Month: July 2006

Intersections: Organizational Culture, Business Goodwill, Branding, & The Law

What’s your company really worth? Sure, there is some book value there, but for most of us, a lot of the value of a company is in what we lawyers call “goodwill.” Simply stated, goodwill is the value of your brand.

To maximize the value of your brand, you need to:

1. Understand your current identity in the market
2. Understand your organizational culture
3. Reconcile the brand and organizational culture
4. Protect the investment

Understanding Your Current Identity
The easiest way to learn what customers think about your product or service is to ask them. However, many organizations don’t do that, so they don’t have the feedback they need to make informed decisions. For instance, what if you are marketing a perception of quality, but customers simply don’t see it – think Cadillac? When there is a gap between what you think about your company, and what your customers think about your company, then you need to start examining your organizational culture.

Understanding Organizational Culture
According to Mark Bodnarczuk of the Breckenridge Institute, the purpose of culture is “to teach people how to see the world.” Organizational culture, then, must be viewed as a way of teaching internal and external audiences how to view the organization. It is akin to personality – with each organization having unique patterns of financial and non-financial performance. How does your organization function? Is it primarily focused externally on industry benchmarks? Is it focused on production, administration, communication, or vision? Are your people aligned in a just culture that allows people to bring out new ideas? Understanding these facets of your organization is key to creating a sustainable branding strategy. Any gap between your brand and your culture is an opportunity to build goodwill and bring extra value to your organization.

Reconciling Brand and Culture
Whether shaping the branding strategy of a start-up or optimizing the strategy of an established company, the key to maximizing goodwill is in closing the gap between organizational culture and organizational brand. Sometimes we see wonderful brands that resonate with the market, but are undermined by the internal culture – as in the case of marketing an image of customer service, but having sales clerks who are untrained or unhelpful. In that case, the challenge is to correct the organizational culture over time to effectively support the brand. Typically this management issue can be resolved through a process of adjusting the focus of existing employees while working to make sure new employees match the needs of the evolving culture.

As consumers, we sometimes see a great company culture anchored to a lousy brand, what I call “the best kept secret” syndrome, such as finding a wonderful product in unattractive packaging. Typically, this marketing issue can be resolved by investing in creative communication services to more accurately share the story of the organization. In both reconciliation processes, there will be an investment of time, money, and emotion. These investments should be made with a strategy to leverage and protect that investment, which is where the intellectual property enters the picture.

Protecting Your Investment
Business goodwill, the brand, is worth a lot of money – just ask Coke ($70.45 billion), Microsoft ($65.17 billion), and Apple ($5.55 billion). The time, money, and emotion you invest in your business should be part of an overall strategy incorporating the protections of trademark, copyright, patent, employment, and trade secret laws. The trademark laws are specifically created to protect business goodwill by making sure consumers do not confuse your goods or services with the goods or services of another. Copyright protects your artistic creativity. Patents protect your inventiveness. Employment and trade secret laws protect your investment in training key employees.

The Lawyer’s Role
Your lawyer should understand the legal rules of these different elements, and how these laws fit into the overall mission of maximizing the value of your organization. In today’s world, your lawyer should be more than just an “attorney” – your lawyer should be a “counselor.” who guides you as you build goodwill (or brand equity) over time. Your lawyer should be someone who understands the value of your time, effort and sweat equity, and can help you protect and grow that investment over time.

Branding Malpractice.

I read in last week’s Northern Colorado Business Report about an attorney working in Northern Colorado who uses those little magnetic refrigerator magnet words to “help her clients pick trademarks for their businesses and products.”

My head almost exploded.

If there were such a thing (there isn’t) as “branding malpractice” this should qualify. You should use your legal counsel to help evaluate and select from the possible names YOU have already decided reflect who you are. You shouldn’t be sitting at your lawyer’s desk shuffling letters.

Your brand is arguably the most important asset of your company, product, or service. If your lawyer is asking you to brand your endeavor based on little magnetic tiles, you’re missing at least half the picture.

Granted, making up a new word will help keep you clear of trademark issues in most cases (assuming you actually DO create a NEW word…), but your brand should also be a reflection of what you do, who you are, and what you’re selling.

Unless you have a HUGE marketing budget (think pharmaceutical company), you should create a brand that falls into the “suggestive” trademark classification. That means using an exsiting word or phrase that “suggests” the qualities of the product or service in the minds of the consumer. Think “Crocs”, which suggests “getting a grip” with non-slip shoes. This could also be considered an “arbitrary” mark (even stronger) because it uses a word not normally associated with shoes. In my opinion, combining “suggestive” and “arbitrary” leads to the best combination of marketing efficiency and legal effectiveness.

Why not come right out of the shoot with a completely made-up word?

Because, it takes a LOT of money to build brand association with an “arbitrary” (existing word used in new context) brand, or a “fanciful” (made-up word) brand. You litterally have to build, via your marketing $, the connection in the mind of the consumer between the brand you’re using, and the emotions, qualities, and other mental triggers associated with your product or services. Think Nexium, Protonix, Celebrex, etc. Those word literally mean nothing until you hear and see them on TV, on the radio, and in print a bunch of times. If you have the money to do that – by all means, go for it. Most people and companies simply cannot hope to establish brand awareness of a fanciful mark.

This reminds me of some lines I use with my marketing clients:

1. Don’t let a programmer DESIGN your Web site.
2. Don’t let your printer DESIGN your brochure.

And now:
3. Don’t let your lawyer guide your brand selection (unless that lawyer happens to have a background in brand development, not just trademark registration – like me for instance).

Brand selection and development is a process that combines your organizational culture, your marketing capacity, and the trademark law in a delicate balance. Don’t let any single element of that mix overshadow the others.