure. Often, it is tempting to put the urgent ahead of the important. This is what the NFL has done because it failed to think ahead and failed to envisage a different future. It was forced to rush to judgment—and it miscalculated.

Third, you need to make sure that any changes you make are consistent with your brand—its history and its defining essence. This requires a deep understanding of the way consumers view the brand. In the NFL’s case, the question is why people choose to follow the NFL. What are the core emotions that pull consumers toward it?

When we analyzed the emotions that really connected fans with the NFL, we found that violence wasn’t one of them. This means that the NFL could adapt the game to make it less brutal without suffering a mass exodus of fans, a destruction of shareholder value, and a dynamic in which marginal teams slip below breakeven and into debt.

*****

One Conclusion

Brands are not stable. They rise and fall on the basis of what they did yesterday. Big brands generate sufficient resources to ensure that they can live in perpetuity. If you don’t drain your cash, you will have the resources to create news, improvements, and expansion. If you take money from Peter to pay Paul (from the core brand for a new brand), then you can get into big trouble very fast. Premature abandonment can be a mortal sin. Pay attention to customer satisfaction and the willingness of your core customers to refer and repurchase. These are primary warning signals. Once a year, every company should call its leaders together and ask: How are we really doing? What are our core consumers saying about us? What have we done to drive loyalty, appreciation, and love? What do we know quantitatively? What do we know qualitatively? In our space, who is hot and why? In our space, how do we preempt and arrest?

Four Takeaways

1. No brand stands still. You’re either moving up or falling down. From 1960 through 2010, the NFL was a story of conquest and emotional appeal. In contrast, the last five years have been a story of betrayal, danger, and nonresponsiveness. By any measure, notwithstanding the rapid rise in the size of Super Bowl audiences, the NFL is in trouble. In the next three years, we will know whether the NFL will go on to greater glory or become like boxing, a once-popular sport that is now in decline. You don’t need to fall into the same trap. Respond before the curtain drops.

2. Pay attention—don’t fall asleep at the wheel. The story Toyota tells is opposite to the NFL’s. The story is about vigilance throughout the ranks of the organization. It’s not about shirking danger. It’s about facing up to the issues—confronting them and applying the trusted precepts of kaizen to the challenges.

3. As the leader, you’ve got to stand up and be counted. For every business, there will be a moment of truth when the leaders of the company are faced with challenges to the company’s core values and principles. This is the time when real leaders rise to the challenge.

4. Don’t despair. No matter how bad the news may be, you should never despair. You can be hit with headlines that accuse you of malfeasance. You can be hit with headlines about the state of the economy. But no matter how depressed the economy appears to be, there are always opportunities to recover. Toyota demonstrated an uncanny ability to return to the organization’s value proposition: reliability, durability, and economy of use. It continues to draw strength from this value proposition.