House of Brands or Branded House?

An overview of what to consider when making a change to your B2B brand architecture

So you’re wondering if you have the right brand architecture in place. Whether you operate a branded house (i.e. focused on a single, consistent brand architecture with segment descriptors), a house of brands (collection of brands, each with their distinct value proposition and audience) or a hybrid model, deciding to reengineer your brand is a major business decision. As such, it needs to be based on a rigorous process, data and planning — a transformational effort that should not be underestimated.

To be clear, this is not about expressing a preference for either model since their relevance needs to be considered in context. However, as a prime asset of your organisation, your brand portfolio needs to be actively managed, especially when market conditions are tougher than normal.

Also, the reason this article focuses on the move to a branded house is that this direction of change is more frequent and is usually the result of a deliberate business decision requiring a major transformational effort.

The reverse is usually the result of a less deliberate, ad-hoc and/or a laissez-faire approach, which leads to a hybrid model. This can be the result of multiple acquisitions of brands that still resonate with the market or have particular earn-out conditions attached to them and are, therefore, merely stacked onto to your brand architecture rather than being integrated. And since the brands carry a monetary value that was part of the acquisition price, there is a natural desire to leverage the acquired brand value even if it doesn’t quite fit into your existing brand strategy or architecture. This may work in the short term but may well cause inefficiencies and increased integration costs — as well as costs of opportunity — further down the road. Note that it is worth distinguishing between an operation predominantly driven by acquiring market-share (here, the brand plays a more important role), or acquiring product/expertise. In this latter case, the acquisition rationale will have been clearly aligned to the portfolio strategy, making the integration into a branded house much more straight forward.

There are a few indicators that may warrant a brand audit and be evaluated against your business strategy and operating model. The items below are by no means comprehensive and need to be considered in the specific context of your business and market you operate in:

• Customer segmentation is shifting with increasing numbers of customers buying more than one product or brand, indicating that a common value proposition to your portfolio is gaining momentum

• Stagnant growth and deal flow or missed opportunities due to a lack of cross-selling and insufficient leveraging of the full portfolio in all your geographies or market segments

• Increasing disparities in performance among the brands in your portfolio

• Customers — especially the more sophisticated ones that buy products or services from several of your brands/entities — wishing to reduce their supply chain complexity and deal with a single point of contact in your company (time to set up a global account management structure?)

• Your sales and marketing costs are on the rise and eating into your margin

• Share price volatility has increased or is above the industry average and analysts and investors tell you that the value drivers and operating model aren’t well enough understood and, therefore, potentially attracting more short-term than long term investors

• You’re having a hard time attracting top talent due to a lack of brand and EVP awareness in a highly competitive global talent market

• Fragmented company culture or multiple company cultures (some of which may be conflicting with each other) and organisational silos leading to low employee engagement, higher turnovers and low brand championship externally

Two areas you shouldn’t underestimate

So you’ve now concluded that it is indeed relevant to adopt a branded house approach. This is a considerable undertaking and should be handled as a company-wide transformational project, not merely confined to a functional brand update. From experience, there are two areas that are often overlooked or underestimated — yet they are critical to making your new brand strategy and architecture a success.

1. The impact on the organisation — a need to align your operating model to the new value proposition and brand architecture (in that order!)

2. The impact on your people — because strong brands are built from the inside-out

Connecting brand strategy to organisational design

If you have operated a house of brands aligned to the operational entities’ P&Ls you will need to reengineer your organisation to fit with your branded house model and, if you don’t have one, create an integrated product/service portfolio strategy.

Why? Because your brand is now a common asset for the entire organisation and for which each business entity has a shared responsibility. This in turn means you need to ensure the consistency and integrity of an integrated value proposition from what previously was a collection of brands. It follows that a system is required that balances a support & control function with the go-to-market flexibility the business entities need to ensure continued growth.

If you have concluded that the move to a branded house will produce strong synergies, the full solutions portfolio will have to be leveraged globally as opposed to it being limited to merely a country or region. If previously your brands operated globally but in an uncoordinated manner, a more planned and orderly approach is needed to reap the synergistic portfolio opportunities.

This means that you will need to align your customer and geographic segmentations and adapt your go-to-market strategy. As a consequence, you may need to redraw the org-chart of your operating entities, align incentivisation and, most importantly, create capable and group-wide support functions with processes that are conducive to value creation for the business entities (read: not merely based on command & control, but with a business partner & outcome-oriented mindset).

To achieve this, a balanced matrix organisation, with 2- or 3 dimensions, seems to be the most effective way to deliver value to customers, value to shareholders and exciting career development prospects to your people and future talent.

From experience, it happens ever so often that such changes in organisational structures are half-baked at best. Company politics aside, leaders often tend to underestimate that…

• Transformation of this scale also means that the company culture needs to evolve

• There is a leadership skill gap (behavioural, experience and hard skills) to navigate and operate a matrix organisation effectively

• Resources, commitment and a realistic timeline are often amiss for the change to take hold and produce visible effects

Such an undertaking should also be accompanied by an effort to streamline the company’s cost structure, rebalance resources and optimise processes by removing inevitable duplications inherited from a house of brands structure.

And while such organisational and process re-engineering may seem daunting and leviathanesque for companies that consider themselves as lean, agile or entrepreneurial, they are not mutually exclusive. If they are, something was missed in the transformational process, not because of process or organisational inflation. With the right leadership, culture, processes and tools, such a matrix organisation can and must be agile to generate profitable top-line growth.

Strong brands are built from the inside out!

How so? Simply because it is your people who will articulate and bring to life the new brand architecture, an integrated value proposition and deliver the brand promise to your customers.

As mentioned before, change of this scale is a massive undertaking and requires a serious commitment from management to make it a success. According to a study by Brightiline & The Economist Intelligence Unit, among the many challenges to the successful implementation of (a new-) strategy are:

1. Cultural Attitudes

2. Insufficient or poorly managed resources

3. Insufficient agility

4. External developments

5. Strategy not understood/poorly communicated

6. Poor coordination across the organisation

All of these factors, except 4, are company internal and directly under the control of management — no excuses! They highlight how critical cultural change, an explanatory effort towards promoting understanding of strategy, a re-skilling program and basic leadership cheerleading are to the successful adoption of the new brand model internally. This is even more important for those colleagues who identified themselves with one of the legacy brands that is no more.

But if there is one thing to remember from all of the above, it is that in a branded house, the brand becomes a common asset for the entire organisation. That changes, if not everything, a lot!

This is why a rebranding exercise — strategy, architecture, refresh, etc. — is about creating a more integrated organisation in which your people share the responsibility for the reputational life-cycle in every market the company operates in.