What Business Are You in Again?

The Power of Purpose in Diversified Tech Companies

It’s grow or die in the technology business. But if tech companies lose their identities as they grow, they can also lose the loyalty of their customers and employees and the confidence of the media and investors. Growth can kill a company just as fast as stagnation.

A recent Siegel+Gale survey of more than 600 technology consumers and employees reveals the real challenges companies face as they morph from singular areas of focus to diversified technology companies, especially if they lose sight of their purpose—that is, why they do what they do.

After decades of growth and consolidation, the technology industry is dominated by a dozen behemoth companies like Microsoft, Oracle, Dell and Apple. These highly successful diversified technology firms have amassed broad product and service portfolios that span consumer and business markets, including hardware, software, cloud services, consulting and security.

Technology companies have to do it all. To continue to grow, companies like Amazon and Google must expand into new businesses. But how does this affect their purpose? How does Amazon’s cloud business square with its online book business? How do Google’s smart phone and e-wallet businesses relate to its search business? And do employees, partners and the media understand it?

As technology companies diversify, they often drift further from their founding purposes. The original brand identities that made them distinctive and compelling and drove their success become less and less connected to the companies they are trying to become. In fact, our survey found that the brands of many major tech companies, including Facebook, Google, Amazon and Microsoft, have become more and more unclear over the past five years in the minds of consumers and most troubling, their employees.

What are the consequences of this lack of clarity? At worst, it can lead to outright business failure. Witness Cisco’s misguided $590 million acquisition of Pure Digital Technologies, maker of the hot-selling, pocket-sized Flip video camera, in 2009. Two years later, Cisco shut Flip down. The network giant, a long-time leader in the business-to-business sector, couldn’t find its footing in the consumer markets. Employees and customers alike were left scratching their heads.

Diversification isn’t the problem

This isn’t to say that technology companies should not diversify. Diversification is unavoidable for many of these companies: they already have such large market shares in their core businesses that they have no choice but to launch or acquire new businesses to drive growth, innovate and fend off new competitors.

Diversification itself is seen as a plus by our survey’s respondents and is correlated to the highest levels of purchase consideration…as long as the purpose and values of the brand remain positive and clear. A majority of our survey’s respondents (58.3 percent of customers; 62.7 percent of employees) also believe that it is somewhat or extremely important that large technology companies have a clear purpose and brand values.

How important is it to you that a company has clear values and a stated missions/purpose that it lives up to?

Clear values

Take, for example, Apple and Microsoft, which are companies viewed by respondents as having evolved to a high degree over the past five years. Apple is viewed in a much more positive light than Microsoft: 80.7 percent of respondents think Apple is easy to do business with versus 50 percent for Microsoft. By significant margins, Apple is also identified as having a more straightforward and clear purpose than Microsoft.

Those who feel Apple's focus has changed are more likely to rate it high on a series of perception statements that involve the brand mission, products and organization.

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A singular identity sells technology

Technology companies need a singular identity—a deliberately chosen, coherent master- brand that communicates the company’s purpose today…and tomorrow.

Such an identity should encompass the core insight of technology companies’ brands. This insight serves as the bedrock for a strategic platform that weaves a company’s purpose and values into a brand promise. This promise is the company’s pledge to customers: it’s what it does for them and why they should care. And to gain its full power, the promise must be communicated in a consistent and coherent voice—a tone and style that evokes the company’s true and unmistakable character at every touchpoint in the brand experience.

Leading companies in other industries have captured their core insights and created powerful strategic platforms. These often hinge on a deceptively simple, intangible concept. Disney, for example, has successfully identified itself with the idea of magic, a concept that embraces a diverse business portfolio, establishes and supports corporate culture, attracts talent and clearly defines the company in the minds of stakeholders.

A singular identity can help large diversified technology companies carry customers, employees, business partners and investors with them throughout their evolutionary journeys. Our survey found that the better consumers understand a technology brand’s purpose, the more likely they were to have a positive perception of the company and buy its products and services. Consider IBM, a massive business-to-business technology company that has succeeded in creating a cohesive image. Its more than 400,000 employees and millions of customers all understand IBM’s purpose: to create “A Smarter Planet.”

Conversely, the less a large company’s brand is understood, the less likely consumers are to have a positive perception of the company and buy from it. As you might expect given Cisco’s experience with Flip, consumers in our survey had a very low level of familiarity with Cisco’s brand identity.

Three ways to win at scale

Large technology companies that win at scale understand the importance of creating a brand identity that is clearly understood both externally and internally. Toward that end, they do the following:

1. Embrace and socialize a brand purpose. A brand purpose can unite disparate business units and their customers in a common cause. To create one, technology companies need to answer the fundamental question: “Why is it we do what we do?” This essential insight is the core element of a singular identity.

When SAP, the market leader in enterprise application software, answered this question, it led the company to a compelling promise—“the best run businesses run SAP”—and even larger Purpose—“SAP helps our world run better in order to create enduring prosperity for people.” Internally, this idea has helped SAP, as a company, rally together and capitalize on the notion of enduring prosperity. Externally, it led to a refreshed brand identity that struck a chord with customers and shareholders.

2. Use a consistent brand and naming architecture. A brand and naming architecture can maximize the value of a business portfolio, even when the products and services a company sells are highly diversified. It also makes it easier for tech companies to extend into new markets, launch new products and retain customer loyalty.

Apple, whose market capitalization recently made it the world’s most valuable company, is the corporate poster child for brand and naming architecture done right. Its naming architecture—iPod, iPhone, iPad, iMac—carries customers from one product line in a seamless fashion and, in the process, solidifies the Apple masterbrand. This allows more latitude to leverage its brand equity to enter new markets.

3. Create a cohesive visual identity. A strong visual identity communicates a pledge that what the customer sees is what he or she will get. It is simple, often ordinary—but it instantly connects. It creates a sense of pride in and appreciation for the brand.

A company’s visual identity helps it to tell complex stories in simple, yet relevant ways. Picture HP, a mark that has stood the test of time. From printers and PCs to servers and services, with thousands of offerings, one consistent and clear mark appears. Over time, it helps to explain the company’s value to those outside the organization as well as present the organization internally and externally as singular and cohesive.

Tech companies that follow the three principles above can create singular brand identities. They can grow and diversify—attracting new customers, employees and investors without fear of losing the brand equity and loyalty they have already earned from their existing stakeholders. They know their purpose, and so does everyone else.

This whitepaper includes data from a Siegel+Gale survey of 302 consumers who are representative of the U.S. Census and 319 employees of midsize and large technology companies. The 25-minute survey was conducted online with the assistance of panel provider Research Now in July 2011.

Jason Cieslak is managing director for Siegel+Gale’s Los Angeles office.


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