How viable are family name corporations?https://indianexpress.com/article/opinion/columns/how-viable-are-family-name-corporations/

How viable are family name corporations?

A corporate name with aspirational evocation is timeless. New generation global business leaders such as Bill Gates,Steve Jobs,John Chambers and Philip Knight

A corporate name with aspirational evocation is timeless. New generation global business leaders such as Bill Gates,Steve Jobs,John Chambers and Philip Knight have figured that out in the last 40 years. Instead of anointing their companies with their own names,they chose to ignite end-customer imagination and coined Microsoft,Apple,Cisco (from San Francisco) and Nike (Greek Goddess of Victory). There’s absolutely no problem if the founder with his family is the company’s owner,but the business need not carry the family name. Except for creative fashion or jewellery businesses that cannot avoid the creator’s authenticity,so designers such as Louis Vuitton,Jean-Paul Gaultier endorse their brands.

For a recognised inventor,giving his company his name can work,eg Henry Ford. The inventor becomes the world’s icon,his family name and brand become synonymous with an invention. Sometimes though,even such a corporate brand can carry risk. When Henry Ford’s picture was found in Hitler’s desk,a crisis erupted. It proved Ford was aligned to a Jew-killing regime. Actually Ford’s anti-Semitic outlook emerged earlier in 1920 when he wrote in his newspaper,Dearborn Independent,“If fans need to know the trouble with American baseball,they have it in three words—too much Jew.” His book,The International Jew,the World’s Foremost Problem,inspired young Nazis. In the US,he managed his surname as his company’s brand because he commanded immense power with superior business acumen. But wouldn’t his hobnobbing with Hitler negatively impact a customer or employee of Ford,especially a Jewish one?

On the other hand,Louis Renault couldn’t manage his aura in spite of inventing the automobile’s drum brake,hydraulic shock absorbers and compressed gas ignition. During the German occupation of France in World War II,he supplied 34,232 vehicles to Hitler. Liberated France imprisoned him and he died in Fresnes prison near Paris awaiting trial. His family was denied his company which French government nationalised. Renault’s management has since avoided mention of Louis Renault and ignored his grandchildren in Renault’s centenary celebrations 1999. Another Frenchman with Nazi association saved his family business,and Madame Liliane Bettencourt became the world’s second-richest woman. Her father Eugene Schueller invented hair-dye formula,Aureale,in 1907. He’d supported Fascist organisation La Cagoule,yet his company L’Oreal became successful for creating ground-breaking products. This innovative power overshadows his reputation,taking L’Oreal to global heights. What portrait would L’Oreal carry today if it was named Schueller?

Breakthrough 19th century inventor Thomas Alva Edison didn’t manifest his name in his company,General Electric. His many inventions inherently find meaning in “GE Imagination at Work”. Another American,Sam Walton,founded Walton’s 5 & 10 in March 1951. Changing to Wal-Mart in 1962 to start his retail chain,he corporatised it to Walmart in 2008. Global image takes a different dimension when a company does not bear a family name.

Japan’s Toyoda family was loom specialists,but entering the consumer-connect business of automobiles they changed to Toyota in 1939. Apart from Honda and Mitsui,most Japanese companies have gone global without using family names. In their urge to become international,companies such as Mitsubishi,Hitachi,Toshiba,Nissan,Sony,Canon,Shiseido have company names not related to the founder’s name.

Let’s compare performance and global image using family and non-family names in the footwear industry. Bill Bowerman and Philip Knight founded Blue Ribbon Sports in 1964. In 1978,they had the guts to change their running business to Nike,taking it global without using their own names. Family owned Bata,founded by Tomas Bata in Czechoslovakia 1894,retails in 50 countries. Yet Bata couldn’t create the global culture that revolutionised the footwear business which Nike did.

Handicaps of family named companies: The first is security for family members. Next,if any family member gets discredited,it reflects in the business. Others who carry the same surname can use it inappropriately,making the original business vulnerable. There’s no telling if the founder’s heirs will continue the business as passionately. When digital technology is bringing fortnightly advancements,it’s difficult to change a company’s perception if it’s associated with a person in the past. For an employee,it connotes working for the owner. Unnecessary problems can also be created by activists who see nothing beyond the founder’s wealth. Aspiration is another problem. “Knight Just do it” may be construed as Philip Knight’s diktat,but when Goddess Nike says,“Just do it” you are totally enamoured.

Without passing judgment on Indian founder family-named companies,my perspective is to imagine their future in the global field. In the Licence Raj era,Indian companies with family name heritage as the corporate brand in business have given end-customers the trust of being bonafide. Now that global competition is already here,end-customers have the choice to compare differences. Several Indian companies are already taking a beating in benchmarking with global biggies. Not yet being associated with fundamental invention,Indian companies are likely to continue to operate with available adopted technology.

India reflects more as a business and trading society rather than being inventive. This is the time to transform the family name to a more mystic brand before global companies overwhelm end-customers away. A well-researched company name should evoke its product and service higher than its basic substance so that multiple market usage can never make it look tired or boring. It should never reflect the generic of a category. When combined with quality products and point-of-purchase experience,it should give differentiated perspective and benefit to end-users. The company’s future is more prospective when it has an added value name with universal appeal rather than a family name.

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Shombit Sengupta is an international creative business strategy consultant to top management. Reach him at http://www.shiningconsulting.com