CXO

Branding through a merger in tough economic times

Turbulent times have forced firms like Scient and iXL, and technology giants HP and Compaq, to join forces. The CEO of Prophet Brand Strategies offers advice for how these newly merged firms can create a cohesive brand to win new customers.


While a company's brand identity is certainly critical to its success, many consulting firms that invested heavily in branding efforts during the past few years have gone out of business. Others have merged with former competitors to increase their chances of survival.

Achieving a lasting brand that will endure and enhance a firm—regardless of the financial forecast—requires well-thought-out long-term goals and strong leadership. But that process becomes even more difficult when two firms come together.

Michael Dunn is the president and CEO of professional services firm Prophet Brand Strategies. In an interview with TechRepublic, Dunn offered his take on branding issues in the current economy and gave some advice for branding newly merged companies.

What is branding?
Dunn defined branding and its importance in "How are your customers experiencing your brand?"

Brand identity must be flexible
At the height of dot-com mania, many consulting firms were sending out warnings about keeping up with the speed of business, Dunn said. For example, Scient (a consultancy that has now merged with Atlanta-based iXL) and the now-defunct marchFIRST were suggesting that if you didn't have "the latest and greatest," you were going to be left behind.

"There was an arrogant element to the personality in those brands," he said. "Some of that they were actively messaging in the communication strategy, and some of it they were just exuding in terms of the way they interacted with their prospect and their clients."

Now the economic client has changed dramatically, and Dunn said it's a brutal time in many of consulting's submarkets.

"Utilization rates are down, and there’s a lot of excess capacity, and people have had to lay people off," Dunn said. "There’s really aggressive price discounting going on."

With speed no longer being the driving factor, certain elements of some consultancies' brands seem irrelevant in the new market context. The dramatic change in the economic climate demonstrates how little flexibility those firms had with their brand and their positioning, Dunn said.

Establish and maintain core brand values
The challenge to consulting firms is to maintain a focus on long-term strategies and brand-building issues which may insulate them—to some degree—against the economic storm, Dunn said. Firms should focus on the types of values they want their organization to stand for and the key behaviors they want their people to manifest when they interact with clients, colleagues, and each other.

"As long as that is clear, and you have a road map for that, then you can flex your positioning and your value proposition to be responsive to what’s going on in the external environment,” Dunn said. “You can be responsive to some of the short-term kind of changes that are requiring you to change the way you are going to market, but do it in a way that can still help you get to your long-term goal."

Dunn cited IBM Global Services as a company that has been successful in maintaining its core brand while responding to economic fluctuations and their effects on customer spending. While continuing to broadcast the message that its services are best of breed, innovative, and collaborative, its messages now have a stronger emphasis on "return on investments, stability, and infrastructure and girth, and depth of their expertise" in response to the turbulent economy, Dunn said.

Merger environment is rocky
While several consultancies have joined forces in order to survive, mergers in the service sector overall have proven "incredibly difficult," resulting in the downfall of previously successful firms, Gartner said.

MarchFIRST, for example, was the result of a merger between USWeb, CKS, Mitchell Madison Group, and Whittman-Hart. And although the merger between Scient and iXL will probably be stronger financially, it will "likely not result in a competitive advantage,” Gartner said.

But despite the fact that a major investor in both Compaq Computer and Hewlett-Packard (HP) is urging the companies to scrap their merger, the companies' leaders remain steadfast in the decision for HP to acquire Compaq. Gartner said the impact of the merger between the two powerhouse vendors will have profound short- and long-term effects on both enterprises and the vendor market.

In order to survive, two firms must create a combined entity that convincingly offers new and better value to its customers and that communicates that value effectively. Dunn suggests that most mergers and acquisitions fail because the expected technology benefits and cost reductions don’t materialize.

"They fail to produce the synergies that were talked about as a reason for acquiring the company," Dunn said. "They fail, over a five-year period subsequent to the acquisition, to actually add shareholder values, so they are more value-destroying than value-creating."

Creating a new brand identity from existing companies
Dunn said it's difficult to create a new brand from merged companies—especially services firms—due to the heavy reliance on the newly formed entity's staff to communicate the new values to the customers.

To make a merger work, both the employees and the customer base of the merging firms must understand why it makes sense for the two firms to come together, and that message has to be communicated in a visible, aggressive, consistent, and persistent way, Dunn said.

"What new space are you going to be providing so that this merger is not one plus one equals one and a half, but one plus one equals three?" Dunn said. "Part of that is staking a position in the market and articulating a sense of combined strength and core values. What types of client problems are you now going to be able to tackle in a better way because your two firms are combining these kind of different heritages into this new strength?"

Conveying such a message is easier if the merging firms are similarly aligned in terms of values, behaviors toward customers, and the types of behaviors that get rewarded inside the firm.

Despite their best efforts, most merging firms are going to be met with skepticism from the market. Newly merged firms will have to gradually migrate perceptions of the client companies, Dunn said. “It’s almost like you have to have a two- to three-year road map of how you’re going to bring these things together," he said.

Demonstrating core strengths
In regards to the HP acquisition of Compaq, Gartner warns that the new entity must ensure that the migration, consolidation, and integration process and the ensuing internal battles don't disrupt service to existing product lines or damage its ability to create new products.

"Any merger requires internal focus on service offerings, methods, practices, infrastructure, culture, and management of consultants' (a service firm's most precious asset) expectations," said Gartner analysts in a recent FirstTake regarding the merger between Scient and iXL. "Generally, such activity detracts from focusing on customers."

What are your thoughts on the HP/Compaq merger?
Do you think the HP/Compaq merger will create a great new company, or will it be the downfall of two industry giants? Post your comments below.

 

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