I wasn’t going to post this article, but then I listened to Scott Galloway‘s Prof G Markets episode, where they talked about how Nike’s dependence on its brand might have led to its downfall and It got me thinking… this blog post feels especially relevant right now, with one of the strongest brand moats showing signs of instability and potentially on the verge of a collapse. Enjoy the article.
According to the Merriam Webster dictionary, a moat is “a deep and wide trench around the rampart of a fortified place (such as a castle) that is usually filled with water” and in business, a brand moat can also feel the same way.
Before we answer the question Do Brand Moats Make a Company Indestructible?, we need to revisit examples of brands that have thrived thanks to their moats and study those that have collapsed despite them. We’ll get to the heart of what it takes to not just survive, but to stay on top, this will also help us answer this important question.
‘Brand moat’ kind of sounds like a buzzword, but maybe its not?
A moat is an advantage that sets a company apart from its competitors. At its core, a moat is simply creating something so valuable or unique that it becomes difficult for others to replicate or compete against. This could be a product that people can’t get enough of, a reputation for quality that customers trust, or a level of customer loyalty that others envy.
Brand moats come in various sizes and depths. Some companies rely on strong brand recognition, where just the sight of a logo triggers positive associations and trust. Others build their moat through customer loyalty, where the relationship with their customers is so strong that competitors struggle to bring them over to the dark side. There’s also pricing power, where a brand can charge as much as they feel like, simply because people believe it’s worth the cost.
Apple is the most obvious example of a brand with a strong moat. Apple’s moat isn’t just about design (although that plays a huge part) or technology (we know they are always late to the party), instead it’s about the entire ecosystem they’ve built. From device integration across hardware and the apps that run on them, to the emotional connection with their users, Apple’s moat is broad and deep, making it incredibly tough for competitors to penetrate.
But understanding what makes a brand moat strong is only one step of this road i’m taking you down. As we move forward, i want to talk about some examples of companies that have built impressive moats and look at whether those moats have stood the test of time.
Who has a strong brand moat?
Some companies stand out as prime examples, but we need to take a closer look at how these brands have built strong moats to really understand how these moats have shaped their long-term success. I’ll also touch on not so popular brands later in the article.
Apple: Apple’s moat is a combination of innovation, design, and ecosystem. They’ve cultivated a wildly loyal customer base that values not just the products themselves but the experience of using them together.
Coca-Cola: Coca-Cola’s brand moat is rooted in one of the most recognizable logos and tastes in the world. Coca-Cola has built the brand’s association with happiness, nostalgia, and universal appeal. And this process started as far back as the early 1900s.
Google: Google’s moat lies in their dominance of the search engine market and its massive data infrastructure. Google is so synonymous with search that “Googling” became a verb. This dominance created a whole industry, Search Engine Optimization or SEO.
Who had a strong brand moat?
Brand moats clearly provide an advantage but they are not invincible. History is filled with examples of companies that seemed untouchable, only to be brought down by forces they couldn’t anticipate or adapt to.
Kodak: Kodak brand moat was their dominance in the photography industry, their brand was synonymous with film. Despite inventing the first digital camera, Kodak failed to capitalize on this. Digital cameras eventually took off and competitors who embraced them quickly ate Kodak’s market share, leading to Kodak’s eventual bankruptcy.
Blockbuster: Blockbuster’s brand moat was built on its widespread network of video rental stores and its dominant market presence. However, Blockbuster failed to anticipate the rise of streaming services like Netflix. Worst part is Blockbuster had the opportunity to buy Netflix for $50 Million but ‘laughed them out of the room’ — A literal $150 Billion Mistake.
Nokia: Nokia for many years was the global leader in mobile phones, Nokia’s brand moat was its reputation for durable, reliable devices. However, Nokia was slow to recognize the shift towards smartphones and touchscreen technology. Apple and Android manufacturers captured market share and Nokia was left in the dust. An acquisition by Microsoft wasn’t enough to revive the brand.
How can a brand maintain its moat?
A brand moat, no matter how strong, requires constant maintenance and reinforcement. Here’s how brands can keep their moats strong.
Innovation: The most effective way to maintain a brand moat is through continuous innovation. Companies like Apple and Google have consistently stayed ahead of the curve by introducing new products, services, and features that keep customers engaged. Apple didn’t just stop at the iPhone; they built an entire ecosystem with products like the Apple Watch, AirPods, and Mac, along with services such as Apple Music, iCloud, and Apple Pay. The App Store has become its own marketplace where Apple holds unrivaled dominance, offering millions of apps that enhance the user experience and drive customer loyalty. Each product and service is interconnected, creating a seamless experience that keeps users locked into the Apple ecosystem. Just see the Urban Dictionary definition of the term Apple Fanboy, while ridiculous shows how truly deep Apple’s moat is.
Adaptation: Brands must be willing to listen and, most importantly, adapt to changes in the market and consumer behaviour. Mark Zuckerberg and Meta have done this through a series of strategic moves. The company expanded its ecosystem with acquisitions of WhatsApp and Instagram, allowing it to stay at the top of social media. It ventured into virtual reality by acquiring Oculus, rebranding as Meta, and launching Horizon Worlds and Ray-Ban Meta’s smart glasses, including the new Orion model. They even developed Threads as a competitor to Twitter (X) in the middle of the platform’s turmoil under Elon Musk. This shows Zuck’s commitment to constantly evolving with the market.
Diversification: Expanding into new markets or product categories can significantly strengthen a brand’s moat. Amazon, for instance, started as an online bookstore but quickly diversified into various product categories, cloud computing (AWS), and entertainment (Prime Video). The company has also made significant acquisitions, such as Whole Foods to enter the grocery market, Zappos for footwear, and Ring for smart home security. Amazon has invested in several startups, including Rivian for electric vehicles and Aurora for autonomous driving technology, signaling its interest in the future of mobility. Additionally, Amazon developed its own logistics infrastructure, which now rivals major players like UPS and FedEx, giving it greater control over delivery speeds and costs. This diversification has not only bolstered Amazon’s brand but also created multiple revenue streams, making it more resilient to market fluctuations.
Consistency: Finally, maintaining a strong brand moat requires consistency. Companies like Disney have built their moats on a consistent brand message and experience across all touchpoints—from movies and theme parks to merchandise and streaming services. Consistency builds trust and ensures that customers know exactly what to expect, which reinforces their loyalty.
So, do brand moats make a company indestructible?
Finally, let’s answer the question: Do brand moats make a company indestructible? The answer, as with many things in business is, it depends.
A strong brand moat undoubtedly provides significant protection. For many companies, a well-maintained moat is the difference between being a market leader and just another player in the field. But, as we’ve seen, no moat is impenetrable. The market is always changing, and what works today might not work tomorrow. Technology, shifting consumer behaviours, and unforeseen pandemics can quickly breach even the most heritage moats. Companies that rely solely on their existing advantages without continuously innovating, adapting, and engaging with their customers will probably fade into the shadows.
Brand moats are not exactly crucial, and they definitely are not a silver bullet. They are just a piece of much larger puzzle that is a business — a big piece for sure — but not the entire cake. True indestructibility requires a combination of a strong moat, a forward-looking strategy, and the agility to pivot when necessary.
The companies that succeed over the long term aren’t the ones that just sit back and bask in their glory; they’re the ones that constantly find ways to reinforce and expand their moats. A strong brand moat is great, but real indestructibility comes from being able to adapt and evolve in a world that never stays the same.
Nike for example, is struggling because it hasn’t kept up with changing consumer tastes. The brand is no longer seen as cool by GenZ, and a lack of product innovation has played a major role in Nike’s decline. The over-reliance on staple models like the Air Jordan 1, Air Jordan 4 and the Panda Dunk led to market saturation, with sneakerheads growing tired of the same drops year after year. At the time of writing, the stock is down 22% this year — a scary sight for a company with a $122B market cap.
The media seems to blame former CEO John Donahoe, but that doesn’t feel fair to me at all. Donahoe took over during the peak of COVID and the boom in digital shopping, bringing experience as a SaaS executive (he is ex-CEO of ServiceNow and eBay) to one of the world’s most iconic consumer brands. But Nike is fundamentally a hardware company, and Donahoe’s software background just isn’t the right fit. What Nike really needs is a supply chain maven, someone like Tim Cook, who can get products from R&D to retailers faster than ever.
There’s hope with incoming CEO Elliott Hill. Social media is loving his intern-to-CEO story, and that’s a solid starting point to generate some buzz. The big challenge will be keeping that momentum going and fixing the supply chain and product development issues that have held Nike back. If you know me, you know im team Jumpman for life so I’m hoping Hill is the kind of leader Nike needs to get back on top and strengthen its moat.
Hope you enjoyed this deep dive as much as I enjoyed delivering it. This is the point in a YouTube video where you’d be asked to like and subscribe, but since this is an article, I’ll ask you to share it in your favorite Slack chat. Why? Because we’re grown-ups over here.