Getting the Brand Dosage Right in Post-Merger Integration
By Christian Dörffer and Ray George
The role of Brand is often misunderstood
Did many of your colleagues see brand as falling somewhere between “common cubicle etiquette” and “revised parking policies” during your last merger? If the answer is yes, then your company is most likely missing out on significant business benefits and causing unnecessary stress to the organization. Leading Healthcare manufacturers demonstrate that the corporate brand is the single most powerful lever to ensure post-merger integration success. Based on Prophet’s experience in the healthcare industry, we synthesize five key lessons that have helped successful executive teams deliver completed integration of acquired companies in record time and further strengthen their customer and employee relationships in the process.
Benefits of using Brand to guide post-merger integration
Close to 1000 deals are made each year in the healthcare industry across all major sectors. What did these deals have in common? The vast majority of deals resulted in lengthy post-merger integration activities, of which few have either been completed or reaped the full potential upon which the valuations were made. We believe one key reason that integrations take longer than planned and fail to reap projected synergies is that companies fail to leverage their strongest asset, their corporate brand, to help them navigate significant change.
Source: MedTrack
Mergers result in extensive internal changes: building a new combined organisation that fosters efficiency and effective sharing of knowledge, educating the sales force to sell an integrated portfolio and prioritizing and managing a larger pipeline to name a few critical tasks. Most often the integration effort is divided into numerous change projects that engage almost every function of global management teams. At a major orthopedics manufacturer, the integration of an acquired company was managed through more than ten global change projects run in parallel, in which each included both product and region-specific sub-projects of change. Interviews with managers involved in the change revealed a lack of clarity on overall strategic direction for the firm, and uncertainty as to how their integration work-stream was expected to contribute to firm competitiveness.
In addition to internal change initiatives, post-merger integration also includes a significant xternal component. For a company’s most loyal doctor relationships, change of this magnitude is often the one thing that may make them consider looking to competing providers. The integration process should therefore pay close attention to how the merger can be turned into something positive with doctors and other key stakeholders, who fear a loss of longstanding sales relationships, an adverse impact to product quality, less attention from their provider, or a forced transfer to a new and perceived inferior product set.
Leveraging the corporate brand as integration navigator can be a powerful indicator of business continuity with both internal and external audiences that can either cement or destroy your relationship with your valuable customers. Actively using the brand to drive integration efforts can also accelerate organizational collaboration and cooperation by bringing management teams and other key stakeholders together around a new purpose and strategic agenda.
Successful companies actively use the Brand in the integration process
Lesson 1: Brand as a means to an end
In recent projects in the orthopedic and ophthalmology sectors, management teams have successfully leveraged their corporate brands, (i.e. the promised customer benefits and experiences associated with the corporation), to guide their change efforts. Historically these companies have taken a traditional manufacturer’s view of change management: determine which products to produce, decide on where to sell them, optimize the distribution network, and then update brochures and training of the sales force. Today, many management teams view brand as the platform for building organisations and loyal customer relationships. The corporate brand is used to first define where to compete, then to encapsulate / refresh what the integrated organisation should stand for and the competitive positioning that will maximize revenue synergies between the two companies.
With the brand strategy in place, management next turned their attention to the alignment of their organisations and to arming sales force with tools to deliver a differentiated customer experience to physicians. The management teams leveraged their corporate brand as the guiding framework that tied all integration work streams together. This implied translating brand values into the actions, systems and processes that were going to define the combined company.
Lesson 2: Develop the right strategy and team
Anintegration plan will have limited practical value without clear strategic direction. It is the job of the new joint management to define a common direction and a set of brand values that provide internal clarity, set clear standards, motivate the right behaviors, and avoid reinforcing a silo’d approach. A new corporate brand strategy that reflects the “best of both worlds”, without losing the heritage of the dominant corporate brand is often the best answer, as it forces management to assess their combined brand assets and leverage the strongest elements from each.
Our experience reveals that the next priority for leaders of the brand integration process should be to designate a cross-functional team that can promote continuity while acknowledging and filling skills gaps. To capture all relevant knowledge and to instill a sense of continuity, your team should have well-respected managers from both the acquired company and the acquiring company. In addition, successful firms take steps to ensure that all key functional areas have a seat on the brand integration team. As the sales force is often the most prominent face of your brand, it is imperative to engage them early in the process and to include their voice on the brand integration team. At a major healthcare provider the integration team averaged around 30 people, but swelled up to 80 people at times to ensure that insights on the impact of all areas were taken into account. The director of customer relations and services stressed that you cannot have too much cross-functional planning or too much communication.
Lesson 3: Set realistic, appropriate customer expectations and be transparent
Some of the more successful post-merger integration cases indicate early and frequent communication is essential to make physicians feel valued. Sir Tom McKillop, Chief Executive of AstraZeneca, confirms that setting clear objectives for the deal and translating these into communication that everyone understands, was one of the critical factors behind the successful integration of Astra and Zeneca – ‘the main thing was to communicate, communicate, communicate, right from the day one…’ (Pharma Times, May 2004).
When healthcare firms postpone communication with physicians until all the answers are finalized, many physicians feel distanced. For physicians, often ‘no news’ translates into ‘bad news’ for their future experience with their trusted providers. In cases where top management communicated the direction, benefits, status and process from day one, physicians felt much more certain that the merger was also in their best interest. Honesty and clarity are therefore critical signals that enforce physician trust during this disruptive time. These and other actions will build your brand more so than an advertising campaign upon completion of the internal integration efforts.
Lesson 4: Set objective brand decision-making criteria and clarify product portfolio roles
Brands help create a loyal bond with customers and employees alike, and as such, both will have emotional attachments to both corporate and product brand names. Changes to these brands typically generate subjective reactions in powerful ways. One way to combat this reaction is to ground the decision making process in objective, fact-based criteria. General criteria should go beyond pure customer perceptual measures and include business, customer, and competitive facts that extinguish the emotional fuse before it gains momentum. For some companies, these types of decisions are straightforward and based on the inherent brand equity in the current corporate names, such as American Home Products leveraging the Wyeth name. For others, the move to hybrid (GlaxoSmithKline) or coined corporate brand names (Novartis) required objective rationale that could be communicated to both organizations. Despite change, these firms ensured there was a pillar of consistency.
At the product portfolio level, leading healthcare firms focus on matching complementary products to further deepen their physician relationships. However, in some cases the joint portfolio will contain competing or overlapping products that require clarification. In such cases, an objective regional brand equity evaluation combined with an internal brand portfolio review is the most common approach to ensure effective cross sales and minimization of customer attrition. A common trait when integrating complex healthcare portfolios is also that product naming is ‘all over the place’. In orthopedics for example, product naming is particularly confusing for surgeons; products are named after designing surgeons, anatomically, by material, by acronyms, and by loaded terms such as Stryker’s ‘Omnifit’ hip or Depuy’s ‘Total Shoulder’. Research conducted by Prophet reveals that surgeons have little preference for any particular type of naming as long as it is consistent and makes intuitive sense. Due to the limitations in changing existing product names (names tied to clinical studies) leading healthcare providers are today developing naming guidelines that ensure that products in the pipeline are named to both leverage and help strengthen the corporate brand that physicians trust.
Lesson 5: Arm your critical customer points of interaction
During the last 12 months a couple of leading healthcare providers in the midst of integration efforts have leveraged a better understanding of the customer experience to help manage both their communication and interaction with physicians. These firms have found that they can use the touchpoint wheel (‘Building the Brand-Driven Business, Davis & Dunn, 2002) to focus the way they want to portray the integrated company in the eye of their customers.
A major player in the MS segment found that to reap the full benefits of their acquisition, they needed to rely on more than the sales force to establish a closer relationship with their customers., As a result, this company developed a comprehensive touchpoint wheel in order to understand and act upon specific ways to better engage the physicians in the company’s activities and brand values. The objectives of this effort was to better reach physicians and ensure they understood the merger benefits, ultimately strengthening the physician relationship and increasing the prescription rate with the firm’s products.
A Simplified Customer Experience Touchpoint Wheel (Multiple Sclerosis Segment)
The company translated the refreshed brand strategy, developed shortly after the merger, into the 19 most important points of interaction with physicians. The physician benefits of the merger were carefully documented and translated into industry associations, advertising and even patient chat rooms. Existing customers learned about the mergers, not only through the press and their sales reps, but also through enhancements to scheduled training programmes, personalized letters, communications to clinical staff through educational channels, and site visits. As a result of these efforts, the company has built positive buzz around the merger, and many physicians have started to engage in more active dialogue with the provider around their educational programmes.
Conclusion
With no signs of M&A slowing in the healthcare sector, companies will continue to be placed under pressure to meet shareholder expectations related to these mergers. The complexity of integrating large, complex organizations and vast product portfolios poses great challenges for management and calls for clear guiding principles that optimize benefits to physicians and employees alike. The five lessons from leading global healthcare companies provides valuable insight on what made their post-merger integrations successful. By applying a brand lens on post-merger integration, results confirm that the likelihood of a smooth integration process and beating market growth expectations increase significantly.
A version of this article was featured in the February 2005 issue of Pharma Times
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