What's in a company name change?

OneSteel and Gunns have both recently flagged potential name changes, but unless such a move represents a change in strategy, there really isn't any point.

What’s in a name? Some companies these days, like OneSteel and Gunns, want to change their moniker when they’re in trouble. In an attempt to rule a line under the past and start again, they’ve produced empty sounding replacement names. But changing your name to market a struggling company is, to paraphrase Barack Obama, like putting lipstick on a pig.

Name changes are an expensive exercise, costing tens of millions of dollars that goes beyond changing the sign on the front door. There has to be a substantive reason for a name change. Does a new name really change anything when a business is struggling? Many name changes are all about marketing, not shifts in strategy or direction. It can also provide a distraction from what really ails the company. Still, it’s lots of work and money for marketers, consultants and public relations spivs recommending the exercise.

OneSteel and Gunns have announced they want to change the names that everyone knows so well. OneSteel will become Arrium and Gunns will morph into Enpax Australia. The problem is that they are nothing names, no-one has ever heard of them. Branding specialists say one reason they come up with names like that is that it’s easy to get the URL. But what’s the point of coining a meaningless word that no one has ever heard of and that’s not catchy? As a brand name, you don’t really know what it means and that potentially creates a barrier.

This nomenclature does not mark any shift in strategy or new management model. They are cosmetic exercises. It’s all about marketing, not defining and creating a competitive advantage which is what great companies do.

Of course, name changes are nothing new when businesses are trying to put the past behind them. In 2001, Philip Morris renamed itself Altria which, the company claimed, is derived from the Latin "altus”, meaning high. What they didn’t say was that that they were trying to distance Philip Morris from tobacco. It didn’t work. Blackwater, the company of mercenaries which got tarnished by a string of high-profile incidents, including a deadly 2007 shootout in Iraq, reorganised and rebranded itself as Xe Services and then a year later, renamed itself Academi. The company formerly known as Blackwater has had more name changes than Prince.

There have been some successful name changes. Kentucky Fried Chicken becoming KFC is one. Another is National Australia Bank becoming NAB. But then in both cases, it was less about adopting a new name and more about formalising the acronym that everyone uses. And then there is Andersen Consulting which turned into Accenture in 2001, but that only worked because Andersen was later implicated with corporate fraud at Enron.

For OneSteel, which has taken a battering of late with a first half loss of $73 million and sackings, changing the name is supposed to reflect a transition from being a domestic-focused steel company to a globally oriented mining and mining products group. It’s no longer primarily a steel company. About five years ago, OneSteel was unambiguously about steel with 92 per cent of its assets focusing on that sector. Today that proportion is at around 47 per cent. Mining now accounts for 16 per cent and mining consumables 28 per cent. But the company isn’t getting out of steel and it’s confident it can make it cash generating. So why change the name?

In an interview with Business Spectator (KGB: OneSteel's Geoff Plummer, March 9), OneSteel CEO Geoff Plummer said the name change was designed to address confusion in the market. "It’s also often other stakeholders; media, politicians and so on, see it just as a steel company and at the end of the day that’s really a significant impediment to our investors and potential investors. There’s a large pool of potential investors who really don’t look at it and even the experience over the last week or two, people are saying, ‘gee I didn’t understand that you were already so significant in mining’ or ‘I didn’t understand you were as such a significant mining consumables business, we thought you were only an Australian domestic long product steel company’, which is what we were four years ago.”

Maybe, but isn’t that because OneSteel hasn’t explained itself enough to the market? Would a name change make it an easier sell when investors are looking for profits?

Gunns, which is no longer logging old growth forests, is looking to change its name and relocate its headquarters to Melbourne, coinciding with the company’s $400 million capital raising that will finance its proposed pulp mill. It hopes a name change will give it the opportunity to make a break with that past. Also, most of the company’s investor base is in Melbourne and Sydney and indeed, Launceston-based Gunns last year held its annual general meeting in Melbourne for the first time ever. Relocating to Melbourne could help the company escape the intense media and political scrutiny in Tasmania. Gunns however is still locked in battles with environmentalists over the proposed pulp mill. The company has to contend with court action, as well as falling revenues and profits with the downturn in the housing sector reducing demands for its softwood products, and strong competition from imported products. A name change will not alter that. The company will still be Gunns. It’s a high risk gambit because they will be accused of trying to cover up their past and not addressing its problems. In any case, relocating is unlikely to end controversy. Toyota, which has its headquarters in Japan, discovered this when it sacked 350 workers in Melbourne.

Companies don’t have to change their name if they want to make a break with the past. Established in 1872, Kimberly-Clark made most of its money in forestry and mills. In the 1970s, its CEO Darwin Smith sold off the mills and auctioned off the forest lands to focus on paper products, revolutionising that market by introducing Kotex sanitary napkins and the first throw-away tissues, Kleenex. Similarly, Nokia started out as a wood pulp mill in Finland and then moved into rubber works and then electronics followed by telecommunications. True, Nokia might not be long for this world before it’s swallowed up by Microsoft but it’s never changed its name. Similarly, no one thinks of GE any more as the company that makes light bulbs. Or for that matter, Apple stopped focusing just on computers years ago. These companies focused on changing strategy, not their names. That was much more important.

For sure, these changes will produce lots of marketing opportunities with evaluations of the new monikers and logos. But in the long run, it’s unlikely to produce results. Like rock stars that change their names, it’s more a fashion statement than a corporate strategy and change in management model. That could be a warning for investors.

Leon Gettler is a contributing editor at LeadingComapny. You can follow him on Twitter @leongettler


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