HP Enterprise's brand imperative following spinoff-merger announcement.
In a year marked by unprecedented M&A activity in the technology industry, Hewlett Packard Enterprise (once again) made headlines last week with its announcement of plans to spin-off its technology services operations and merge them with those of Computer Sciences.
Change is Never Easy
As Chief Executive Meg Whitman tells it, the deal is “game-changing,” “creating two great companies that are going to be more focused on a narrower set of businesses.”
The market is less convinced, though, with one analyst referring to the deal as “just a financial-engineering story.” Terms like “lumbering giant” and references to HPE “falling further and further behind” were also common in the aftermath of the announcement. There was even an almost nostalgic reference to HPs geneses as the “original “started in a garage” company.”
Despite mixed sentiment, HPE shares rose more than 10% in after hours trading following the announcement on Tuesday.
As the WSJ pointed out, the restructuring is “evidence of ongoing turmoil in the corporate computing market as business spending tightens and traditional data centers give way to cloud computing.”
While competitors like Dell and EMC are taking a merger approach to navigate this inflection point, Whitman has decided on a breakup strategy. Though their approaches are different, the big players are united in a common goal: staying relevant in a rapidly changing tech landscape.
Who’s the Who?
In what is surely a sign of the times, HPE made a “Transaction by the Numbers” infographic series. Dedicated landing pages created a targeted experience for visitors to the site. There was also a steady stream of communications through Twitter.
Clearly this was an announcement strategy made for the digital age. But while their use of rich media and social platforms is commendable, we couldn’t help but notice that these communications were almost exclusively targeted at investors. Where was all the messaging for employees and customers?
It’s hard to know what was communicated directly to these stakeholders through internal channels. As the news became more widespread, communications seemed to focus on (or at least reference) customers more. But with the immediate headlines touting the “tax-free” deal and its anticipated “first-year cost synergies of approximately $1 billion,” it seemed investors were the primary focus.
What’s the Why?
With all the movement, it’s hard to imagine HPE employees or customers (let alone investors) have a clear understanding of what the company stands for. And that’s a problem. Without a clearly articulated vision and compelling benefit-driven story, the market will create its own narrative.
That’s precisely what happened last week. The immediate focus on the HPE deal was less about what the restructuring will achieve (the benefit) and more about why the company needed to restructure in the first place (all those ‘lumbering giant’ references).
Employees will work harder and smarter and build lasting relationships with customers and prospects if they’re inspired by a clearly defined and articulated purpose – in other words, a brand. Understanding the ‘why’ behind the newly organized company will generate trust, and ultimately that will translate externally, helping to build the brand’s meaning with customers.
The next step for HPE, then, will be understanding how the change in business strategy impacts the corporate brand. Is HPE’s current brand aligned with the direction Whitman wants take the company? Likely not. And rebuilding HPE’s brand will be critical to ensure the long-term success (as measured by investors, customers and employees) of Whitman’s strategic direction.
According to the Harvard Business Review, “study after study puts the failure rate of mergers at somewhere between 70-90%.” More often than not, brand is not promoted or leveraged to provide unity, clarity and solidarity during this critical inflection point, yet brand can make all the difference between success and failure for the companies…
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