Why brand architecture gives CMOs a headache

Brand architecture is market signposting. It helps clients navigate and make sense of a professional service firm’s offer. Surprisingly, this externally focused part of the brand strategy often gives CMOs a big headache because of the internal dynamics.

There’s a ton of strategic innovation and acquisitions going on in the business of professional services: law firms adapting to new technology (AI, etc.) tech companies attempting to become more design literate, management consultants of all stripes becoming more digital.

One of the tricky tasks that often lands in the CMO’s lap is brand architecture, aka what to call things.

There are only ever three choices in brand architecture

The reason it’s tricky is that it involves trading off all sorts of competing factors in making the ‘right’ decision. What initially seems like a simple choice becomes something more like untangling the Gordian Knot.

Added value

Let’s take acquisitions first.

Big Tech acquires a boutique design company, Small Design. The strategic rationale is easy to see. Big Tech has a strong reputation for the digital ‘plumbing’, but the world of tech has moved into apps and customers who reward solutions that are cool not just reliable. Big Tech knows it can’t close the gap by hiring a few designers to upgrade its capabilities. So it buys a whole company.

But what to call it? Explaining this one scenario in a bit of detail is helpful to shine a light on the CMO’s dilemma across a range of situations. So bear with.

At face value, it’s pretty straightforward. There are only ever three choices in brand architecture:

Monolithic. After a period of migration, Small Design drops its name entirely and becomes a part of the Big Tech brand (called Big Tech Design or something like that). IBM’s acquisition of Resource Ammirati is a good example of this approach. Now fully integrated into IBM iX

Endorsed. Small Design retains its name but is visibly endorsed by Big Tech in its market presence (Small Design. A Big Tech Company). Example of this is Accenture’s acquisition of creative agency Karmarama. Now endorsed as ‘Part of Accenture Interactive’.

Independent. Nothing changes, short or long term in terms of Small Design’s brand name and marketing presence. (Big Tech is hardly even mentioned in its branding). Australian creative boutique Tinkerbell is an example of this. Owned, or at least part-owned, by PWC Australia but very much kept at arm’s length.

Because the strategic rationale for buying Small Design is to enhance Big Tech’s design capabilities and reputation, the obvious answer is 1. Monolithic. What’s the point of buying it if it remains separate and similarly, if it remains separate what’s the long term impact on Big Tech’s internal capabilities? Not much. If Small Design follows the independent or even endorsed naming model, in the long term, then it’s entirely rational for them to argue they need to remain in their original offices and more or less carry on as before with their jeans and sneakers ‘design business’ culture.

Under pressure

This where the CMO’s headache starts.

Maintaining Small Design’s distance from Big Tech is the ‘no pain, no gain’ option.

Pain comes in persuading the leaders (probably the founders) of Small Design that as well as give up their independence they must also give up their identity. The founders themselves might be ‘soothed’ by the sale proceeds they’ve received, but they know that their teams will be anxious about the future and won’t have gained anything much from the sale themselves. So the mantra, “nothing has changed,” or “they haven’t bought us to kill us,” is often heard at Small Design’s post-sale, town hall meetings.

“Why are we buying them? To build our brand or to build theirs?”

On the other hand, the CMO knows that if they don’t fully integrate Small Design into Big Tech before the founders complete their earn out (and most likely leave), the new skills and capabilities they have acquired may evaporate before they have had any impact on Big Tech’s overall brand. Full integration means moving quickly to absorb Small Design’s reputation and people into Big Tech. Moving them into the same office spaces, integrating them into client and sector teams, and presenting them to the market as ‘part of us’ not just ‘some people we know’.

What makes the CMO’s headache worse is knowing that full strategic integration of acquisitions into Big Tech isn’t really her job. But she also knows that her colleagues in the leadership team may not see the fudge of putting big spaces between the two brands as such a problem. “Why don’t we see what happens?” they might well say.

It takes a brave CMO to challenge the board to decide to opt for speedy integration — despite the real and understandable reticence of Small Design’s founders — but keeping a focus on the strategic question is the best way. “Why are we buying them? To build our brand or to build theirs?” If it’s the latter then an independent or endorsed model fits perfectly, but if the answer is to add to the Big Tech brand, then full integration after a short migration period is always the best approach. “Now, how do we best manage the people and emotions involved?”

Rebel with a cause

The issues are in sharp relief with a new acquisition, but the same dynamics also apply to internally generated attempts to sub-brand ‘new’ services.

In big law firms, the current poster child of this phenomenon is all the activity around the challenges and opportunities of new business models and tech-enabled processes. Every big law firm has created a new business unit looking at it. Nominally called ‘innovation’ or ‘alternative legal services’ these business units are led by dynamic and entrepreneurial people who quickly decide that they need to ‘brand’ their group to differentiate it from the core firm brand.

Brand architecture should signpost to the market the relationships between the various parts of your business

At face value, this urge seems to make sense. A different brand would help people see the new offer as distinct from the ‘traditional’ law firm and because they’re dealing in the future and tech they inevitably want to call it something that sounds like a Shoreditch / Silicon Valley start-up.

On the other hand, standing back and thinking about it strategically, the primary source of projected future revenues for the new services is usually almost entirely existing clients. This is because the partners believe that they can cross-sell the new services to them under the strength of the current relationship — either as a defensive play against new legal tech businesses or to extend the relationship.

These clients are loyal to the Big Law brand, and the partners within it. Cross-selling is hard enough when it’s another generically named department within the law firm (corporate, real estate, IP, etc.), it’s harder still if the partner first has to explain that Zippo is part of Big Law and if they were to engage with them, the ‘trusted’ partners they know and love, would continue to look after the relationship.

In this situation, boring as it might seem to the entrepreneurial innovation partner, the name of the new services should something descriptive like “Big Law Innovation” or “Big Law Applied Solutions.” There are plenty of options to choose from, but just like GE or FedEx do it, the suffix should be descriptive (GE PowerFedEx Express).

Take two with water

To see how messy it can quickly become take a look at the websites of the Big Law brands and go to the ‘innovation’ or ‘advanced delivery’ section. Under these appropriately descriptive headings, you’ll likely find a smorgasbord of smaller products and services with names like “iTechsphero” (I made that up, but it’s not far off). Each one probably seemed innocuous at the time, but with the benefit of hindsight can be a bit confusing.

To make you feel better, big brands like GE and FedEx also used to look like this — with hundreds, even thousands of endorsed and independent sub-brands littered across their global operations. At a certain point, they stood back and asked themselves if this was perhaps a bit confusing to customers, and went about rationalising their brand architecture to reflect their strategy better.

Brand architecture should signpost to the market the relationships between the various parts of your business. There’s no right and wrong; it just ‘is’. The market also doesn’t care. They just read the sign and respond accordingly. So better make sure they’re reading what you want them to.

End


Ian Stephens

CEO and Founder of Principia, the world's leading strategic consultancy specialising in brand-led transformation for knowledge-led businesses.