New Names for Old Companies
When, why, and how to change a company's most valuable asset.
(Business 2.0) – Among the biggest problems facing Kodak recently--and it has a ton of them--was what to do about a name. Battered by declining revenues and a stock price hovering near 20-year lows, Kodak had pinned its hopes on Ofoto, the Internet-based photo-services firm it acquired in 2001, to establish the company's relevance in a postfilm world. But that raised an issue: If Ofoto was to become a key element of Kodak's turnaround strategy, shouldn't the website feature the name of, well, Kodak? "Do you spend tens of millions of dollars building the Ofoto brand," Kodak VP for online services David Rich asks, "or do you leverage the legacy of a hundred years of Kodak?"
After six months of study, Kodak dropped the Ofoto name in March and redubbed the site the Kodak EasyShare Gallery. Why the mouthful? EasyShare is the name of Kodak's popular digital cameras, which today command an industry-leading 22 percent share of the market. Likewise, the company has shipped more than 2 million EasyShare-branded printers since 2003. "EasyShare Gallery telegraphs the brand and the services customers will receive," Rich explains. "It tested well with our target."
Such naming dilemmas have become increasingly common in American business: Corporate name changes are up 12 percent since last year. Consider all the companies that want to distance themselves from the taint of Internet excess or corporate scandal. (Think of MarketWatch dropping its ".com," or WorldCom changing its name back to MCI.) Then fold in mergers and acquisitions. Last year more than 9,000 M&A deals were struck in the United States--the most since 2000 and a 50 percent jump from the previous year. Suddenly, renaming has become a big priority for many companies.
The Name of the Game
Different circumstances present different challenges. Start with mergers, by far the leading trigger for corporate name changes. When one company gobbles up another, executives face three choices: Settle on one of the old names, combine the two names, or come up with something entirely new. The decision usually comes down to picking a name that best fits the strategic direction of the combined entity. Sometimes the choice is easy, as in the case of Atlanta-based ValuJet Airlines, which in 1997 adopted the name of its merger partner, AirTran, as part of an effort to rebuild passenger confidence following the 1996 crash of a ValuJet DC-9 in the Florida Everglades.
In less dramatic cases, it's important to evaluate the relative strength of each M&A partner's brand. "You do substantial quantitative research," says William Lozito of Minneapolis-based Strategic Name Development. The survey techniques are rigorous, but the questions themselves are necessarily subjective: "Can the brand be described as a leader or a follower?" "Does it feel young or old?"
As a result, these decisions often turn out to be judgment calls. This year, for instance, former Baby Bell SBC has proposed adopting the 120-year-old name of its takeover target--AT&T. That might be a good idea, given AT&T's superior name recognition among consumers, but it's also risky, given AT&T's tarnished image on Wall Street. Sprint, meanwhile, decided that its well-known name was a better strategic fit than Nextel, the name of its acquisition target. Yet, in a compromise, Sprint adopted Nextel's yellow-and-black color scheme, along with the tagline "Together with Nextel," to signal that the combined firm will still offer the unique network capabilities that Nextel's customers have long enjoyed. "It's a perfect example of co-branding," says Lozito, whose firm wasn't involved in the effort.
Some merged companies start over with an entirely fresh name. The 1996 marriage of Swiss pharmaceutical giants Ciba-Geigy and Sandoz Laboratories yielded the all-new name Novartis. However, the delicate nature of managerial politics and employee sensitivities means that not all mergers result in one tidy moniker--recall ConocoPhillips, DaimlerChrysler, ExxonMobil, JPMorgan Chase, and Konica Minolta. When two names are mashed together, the cumbersome result is often difficult for consumers to remember.
A decision to change the corporate name may also make sense when a company outgrows its original business model or a product outgrows its parent company. In the 1930s, Galvin Manufacturing sold a successful car radio called the Motorola 5T71--leading the manufacturer to adopt the name in 1947. The company now known as Xerox--shorthand for a patented xerography copying method--was originally called Haloid. And in 1983, Relational Software changed its name to Oracle to reflect its top-selling database product. The change doesn't always have to be formal; in its marketing, Citibank often truncates its name to Citi to deemphasize its ties to traditional banking as it expands into other financial services.
Some companies simply conclude that their original name has become a hindrance. Following the humiliation of the Internet crash, dozens of companies dropped their ".com" suffixes, including About, Autobytel, and Infospace. (Likewise, the magazine you're holding was formerly eCompany Now.) Primordial, a St. Paul, Minn., startup that began by selling vision-enhancement systems to the military, was called Soldier Vision until founder Randy Milbert decided that the old name was scaring off civilian clients. After an exhaustive search--"Every other name in defense has 'stealth,' 'hawk,' or 'systems' in it," Milbert says with a laugh--he hit on Primordial, a word that suggests newness. Since the switch earlier this year, Milbert says, Primordial has landed two new contracts with non-defense companies: "The new name has been a huge plus."
Making the Switch
Whatever the reason for the renaming, engineering a successful name change is hard work, and it can cost a bundle. Many companies enlist the expertise of a branding agency--a service that usually costs between $30,000 and $150,000. For that price, agencies typically provide detailed market research and a list of about 60 possible new names. To make the exercise more realistic, many shops also produce "demos" of the best potential names, including mock-ups of annual reports, business cards, and websites. "Black and white on paper isn't the same thing as the real world," says Julie Cottineau of global branding agency Interbrand. "You need to try it out."
The process should also include legal and URL vetting--a serious headache when trying to navigate the 11.8 million active trademarks and 83 million registered domain names around the world. "Names should always be prescreened to avoid the risk of having executives fall in love with one that's unavailable," Cottineau adds. There's more than just potential disappointment at stake: In 2003, Philip Morris changed its corporate name to Altria Group, which prompted a costly trademark fight with Altira Group, a Denver venture capital firm founded in 1996. (A court eventually decided against the VCs at Altira, ruling that trademark law doesn't protect names that merely look similar.)
Once a new name has been chosen, the practical mechanics of the switch begin. Selling the new name and explaining its rationale to workers is the first step. Suppliers, clients, and customers should be the focus of a similar effort. Then comes the most expensive part: introducing the new name to the world. In addition to buying new letterhead and business cards or altering logos and signs, many companies also launch a formal marketing campaign--advertising and promotions that call attention to the new identity.
But even with solid research and big marketing budgets, companies still make silly naming decisions. In 2002, PwC Consulting (spun off from the equally unwieldy PricewaterhouseCoopers) began changing its name to Monday--a widely ridiculed plan that was quietly dropped when the firm was acquired by IBM a few months later. And no name change, no matter how clever, can save a company from bad management or scandal. The 1985 merger of Houston Natural Gas and InterNorth produced a new company called Enron. That name remains an albatross for CrossCountry Energy, PipeCo, and Prisma Energy International--firms trying to create new businesses from the ruins of the former energy-trading giant.
"At the end of the day, you've got to deliver a great-quality service. That's what consumers buy," says Kodak's Rich. So are consumers buying Kodak EasyShare Gallery? It's still early; the Ofoto name vanished just last spring. Since then, Kodak says, the online service has gone from 18 million to more than 25 million users, while revenues have grown at a double-digit pace. Yet the site's more intimate affiliation with its parent company may not be as much of a help as Kodak executives might like to believe. Thanks to Eastman Kodak's strategic woes, Interbrand today values the Kodak brand at $4.9 billion--55 percent less than in 2001, the year the company bought Ofoto.
What's in a Name? Understanding the logic behind some high-profile changes.