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One word is critical to M&A Success – CULTURE

One word is critical to M&A success – CULTURE

We learned last week that Hewlett Packard Enterprise is merging its enterprise services unit with Computer Sciences Corp (Read the full story). This is a perfect opportunity to talk about the consequences of mergers on identity and brand, and how having a solid strategy for both is key in your merger’s success.

Research has shown that as many as 83 percent of mergers fail to achieve their original business goals. Brand value, or goodwill, suffers right along with business value, often destroying the appeal and premium that might have inspired the acquisition in the first place. Why is this? Because culture, and the purpose behind each organization being combined, is often ignored in favor of the numbers.

These deals are put together by attorneys and investment bankers, who fail to consider the cultural implications of the merger. These people think in terms of “synergy” and 1 + 1 = 3, when the real goal should be 1 + 1 = 1.

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Brand Diversification: When Is it a Good Idea?

Brand Diversification: When Is it a Good Idea?In April I posted a SlideShare presentation (below) about tech startups and key brand considerations as they grow. In it I described Facebook’s decision to retain the WhatsApp and Instagram brands as part of a brand diversification strategy. Retaining acquired brands (rather than renaming and assimilating them into the parent brand) can be useful if they appeal to audiences, or deliver services that are not aligned with your core brand. While Facebook has 1.2 billion users, both Instagram and WhatsApp have hundreds of millions of loyal users. Since many of these users prefer these acquired apps over Facebook, it may make sense to keep those brands separate.

I also remarked that Facebook could continue to grow by following this type of diversification strategy, although it risks cannibalizing some of the popularity of its flagship brand. Now Facebook has publicly committed to this diversification strategy, which has been dubbed by some as “unbundling.”

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4 Questions to Ask When Developing a Brand Architecture Strategy

4 Questions to Ask About Your Brand Architecture as Your Organization GrowsLet’s imagine you are Facebook. When you first started, you had a clear idea. You created messaging, a user experience and an identity platform to guide it as it grew. You made the hard decisions to whittle your brand’s message down into one clear, coherent thought.

But now, you’re acquiring additional brands at a very high cost, adding complexity to your brand. Now you’ve got Instagram and WhatsApp. You say you are committed to preserving their independence. We say it’s time to revisit those hard decisions, to keep your brand architecture intact and your brand strong.

We see organizations—especially those in the technology and digital fields—take a “ready, fire, aim” approach to acquiring brands and working them into their brand architecture. As a result, any of the following situations may occur, creating a complex and unwieldy environment:

  1. You’ve brought in a little monster that’s unlike the rest of the monsters in your zoo, but you love it anyway.
  2. You decided to preserve the equity of an acquired brand because you don’t want to “mess it up.”
  3. You are developing a new brand in response to a short-term market need or competitive threat.

So how does a growing company develop a brand architecture strategy?

Developing a Brand Architecture

There are four questions you can ask of your company that will guide your brand alignment through this transition:

  1. “How many promises do we want to make to our audiences?”
  2. “How elastic is our current brand in making these promises to these audiences?”
  3. “How many brands do we eventually want to have, and need to support?”
  4. “How does the introduction, or cancellation of a brand, affect the rest of our portfolio?”

These questions must not be thought of in a vacuum; rather, they should be thought of as a connected part of the organization. While some organizations are disciplined about this, others could stand to use some help. Even the most disciplined companies have to revisit this over time.

IBM, for example, is a technology giant and appears to be a master-branded company, but if you look at IBM over time, they have struggled with supporting the master brand in exchange for some autonomy at the sub-brand level. IBM acquired a number of sub-brands over time, such as Lotus, Rational Software and Tivoli. Progressively each company began using more and more of IBM’s resources until the organization made a decision to rein these brands in. Lesson learned: when they acquired PwC Consulting, it rather quickly became IBM Global Business Services.

On the other hand, GE has done a remarkable job of maintaining the GE brand. It’s very simple; it covers everything from light bulbs and toasters to aircraft engines and nuclear reactor services. How did they manage that? GE focused its brand promise on excellent management and ceaseless innovation. Anytime you see that GE brand, that’s what it means. That’s a pretty powerful model. If I were Facebook, I would take note.

Learn more about our brand architecture services.

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