Brands & Ownership Changes

It is a sad day when a previously meaningful and vibrant brand is taken over by or combined with a new entity that does not share the brand’s essence, promise, and values. This happens quite often, with mergers and acquisitions, when a company is taken private or public, or with other changes in ownership or leadership. Sometimes it happens when a financial owner (such as a venture capital firm) replaces the previous management team with its own new team. This is particularly true when people who only understand one thing, ROI (or, more specifically, their personal financial gain), replace the leadership team that had the original brand vision. We saw this happen when General Motors took back control of Saturn, tossing out Saturn’s “different kind of company” operating philosophy and forcing it to run like any other GM brand. Likewise, Compaq once owned 20 percent of the personal computer market, but mismanagement of the brand after Hewlett-Packard acquired it eventually resulted in its complete demise. Quaker Oats 1994 acquisition of the Snapple brand led to huge sales decreases, going from $1.2 billion to $500 million in 27 months. Sprint's takeover of Nextel was a disaster. Sprint had catered to the consumer market, while Nextel concentrated on the business market. Soon after the merger, large numbers of Nextel executives and employees left citing cultural differences between the two brands. Sprint was bureaucratic, while Nextel was much more entrepreneurial. The integration never was executed properly. Jaeger lost its way since its takeover in 2012. And recall the impact on Daraprim's reputation when Turing Pharmaceuticals acquired it from Impax Laboratories and Turing's CEO Martin Shkerli (former hedge fund co-founder) raised that lifesaving AIDS medication's price from $13.50 a pill to $750 a pill overnight. Shkerli was later arrested for securities fraud by the FBI. 

Such a change is akin to a person’s spirit exiting his or her body to allow a new spirit to inhabit it. While the newly combined physical/spiritual entity may seem to be the same entity as before, new attitudes and behaviors will eventually betray the new spirit, but not until after the huge reservoir of brand equity is traded for short-term financial gains for the new owners. This is one reason previously strong brands seem to “lose their way.”

Much of this was reprinted from Brand Aid, second edition, available here.

Taking Risks

Southwest Airlines tried something new when it decided to create an airline based on a new low cost model and employees who were cheerful and funny. Amazon.com took risks when it created an all online mega store. eBay was also an entirely new concept. Industry insiders laughed at GEICO when it began advertising so heavily with a gecko spokesperson. Uber thought out-of-the box when it created its new model for paid vehicular transportation. Wegmans has a history of constantly trying new things and integrating them if they work and abandoning them if they don't. Tesla started a new car company based on the concept of an all electric luxury car. And they decided not to sell through dealerships. CarMax created an entirely new model for selling used cars. Abercrombie & Fitch repositioned itself from a staid century-old upscale sporting goods store to a hip clothing store targeted at the teenage market. 

Not all risks pay off. Saturn was a different kind of car company and a different kind of car but when it got integrated back into GM mainstream, it began to fail. Song Airlines, a Delta Airlines startup, was designed as a lifestyle brand targeting stylish hip professional women and focused on creating a new culture in flying. It started at the worst possible time for airlines, post 9/11.

My point with each of these brands is that wildly successful brands (and some that fail) usually step out of the box, break the industry mold and take risks. As a brand, you cannot win by doing what everyone else in your product categories is doing. 

I can't tell you how many clients have said to me, "But if we do that, we would be taking huge risks. No one else in the industry has ever done that before." I have also heard the following: "We just don't know how to do that." "That is not our area of expertise." "But then we would be entering a new product category." "Our shareholders would not allow that." "That is just too risky. What if we fail?" Gambling establishments are quick to point out that "you can't win if you don't play." The same holds true for brands. If you are unwilling to take any risks, it is almost certain that you will not stand out as a brand. In fact, every single brand that was successful over the history of commerce took a significant number of risks to achieve their success. That is just how it works. 

If you are unwilling to take at least calculated risks, your brand will never achieve the highly successful differentiation you would seek for it.