Enron. Arthur Andersen. WorldCom. Tyco International Corp. The names read like wanted posters for corporate villains.
Today, only one of these companies remains in business with the same name. Enron evaporated when the extent of its misleading of investors was revealed. Arthur Andersen received the corporate death penalty for its involvement in the Enron escapade. And WorldCom rebranded itself as MCI and continues to struggle in a depressed telecom marketplace.
Only Tyco-whose contribution to corporate scandals was former Chairman-CEO L. Dennis Kozlow-ski's trial for plundering the company, which ended in a mistrial last spring-remains in business under its original brand. Remarkably, the company's reputation has sufficiently stabilized that it is confident enough to run an aggressive branding campaign that will add TV spots in December.
The diversified industrial company spent $33.9 million on advertising in the first eight months of this year, a 40.7% increase compared with the same period last year, according to TNS/CMR. This campaign is not of the "mea culpa" variety. It doesn't acknowledge the scandal and uses the tagline "a vital part of your world" to present the company as a nearly ubiquitous b-to-b brand.
"I think they've been doing a very good job," said Jim Gregory, CEO of branding consultancy CoreBrand. "I would say they've certainly stabilized."
moving past kozlowski
Tyco was able to start rebuilding its brand with the resignation of Kozlowski in June 2002. That enabled the company to differentiate itself from its former leader, whose profligate lifestyle, exemplified by a party in Sardinia that included an ice sculpture of Michelangelo's "David" appearing to urinate vodka, became fodder for the tabloids and almost as embarrassing to Tyco as management's alleged plundering of the company. In October 2002, the company further separated itself from Kozlowski by filing suit against him for "misappropriation of assets."
Kozlowski was succeeded in July 2002 by Ed Breen, former Motorola COO. Breen quickly dismissed the company's board of directors, cleaned house in the front office and moved the company's headquarters from Manhattan to Princeton, N.J.
But none of Breen's moves changed the fact that he was presiding over a brand in trouble. Tyco's share price had plunged almost 90%. "We were down with Exxon after the "Valdez" and Union Carbide after Bhopal," said Jim Harman, Tyco's current VP-advertising and branding.
According to CoreBrand's propriety brand power ratings, Tyco hit a favorability rating peak of 63 in 2001, but that had fallen to a 48 by the second quarter of this year, when Kozlowski's trial was under way. At the same time, Tyco's familiarity had risen over the same period, because of the scandal, from 44 to 58.
But even though Tyco had a nasty perception problem, the underlying performance of the company's units remained healthy. Kozlowski and his compatriots may have been many things but they weren't fools when it came to acquiring companies. The conglomerate's stable of companies consisted of a number of strong businesses, including ADT in security and U.S. Surgical and Kendall in health care.
From holding to operating
Breen took steps to turn Tyco from a holding company-under Kozlowski the company had essentially been in the mergers and acquisitions business-into an operating company. To accomplish that goal, he began recruiting top operations executives, hiring them away from United Technologies, Honeywell and other Fortune 500 companies.
Two of those executives were General Electric Co. marketing veterans: Harman and Charles Young, who is now Tyco's CMO. Their job was to begin communicating the strengths that remained solid at Tyco despite the controversy swirling around the company.
Some observers believe that Tyco should have taken the scandal as an opportunity to change its name. Al Ries, chairman of branding consultancy Ries & Ries, noted Tyco shares its name with a toy company. "It's a rinky-dink name," he said.
So, Tyco decided to fix the hole. In 2003, it selected Hill Holliday, a Boston-based advertising agency, to help it communicate with its 260,000 employees. The message included explanations of what Breen's changes meant for the company as a whole and how strong the individual businesses were beneath the tarnished Tyco name.
Next, Tyco took a similar message to an external audience. In a straightforward ad with a simple design prepared by Hill Holliday, the company told the story of how so many Fortune 500 executives had joined Tyco since the departure of Kozlowski. At the bottom of the ad were the executives' signatures. This was designed to drive home the point that these were people who could be trusted. The ad ran in major business publications such as The Wall Street Journal.
"Whenever you picked up a newspaper and you would see any news about Tyco, the newspapers covered one thing and one thing only: Tyco equaled scandal," said Hill Holliday CEO Mike Sheehan. "We wanted to take the news in a new direction. The Tyco in the news isn't the Tyco of reality."
The next step was to create a broader campaign that addressed Tyco's businesses. The "Vital" campaign, which features a positioning statement developed last year by Hill Holliday, was launched in June of this year. As befitting the messaging of a large b-to-b corporation, the ads are running in general business publications such as BusinessWeek, The Economist, Financial Times, Forbes, Fortune and The Wall Street Journal, as well as The New York Times and USA Today.
Ads highlight products
The ads in the campaign feature a background of about 6,500 words that describe the products Tyco manufactures: "smoke detectors, taximeters, airport screening devices ..." Each ad highlights a particular product, and the background of words is tinted to create a picture of how that product is used.
The ad highlighting Tyco's pediatric monitoring equipment, for example, depicts a baby. The ad for fire and security products shows a firefighter. And the most recent ad highlighting aircraft wire and power cables shows a commercial jetliner.
The campaign has three basic audiences. For employees, the ads are aimed at boosting morale in an attempt to convince Tyco's work force that it is engaged in making important products. For Wall Street, the ads present Tyco as a stock worth watching. And for customers and potential customers, the ads remind them that Tyco is unbowed by the scandal and continues to manufacture its b-to-b goods.
Outsiders have viewed the advertising effort positively. "They're trying to show that they're the ultimate ingredient brand in their businesses," said Hayes Roth, VP-worldwide marketing and business development at brand consultancy Landor Associates. "And they've used the design of the ad to effectively communicate a message, which is hard to do in business-to-business."
For Tyco and Hill Holliday, the ads represent an initial move toward rebuilding the brand. Part of the next step will be to define Tyco's brand architecture. Interbrand is helping the company decide how the Tyco name will be used in conjunction with some of the company's stronger brands, such as ADT.
Tyco acknowledges it has a long way to go on its path to recovery. CoreBrand's brand power ratings, which show no recovery for Tyco's favorability yet, seem to underscore that reality.
Hill Holliday's Sheehan said the communications effort is only getting started. "We've helped communicate the prologue and now this is chapter one," he said.
Added Tyco's Harman: "You can ruin a company very fast, but it does take some time to bring it back up. It's going to take a long time."