Josh Dougherty is a brand strategist, speaker, and the founder and CEO of A Brave New, a Seattle-based branding agency that crafts bold and memorable healthcare brands. They have specific expertise in healthcare technology, hospitals and specialty care providers, and healthcare nonprofits. Josh has 15 years experience building new brands from scratch, refreshing existing brands and building strategies to bring those brands to life in the market.
Josh Dougherty:
Welcome to A Brave New Podcast. This is a show about branding and marketing in the healthcare space. But more than that, it's an exploration of what it takes to create brands that will be remembered and how marketing can be a catalyst for those brands' success. I'm Josh Dougherty, your host. Let's dive in.
There have been murmurs for months about an upcoming new investment. One company's fairly established in healthcare delivery. The other provides ancillary services. Both of them have been working hard to build their brand equity, to build their value, to build their customer bases over numerous years, but they also know that they need further investment to succeed. And so as news begins to leak out throughout the organizations and maybe a few more people here and a few more people there hear about these new investments by private equity, there is both excitement and trepidation. There's excitement because it's an opportunity to keep building, but there's concern about what's going to happen.
And then it does happen. Two healthcare companies are merged and the PE firm, because they're thinking strategically about their whole portfolio, wants the two companies to move forward with the unified go-to-market in 18 months. And this is all well and good until you get into the details, right? Because all of a sudden, sales teams are being tasked in the very near term to sell two different products or service sets that are pretty different, maybe related. There's probably some natural connection between them because that's why the PE firm put them together. But all of a sudden these organizations are confused about what they say on sales calls next week, let alone in six months. And people are wondering about, as we're representing these different brands, which name do we use? Do we co-brand things? Do we present it in just our old brand? Do we use the new brand?
If this sounds familiar to you, you may have worked in the healthcare space for a while. And although some people do a really good job of this merger combination of a few companies, others struggle. And in this episode of A Brave New Podcast, I want to talk about how you can approach healthcare MMA and the merger of two brands or the thinking about two brands coming together in a thoughtful way using the framework of brand architecture to do so.
So let's zoom out and look at the macro picture first for a second. If you've been around healthcare at all, you know that there are tons of roll-ups happening in both healthcare services and in health tech, and as payers and providers are converging together to form alliances or maybe payers are acquiring provider networks to provide service or provide care directly to their members.
And even when private equity isn't involved, there are roll-ups as nonprofits may consolidate together in order to be able to effectively compete against larger private equity backed firms or against really the large health networks that exist in their area as well. And because of the speed with which these deals are doing the work and I think especially in the PE space, the speed with which they're trying to get to value the collateral damage is often brand work. There's a common refrain that I've heard in the last five years of, "We'll figure out the branding later." And in my experience, this answer of, "We'll figure out the branding later," almost always costs more than doing it deliberately when the deal closes. So why is it so much more costly to say that you can figure out the branding later? There are a couple reasons and a couple experiences that I've had throughout the years.
The first is saying that we're going to do the branding later isn't really the reality of how things happen in the real world. So, by not investing in some level of strategic brand thinking upfront, you're leaving the decisions about how the brand's going to show up in the marketplace to people who are tasked with tactical decision-making and are facing timeline pressures, pressures about moving quickly, about delivering, or making it through the next meeting to decide how to represent the brand. This doesn't mean that the branding was left to later. It means that someone who wasn't thinking strategically, because it wasn't their job, not as any criticism to them, had to make a call about how the brand was represented and all of a sudden you've made decisions that you have to stick with from a consistency perspective that may have not been the best for the growth of the organization.
It's also costly because maybe you cut corners on your branding, maybe you say, "Yeah, we got to do some brand work, but we're going to cut some corners and we're going to move quickly." And then all of a sudden you may find yourself in financial trouble, legal trouble. And then because you made a decision that went into a territory of a competitor or someone else that you can't legally own. All of a sudden, the cost of doing the branding later is a lot higher because you're undoing the quick brand decision that you made because you had to. And I think the final reason why we'll figure out the branding later almost always costs more than doing it deliberately upfront when the merger happens is that it creates incredible frustration amongst your team and makes it harder for them to drive value, which is ultimately what the goal of the merger is.
And so I think the better option is to take a moment to take a beat. Maybe you don't take 12 months or 14 months. Obviously that's too slow, but it's important to take a beat and think about architecture, about how the two organizations are coming together and how they're going to represent each other. And when we think about architecture, we think about four main, well, really three architecture options, ways that different … and if you're not familiar with the term brand architecture, we're thinking about how different distinct brands—when they're operating as part of the same entity—interrelate with each other so that people can make sense of how they fit together.
So there are probably three distinct types of architecture approaches and then one that I think can be really beneficial. And so, I'll describe each of them, just to walk you through what they each look like, and then I'll talk about, great, we know these architecture models, what should we do with that?
So let's talk about the architecture first. First off, you have the monolithic brand. So a monolithic brand is when there's only one brand at the end of the day and it happens quickly, right? So one brand absorbs the other. So you can think of this when, from the technology world, if we steal an example from Salesforce, Salesforce acquires and kind of gobbles up everything that it acquires, it stays a monolithic Salesforce brand except for maybe Slack, but that's an outlier. And this is when the acquiring brand equity dwarfs the targets. So if it's less of a merger and more of an acquisition, you might say, "Hey, brand A who's doing the acquiring, more people know about them, more people trust them. The reputation is strong and we want to build on that by bringing in more capabilities."
So we're going to keep that brand that's doing the acquisition or more of the acquisition and the merger. We're going to keep them as the standard brand or as the one brand that people know about. That's one example of when it's great to run with a monolithic brand because you have the opportunity to build on what's already strong, which is the foundational principle of branding.
The other time when a monolithic brand can be really valuable is if there's a merger and one of the organizations in the merger is really damaged. Maybe they have a good underlying product, maybe they have a good underlying care model that they provide, but there's a reputation issue. Maybe they haven't been as good at follow through as they could have been because they were stretched for resources and time, and so they need someone to help them build in that discipline. And this merger is really going to help them build in that discipline, but in some ways, the brand name is tarnished already and it's a liability. In this case, again, like a monolithic brand of saying company A is acquiring company B.
Company B has a liability or their reputation is bad despite the fact that their underlying offering is great. We're going to merge them together and we're going to take away company B's brand essentially and absorb it into company A. And what company B provided before that service that is actually good or that feature functionality product that's strong will become a feature product service of company A underneath their brand so that you can lend the equity or the value of company A's brand to this great product in company B and sell it in a way that company B never could. So that's an example of maybe one approach that could be taken.
Two reasons, right? You have the monolithic brand, one brand that stands out from the other, one brand that can be marketed on its own post acquisition and it works best when the brand that's in the merger that is much larger or maybe it's an acqui merger, it's really an acquisition. The acquiring brand's equity is so much stronger than it makes sense to gobble up the target’s brand and market as solo. The other is when one of the company's reputations is a liability. So that's the first option you can think about when you're combining.
The second option is this idea of an endorsed brand. So here again, in a merger, typically, there's one company that's stronger or more well known than the other; but if the less well-known brand does have a really, I don't know, a specific buyer segment that you want to keep, they have specific key strengths. They are thought of really positively in the market. All of a sudden it becomes a really hard sell to get rid of that brand altogether, but you also want to start sharing the brand equity of the two companies together. And so in this case, an endorsed solution might work really well. Now, if you think about endorsed brands, one that's a really good example is how Marriott does all their hotels. They are endorsed as a Marriott Bonvoy Hotel and you have Courtyard by Marriott, you have SpringHill Suites by Marriott.
Now this isn't anything like healthcare, but it makes it a little bit understandable about what I'm talking about. Both companies are respected, but it allows you to transfer equity in the two brands back and forth. So in this case, maybe it's a really nimble healthcare AI analytics startup. The product is really good. It's getting bolted onto a more traditional healthcare analytics company that can be perceived as stodgy. And so the more stodgy traditional healthcare analytics company wants to get some of that sexiness that the AI analytics company has, but they also want to make sure that people still want to buy from that AI analytics company. So the more stodgy analytics company can endorse the other brand by saying, "Hey, this is our new... The AI brand is a stodgy analytics company." Obviously I wouldn't use that name, but endorse it as saying that that company is part of their family.
And this is a great way to kind of transition and share equity between them because all of a sudden the equity of this more established analytics company also helps the AI company because with it comes—despite being a little more traditional in its approach, maybe stodgy a little bit in its approach—it brings more financial weight. It brings more operational expertise or operational processes. It brings more people power. And so that equity, that thought of it being maybe a more stable brand, gets passed down to the AI startup while the AI startup passes up its innovative thinking and services, the equity that comes with that, up to the traditional brand. And in this situation, all of a sudden employees don't have to question, right, why they're combining or who they're selling. Both companies keep selling their services as they did before, but the smaller, more agile AI brand discloses that they are now part of the family of companies for the more established healthcare analytics firm.
So that's endorsed brands and why you might do that. As you can see, both of these provide clarity, right? Either all of a sudden I'm part of ... Two companies have combined and we're a one monolithic brand. We're just going to talk about that one brand, or two companies have combined and one of them is endorsing the other so we can talk about the relationship as being part of that family of companies.
The third option is to keep things completely separate, and this is when I think the two entities that are combined together, maybe they're getting some operational strength, right, like combining together some level of strategic planning, or some operational management, or finances, or HR. They're working in tangential areas that are similar enough that there's benefit from the combination. The two companies operating together become more valuable as assets, but they're genuinely serving different buyers and consolidating them into a single company and trying to sell to these two diverse products that wouldn't make sense.
In this case, it makes sense to use a house of brands, just have separate brand names, go to market with your existing brand names and benefit from the strength that the two of them have together. And I think the third option that might make sense as well is this idea of a transitional brand and this is when maybe you're saying, "You know what? We want to benefit from the equity of both of the companies for the short term, but eventually we want it to be one brand." And this is where we might say that we're going to use an endorsed brand strategy, the saying that each company is or that the smaller of the companies is part of the family of the bigger companies. And we're going to use that strategy for a while, but over 18 months, we're going to move towards having just the original company exist and we're going to use that endorsement to build comfort so that when the name of the startup or the smaller startup goes away, people aren't as surprised.
Now for each of these architecture approaches, you can see how having this plan and taking a moment to pause creates clarity, right? Because if through the acquisition process and as the deal closes, you can say, "You know what? Nope, we're all about this company." Or, "Nope, we're going to go to market completely separately or in between, we're going to say we're part of a family together and we're going to go to market there." Sales teams have clarity about how to talk, marketing teams have clarity about how to go to market, and you're not going to lose momentum. So for each of these, I think there's a single question to ask to understand whether this is the right approach for your brand. For the monolithic side of things, I think the question is, do we have one brand that dwarfs the other in this merger?
And as a second follow-up, will consolidating between this one larger brand help us drive momentum forward quicker and faster? The key question for the endorse brand is, is there a specific buyer segment or a specific product feature that we should want to keep separate for now because it benefits and provides greater equity to both organizations. And then the question about the house of brands is, do we actually serve genuinely different buyers and will consolidation dilute the effectiveness of both brands? So that's thinking about architecture, and hopefully that's helpful. When we lead someone through a process like this, we can go through weeks of doing discovery, talking about all the ins and outs of things, but ultimately we're trying to understand what is a roadmap to get to where you want to go.
So what needs to happen to make the endorsed brand work? What needs to happen to move to a monolithic? What needs to happen to be a house of brands—which is probably not very much. And so we need to be really cognizant and moving forward with these ideas in an intentional way and in a quick way, but you don't have to take a ton of time to do it.
The big pitfall of not taking adequate time is not understanding the costs and benefits for each of these, and that's why we usually recommend a strategic process. Now there is one wrinkle when it comes to this and that wrinkle is the private equity firm. When there's a sponsor like a private equity firm, there's usually an exit timeline that shapes how much equity building investment makes sense. And so sometimes the brand logic won't match what is the reality from the funding that you're receiving. So for example, you might really think there's value in keeping the brand separate, but a monolithic brand is much cheaper and easier to manage. And so, in order to make a transition quickly and be able to move forward into building value, that monolithic brand is going to get chosen or, really, what I've seen sometimes more often is that there is an appetite to do a whole big rebranding and the real appetite is to increase revenues.
And so it may make sense to combine these organizations into a single brand, but in order to not have the friction that comes from going through a full branding process to do this, the investment group may say, "We're going to keep a house of brands and maybe we'll slap another company over the top one that we make up as we go." And this can work, but again, there are demands outside of branding that make it challenging too to work through. And I think in this case, you really need to think from the minds of if you're working in brand in one of these areas, you need to think from the perspective of the private equity firm because there is, as their economics work and as their work happens, there's real logic into what they're thinking as well. They're trying to get the biggest value for their investment, right, and get the biggest ROI on their investment.
And so you have to show and really think about the brand and building out the brand logic in a way that's going to support that goal of getting the biggest ROI, return on investment. for investors. So, with that in mind and knowing here are some architecture archetypes we can think through, we have to make the case in a way that makes sense for private equity. It's going to drive financial results for them as well.
There can be some real complexity that comes in if you are part of an organization that has been acquiring or emerging over time and there have been decisions that were made to keep other old legacy brands. So all of a sudden you're not just playing with two brands, you have three or four brands, and it's been challenging to express maybe the two preexisting brands and now that you have three or four combined together, it gets even harder. In this situation, I think it's important to not just try to live with things and to ask what is the best situation to make a decision and move and move judiciously to simplify things so that the legacy debt you have that's been hard to manage, the debt that's made it hard for you to build brand equity across the board, it's worth spending a little bit of time to clean things up so you can move forward confidently.
So as I close out, I'd like to give you four questions to help you think about your brand architecture and what the right decision is. You have the frameworks, right? You have the monolithic brand, you have endorsed brands, you have a house of brands, you have transitioning from maybe endorsed brands into a monolithic brand over time. And these are all well and good, but you’ve got to ask questions to get to where you need to go to understand which one is the right model for you. So here are four questions to start with.
The first question is related to buying, right? Because, ultimately, we're worried about revenue and how do we drive revenue. Or if you're a healthcare delivery organization, you're worried about meeting patients where they're at and getting them in your doors, driving up utilization. And so the question you need to ask here is who actually buys for each organization and do they buy differently from each entity today? If the answer is no, then a monolithic brand might make sense. If the answer is, yeah, they're vastly different in how they buy and what they buy and how they approach things, then maybe it's going to be harder to consolidate into a single monolithic brand.
The next question to ask is where does equity live? Is it in the name of the organization, the people, the product, or the relationships? Depending on where you land answering this question, if the name has equity, great equity, and if both organizations coming together have great name equity, getting rid of one of them is probably going to hurt you. But if it's more about the product, people love this product and how well it works and what it does, but they also love this other organization, and the services that it provides, and the approach it takes, then maybe it makes sense to consolidate into a single monolithic brand that could be one of the two organization's names. And I think I would recommend that from a brand equity perspective so you don't have to start from scratch. Or it could be a new name, but if you do that, you need to know it's going to take a lot of time and effort to get known.
The next question after we figured out where the equity lives in each company, we figured out how buyers either differ or similar in their buying behaviors between the two companies, is we need to think about what the integration timeline is and what the exit timeline is. So first of all, understanding how quickly do we need to get to our ideal state and then how quickly is private equity looking to exit? Both these questions will help you determine the speed that you need to move in, but they'll also help you determine the appetite to make a big change and how you should frame your argument because I think even if there's an appetite to address this type of brand architecture question, it's important to address, regardless.
And then the final thing to think about is what can the org actually execute? It's great to think you should have a house of brands of five different brands, but if you can't maintain five different brands, then that is a failure. Consistency, as I talked about in previous podcasts and in previous blog posts over the years, is king. And so if you can't be consistent, it doesn't matter how pure the brand architecture is, how perfect it is, it needs to be practical because it's got to be lived out and executed every day. Brand architectures almost always fail on operational capacity more than strategy because the doing is much harder than the coming up with the idea.
So the key takeaway I want you to take away here is that as we live through this era of quick consolidation, massive consolidation across the healthcare space, across the health tech space, I want us to take away that rather than brand being an afterthought in the M&A process, it can be a forcing function for driving clarity about what the combined company actually is. Most of it isn't a big, complex design exercise. It's about getting everyone on your leadership to agree to the answer to the question of who actually buys and do they buy differently from each entity?
This allows you to then, if people honestly answer that question, to then begin to talk about, well, if they buy completely differently, it probably makes sense for us to keep somewhat separate entities versus they buy very similarly and they buy similar things, maybe it makes sense for everything to be combined under a monolithic brand, but this isn't design work. This is a question of strategy that underlies and then underpins everything you do afterwards from product design, to marketing, to sales, to kind of the creative expression or the visual identity you bring into the market.
So I hope this has been a helpful conversation about M&A and how to use M&A as a lever to think about your brand architecture. And if more of us can do this, I think more consolidation that is bound to happen can go smoother and organizations can maintain their DNA of how they want to interact and how they want to grow as they go through that process.
With that, I'll wrap up. Thanks for joining me and I'll talk to you next time on A Brave New Podcast. Thanks for listening to this episode of A Brave New Podcast. Go to abravenew.com for more resources and advice on all things brand. If you enjoyed this episode, show us some love by subscribing, rating, and reviewing A Brave New Podcast wherever you listen to your podcasts. A Brave New Podcast is created by A Brave New, a branding agency in Seattle, Washington, that crafts bold and memorable healthcare brands. Our producer is Rob Gregerson.