Restructuring: Why should a company change its name?
One of the last things a company ever wants to do is change its name. It is disruptive, expensive to implement and, really, what’s so bad with the one you have? And what are the odds you will find a better one? It’s just easier to stick with the one you have, isn’t it?
The answer is, of course: it depends.
Companies change their names for a variety of sound business reasons.
Name changes often reflect how a company wants its changing business to be perceived. A much cited example of “shareholder value repositioning” is cigarette maker Philip Morris Cos. In 2003, PM officially changed its name to Altria Group, stating that the change was to clarify the relationships between the parent corporation and the operating companies, which then included Kraft Foods. "The name was chosen to reflect our aspiration to be a financially strong global family of consumer products companies and a commitment to responsible business practices," said CEO Geoffrey Bible at the time.
Bell Atlantic changed its name to Verizon after a series of acquisitions gave it a national footprint. Both parts of the name – Bell and Atlantic – were either geographically or technologically limiting for a telecommunications company offering a myriad of new national services, apart from telephony.
International Harvester changed its name to Navistar in 1987 when its business had diversified well-beyond its origins in farm equipment to encompass commercial trucks, diesel engines and school buses.
Andersen Consulting was required to change its name as part of its separation agreement with its parent Arthur Andersen, the accounting firm. In January 2001 the split was complete and Accenture was born (nine years later Arthur Andersen ceased to exist after becoming embroiled in the Enron scandal).
Companies also change their names in an attempt to get beyond a scandal or a disastrous event.
The controversial security firm Blackwater recently changed its name to Xe — pronounced like the letter Z — in an attempt to distance itself from its operations in Iraq, including a 2007 shooting that killed several civilians.
Even Abu Ghraib, the Baghdad lockup where U.S. military guards tortured and humiliated Iraqi prisoners, has reopened with fresh paint and a new name in a bid to shed its notorious reputation. It is now known as Baghdad Central Prison.
After the Los Angeles corporate headquarters of National Medical Enterprises, a hospital operator, was raided by hundreds FBI agents as part of a wide-ranging investigation into fraud and abuse, the company settled the charges, merged with another hospital company, AMI of Dallas, and transformed itself as Tenet Healthcare – a new company with a new future.
But is changing the name the right thing to do for a company that needs to shed a troubled past and start fresh? Explaining the Abu Ghraib name change, Mohammed al-Zeidi, the assistant director of the Iraqi Rehabilitation Department, explained it thus: "We felt that it was our duty to rehabilitate the prison. We turned it into something like a resort not a prison. The first step was to change the name."
A name change is often the first step on the road to rehabilitation. But it comes with a huge caveat: If a company’s reputation and brand is so fundamentally damaged by an event that constitutes a breach of trust or confidence with customers, suppliers or employers, a new name can help, but a name change alone cannot restore a damaged reputation. If anything, it can make things worse.
Consider 21st Century Insurance. Acquired and absorbed by AIG several years ago, it has been resold to Zurich Financial Services and restored to its original name. Because the change was so poorly explained, public opprobrium was piled on the company with many people believing it was a somewhat cynical renaming exercise to hide the tainted AIG connection. Altria’s name change move was also immediately criticized by a corporate watchdog groups that favor international tobacco controls. One termed the name change "a PR maneuver meant to distance the corporation's image from its deadly business practices."
The lesson here is that, even though a name change may be logical, it cannot be seen as an attempt at verbal sleight of hand to escape a problematic past. The business fundamentals that created or contributed to the problem first have to be changed, and transparently so.
The ValuJet lesson
ValuJet offers both an object lesson in the difficulties of overcoming a damaged brand and how to do it right when it comes to a name change.
ValuJet seemed like the perfect name when the no-frills airline took to the skies in 1993. The Atlanta-based carrier had grander ambitions, with a small but growing fleet of jets and
plans to expand well beyond the southeast.
On Mother's Day weekend in 1996, ValuJet's reputation crashed along with one of its DC-9 jets in the Florida Everglades. The tragedy claimed all 110 passengers and crew members and made people question the safety of low-fare airlines. Even so, the airline's executives still believed ValuJet could recover and retain its name once negative media coverage abated.
After its fleet was grounded for three months, ValuJet flew again in September 1996, but with lots more empty seats than before the crash. Although the company's financial results worsened and the stock price continued to fall, ValuJet executives were proud of the
company they had founded and the name they had christened it with.
They studied other crises after which the corporate and brand names had survived, including the Tylenol poisoning cases and the 1985 crash of a Midwest Express DC-9 jetliner. ValuJet's marketing department tried offering free tickets, but the airline couldn't even give seats away.
They overlooked a critical factor of any and every airline brand – the perception of safety. Safety is a critical component of any airline’s brand. The ValuJet brand was too damaged to rebuild.
Finally, in September 1997, the ValuJet name became another casualty of the Everglades disaster. ValuJet merged with AirTran Airways, moved its headquarters to Orlando, Fla., and adopted the AirTran name.
As pointed out earlier, a name change alone can't restore a company's damaged reputation. Before changing names, ValuJet brought in a new management team, added a business-class section to its planes, began by giving passengers assigned seats, and ordered new Boeing 717 planes.
The company and its brand agency and public-relations agency orchestrated extensive media coverage of the name change. AirTran's ads reflected the overhaul, declaring that "when ValuJet became AirTran, we decided to change everything."
"We succeeded in changing perceptions with a new name and new management," says Tad Hutcheson, AirTran's marketing director, "even though people sometimes were boarding the very same ValuJet planes.”
"If we had tried to fool people by acting like AirTran came out of nowhere, they would have assumed we were trying to hide more bad things.”
Chapter 11
What about a company that goes into bankruptcy? Today, Chapter 11 is, of itself, not regarded as a reason to change a company’s name. Bankruptcy no longer has the stigma it once did. Most of the major airlines at one time or another has filed bankruptcy and people continued to fly them. Delta Air Lines and United Airlines both came out of Chapter 11 with their brands relatively unscathed after a period of necessary financial restructuring.
However, it is always advisable in any situation where a company’s reputation is at stake to undertake brand awareness and perception research in your particular markets, whether they be regional, national or international. It will establish the strength of your brand, the level of damage that may have been incurred, and its inherent long-term resilience or otherwise.
Such research is relatively quick and easy to conduct. It typically consists of aided/unaided quantitative research among potential customers, combined with qualitative research among current customers, suppliers, etc.
If a company does decide a name change is the only solution forward, it should be under no illusion that it is the easier path to go. Naming a company sounds easier, but in reality there are few things harder or more contentious in business than changing a name.
Why are we changing the name?
The reason for change may seem self-evident, but there should be a clear understanding of the issues surrounding the name, the implications of changing a name, and agreement that the name is actually the problem. Sometimes, the problem and the solution lie elsewhere.
While a company may have outgrown its origins and the name may no longer accurately represent the entire business reality, such as Bell Atlantic and International Harvester, the problem might lay in the structure of the business itself rather than the name. In this case, brand architecture might well be the solution.
An example – Equitable Resources in Pittsburgh started life more than a hundred years ago as a regulated gas distribution company. Over the last decade the company developed innovative drilling techniques that enable it to reach natural gas resources on its land holdings that were hitherto unreachable. The CEO was immensely frustrated that investors still regarded the company as a low growth gas utility, masking the reality of what is today a high growth exploration and production company. The solution was to create a new parent company with the name EQT, based on its familiar ticker symbol, while retaining Equitable Resources as the name for its regulated service company as a subsidiary. The company is now positioned to communicate singularly to both investors and customers without confusion and to take advantage of new growth strategies.
Trust the process: Naming is, above all, a managed process that requires experience and strong counsel. Without very careful management naming initiatives can easily spiral out of control. It can be a difficult and uncomfortable experience for some. Expectations start high. People hope to a see name “jump off the page.” This rarely happens. Lists of strange, unfamiliar words just seem to sit there on a page. Enthusiasm then turns to frustration.
Names are plucked out of the air, and the whole spiral downward begins. An employee contest yields nothing and alarm spreads throughout the organization.
Unfortunately, this is an all too common scenario with poorly managed naming programs. Naming is a process. Trust the process. A name’s ultimate meaning is always the result of ongoing communications and people’s experiences with an organization and its products and services. Today we Google things quite happily and use Kodak, a completely manufactured name that is synonymous with photography, and buy gasoline from a company called Shell.
A major difficulty of corporate naming today is availability. It is often said that every word in the dictionary has been taken. That's why you'll rarely find a new corporate name in an English dictionary. While it is true most of the obvious and appealing words have surely been plundered, there’s still a lot in the OED if you have the courage and imagination. How about Orange for a telecommunications company, or Monday for a management consultancy? Not expected, but then no new name ever should be if you want to differentiate your business.
A more usual route is a hybrid name made up of two word parts, such as Entergy and Verizon. They sound familiar but they are clearly manufactured words, thereby being all the more ownable and unique. This is not a route to be scorned. Shakespeare was the master of neologisms.
There are about 1,700 words in common usage today that were invented in such a way by Shakespeare, including baseless, castigate, countless, courtship, critical, dexterously, dishearten, frugal, premeditated, radiance, sportive and submerge.
Look two steps ahead, not one: First and foremost, you should identify the long-term business objectives, with the intent of creating a name for tomorrow and not just for today. Spend enough time analyzing the market, identifying opportunities for differentiation and
setting the appropriate strategic naming objectives to be used for the name evaluation process. In today’s highly competitive environment, the strongest brands are the ones that transcend the physical attributes of a product or service to form an emotional connection with the customer. Jeff Bezos, the founder of Amazon, deliberately picked a general, nonproduct specific name because he knew he’d eventually be selling more than books.
Think creatively: The key in name creation is to think outside the box and not be tempted to play in the comfort zone of your competition. Look for inspiration outside your category and learn from completely unrelated brands. Names created in this way have the advantage of being more readily available from a trademark perspective since they go beyond the common category descriptors into fresher territory. AirTouch Cellular, launched as a spin-off from Pacific Telesis, completely broke the mold of the “com, cell, tel” names and was a resounding success in the marketplace, but it was a difficult choice for senior management because it was so unfamiliar. At the same time, be realistic, and make sure that you have a well planned and well-executed communications campaign to support the new name.
Avoid the “CEO’s wife” syndrome: Do not evaluate the names based on a like/ dislike basis, but more on a “fit to concept” scale. Every new name will look strange at first. Remember the strategic objectives you set up at the beginning of your process? Now is the
time to use them. Check each name against these criteria. Also, remember that names that make you feel uncomfortable at first, should not be dismissed…usually these are the ones with impact and differentiation in the marketplace. Winning names don’t always rise to the top immediately; they need time to sink in. And try to avoid the informal focus groups with your nearest and dearest.
Don’t forget the legal battle: Names should always be pre-screened for legal availability to avoid the risk of falling in love with a specific name, since it probably isn’t available. If you are also interested in a URL, remember that if the standalone URL isn’t available, you can always modify it. Also, build in enough time for full legal investigation. You don’t want to rush in this phase and risk missing a potential conflict already out there.
Listen to your target audiences: Test the old name alongside new alternatives. The key in naming research is to listen carefully for things that can be overcome (e.g., neutral name, reminders of different category, etc.) and for things that can’t (e.g., negative associations, inappropriate meanings). In addition, pay attention to key languages for linguistic issues. Even if you are solely US-based, we live in a very diverse country and cannot ignore key languages such as Spanish, French, etc.
Don’t ask for everybody’s opinion: When it comes to final name selection, it is not a democracy. A small team of the key decision makers, who have a good understanding of the business and strategic objectives, should select the final name. In addition, in the case where senior management is not involved in the development process, make sure to build in enough time to strategically introduce your new name choice and gain their approval.
And finally, let everybody know the smart, strategic vision behind the new name: Your internal audiences are the most critical for the success of the new name. Employees are the ones who have strong emotional attachments to the old name; they are also the ones who will “live” the new brand on an everyday basis and they should feel good about it. The goal is to use internal communications to raise employee morale and excitement about the name, by building awareness, generating acceptance and sustaining commitment. In this way, you enable them to better understand the transition, the new brand promise and create a “rally call” for success.
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