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Purpose Driven Brands are Relevant Brands

Why IKEA, DIsney and Lush resonate with consumers in the UK, because they know actions mean more than ads.

It is well reported that brands with purpose outperform their peers; often attracting and retaining the best talent, providing a real point of difference for consumers. Unilever announced strong results that support this notion with purpose-led brands in their portfolio growing 69% faster than the rest of the business and delivering 75% of the growth.

The results of our 2019 Prophet Brand Relevance Index® (BRI), which speaks to 12,200 consumers in the UK to understand the brands most indispensable to their lives, shows that many of the brands successfully soared up the rankings are the ones centered on clear, authentic purposes. Brands like Lush, Ikea and Disney have all seen their relevance with British consumers increase over the past 12 months and they were classified as purpose-driven brands in the U.K.

“It is well reported that brands with purpose outperform their peers; often attracting and retaining the best talent, providing a real point of difference for consumers.”

So, what do purpose-driven brands do to drive success? Purpose exists to differing degrees in organizations and even for those that are truly purposeful, there is an ongoing journey to maintain the conversation and engagement with consumers in order to stay responsive in an ever-changing world.

Here are three fundamentals to become a purpose driven brand:

1. Identify a purpose rooted in truth

A purpose cannot just be invented. It is not just a slogan or a campaign. A purpose-driven brand knows why it exists, and what it wants to achieve. It is at the core of what makes the brand relevant because it is in the DNA of the company. Ikea, for example, knows the importance of brand purpose and stays true to its guiding principle to ‘create a better every day for the many people.’ Even as Ikea continues to grow, its relentless focus on bringing design to the masses in a way that is authentic and transparent has manifested itself across the entire business model. This year, the brand jumped up 10 spots in our BRI, to sit comfortably at 18.

2. Articulate the ‘why’

A purpose should inspire its audience, acting as a rallying cry for its employees as well as a demonstrative signal to the outside world of the values and belief system behind the company. To drive impact, the purpose must resonate with hearts and minds.

A great example of this is Disney, which climbed to No. 14 in the Index with its simple and inspiring purpose: “make people happy.” Not only is this rooted in the organization’s DNA, but it inspires across all levels of the organisation and drives behaviours in the pursuit of constantly increasing happiness. This single unifying principle speaks to the heart. And when a purpose speaks to the heart it has the power to truly inspire change.

3. Activate with conviction

A purpose-driven brand doesn’t make empty, albeit appealing and cleverly executed, claims. It actually uses its brand purpose as a yardstick to measure what they do and how they do it. Brands that possess purpose have a clear conviction; they don’t just talk, they act too. Purpose drives relevance and perceptions, but to do so employees and customers need to know about it.

Lush has long been a proponent of cruelty-free and vegan products. And whilst much has been made of previous campaigns what constantly remains at the core of their actions is a real conviction. Lush doesn’t just talk about the environment, it acts on it. It is a big deal to put your conviction above profit but that’s precisely what the brand did on Friday 20th September when it closed its stores and website to lend its voice to the climate crisis. It is no wonder Lush powered into the top 10 this year, with British consumers scoring it highest on relevance measures such as ‘has a set of beliefs that align with my own’ and ‘lives up to its promise.’

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FINAL THOUGHTS

Brands need to learn that it’s actions and not ads that make the difference. To build a relentlessly relevant brand, and perhaps move through next year’s Index, you must identify your organisation’s true brand purpose, articulate it well to employees and customers, and activate it for the world to see.

If your brand is ready to become a purpose driven in order to unlock uncommon growth, let’s set up a time to discuss. Our team of strategic consultants is ready to help you chart the course.

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REPORT

Social Media Employee Advocacy

Employees like sharing work stories. Social efforts support employer branding and increase worker engagement.

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Tapping into the power of an engaged
social workforce

The use of employees to advocate on behalf of their brand is nothing new, but a combination of market forces and growing comfort with social business has created a tipping point for the growth of formalized Employee Advocacy programs. In Ed Terpening’s latest report, he surveyed brand leaders, employees and consumers to understand employee advocacy. His research uncovered motivations for companies investing in employee advocacy programs; what motivates employees to share information about their workplace; and what employee-driven content resonates most with customers.

Key Findings

  • 90% of brands surveyed are already pursuing or have plans to pursue some form of employee advocacy
  • Consumer response to employee posts often outperform traditional digital advertising results
  • 21% of consumers report “liking” employee posts – a far higher engagement rate than the average social ad
  • Employee advocacy drives employee engagement. When employees are asked how they felt after sharing work-related content, the leading response was “I feel more connected and enthusiastic about the company I work for”
  • Employee advocacy supports employment branding. When asked which employee-shared content consumers found most relevant, recruiting rose to the top
  • Interestingly, European consumers are less likely to be interested in a connection’s posts about work and European employees are less likely to share work-related content.
  • Europeans have a stronger preference for keeping work and home life separate: 44% of Europeans cited this as a reason for not sharing work-related content, compared to only 23% of North American

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Aaker on Subcategory Competition

Why be one of many in a crowded category, when you can create one you can have all to yourself?

2 min

VIDEO

Aaker on Signature Stories

The best stories grab attention and don’t let go, with interesting characters and intriguing details

2 min

Summary

David Aaker says that brand marketers shouldn’t communicate important messages using facts, they should use signature stories. The narrative is more likely to capture the consumer’s attention, peak their interest and be remembered.

Learn how to create strong signature stories on Dave’s ‘Aaker on Brands’ blog: https://prophet.com/2018/03/create-strong-signature-stories/

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Using Anniversaries to Reinforce Your Brand Purpose

Annual events can strengthen and reinforce important values, helping to tell different stories.

It is more important than ever for companies to have a brand purpose. To remain relevant to their customers, companies need to find opportunities to share that purpose with the world and in turn, also become inspiring places to work for their employees.

A powerful way to reinforce a brand’s value to both internal and external audiences is through brand anniversaries.

They are also an opportunity to celebrate the past while setting up a vision for the future.

In the past few years, many iconic brands have used key anniversary milestones to strengthen ties with their stakeholders and build brand perceptions around a strong purpose. But anniversary celebrations can be used in different strategic ways as well. We’ve identified 3 ways brands can make the most of their anniversary through a focused strategy.

3 Ways Brands Can Use Anniversaries to Reinforce Their Brand’s Purpose

Reinforce the Core

For example, Marvel Studios used its 10-year anniversary to engage core fans and drive loyalty through its “More Than a Hero” campaign. The branding campaign kicked off with a week-long event showcasing 20 Marvel movies in IMAX theaters. Marvel also released behind-the-scenes, never-before-seen footage and launched a sweepstake for fans to share their favorite Marvel memory on social media.

Through these activities and content, they successfully engaged tens of thousands of fans in live events and via anniversary videos on YouTube (which received over two million views), helping to cement loyalty for the franchise.

Strengthen Your Image

Swiss Re celebrated its 150th anniversary by engaging stakeholders worldwide to participate in collaborative dialogues on important topics of our time, such as advancing sustainable energy solutions, funding longer lives and partnering for food security. To achieve its goals, Swiss Re launched The Open Minds Forum around the world, discussing ground-breaking ideas and exploring fresh perspectives on the risks facing generations to come. Employees were also encouraged to write articles and share their perspectives.

The anniversary celebration helped Swiss Re initiate conversations around business and societal risks with its customers and reinforced the brand image of being ‘smarter together,’ by creating a dialogue with people around the world.

Shift the Narrative

For its centennial anniversary, BMW launched “The Next 100 Years”, a year-long integrated campaign to strengthen its brand worldwide. As part of the campaign, the company revealed four concept cars and released “The Next 100” publication to invite industry experts & pioneer thinkers to envision the future of BMW. They interacted with consumers digitally through curated content on a dedicated centennial website, live discussions on social media platforms, and AR/VR interaction through the ‘BMW VISIONS’ mobile app.

These anniversary celebrations bolstered BMW’s status as a future shaper by gathering hundreds of thousands of guests and consumers to join celebration events in person or online.

How Do Anniversary Celebrations Help to Amplify Brand Purpose?

While each of these celebrations took on different forms and focused on different objectives, there were four guiding principles they each followed which made them successful:

  • Be authentic: For any anniversary celebration, you need to stay true to your brand DNA in everything you do and say
  • Be clear: You need to have clear objectives and create a single, overarching theme to align all activities and leave stakeholders with a clear understanding of what your brand stands for
  • Be targeted: You must consider what you represent to different stakeholders and design specific ways to engage each of them appropriately
  • Be bold and brilliant: To deliver impact, you must activate at sufficient scale and frequency to get noticed and to show the company in a new light

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FINAL THOUGHTS

Anniversaries are a great time for celebration and a great opportunity to reinforce your brand purpose. To get the most out of the milestone, they require a deliberate approach. As you plan your next brand anniversary make sure you do four key things:

  1. Align on the vision, with clear objectives and a creative theme that will serve as the guiding foundation to engage all stakeholders
  2. Plan the experiences throughout the campaign and define the desired interaction and requirements
  3. Design and develop unique content to bring the experience to life at each touchpoint – spanning digital & physical and internal & external
  4. Prepare for activation with an integrated roadmap that pulls together all activities into a coherent campaign
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VIDEO

Aaker on Brand Vision

Visions are compelling and unifying. Just make sure you can really bring it to life.

1 min

Summary

What do you want your brand to stand for? The answer to this question usually leads to 2-3 attributes that differentiate your brand, resonate with your target audience and drive your brand-building programs.

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M&A Portfolios: Are You Thinking Like a Digital Native?

Companies need radical flexibility, not “house of brands” hang-ups.

After several quarters of near-frenzy pace, global deal-making is starting to slow. But for those in charge of managing portfolio and architecture strategy, the recent mergers and acquisition binge is creating something of a mess.

Many of the decisions about customers, brands and marketing have been addressed too quickly as deals were coming together. And once the integration process starts, those initial plans unravel. As the financial and operations teams that finalized deals hand them off to those responsible for taking new assets to market, tangles of false assumptions and the sub-optimal use of brand assets emerge; the value creation logic of the deal never gets out of the spreadsheet. And with $1.24 trillion in deals already on the books this year, that confusion presents material risk for shareholders.

Increasingly, clients are coming to us for help figuring out the best ways to organize and manage new, post-deal asset bases. Often, they start by asking: “Should we be a house of brands? Or a branded house?”

“Should we be a house of brands? Or a branded house?”

We’re not afraid to say that’s simply the wrong question. Digitally-focused companies can’t afford to think that way. The modern approach to architecture and portfolio strategy, and the one inherently chosen by digital natives, is radical flexibility.

Older companies are coming to understand this, too, focusing on customers earlier in the M&A process, aware that integration management offices are often working with incomplete data.

In order to get this right and maximize the value of today’s deals, we believe the best post-merger decisions come down to answering three essential questions.

Three Essential Questions For the Best M&A Portfolio Strategy

1. Are we customer-obsessed?

Our research on brand relevance offers compelling evidence that companies that are obsessed with customers significantly outperform others. It’s no surprise that the names that dominate the top of the Prophet Brand Relevance Index® are digital-first, including Apple, Amazon and Netflix. And those at the top of the list consistently outperformed the S&P 500 by 3x in revenue and 205x in profit in the last decade. These companies constantly ask themselves: Are we putting customer-use cases and environments first? All decisions are filtered through the perspective of customers and prospects.

When considering customers first—the buyers, the deciders–it’s easy to see how easily a company like Procter & Gamble and Schick might be outflanked. Direct-to-consumer brands like Dollar Shave Club and Harry’s have devoted themselves to changing and improving the razor shopping experience, rather than focusing on promotions and product features.

In post-M&A environments, brand portfolios should be built around key customer use cases, balancing the desire for efficiency with a customer-centric model that leverages the strongest brand for each use case. When J.P. Morgan & Co. and The Chase Manhattan Bank merged, they prioritized efficiency over customers and created a brand mash-up that weakened both brands. After a couple of years of brand value degradation, a new strategy that led with customer needs was founded with a powerful institutional brand, J.P. Morgan, and a powerful retail brand, Chase. This approach allows for effective targeting of clearly defined customer segments with separate brands and tailored offerings, and is paying off for JPMorgan Chase, with a five-year gain in brand value of 53%.

2. Can we find max value?

When M&A deals fail to generate revenue synergies, there is usually a lack of early focus on customer, marketing and branding issues. Playbooks often don’t include these steps and when they do, the discussions are qualitative and overly reliant on opinion and emotion.

The solution is in this key question: Are we deploying our assets to maximize customer use cases?

Companies can find significant incremental deal value when they integrate customer and marketing analytics in pre-close analysis and the integration management office. We studied one deal that doubled the final price of a $5 billion global asset by modeling the financial impact of future (post close) brand use cases. Another estimated market-share gains between 2 and 3% on a $60 billion deal through brand portfolio economic analysis. And on the cost side, we are helping companies lower post-merger migration costs between 15 and 40% by using cost-optimization analysis.

3. Are we serving up the right offer?

The best way to achieve this optimization is to constantly elevate the right offer for each person, on the right device and at the perfect time. Companies like Google, Amazon, Facebook and SAP are experts at this kind of hyper-responsiveness, with nearly-infinite capabilities for personalization, depending on the needs of each customer. They continually ask: Do we have an adaptive brand architecture? To win with today’s digitally demanding customers, companies need to maximize all the flexibility available through digital tools, making sure offers are as adaptive and individualized as possible.

Amazon remains a perfect example. Rather than being a monolithic Amazon or a fragmented collection of sub-brands, the brand adapts to its audience, use case or environment. Do you listen to a book at 9 p.m. each night? If so, it’s likely Amazon will push an Audible brand message just before. Recently ordered paper towels? Alexa will check-in to see if you need a refill. Context is king in our world, and successful companies will deliver an adaptive architecture that ensures maximum relevance.

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FINAL THOUGHTS

Older companies don’t have to cede their future to those that came of age as digital natives. Moving forward, all companies–and all brands­–can benefit from a modern portfolio and architecture strategy. And while all companies acknowledge that the future is digital, we’re convinced that those that win are those that also understand that the digital’s primary power is in better serving customers.

For more information on capturing greater value in the M&A, please contact us today.

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Driving Uncommon Growth for Digital Native Brands

As these once-disruptive brands hit speed bumps, sharper omnichannel thinking can recapture growth.

As successful early-stage founders and investors would agree, building with a product-market fit focus is one of the top priorities in launching a company (perhaps second only to raising capital to enable the prior). Once a company has reached organic growth and reach with a product-market mindset, the priorities need to quickly shift towards strategic growth and scale.

As the digital marketplace continues to become further saturated and competition has become too numerous to name, we are helping digital-native brands focus on a few strategic objectives to help them reach uncommon growth.

6 Strategic Objectives to Help Digital Native Brands Reach Uncommon Growth

1. Build an irreplaceable, valuable brand

The digital marketplace is now an unbelievably crowded space packed with digital natives as well as droves of large consumer product brands investing in direct-to-consumer initiatives. (According to a recent Salesforce study, “despite all the criticism CPG companies receive in regard to their retail and commerce strategies, at least 99% say they’re investing in direct-to-consumer strategies.”) With such a competitive marketplace all vying for much of the same customers, the value of a meaningful brand is higher than ever.

For many digital natives, growth curves flatten quickly before they can truly build an enduringly valuable brand position. But for those that have a relevant story to tell with their brands (Dollar Shave Club, Everlane, Airbnb), strategic growth comes in the form of growth-stage capital, acquisition exits and IPOs. For traditional CPG companies and the financial market, effectiveness and success in brand building and amplification have become a clear differentiating growth indicator for targeting digital-native brands for inorganic growth.

2. Create a strategic customer targeting strategy to posture for growth

Customer acquisition is VERY difficult at the growth stage for most organizations. It takes additional capital and sophisticated growth techniques for digital-native start-ups to achieve scale without burning through profits. The question we most often hear from our growth-stage,  digital-native clients is, “Now that we have figured out our initial entry market, how do we grow with new, unidentified targets and geographies?”

The first step is in taking a comprehensive look at the market landscape and executing market and customer segmentation mapped to the company’s value proposition. The strategy will be followed with a cohesive roadmap with savvy demand gen and acquisition techniques. However, this poses a chicken/egg dilemma. Many will say that they need strategic capital in order to reach these new customers. But it is very difficult to raise that capital unless you have a strategic plan in place. We’ve found that completing an expeditious, yet effective, customer targeting strategy provides investors a plan they can buy off on, which forms the basis for an immediate plan of action once the capital comes through.

3. Take customer data to the next level 

Digital native brands are rich in data. However, we often find the abundance of data untapped and under-utilized in driving strategies and operational execution. Sophistication comes from not solely basing strategies on historical data, but driving current data into actionable insights that drive the execution of the product and user experience (most often through machine learning).

“Despite all the criticism CPG companies receive in regard to their retail and commerce strategies, at least 99% say they’re investing in direct-to-consumer strategies.”

Customer expectations are driving companies to think about next-gen data strategies. It’s not just about the tools and technology used to access and manage data; It’s the deeply human insights to understand and implement behavioral data-driven retention and acquisition strategies. Journeying through the landmines of data value exchange, ethics in AI and overall customer data privacy become even higher stakes with global expansion.

4. URL to IRL. Getting physical with the brand experience

With the rising cost of digital customer acquisition, many successful growth-stage digital-native brands are finding growth in brand awareness and customer acquisition with offerings in a physical retail experience (Warby Parker, Casper). However, going physical without considering the customer journey with a brand will often come up short.

It is critical to have a customer-centric approach in understanding and meeting the customer’s journey with the brand toggling in the metaverse of both digital and physical.

5. Expanding with a brand portfolio

Perhaps the market assessment tells you that an unserved market will require a different brand identity or positioning. Too many razor options for facial-hair growing men? Grooming products and supplies? Razors for women? Will the master brand be sufficient or stretched too thin? Should there be a sub-brand to capture additional opportunities among adjacent consumer segments?

Prophet vice-chairman and master brand guru, David Aaker, writes about innovating with new brand subcategories in his book coming in 2020 titled, “Achieving Uncommon Growth in the Digital Age: Own Game-Changing Market Niches.” In it, he’ll discuss how game-changing market niches create growth, how digital drives and enables new market niches to win, and how to find, evaluate, manage and build barriers around these game-changing market niches.

6. Growing together with your employees and brand advocates

In reaching out to new targets and markets, it’s easy to lose sight of the early-stage magic that created traction with customers and employees in the first place. Accelerating the speed and scale of growth without alienating the core consumer group takes extra care and caution in brand management disciplines.

The often unforeseen challenge in strategic growth is in paving the way for organizational growth – keeping the best talent, training existing talent for skills required for the next generation of growth, and luring new talent to fill resource gaps and needs. With a competitive market, it’s more than free food perks at this stage. Start-up culture is part of the secret sauce – so how do you grow without losing sight of the most important ingredient of success – employee culture?

Due to the nature of the start-up hustle, most digital-native companies have not prioritized professional development support and are not the best positioned at cultivating talent. Where speed to market is a constant drumbeat, work-life balance and communication are often weak. And as the fight for talent increases, companies need to rethink team growth. Another clear differentiating growth indicator is how companies are leveraging employee/team optimization to help with growth.

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FINAL THOUGHTS

In the post-digital-revolution age where businesses are pervasively disrupted – entry barriers to earning the “first pots of gold” are ever low, while driving toward the second, third pots of gold, and achieving enduring growth is extremely challenging. Moving from organic growth focused purely on a mind-blowingly-great product or service to making strategic choices based on an understanding of their unique brand, customer and employee culture is a necessary path to achieve 2.0 and 3.0.

If your digital native brand is ready to determine its path to uncommon growth, let’s set up a time to discuss. Our team of strategic consultants is ready to help you chart the course.

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Inside The Experience of Relentlessly Relevant Brands

How hyper-personalization, contextual shifts and intelligent offers are reshaping consumer expectations.

Culture is being re-coded, and people expect very different relationships with brands: more human, immediate, seamless and responsive.

Across every category, from healthcare to household goods, auto to automation, B2B to B2C, the companies that are building the most cohesive businesses—through what we call “dynamic and digital brand experiences”—are expanding their relevance and are growing faster than competitors.

Dynamic brand experiences are the new standard. A company that can functionally integrate around the customer with regard to technology, data, marketing and the customer experience is delivering its product and service not simply as an offer, but as an experience ecosystem: a hyper-contextual, empathetic, cohesive and humanized experience that responds to, learns from and anticipates its customers’ next moves and needs.

What Is a Relentlessly Relevant Brand?

We call them relentlessly relevant brands because they understand that they must prove themselves every day, that they operate within an ecosystem of customers and other brands, and they adapt their behaviors in real-time based on context.

They have both a brain and a heart. They are strategic and emotive, contextual and aware. And they lead with data-informed stories. Customers love these experience ecosystems.

“A relentlessly relevant brand is continuously testing its approach and optimizing it in real-time.”

In the modern brand world, relevance trumps consistency; the brand shifts and adjusts in the quest for individual relevancy, explicitly at the expense of being consistent. A relentlessly relevant brand is continuously testing its approach and optimizing it in real-time.

Here’s a simple metaphor: An individual behaves differently with her spouse, her children, and her colleagues. Each expression is authentic but unique. We each have a personal “code” that allows us to behave differently in different settings but still makes us recognizable across all our relationships.

Key Characteristics of Relentlessly Relevant Brands

Relentlessly relevant brands are already flourishing around us. The easiest way to identify them is by looking for entities that are already exhibiting these key characteristics:

Relentlessly relevant brands are hyper-personalized.

The experiences that brands offer are driven by empathy and are designed to feel personalized to each individual. With a rich data set on returning users, TurboTax makes filing taxes a breeze—with prefilled data and explanations about why tax returns might be different from past years, based on personalized events such as moving, getting married, or having a baby.

Relentlessly relevant brands are contextual.

The brand shifts how it acts, feels, and looks according to the environment in which it operates. With the addition of separate kids, music, and gaming environments, YouTube adapts depending on a user’s context. The YouTube Kids interface, for instance, offers icons instead of text navigation and family-friendly content only.

Relentlessly relevant brands are intelligent.

These brands are in learning mode all the time and use this knowledge to inform how they think, act, and engage with consumers. Netflix learns from its users’ viewing habits not only to offer recommendations on what to binge-watch next, but to actually create original content. The company famously commissioned “House of Cards” because it knew a wealth of users had streamed “The Social Network,” which was directed by “House of Cards” producer/director David Fincher.

Relentlessly relevant brands are continuous.

Infused with a digital pulse, brands maintain ongoing conversations with customers. Marriott’s new Li Yu program helps Chinese tourists traveling outside of China feel at home wherever they go. Through a WeChat program, these tourists can engage with a local concierge who can assist in Chinese with anything from restaurant recommendations to in-room amenities requests.

How to Become a Relentlessly Relevant Brand

Where to start? There is no single journey to becoming a relentlessly relevant brand and engaging customers through dynamic and digital experiences, but there are important features that empower brands to succeed in today’s transforming world:

To make your brand more contextual:

Update brand guidelines and toolkits to support adaptive design elements, data-driven content, and personalized, persona-specific experiences. Wrap core products with value-added services and experiences.

To make your brand more intelligent:

Offer customers opportunities to exchange data for improved service levels. Leverage predictive analytics to create proactive offers. Embed AI and machine learning into your data environment and smart (data-enabled) solutions.

To make your brand more continuous:

Use APIs to create seamless connections with ecosystem partners. Integrate customer data records and provide customer single sign in. Embed product extensions or solution recommendations in customer service and digital assets. Create value-added service layers and platforms for customers to expand customer utility and reward loyalty.

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FINAL THOUGHTS

We are living in an experience economy. Today, we understand that brands are no longer static logos or advertising campaigns, but total, immersive experiences.

For companies to grow, they must evolve from selling, distributing, or communicating to building dynamic brand experiences. To do this, they must be purpose-centered and powered through culture, capabilities and employee engagement.

They must become “humanized” organizations prepared to deliver experiences people remember and love—experiences that matter in both function and emotion, and consider the entire person—the head and heart. Brands no longer just have an opportunity, but they have an obligation to come to life in order to remain relevant and drive profitable growth.

Download Prophet’s Brand Relevance Index® to learn more about the brands that consumers simply can’t live without.

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Turning Small Acquisitions into Big Business Transformations

Integrating the new capabilities, technology and people is important. So is understanding its leaner culture.

You Acquired a Shiny, New Technology Company, Now What?

Mergers and acquisitions help many organizations accelerate digital transformation through the acquisition of new products/services, technology, processes or talent. For example, McDonald’s recently acquired the machine learning start-up Dynamic Yield for $300M to scale their use of machine learning technology and improve the customer experience.

While there is nothing new about large corporations acquiring small specialist products or capabilities; these “digital M&A” deals are often different because:

  1. The acquirer is typically a more traditional business
  2. It’s not a “mega” deal, but more likely a small acquisition of a start-up or growth stage firm with an enterprise value of few hundred-million dollars
  3. The motivation isn’t always about the products or capability but about the brand, culture, ways of working, processes and experiences
  4. The acquisition is being used as a vehicle to accelerate business transformations, though has little in common with the acquirer

The target acquisition company is likely to be less than 10 years old and has “grown up” in the digital age. Its business model, processes and structure are much more likely to look like a “lean startup” business and has never operated outside those principles (e.g., customer-focused, data-driven, empowered decision making, rapid/iterative product development and innovation).

Typical Integration Approaches Will Prevent Maximum Value Capture

The traditional approach to M&A, with its focus on integration and synergies, was designed to extract value from an acquisition, not to enable the transformation of the acquirer (by the digital characteristics or products of the target company). The traditional “victor” approach risks damaging three of the most valuable aspects of digital acquisition: people, customers and growth.

People

The employees of targeted small technology firms have been part of a rapidly growing start-up company with a distinct culture and ways of working. They are committed to the culture and company, and proud of what they have accomplished. Yet, after an acquisition, only 36 percent of founders expect to stay at their company (CBInsights, 2019) and 33 percent of employees will have left within a year (Kim, 2018). This attrition is value destructive in two ways:

  1. These employees are the talent who created, and knew how to operate the value, that was acquired in the company.
  2. The people are often the types of new thinkers and cultural change agents that are key to helping the acquirer pivot into a more digitally-enabled organization.

Describing these differences simply as a culture fit issue understates the challenge. These differences are deeply embedded in processes, organization and behaviors – even technology choices (pretty much the whole business model). A rapid flight immediately caps the value creation potential of the deal by stunting the acquirer’s ability to learn from and be more thoroughly transformed by the new, digitally-centered team.

Customers

The merger or acquisition will undoubtedly result in changes to the customer experience. Sometimes these changes can seem relatively trivial (minor billing changes or web page navigation) while others are more significant (new pricing structures or sales relationships). Big or small, changes in customer experience are magnified in the context of digital acquisitions.

“The traditional “victor” approach risks damaging three of the most valuable aspects of digital acquisition: people, customers and growth.”

These companies have been built from the market back, products of fierce customer obsession and rapid, often daily (or even hourly) updates to products or service experiences. Even the slightest variation, like slowing the release of new updates or adding a new approval layer, can reverberate negatively with customers that have come to expect a more frictionless experience.

If not managed carefully, changes that impact customer experience can cause customers to look for alternatives, taking with them not only revenue but the types of engagement, feedback and insight that are components to driving broader digital transformation.

Growth

When working on “digital” mergers and acquisitions, we find that the primary driver is to drive significant growth. This is atypical to most M&As which tend to be focused on finding cost synergies.

As a result, the post-merger integration that is applied to the acquisition is biased heavily towards the identification and realization of cost synergies in technology, finance and operations. This “traditional” integration methodology was never designed to drive growth, and it certainly was not designed to consider brand, customers and a digital operating model.

Four Integration Actions to Create Value and Ignite Business Transformation

To maximize the full value of your next small digital/technology acquisition, make sure your integration process preserves, and is ultimately transformed by, the full assets of the firm – it’s people, customer relationships and operating models. There are four integration actions that will help you preserve these assets:

Consider Brand and Customer Experience Early and Often

Ensure all functional discussions include conversations around customer impact and set the precedent that customer impact and experience is a priority. Assess how the integration is impacting your customer experience in terms of disruption and potential opportunity from initial deal planning through to deal close. You should leverage your existing customer journey maps to assess the potential impact. Consider creating a standard set of journeys that you can show side by side between yours and the acquired company’s customer journey to define a future consolidated journey.

After the deal close, you may want to discuss details of the acquisition with your largest and most strategically important customers (particularly the key customer of the acquired firm). For your own customers, this provides a great opportunity to discuss what it could mean for them and how they could benefit from the new products or capabilities.

Broaden Your Culture Assessments

Standard culture assessments help businesses understand the broader cultural and ways of working differences between the two organizations, but rarely provide enough insight into how the cultural differences will impact the ways of working. Nor do they place an emphasis on what the acquirer can or should do for the acquired business. You should broaden your culture assessments to identify key processes where digital capabilities are likely to have a high impact such as product development, experience, marketing and sales.

Quickly Integrate New Talent

The most effective ways to integrate the new organization and accelerate your digital journey is to quickly include talent from the acquired digital organization. You can do this in two ways:

  1. Look for individuals who you could move into your existing digital transformation program or team.
  2. Place one of the digital founders into a leadership role within your organization where they will be a significant stakeholder for your digital transformation activities.

You will need to reshape incentives and governance across the enterprise to meet and support the expectations of your new digital-first talent and start to change the behavior of your existing talent. In addition, you will need to help reskill your existing workforce so they can play well with their new digital native colleagues.

Shake Up or Test New Operating Models

Acquiring a new company provides an opportunity to shake up your existing operating model. Examine a few areas of the operating model where characteristics of the acquired business might help you move toward a more evolved digital enterprise. For example:

  • Governance: Does the acquired business have greater delegation in decision making which could help improve agility in certain more innovation driven functions?
  • Product: Is their product development process using customer feedback more effectively to drive higher customer satisfaction?
  • Measurement: Are their KPIs more consistent with digital products, and therefore driving improved performance?
  • Service: Do they have a stronger service and customer first culture which improved customer retention and loyalty?
  • Data: Are decision-making processes based on data or more effective?

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FINAL THOUGHTS

Digital mergers and acquisitions create a specific set of challenges that force us to think differently about our integration methodology. Given the rapidly changing world, and increased emphasis on growth, companies that embed digital transformation principles into their M&A integration process will driver higher returns on future digital M&A.

For more information on capturing greater value in the M&A, please get in touch.

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How to Define Your Verbal Branding Strategy

Voice, naming and nomenclature all factor into making choices with the most potential.

In today’s digital, always-on world, words are an increasingly powerful currency for brands to create real-time value and demonstrate relevance.

But finding the right words—and using them effectively—requires rigor and structure. Deploying a thoughtful verbal branding strategy (sometimes called a verbal identity) can help bridge your brand strategy to in-market execution through content, communications and experiences.

From finding the right voice, to building equity in key messages, to creating a methodical approach to portfolio naming, a clear verbal strategy can empower writers, marketers and sales teams with centralized ways to create cohesive, connected communications. Which, when done right, have the power to influence opinion, shift perceptions and ultimately help drive business growth.

Defining Your Verbal Branding Strategy

Strategic Naming

Simply put, names are one of the quickest ways for brands to tell their stories. A great name provides a glimpse into what a brand stands for and gives audiences a preview of the experience to come. And while good names can come from anywhere, the best ones are just as strategic as they are creative. Taking an art and science approach to naming ensures names not only signal a compelling story but also connect back to their strategy.

Before ideating names, it’s important to get strategically grounded by thinking through questions like:

  • What should my new name communicate about my business or product?
  • What should it signal for the future?
  • How will my audiences interact with the name? And where?
  • How can I avoid naming trends to create an enduring, evergreen name?
  • How can my name help me stand out in my category?

And because naming is inherently an emotional, subjective process, it’s key to align on these questions at the outset with all relevant stakeholders and decision-makers and bring them along for what will surely be an iterative process.

Nomenclature

But while most organizations aren’t naming or re-naming their company or hero product every day, almost all organizations are tasked with managing product, service or feature naming.

This is particularly true in today’s world of mergers, acquisitions and rapid innovation, where portfolios across categories have become complex and inconsistent, ultimately creating a confusing customer experience.

Nomenclature, also known as Naming Systems or Naming Architecture, allows brands to create order and hierarchy across their portfolios to provide internal clarity around offerings and how they work together as a whole. This creates a more simplified way for customers to better navigate a brand’s breadth of offerings, ultimately driving choice.

At Prophet, we take a considered, strategic approach to nomenclature that ensures existing portfolio names are optimized and streamlined, while also providing clear systems and constructs for creating new names. This creates efficiencies in naming and managing names internally while providing a system for growing and evolving portfolio names in the future.

Brand Voice

Just like people, brands also have unique personalities, styles and quirks that define their behaviors and relationships. Brand voice is the art of conveying that personality through how its people write and speak.

By using a distinct voice consistently across touchpoints, brands are able to make connections, strengthen relationships and build loyalty and affinity over time. Brand voice can also help you stand out and grab attention in a crowded or commoditized category. But creating a voice isn’t just a creative exercise—it’s also a strategic one. To be truly successful, your voice should be rooted in your brand strategy and organizational DNA, optimized for your industry, and reflective of your customers’ needs and attitudes.

“A clear verbal strategy can empower writers, marketers and sales teams with centralized ways to create cohesive, connected communications.”

But while your voice is a hardworking asset, simplicity and utility are key to successful execution. We recommend avoiding “attribute soup” and boiling your voice down to just 2-3 core components. If you were tasked with writing, say, a piece that must be Trusted, Friendly, Insightful, Bold, and Engaging—would you know where to start? Instead, try to identify the main hallmarks of your voice, and distill them into a persona and 2-3 directive principles that give your writers a clearer understanding of what “right” sounds like.

Messaging

Now, onto messaging. First things first, messaging themes aren’t copy—they guide copy. As high-level communications points, they can be dialed up and down across communications and adapted for different audiences—ensuring a flexible, cohesive expression, rather than a static, repetitive one.

Because messaging should help convey your strategy, your positioning or value proposition should be your starting point for developing your messages. If you don’t have that in place, you can still derive messages by thinking about the intersection between what your brand wants to say, and what your audience wants to hear—leaving room for how you’ll grow and evolve in the near future.

By prioritizing those ideas down to a focused set, you can bolster them with proof points, keywords or phrases that help writers and marketers bring them to life.

It can be easy to see how voice and messaging come to life in high-impact touchpoints like advertising or your website, but it’s equally, if not more important, to use these tools in more functional touchpoints, like customer service call center scripts and chatbots, so that on-strategy voice and messaging becomes an integral part of the entire customer experience.

Finally, don’t forget employee touchpoints. A compelling approach to voice and messaging can go a long way towards shaping internal communications and experiences that keep employees feeling engaged, informed, and inspired to live the brand more fully.

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FINAL THOUGHTS

Defining your verbal branding strategy is a critical step in creating your brand expression. Once these assets are defined, make sure to bring them to life through steps like training and global adaptation. Because when done right and put in the hands of your marketers, your verbal branding strategy is a critical asset, connecting the dots between your strategy and expression, and shaping how your audiences perceive, engage with, and choose your brand going forward.

Learn more about using verbal branding to express your brand and business strategy.

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VIDEO

Bernhard Schaar: The Importance of Brand Relevance

Relevance matters more, and differentiation counts for less. Here’s what’s behind the shift.

2 min

Summary

Bernhard Schaar, an associate partner at Prophet, talks about how to create a relentlessly relevant brand. He lists the four key dimensions that make up brand relevance: pragmatism, innovation, inspiration and customer obsession, as well as offers advice to companies to increase their brands’ relevance.

One important thing to note, according to Schaar, is that digital is an opportunity that can be utilized along all four of these key dimensions. From social media to artificial intelligence, Prophet can help to support these areas of growth in brand relevance.

Learn more about the importance of brand relevance for business growth.

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