To stay in the game, companies across industries are innovating new businesses to meet the shifting demands of customers, adopting new ways of working, opening digital platforms and establishing relationships with innovative players. The unlocking of new value often leads to calls for a new brand. What we have learned is that the team responsible for building the new future often call for a new brand for the wrong reasons.
Transform, or be reduced to a commodity brand
Let’s look at two industries in disruption, energy and financial services industries. Unlike energy companies of today, future companies will mainly use renewable energy sources, and their energy grid is a hybrid grid that transmits energy from the centralised energy plants as well as from decentralised local sources owned by their customers. They need to enable their customers to become energy producers and sellers in the open energy market.
In the financial services, the pressure on European financial institutions is steadily increasing. Low interest rates, rising customer expectations and regulatory changes such as PSD2, GDPR and Open Banking forces traditional banks to step up their game to own the end-customer relationship and customer-related data in order to control the full customer journey. Otherwise, banks will be reduced to mere infrastructure providers.
The business fundamentals are changing while technologies empower end-customers. The disruption leaves room for new entrants to create a new service layer which enables customers to control and optimise the usage of the legacy products in digital platforms. To reinvent business models from sales-driven product business to customer-centric service business, the legacy companies are busy building new capabilities to expand vertically upstream.
A need for an optimal commercialisation environment
Companies recruit new talent to build new digital assets, partner to have the capabilities needed to meet customer expectations and invest in promising start-ups. It is the new teams who say that they need a new brand. Their reasoning is that the legacy brands hamper effective commercialisation of transformative ideas to the market. So the question is, does an established energy brand need a new brand to transform into an energy service provider with a mission to optimise energy usage? Does a traditional bank where the business model is troubled by low interest rates need a new brand to uncover new revenues streams in order to compensate the decline in the core business?
The distance of the new to the core is the essential criteria in deciding the best innovation and branding strategy. The closer the new and disruptive business is to the core business, the closer the new capabilities and services should be kept to the core.
The burden of pre-digital revolution culture
In the strictest sense, brand is what people—employees, stakeholders, business partners and customers—think about a certain company, business or a product. It is inside people’s heads. The brand is created by brand behaviours that lead people to think about the company, business or a product in a certain way. The brand is led by vision, mission and values which should be manifested in people’s everyday lives whenever they engage with the brand.
When there is a call for a new brand, it is critical to differentiate between internal culture and external brand. Having a legacy business means that a company’s culture and way of working, including KPIs, structures, processes, platforms and tools still represent times before the digital revolution. Ambitious change-makers do not thrive in a culture which is built in pre-digital era. Therefore, the need for a new brand often stems from internal reasons and very rarely from external reasons. End-customers very often can imagine the legacy company credibly operating in the new era.
Three phases of commercialisation process
We have learned that breaking down the innovation and commercialisation process into three phases helps companies to create an optimal environment for uncovering and commercialising growth ideas and avoid unnecessary and costly brand projects.
Brand-free innovation environment for semi-autonomous teams
When innovating new businesses and services, the sole focus of management teams should be on creating an effective environment for the change-makers. The environment is designed for uncovering unmet customer needs, translating them into growth ideas and identifying new business models that create, deliver and capture value. The more effective the innovation environments are, the less there is talk about the need for a new brand.
At this phase, the question whether a new brand is needed is irrelevant. The only thing that matters is the change-makers being focussed on creating new value for customers and making sure that there is a sustainable business model.
During this phase, the semi-autonomous innovation teams should stay in frequent contact with representatives of the core business. The probability of large-scale commercialisation of the new business is higher if synergies between the core and the new are identified and enforced from early stages on. The common mistake the change-makers make is that they omit understanding the business logic of the core business.
Modern tools for effective validation and refinement
The first time the branding question becomes relevant is when the innovation unit is close to testing the desirability of the new ideas with prototypes. What is the most suitable brand for testing? The representatives of the legacy brand do often not want the brand to be diluted by ideas that eventually might not be commercially sustainable. The change-makers, on the other hand, often believe that the legacy brand is not strong and flexible enough to be the most effective validation tool.
Again, it is important to distinguish between internal and external problems. Do the change-makers have all the modern tools needed to validate the new ideas on the market effectively? Does the legacy brand have a flexible brand architecture that enables the change-makers to test the new ideas without the risk of damaging the reputation of the legacy brand?
If the problem is internal, the right course of action is to modernise marketing tactics and tools, fast. The legacy brand should also have for testing purposes a sub-brand in its toolbox to inform about the work-in-progress status of the new business or services. Never miss the opportunity to build a brand image of being an innovative and agile brand.
Legacy-branded environment for large-scale commercialisation
The brand question must be settled when the time is ripe for a large-scale commercialisation. As a rule of thumb, there must be strong external reasons to launch new businesses and services under a totally new brand. Legacy brands carry brand equity to customers and brand value to businesses that own them. The whole point of business transformation is to ensure that businesses have the right culture, competencies and structures to keep valuable legacy brands relevant in fast-changing times.
This post is the second of three-piece series about business growth and brand architecture related issues. The first post was about factors that contribute horizontal M&A deals becoming a high-performing deals. In the third post, I will examine what kind of B2B-branding architecture models and brands best support the growth of B2B brands.