Google and the ABC of creative destruction

I know, it’s been done to death. But I think it’s time to call BS on Alphabet.

The most remarkable thing about the announcement of Google’s restructuring was not the news itself but the rapturous praise that was heaped upon it. The branding community was quite giddy with excitement.

“Without a doubt the biggest rebrand in the 21st century.”

“One of the most incredible pieces of corporate brand communication I can remember.”

“A brilliant branding move.”

“A strategy at the opposite of what is typically recommended by consultants or advisors.”

 

The outpouring of adulation gave me pause for thought… had I missed something?

As a business story, Google’s creation of Alphabet, a holding company, is remarkable, not so much for what it is but for what it will make possible; as a branding story, it’s really old hat.

There is nothing in the creation of Alphabet that hasn’t been done many times before and equally as well by many other companies in the cause of business reconstruction and renewal.

At its most mundane, Google has turned itself into an unfashionable conglomerate. It’s a familiar tale, one told by such unglamorous conglomerates as ITW, Manitowoc and Textron. And it’s hard to forget the disastrous attempt by UAL Corp to bind together Hertz, Westin and Sheraton Hotels under a holding company called Allegis. This is a story I’d recommend as further reading for all brand strategists. If Alphabet is the branding road less traveled then Allegis is the reason why.

“The next world-class disease” according to Donald Trump

More worthy exemplars of the genre are to be found among the energy companies such as Constellation, NextEra Energy, Exelon. They grew exponentially beyond their regulated core utility origins by creating a holding company, à la Alphabet, so they could offer enhanced services and products in the competitive energy market, satisfying both shareholders and regulators.

The energy giant Exelon, for example, has its origins in two very humble regional utilities – PECO (Pennsylvania Electric Company), and Commonwealth Edison, which are now operating divisions of Exelon – just as Google will become an operating division of Alphabet.

For some reason we accept Amazon in all its sprawling vastness as it attempts to become the world’s retailer, even though it makes most of its money from its web services business, AWS. Google had become impossible to define. To most people, Google is a search engine; as a business, it is much more. And there, in that dynamic, is the tension that created Alphabet.

Google had grown into an opaque, messy hotchpotch of businesses, some speculative, such as driverless cars and life extension technology, and all financed by the phenomenon of Google itself, the financial nuclear reactor.

In decline: This Fortune cover appeared before Google was even created

Branding Google is like trying to brand an explosion. What the new structure provides is maximum flexibility together with investor transparency, discipline and financial accountability as the company makes big bets on the future.

Google’s founders, Messrs. Brin and Page, have handed over the reins of Google to Sundar Pichai who, by all accounts, will do a good steady job. For them, Google is done. The new more enticing future is spelled out by Alphabet, which, as a name, is about exciting as cold rice pudding.

No mind, they have spun a nice story around it and, as a holding company, it will work just fine. It has no other role to play other than that of a name for a legal entity that places the big bets. What’s interesting is what will happen underneath Alphabet in the operating divisions.

Is this the branding story of the century? No, far from it. But it does provide a glimpse into the future intent of one of the world’s great companies.

The truly brave thing about the creation of Alphabet is in its invocation of what economist Joseph Schumpeter called creative destruction, ‘the essential fact about capitalism’. It is the spirit of Schumpeter that will push the company far beyond its origins and the Google brand.

I can’t help thinking such an approach might have saved two other iconic American brands that found it impossible to escape the gravitational pull of their brand’s heritage and an addiction to the cash they threw off.

Kodak missed its chance several times to evolve beyond the failing Kodak brand and determine its own future as a business. It met its inevitable end in one form of creative destruction, Chapter 11,  to be reborn as something else entirely.

And then there is always Levis: as it seeks salvation with cheerleader CEOs who endlessly try to revive a commoditized brand by dressing from head to foot in the product, it keeps coming back to the same product conundrum of heritage versus innovation as it continues on the long, remorseless slide towards business oblivion.

You say Allegis and I say Allegion

You can’t fault Lippincott for persisting with corporate names based on the word ‘allegiance’.

The Pledge of Allegiance is a daily ritual for most American school children and, in spite of its feudal etymology, the distinct overtones of patriotic loyalty resonate positively with people.

No surprise then that it’s a wildly popular base word in naming. There are, literally, hundreds of ‘Allegiance’ names and its variants for companies in every conceivable business category.

Allegion and family

The latest coinage is ‘Allegion’, the new corporate name for Ingersoll Rand’s commercial and residential security business that owns unsexy lock brands such as Schlage and Legge.

Lippincott says of their handiwork: “The selected name, Allegion, conveys the close, collaborative and long-term relationships (allegiances) that the company builds with customers. It also refers to the diverse legion of experts company-wide and suggests the protection and strength that the brand’s security solutions provide.”

It makes you wonder if, in the client evaluation of Allegion, the subject of its first cousin ‘Allegis’ ever came up. It’s a story that Lippincott knows well.

Allegis CEO Richard Ferris explains his strategy

It starts in 1979 when Richard J. Ferris became chief executive of UAL Inc., the parent company of United Airlines. He spoke with messianic zeal of his visionary concept of a one-stop fly-drive-sleep behemoth that would take care of the major needs of travelers. In a two-year span Ferris spent $2.3 billion in pursuit of his vision, acquiring Hertz Car Rental, Westin and Hilton International hotel chains.

In February 1987 he changed the name of UAL Inc. to Allegis Corp. to reflect the broadened scope of his travel enterprise.

“We are a travel company, not just a transportation company”, he said. “The name change clearly identifies us as the only corporation that can offer travelers door-to-door service.”

Wall Street hated the strategy and analysts and institutional investors focused their displeasure on the name. Donald Trump, never at a loss for a pithy remark, said Allegis “sounds like the next world-class disease.”  Wall Street wags joined in; Allegis Corp. became Egregious Corp.

Unnerved by the ridicule, Allegis directors finally bowed to pressure from dissident shareholders who threatened a proxy fight to replace the board. They forced Ferris to resign, symbolically changed the name back to UAL, and began to dismember the company.

It was Lippincott (and Margulies) who came up with the Allegis name. They explained it thus at the time:  “Allegis conveys the central corporate mission of service and guardianship … through its relation to the word allegiant, meaning loyal or faithful, and aegis, meaning protection and sponsorship.”

Now, for me, notions of guardianship, fidelity and protection sound like a much better set of attributes for a security company than a travel company. Too bad for Allegion they had already been pinned to Allegis.

Of course, there was nothing wrong with Allegis as a name. It lives on quite happily today in various corporate guises; here, here and here, for example. Leave it to Donald Trump to provide a fitting epitaph:

“The name change made me more militant as an investor and more willing to speak out against management, because I thought it was so wrong,” he said in the New York Times. ”And I think it had an important psychological role. It brought out even more anger at management and made a lot of people say they had finally had it.”

In other words – if all else fails, attack the name.

See also: Allegis, the name that died of shame.

If Allegis was the disease, is Xylem the cure?

More than 30 years ago Donald Trump managed to bring a visionary $2.3billion enterprise to its knees with a single withering remark. It wasn’t about the competence of the CEO, or the virtue of his problematic strategy. It was about the name of the company.

It was February 1987: Richard Ferris, CEO of UAL Corp., fatefully announced his company would, henceforth, be known as Allegis.

The name change was intended to reflect the broadened scope of the expensively constructed travel enterprise that included Hertz Car Rental, Westin and Hilton International hotel chains, as well as United Airlines.

“We are a travel company, not just a transportation company”, said Ferris. “Allegis clearly identifies us as the only corporation that can offer travelers door-to-door service.”

Investor activist Donald Trump saw things differently. ”It sounds like the next world-class disease,” was his biased diagnosis.

It was the beginning of the end for Ferris and Allegis. Investor discontent coalesced around the name change and within six months Ferris was gone and his grand plan was being dismantled.

Introducing Xylem and Exelis

What was not so easily quelled was the fear and loathing Allegis had generated about corporate names. More than three decades later the fallout still swirled around the corners of boardrooms like a toxic mist. “Don’t give us an Allegis” was the joke, and behind it there was real fear.

The chaotic creativity of the Internet age has eased the anxiety. The likes of Google, Hulu, Zoomba, Skype and Zoosk have, out of necessity, attuned our ears to exotic and unfamiliar nomenclature but not enough to prevent the occasional atavistic twitch from sections of the media over what they characterize gleefully as “disastrous corporate rebrandings”.

There are signs of a real thaw, however. Recently, the conglomerate now known as ITT decided to split itself into three, spinning off its water treatment business and its military business. After much deliberation by Lippincott, the same branding company that gave the world Allegis, they brought forth “Xylem” and “Exelis” as the names for the two new entities. They were met with the dull thud of indifference.

Only a botanist would know that Xylem is a Greek-derived word that refers to vascular tissue that carries water and nutrients through plants. Likewise, it would take a lepidopterist to know that Exelis is a genus of moth, but one can hazard a guess at the intended meaning. In reality both names are, to all intents and purposes, gloriously meaningless.

Where is the outrage, the rending of garments, the gnashing of teeth? There is none.

Admittedly, Qwikster has been given up by Netflix as a juicy sacrificial offering to placate the Rebranding Disaster Gods but Xylem may be the miracle drug it sounds like it should be.

Could Xylem be the cure for Allegis — that most pernicious of name-aversion diseases first exhibited by Donald Trump 34 years ago?

Allegis, the name that died of shame

In the annals of corporate branding the Allegis affair must go down as the granddaddy of all rebranding debacles.

The story is told and retold as the classic disaster, a cautionary tale of what happens when a corporate naming exercise goes badly wrong.

Why — what did go wrong? Is Allegis really that bad a name?

In truth, the fuss had little to do with the wretched name itself.  There are more egregious examples of the genre that have served their corporate purpose successfully and much less controversially – Accenture, Agilent, Novartis and Verizon to mention a few.  And Allegis lives on quite happily these days as a name in various corporate guises, here, here and here, for example.

The disaster, as is often the case where corporate name changes are concerned, was a compound of corporate politics, investor impatience and union unrest. Like Gettysburg, Allegis was transformed through a complexity of circumstances from an innocuous name to a proxy for a battlefield.

The Allegis story starts in 1979 when Richard J. Ferris became chief executive of UAL Inc., the parent company of United Airlines.

A vigorous proponent of airline deregulation, Ferris saw an opportunity to shake up the stodgy industry and create a new kind of company. By putting together the airline with rental cars and hotel services under one umbrella, Ferris argued that large savings could be realized and more customers could be attracted through “synergy”, a word that had new and sexy currency in the corporate world at the time.

He spoke with messianic zeal of his visionary concept of a one-stop fly-drive-sleep behemoth that would take care of the major needs of travelers. With extraordinary prescience for the time he foresaw a future in which travel agent around the world perch in front of computer screens making reservations for his airline, his hotels, and his rental cars completely seamlessly.

In a two year span Ferris spent $2.3 billion in pursuit of his vision, acquiring Hertz Car Rental, Westin and Hilton International hotel chains. In February 1987 he changed the name of UAL Inc. to Allegis Corp. to reflect the broadened scope of his travel enterprise.

“We are a travel company, not just a transportation company”, he said. “The name change clearly identifies us as the only corporation that can offer travelers door-to-door service.”

Lippincott and Margulies, the firm that came up with the name, said Allegis “conveys the central corporate mission of service and guardianship … through its relation to the word allegiant, meaning loyal or faithful, and aegis, meaning protection and sponsorship.”

Ferris’s grand vision now had a name, and his many opponents on Wall Street had the weapon they needed. Investors were growing restless. The huge cost of putting the strategy in place became a drag on Allegis’s earnings and the stock price sank below the break-up value of the company. A disgruntled pilots union put together a bid to buy the company. Allegis was in play.

Investor discontent came into keen focus around the name change. Security analysts and institutional investors stared even harder at Ferris and his operation, which they thought was grossly undervalued. Shareholder Donald Trump, even then never lost for a pithy remark, said Allegis sounded like ”the next world-class disease.” It was merciless and unrelenting. The outfit ought to be called Egregious Corp., burbled the Wall Street wits.

It was all over by the following June, less than four months after the name change. Unnerved by the ridicule, Allegis directors finally bowed to pressure from dissident shareholders who threatened a proxy fight to replace the board. They forced Ferris to resign, symbolically changed the name back to UAL, and began to dismember the company.

Ferris’s arrogance had won him few friends on Wall Street along the way. But even his harshest critics conceded that his big-picture strategy might have been workable some day. They just were not willing to give Allegis the time it needed.

The power of a name to make abstract concepts real and focus emotion and Allegis’s ready accommodation to ridicule made it a lightening rod for dissident shareholders and unions. The naming of Allegis was the beginning of the end for Ferris.

Donald Trump acknowledged as much when told the New York Times how the name had affected him:

“The name change made me more militant as an investor and more willing to speak out against management, because I thought it was so wrong,” he said. ”And I think it had an important psychological role. It brought out even more anger at management and made a lot of people say they had finally had it.”

”A name change can be an incredibly powerful thing,” said naming expert S. B. Master. ”What you’ve been saying in annual reports and speeches suddenly becomes real when you change the name. Ferris’s idea finally got through.”

Joel Portugal, a principal at Anspach Grossman Portugal, perceptively put his finger on the real long-term damage: ”For the rest of my life, I expect to hear clients joke about Allegis,” he said at the time. ”They’ll say, ‘don’t give me an Allegis,’ or ‘don’t make an Allegis out of me.’ And beneath the joking there will be real fear.”

Fear there is. Allegis became a radioactive name and the fallout seeped into corporate boardrooms of America. It is there still. CEOs have a real fear of what they think of as ‘phony, made-up names’. Like Allegis.

Karl Marx said history repeats itself, first as tragedy, second as farce. If Allegis was the tragedy, then Consignia was the farce to prove his point.

Next: The savaging of Consignia and how it could have been avoided.