Off Kilter 217: The Capstone to Advantage.

tl;dr: How to think about brand when it's your #1 priority.

At the end of last year, McKinsey dropped a new State of Marketing Europe 2026 report. In it, CMOs ranked branding as their #1 priority. Yay for me, since doing definitional brand work is how I make a living, and 2025 was, well, challenging to say the least.

Yet, in reading the report, I couldn’t help but notice a striking contradiction. While CMOs rank brand as their #1 priority and Gen AI #17 of 20, what does McKinsey focus on? Yup, you guessed it, those CMOs capturing efficiency gains through AI, while lambasting CMOs en masse for their “massive undervaluation” of the technology. Sigh.

Here’s what McKinsey ignores: CMOs aren’t prioritizing AI efficiency. If they were, they’d have said so. Instead, they’re prioritizing brand. And if they’re prioritizing brand, it means they’re prioritizing growth and long-term value creation, because that’s what a brand focus delivers.

Now, McKinsey isn’t dumb; it’s assuming the CMOs reading the report are. The AI efficiency spiel has nothing to do with CMO priorities and everything to do with its own revenues. It’s pouring a fortune into Quantum Black, and the pressure is on to make back that money somehow. Especially when all the big AI players now view consulting as the margin moat amid a sea of model commoditization.

Unfortunately, this myopia means McKinsey isn’t answering the real question CMOs face when prioritizing brand: finding the signal amid the noise of how they should be thinking about it. Especially when treating brand as a genuine priority means impacting the business more deeply than hiring some designers to refresh your identity, bringing in an agency to run a brand campaign, or outsourcing it all to McKinsey’s Quantum Black AI agents.

So, what follows is my attempt to write the report McKinsey should have written: How to think about brand when it’s your #1 priority.

1. The Sharp Trap. Why The Theory Du Jour Probably Won’t Save You. Again.

It’s exhausting how many theories of brand advantage one must suffer over the course of a single career. Over the past few years, just as brand purpose began to fall out of fashion because mostly it didn’t work, Byron Sharp’s laws of brand growth rapidly fell in. Why? Not because they’re right, or even particularly actionable, but because it’s a theory that’s reductively simplistic, institutionally attractive, and perfectly designed for low-engagement social media scrolling. (This, in case you’re wondering, is why we now have to suffer the tediously boring distinctiveness disciples over on LinkeyLoo peddling brand growth truthiness according to Sharp. Have ChatGPT, will pontificate, I guess.)

Anyway, as a framework, what Sharp offers is narrow and measurable, which finance loves; it limits transformation primarily to media buying, which procurement loves; and it justifies a marketing function reduced to tactically managing the promotional P, which doesn’t upset any apple carts in the modern C-suite.

Win, win, ring-a-ding.

“So what. Will it make me successful?” I hear you asking. Weeeeelllll, that depends on how you define success and the kind of category you play in. If you’re Diageo, operating in low-innovation, low-growth, highly mature categories where you’re already huge and your ambitions are single-digit modest, then yeah, Sharp is the man. Knock yourself out. If you’re not Diageo, let’s step back for a second.

Among many issues I have with the Sharpian view is that he assumes markets are static. This complete lack of temporal context leads him to dismiss innovation as a strategic driver and disruption as a threat. Assumptions the economic evidence soundly disproves.

BCG’s analysis shows that innovation-driven companies generate three times the total shareholder returns of the S&P 1200 through margin expansion, business model transformation, and improvements in valuation multiples, not just volume growth. McKinsey (haha, why couldn’t they have put this in the CMO report?) also identifies innovation as the difference-maker among firms that consistently outperform their peers in shareholder value creation.

And the evidence of our own eyes is readily apparent. Tide Pods versus Tide liquid is a format innovation that still commands a roughly 20-50% price premium per load, over a decade after its introduction. Not through any Sharpian “law,” but through genuine product advancement.

Put simply, Sharp misses the transformative effects of innovation because his theories rely on an assumption of fixed markets, which means the entire basis of his thinking is tactical (what we do in the moment) rather than strategic (how we create future advantage). Yes, of course, how we execute tactics within the constraints of existing markets is important. But if we’re thinking strategically about future advantage, Sharp has very little to say.

So, if real value is delivered by innovation breakthroughs over time, rather than status-quo thinking in the moment, what does this mean for how we should think about brands?

Houston, we need a new theorist.

Fortunately, I have one I prepared earlier. Rita McGrath of Columbia Business School. While she has almost nothing to say about either brands or marketing, we shouldn’t hold that against her. It may even be an advantage.

What McGrath does bring is a career spent studying successful, long-lasting, and—gasp—innovative corporations. Not those fighting over points of share, but those winning battles for entire markets. Those who create new advantages rather than defend old positions. How refreshing.

2. McGrath’s Framework. And Why Brand is The Missing Capstone.

McGrath’s theory of transient competitive advantage begins with a fundamentally different assumption of reality from Sharp's: In dynamic markets, sustainable advantages have been replaced by temporary ones. Success requires managing a portfolio of advantages across different lifecycle stages—emerging through experimentation, strengthening through scaling, exhausting as markets shift.

Here, innovation isn’t dismissed; it’s front and centre. Companies must constantly experiment to discover new advantages before current ones erode. This is offensive innovation designed to create new sources of value, not the defensive kind designed to maintain parity, which Sharp grudgingly acknowledges.

However, such portfolios require discipline: Where to find new advantages? How to create them? How to know we’re on the right path? Which experiments deserve scaling? Which advantages should be abandoned? When should we abandon them?

While McGrath is rigorous about describing the stages of her model and identifies the overarching need for discipline as critical, referring to it as “sources of stability,” she does little to define how this works in practice. And without a clear guiding lens, portfolio management tends to slide rapidly into portfolio chaos. The kind of endless experimentation without direction that should send a shiver up the spine of any CMO who survived the last decade, and the utter misuse of the term agile by digital gurus grifters.

This is where brand becomes the missing capstone to her thinking. Not brand as logo or messaging, but the clarity of what we stand for, what we mean to people, and the decision logic this necessitates. This isn’t brand as a source of status quo equilibrium (Sharpian logic), but brand as a customer permission system through which advantage-creating innovation is brought to market (McGrathian logic).

There's a virtuous cycle here that McGrath hints at but doesn't fully articulate: innovation creates the permission for more innovation, as long as these innovations are coherent with each other. Over time, each successful innovation increases customers' willingness to try your next one. Apple can overnight dominate the watch and headphone markets because decades of previous iPhone and iPod success created the brand permission. Red Bull can launch new events and media properties and successfully run sports teams because its cultural innovation has built the brand's permission for such experiences. This is how brands de-risk innovation and earn the right to pursue new advantages that would be impossibly risky without this accumulated permission. (Conversely, this is why startups typically favor starting with a “wedge”). As a result, successful innovation drives, reinforces, and refreshes what the brand means rather than diluting it, thereby increasing future possibilities. (Looking at you, all you “must protect the brand at all costs" limiters of possibility).

In other words, brand can be thought of as the capstone atop McGrath's framework—an unnamed source of stability, coherence, and discipline. The virtuous cycle, or flywheel effect, this addition creates is why it’s the capstone. Brand brings coherence to innovation; innovation brings essential new vitality to the brand.

The good news is that brand strategy practitioners have been handling the definitional part of this capstone work for decades. Questions like “What do we stand for?” “What do we mean to people?” and “Why should anybody care?” aren’t marketing fluff. They’re exactly the coherence McGrath is looking for. The gap isn’t in the questions themselves; it’s that we’ve done a poor job of connecting the answers to a CEO-level framework for competitive advantage.

As a result, this potentially crucial definitional work ends up being underutilized when its:

1. Buried on page 22 of the design guidelines, and is skipped over by everyone

2. When not buried, rarely gets unpacked into a strategic choice logic. “We stand for X” is purely philosophical unless cascaded into “therefore we measure Y, invest in Z, organize around A, and say no to B.” Without such translation, it makes no difference.

3. Finally, if there is a choice logic, it’s usually focused on marcomms. Guiding what we look like, sound like, and message like. But this isn’t a capstone to advantage we’re architecting the future of the business around.

However, shift your mindset the tiniest bit and employ a McGrathian lens, and this definitional work shifts from lofty statements buried in guidelines to an explicit source of strategic intent that cascades into CEO- and CMO-level choices about competitive advantage.

This transforms it into an organizing principle that separates the strategic management of advantage from scattered activity.

3. Different Approaches, Different Advantages

If Sharp’s theories were truly universal as he posits, every company would pursue the Diageo approach to brand strategy. They don’t, because different relationships between what brands stand for and the innovation they undertake reveal distinctly different advantages to exploit.

Diageo brands stand for continuity over time. Its strategy centers on mental and physical availability in mature, low-differentiation categories. Its brand decision logic prioritizes distribution, distinctive assets, and penetration metrics. It minimizes innovation because its competitive context doesn’t reward it. By accepting equilibrium, it caps potential returns in exchange for reduced risk. Annual organic revenue growth of 1.8% reflects a deliberate choice—stable, predictable, unambitious. This works when your categories are mature and your aspirations modest.

P&G brands stand for superiority through product innovation. Its brand decision logic invests in R&D to improve performance. Tide Pods’ price premium came from solving real problems: convenience, dosing, and mess. Each superior product strengthens a P&G brand's category leadership while creating permission for the next innovation. P&G knows copycats will erode past advantages, exactly as McGrath predicts, so it’s always seeking to create more. P&G isn’t embracing return-capping equilibrium; it accepts innovation risk in pursuit of margin expansion. This only works if your brands give you permission to innovate continuously and your organization can systematically capture those advantages before competitors copy.

Red Bull stands for cultural meaning through media innovation. It doesn’t prioritize product or distribution. It scales the infrastructure for cultural participation. Stratos, Rampage, and sports team ownership aren’t traditional brand activations. They’re a different business model entirely. Here, innovation occurs in narrative, experience, and meaning, which exploits cultural advantages unavailable to energy drink competitors. Red Bull embraces cultural and media risk in pursuit of excess return to both margin and volume. This only works if you can continually create cultural moments that reinforce what the brand means without diluting it.

These aren’t just tactical differences in brand execution. They’re fundamentally incompatible strategic orientations. Each of these businesses stands for completely different things and thus has very different approaches to innovation and advantage.

P&G’s continuous product innovation would bankrupt Diageo’s efficiency-focused model. Diageo’s penetration logic would starve P&G of the innovation that justifies its premium pricing. Red Bull’s media infrastructure investment would destroy P&G’s margin structure entirely. Try applying Diageo’s “minimal innovation” logic to P&G’s portfolio and watch brand permission erode as competitors outflank you with superior products. Apply P&G’s innovation cadence to Red Bull and watch cultural meaning collapse as you pivot from authentic participation to product features nobody asked for.

All three are successful. None is universal.

What matters is how you frame the relationship between what you stand for and how you innovate, relative to the risk you are willing to take in return for commercial advantage. This determines the path you will take, and the portfolio of advantages you will, in turn, set yourself up to pursue.

4. The Strategic Implications

At its core, this is already how transformative corporate brand work gets done. The most successful brand transformations aren’t solo CMO projects; they’re upstream CEO-CMO partnerships. The CEO brings the business strategy, ambition, risk tolerance, and commensurate authority over innovation resources. The CMO brings customer intelligence, understanding of the brand's existing permission, and synthesis capability. Together, they define the relationship between brand and innovation, which serves as the capstone to the portfolio of advantages.

What’s been missing is our ability to connect this work to McGrath’s framework. Here’s what changes when we make that connection explicit:

• Brand becomes the organizing principle for innovation decisions.
  Not “should we innovate?” but “which innovations align with what we stand for?” P&G pursues product superiority innovations. Red Bull pursues cultural participation innovations. Diageo pursues distribution innovations while deliberately choosing not to innovate products. The brand answers which types of transient advantages you’re positioned to capture.

• Brand becomes the lens for product portfolio choices.
  Whether creating new products, amplifying existing ones, or deprecating exhausted advantages. Apple deprecated the iPod because the iPhone captured that advantage more completely while better reinforcing the meaning of “seamless experience.” Microsoft deprecated independent Windows and Office brands because, in a cloud-based world, these advantages had exhausted and were fragmenting the meaning of “productivity platform.” Your brand logic determines how you think about emerging versus exhausting advantages.

• Brand becomes the filter for partnership and M&A strategy.
  Which partnerships reinforce what you stand for versus dilute it? Microsoft began partnering with competitors like Apple and Salesforce because removing customer constraints strengthened Microsoft's “empowerment” focus under Nadella. P&G acquires innovation capabilities that enable continuous product superiority. Red Bull partners with athletes and events that amplify cultural participation. The brand determines which external relationships capture advantages rather than waste resources.

• Brand becomes the discipline for letting exhausted advantages go.
  McGrath’s portfolio management requires knowing when to abandon advantages before they become resource traps. The brand provides that lens—not “is this still profitable?” but “does this still reinforce what we stand for and mean?” When the answer is no, you begin disengaging and moving on to new sources of advantage regardless of current profitability, because defending yesterday’s advantages prevents the capture of tomorrow’s.

This shifts brand strategy work from periodic refresh projects to the coherence layer that continuously sits atop advantage management. Not “what should our new campaign say?” but “which advantages should we pursue this year, and which should we abandon?”

Ending as I began.

Let’s end where we began: with McKinsey.

What I’ve attempted to explain is what the survey actually revealed. When CMOs rank brand as their #1 priority, I’m pretty sure they aren’t asking for an isolated logo refresh or audits of their distinctive assets, or even a shiny new brand campaign.

No, what I think they’re seeking is what’s been lost amid the shift to digital and our current lurch toward all things AI: an organizing principle that enables them to identify and manage sources of competitive advantage in fast-changing markets. A framework that separates strategic portfolio decisions from scattered activity. And a lens through which innovation choices can be made confidently and coherently rather than chaotically.

Not a glorified brochure selling McKinsey’s AI efficiency services. And not Byron Sharps’ equilibrium of mediocrity. But clarity on how to strategically think about brands in an environment where advantages emerge and exhaust, and the hardest job is figuring out where, when, and how to shift from one to another.

So, I'll leave you with this McKinsey-inspired decision matrix:

• If you prioritize brand and care about winning in dynamic markets, think like McGrath.

• If you prioritize brand and care about surviving in mature, undifferentiated markets, think like Sharp.

• If you care about neither winning nor surviving, McKinsey has just the AI efficiency report for you.

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