Brand Focus - Walking away from a $3bn brand.
Divorce cost Andersen Consulting the rights to its name. David Haigh
Divorce cost Andersen Consulting the rights to its name. David Haigh
‘This is very significant because the value of an organisation is its reputation, its people and its brand. The value of the brand is not in the word “Arthur” or the word “Consulting”, it’s in the name Andersen.’
These were the comments of Jim Wadia, the senior partner of Arthur Andersen, following the decision of the International arbitrator in August to order Andersen Consulting (AC) to hand back the Andersen name to Arthur Andersen (AA).
AC promoted the decision as a victory as it was not obliged to pay compensation to AA for the loss of the AC business. It also played down the loss of the Andersen name, claiming that expenditure on re-branding would only amount to $100m.
The reality is that the loss of the AC brand name is likely to be a major setback to the firm. We estimate that the brand name could be worth in the region of $2.5-3.0bn. The costs of recreation could be over $1bn.
While AC celebrated the ruling of the International Arbitration committee in Paris it is likely that its brand managers were holding their heads and weeping. The loss is a brand manager’s nightmare. There will be both short-term and long-term headaches.
There will be global challenges for the marketing department, the design firm, the advertising agency and all those connected with supporting and promoting the brand. They will rub their hands at the large sums of money involved and will also bask in the sudden interest cynical partners are forced to take in them.
Historically, professional services branding has often been neglected.
This case will finally put branding firmly on the map, as the importance of the brand finally becomes apparent.
So what are the implications for Andersen Consulting and how will it seek to re-establish itself in the market?
AC will need to go through a number of steps in the process of generating a new brand. In short these steps are; name creation, trademark registration, corporate identity design, re-signage, market research, internal communications, external public relations, sponsorship and advertising. These are the main elements that AC will now have to undertake, although there are undoubtedly many other considerations. Each element will be costly financially, and also in time and effort.
Diageo, Corus and Invensys are all new corporate brands paraded to the public in recent years. These new names were the result of a mergers; they had little choice but to change but they had the time to think through the process.
In AC’s case it is the result of the arbitrators ruling and must be completed virtually immediately. This provides an added complication for AC. Undoubtedly both AA and the regulator will be keen to ensure that any new name adopted by AC will not be confusingly similar to the Andersen name.
Confusion already exists in the market between AC and the consultancy arm of AA and it has been suggested that AA may actually rename its own consulting division after AC. There are two options:
– Create a radically new name and image, to something like e-Zen perhaps.
– Attempt a subtle change possibly incorporating the AC letters. Names like Acorn, Acord, Acsis, or even Ace spring to mind.
Although it may appear a simple task, creating a new name is a complex issue. Market research is the fundamental foundation. It is necessary to investigate what the various target markets feel about any proposed new name. Will those publics accept what is proposed? Will they understand it and like the connotations? Are there problems with translation, transliteration, or colloquial expressions?
For example a Japanese car maker launched a sportscar in France under the M-R-2 monica only to realise that it was referred to as the ‘Merde’.
Another car maker launched the Nova in Spain only to discover that No Va means ‘wont go’ in Spanish.
Some names are unpronounceable, have legal restrictions or invoke cultural taboos that would be hard to predict in New York or London.
The second complication with brand creation is registration. A brand is made up of a bundle of legal rights which are attached to a name, a logo, a colour and even a smell in some cases.
While creating a new name a firm must ensure that these elements are not already registered in any market, a tedious task when the firm operates across the globe. Having ensured that the proposed new trademarks are indeed new, the company must go through another long and tedious task.
The company must register them in different markets and within different sectors in which it aims to operate.
The design of a new identity may also be an element which needs protecting and like the actual name, any designs must be researched as suitable, must not be registered already by others and must be protected in all areas and possible areas of operation. Design element included logos, swishes, colours, fonts etc. In some countries colours are associated with particular values making them impossible to use. For example, in some countries yellow is associated with death, red with prostitution and green with bad luck.
Name creation and design companies do not come cheap and one only has to look at BA ($100m) and BP ($200m) in rebranding costs to see the scale of the problem.
Legal fees involved in investigating and registering the new brand will not come cheap either. Not only do they run to tens of thousands per country per registration, but it can also take years to be perfected. This is clearly the most costly part of any re-branding campaign.
Aside from the cost it is not always guaranteed to succeed. Management expectations of transferring goodwill from the old entity to the new may be hard to achieve. Changing perceptions and transferring value is a long-term task. Unfortunately, for AC, time is not available.
The old brand name is physically present throughout the organisation from signs, to carpet designs, through stationery to pens. All this will need to be rapidly redone. What will the effect be on the staff – their buy-in is vital.
Managing the change is a delicate and subtle exercise. But it is also necessarily open. AC must not think of the re-branding as a name change, but use it as an opportunity to measure what the firm is, its culture, its personality and ensure that the new identify represents that personality.
This is key to a successful re-branding both internally and externally.
The new name can be used in the healing process as the final step to complete separation from AA. This opportunity will allow AC to evaluate truly what it is about and what it has to offer. It will be interesting to see whether Andersen Consulting uses this opportunity or whether the marketing department in isolation will create the new name without the consultation and co-operation of the rest of the company.
In the words of Ardi Kolah, a former AC marketer and now President of ‘brandsasbroadcasters’, ‘There is a delicious irony in the fact that AC regards itself as the market leader in transformation management. In a very public way it needs to demonstrate that it can take its own medicine’.
The internal market in a re-branding exercises is key. If this market is not consulted the image could be wrong. It is all well and good paying millions to a design consultancy but if the end result does not represent the employees it will fail. Ideally the employees need to be involved throughout. They should certainly be the first to see the new image and it is essential that the employees understand the new image so that they can be that image in external communications. Advertising and PR will of course be a major part of external communications but ultimately the partners and other employees of the firm are the embodiment of the brand.
Ardi Kolah makes the interesting point that advances in broadband digital programming mean that AC could create its own ‘i-Channel’ to communicate internally and interactively with staff in real time during the sell in period. ‘AC have been at the leading edge of technology and should use technology to achieve a successful brand transition with staff’.
In addition, a high profile advertising campaign is likely to be necessary to inform all clients, connectors and influencers of the name change.
This could cost $100m dollars or more a year for 3-5 years at least. It will be particularly necessary if AA uses the AC name in consulting.
The potential for AC to lose clients to its old sibling, as clients remain loyal to the name, is high.
It is also feasible that in the confusion other competitors may woo clients away from both AA and AC. Indeed clients are not always as savvy as consultants would like to think and some clients will inevitably revert to AA. It is said that over 50% of the market doesn’t recognise the difference between AC and AA.
The branding issue is complicated even further by the debate on auditor independence. It seems that the SEC crackdown on auditors providing other services will make it difficult for AA to continue offering consultancy service under the Andersen badge. It may float off its consulting arm in an MBO in the near future!
In all the confusion AC remains upbeat. An AC spokesman was recently quoted as saying: ‘Ten years ago, Andersen Consulting didn’t exist. We created a name once, we can create a name again.’
Good luck is all I can say. Even Richard Branson, the arch marketer and self-publicist, would not be as sanguine about recreating the Virgin brand.
Brands are hugely valuable assets and the reversion of the Andersen’s name to AA, despite the brave face, is a serious loss for AC. It will take a lot of hard work to create a new brand and to transfer the value and goodwill so brilliantly built up over two decades.
Full story on the Andersen split