From Stag to stagflation: what the Australian economy can learn from brand strategy

I saw a Triumph Stag on the road this week. First, I was shocked it was still running. Second, someone had clearly spent hours restoring what might be called one of the worst cars ever made. As I saw it sitting there with a flat tyre, it made me think of a broader omen about our economy.

The Stag was a 70s car made by the bastard child of a company called British Leyland. It is a symbol of the last time our Governments were this involved in our economies. It was made from the parts of four UK car companies mashed together to protect an industry and a business model well past its use by date. The Stag was an outcome of the dilemma solved by Government intervention of a highly unionised and nationalised industry base where companies were shielded from international competition behind high barriers to entry into a domestic economy.

It was a hot mess of a company whose stated aim was to become the British version of General Motors. A low bar they still failed to clear. They made cars from a dumpster bin of parts leading to owners having the daily question all of us who have driven a less than optimal ride can relate to. Will this thing break down today? My car of questionable quality was a Hyundai Pony before ponies became pink and clubby and Hyundai became a legitimate car maker. Unlike Hyundai, British Leyland was never sharpened by external competition. While the Hyundai Pony led to the third biggest car maker in the world today (by volume), Triumph is from a bygone era. It lives on today as a registered trademark of BMW Group. Don’t get me wrong, the 70s gave us great things like Roxy Music and the last childhood pre-computers, but the era was also haunted by another type of stag not made by Triumph, stagflation.

Driving to a standstill

Amid the constant chatter about AI, tariffs and Sydney’s love affair with rainfall, it is easy to miss that despite Government investment in NDIS, infrastructure and defence, our economy faces stagnation.

What felt like a temporary over-reach from Government in response to the pandemic is looking like it might be with us for as long as Victorians still have a fit of rage every time we hear the word 'lockdown'. You can safely argue that rather than unlocking the breakthroughs we seem to need, which are often the silver linings of severe bouts of inflation, we are settling into a period where the cost pressures are up but the growth is not there. Are we getting pinned into a corner of our own making? It seems so. 

As the RBA, last week’s productivity roundtable and the AFR have all jumped on in recent weeks, our productivity has not increased since 2016 and there seems to be no concrete plan to correct this. Say what you want about the King of Alaska, his administration does actually have a plan. Under his personal brand of distraction they have created a sales tax in disguise on their people through tariffing imports, are investing in cutting taxes on corporates, they’re allowing spend on R&D to benefit the balance sheet instantly and making it clear that to make it in America you need to embrace making your goods there. Of course it will likely backfire on us, not necessarily them. The history of USA is a misguided strategy still leading to exceptional economic outcomes. It helps to be the world’s reserve currency :)

They are using their heft now not in the pursuit of liberty but to tip the deck in their favour. The secret of America is that it leads the world in technology and services. They are now doing what China has done in EVs and new energy. Build a trade wall, back home grown winners and make everything you can right where you can see it.

It is a playbook we in the brand world would recognise from How Brands Grow. The big in any category tend to get bigger. This is now the shared playbook of the world’s two biggest economies, so what does the rest of the world do? They have to focus on how smaller countries grow and how they can play the game differently than the bigger ones to create a game they can win.

Is it time to think smaller?

What is Australia’s clever challenge to the current incumbency? We are a big country by land mass but only the 14th biggest economy in the world. Smaller than the Poms, the Spanish and the South Koreans. What we are missing in the current productivity merry go round table is a vision. What do we want to be? Strategy is sacrifice but we don’t seem to know to what end. Where are we going? I am pretty tired of the debate about increasing our productivity without any sense of how, or without the grim determination it will take to actually do it. We seem hell bent on avoiding the tough choices rather than pursuing the all in bets made by Singapore, China, Qatar or dare a Canadian even say, Keating’s Australia.

Maybe it is time to change where we place our gaze and find our heroes. To look at those small giants that have focused on planning, playing to strengths and finding their niche. We forgot that there is also a playbook for how smaller brands grow. You don’t need to be different but you do need to find a different entry point into cluttered categories. This starts with focusing on where you can win and finding a point of differentiation to then grow a customer base around. Here in Australia, surely our productivity will need to come from making those parts of our economy that can be different and valuable even more so.

Our brand is clear, our value proposition less so

The brand of Australia in the world has never been clearer. In a world of chaos our shores offer a lifestyle grounded in a more relaxed way of living. You may not feel that sitting on a delayed train or being stuck in traffic, but the world thinks we have a good thing going.

What we lack is a value proposition for our economy. What we need is to bring this to bear on segments where we can win. Is this Agtech for a world dealing with less water? Is it where low cost energy is used to add value to minerals? An integrated manufacturing system for biotech or using our housing crunch to reinvent housing technology? Could we think like these three challengers who have been able to execute a plan for an export heavy economy like our own?

They surrendered to what is not within their control to maximise what is. The first step in any good strategy is to define the problem before you try to solve it. They make a choice and have reaped the rewards ever since.

Singapore: Block by block

Funded by their Government who built the infrastructure, provided the tax incentives to push their economy up the value chain into electronics, petrochemicals and precision engineering and then into high-value services like finance, logistics and headquarter functions. In this model we would stack on our natural advantages and build on our capacity to capture value up the chain.

South Korea: Protect and scale

They scaled national champions called chaebol in textiles, steel, shipbuilding, autos and electronics. After the Asia crisis they pushed into R&D-intensive industries in electronics and textiles and they spend 5% of GDP on R&D. In this model we would pick national champions and invest to help grow them.

Norway: Virtuous circle

Abundant hydropower let it build energy intensive industries beyond just the extraction of oil. They reinvested their proceeds from their natural wealth to build their financial wealth that now supports their social safety net. In this model we would use our existing financial and natural wealth to create more wealth.

To get our country growing again we need to think about how small brands grow in the face of big ones.

It starts with the right value proposition and consistent choices made to deliver this and only this. I'll say it again, strategy is sacrifice, and it has to be grounded in disruption of the current status quo. Rather than thinking bigger we actually need to be thinking smaller. What would be our unlock from the fourth biggest pension fund in the world investing more at home? What could it lend to or help finance? Without a better value proposition grounded in where we can win, we can’t answer that question. This will break our brand promise and leave us as a country selling our diminished lifestyle to attract immigration and our minerals into markets taking the most of the value. In turn, this will break our brand.

Our luck came from hard work and harder decisions. I reckon it is time to go again.

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Be better to each other.