The industry is excited about the long-forecast and now-developing consolidation of automotive brands and companies. But as BMW and DaimlerChrysler have learned, it is easy to get tripped up by your new partner.
There appears to be a fundamental, unresolved conflict in the mergers. That conflict is between the deitylike status of increased efficiencies in a mature industry and what makes brands great.
Great brands are a composite of many attributes. Some are real; others are quite intangible. They combine to form a personality that differentiates one brand from another. To the consumer, brands are the complex made simple - lots of information, emotion and coloration compressed into a name or symbol.
It takes a long time to weave that rich tapestry into what we call a brand. Brands have energy, life and value, and that's why a company will pay far more for a brand such as Jaguar or Land Rover than the hard assets are worth. You are buying differentiation - the things that make that brand important or special to a group of consumers.
Efficiency homogenizes; brands differentiate. Now, every business has to walk a fine line between allocating resources to strengthen its brand and reducing expenses to remain competitive.
Our experience at building the Land Rover brand in North America taught us there are certain keys to building powerful brands. Differentiation is the most important, and that's as true for Porsche as it is for Coca-Cola. That difference must resonate with a group of customers and permeate everything a company does.
Most people would say the next most important key is the product; after all, in the car business we all worship product. But we believed the second most important key right behind differentiation is culture - the inculcation of the brand among its people.
A focused culture provides energy and vision. It becomes both who we are and how we do things, a total belief system. It lives in the hearts and minds of the associates and drives the passion they put into the business.
The strength of a brand can be measured by the strength of its culture. A strong culture acts as an antibody to foreign ideas that threaten the culture. Operating multiple cultures simultaneously is difficult; it is an art few have mastered.
How is that playing out in the real world?
Ford has had success with Jaguar because it has honored Jaguar's heritage and has appointed executives who understood and prized the Jaguar brand. Ford retained senior executives such as Mike Dale to ensure that new team members truly understood Jaguar. While Ford has brought much-needed efficiencies and quality to Jaguar, it also has invested heavily to keep Jaguar differentiated.
DaimlerChrysler is another fascinating example.
The strength of Mercedes-Benz always has been its engineering prowess (read: people). Chrysler was brought back from the dead by an extremely talented team that created its own culture, a culture unlike that of any other Detroit car company. Combining the two for efficiencies alone could only pit one culture against another, which is exactly what happened.
A word about efficiency: You want to be efficient when you buy bolts, but you want to be effective when you acquire people and teams. The value of a PT Cruiser transcends any gain that might come from one culture consuming another. The Mercedes culture never would have produced such an outlandish product, yet it was a natural for Chrysler.
A company buys a brand because it believes that brand has attributes that it could not duplicate easily at home. Attacking that differentiation and sustaining culture to increase efficiency sounds daft, for you are attacking the very value added that you just purchased.
Building a great brand or a portfolio of great brands is, in the end, a simple alphabet lesson - d before e. Desirability comes before efficiency because the first thing a business needs is a customer. Saving a few cents per wiring harness matters only if someone wants the car to begin with.
Desirability springs from passionate people. The brand-collecting two-step starts with nurturing the culture you acquire, followed by seeking out the efficiencies a larger organization can generate.
Charlie Hughes is past president of Land Rover North America and co-founder of CarBuzz, an automotive e-commerce firm in Annapolis, Maryland. E-mail comments to [email protected]