What’s in a name? Of Umlauts, The Alphabet and World Peace!
As the title should forewarn you, this is a post that will meander from eating spots to basketball players to corporate name changes. So, if you get lost easily, you may want skip reading it. It is triggered by two events that occurred this summer. One is Google’s widely publicized decision to rename itself Alphabet and to reorganize itself as a holding company. The other is the much less public news that the eating place across the street from the building where I teach will be reopening with a new name “Bröd Kitchen”, a new menu, and (probably) higher prices.
Coffee Shop to Eatery to Bröd Kitchen
In my post on my valuation class, I noted that this is my 30th year at New York University and I have seen the neighborhood around the school transition over time. When I started in 1986, I had my office and did the bulk of my teaching in the graduate school campus, which was downtown, but I lived near and still taught some classes at the undergraduate school. Right across the school was the Campus Coffee Shop (Yes! This is exactly what it looked like!) and it was exactly what its name suggested, an unpretentious coffee shop. The menu was primarily breakfast food, served all through the day, and the coffee came in one flavor (bitter), one texture (sludge) with only two add-ons (cream & sugar). The waiters and waitresses were all crotchety and old, viewed service as a foreign concept and I can only pity the poor person who tried to order a cappuccino or latte. To compensate, the coffee was only 50 cents, the egg sandwich about a dollar and you got what you paid for.
About 15 years into my stint at Stern, the building's landlord (a brutally oppressive tyrant named New York University) decided that the campus coffee shop was too downscale and it was replaced by the Campus Eatery. This place offered fewer seats, a wider menu with paninis replacing sandwiches (as if putting a bad sandwich in a hot press can make it a good one) and machine-made cappuccinos that had neither milk nor espresso in them. Not surprisingly, the prices went up to reflect the name change from coffee shop to eatery, though the only edible items on the menu remained the breakfast items, albeit at twice the price you paid at the coffee shop.
At the start of this summer, I noticed that the Campus Eatery had closed and that the space was being renovated for a new restaurant. The restaurant has not opened yet (at least as of last Thursday, which was the last day I was in the city) but the name went up a few weeks ago and when I saw that it was Bröd, the umlaut made me suspicious. My trusted Google search engine found another eating place with the same name in New York, and I was able to find the company's website. It looks like a bakery with a Scandinavian tilt and Northern European prices, but the only consolation price is that it could have been worse. This could have become a Le Pain Quotidien, a New York based food chain with a pretentious French name and prices to match.
While these are three different businesses, with three different owners, they have all occupied the same space and I tend to think of them as the same eating place with three different names. That started me ruminating about why people and businesses change names and whether those name changes can affect the values that you attach to the entities involved.
Reasons for Name Changes
I must confess that I have changed my name, though the change was more the result of happenstance than design. I grew up in South India in a period where caste names had been abandoned, but family names were not in vogue yet, and went through much of my school and college years known only by my first name (Aswath) and without a last name. It was as I was filling out my I-94 form on the my flight into the United States that I faced the question of what to use as my family name, and I used my father's first name, Damodaran, as the filler. Since then, I have seen friends and acquaintances change their names, mostly as a result of marriages, and businesses change names, with mergers being the most common trigger. However, there are other, more interesting reasons for name changes, though, and here are a few of them:
- To decontaminate or escape: In some cases, a name may get contaminated to the point that changing it is the only way to escape the taint. When Philip Morris changed its name to Altria in 2001, it was partly an attempt to remove the taint of tobacco (and its associated lawsuits) from its then food and beverage subsidiaries (Kraft and Miller Brewing). While there may have been other reasons for Tyco Electronics to rename itself TE Connectivity in 2010, one reason may have been to disassociate itself from the accounting scandals at its parent company.
- To change: Changing your name can sometime make it easier for you to change yourself, as a person or how you operate, as a business. In this context, corporate name changes can cover the spectrum. Some name changes reflect changes that have already happened, as was the case when Apple Computer became Apple in 2007, a concession to the reality that it was deriving more of its revenues and profits from its smartphones, tablets and retail than from its computer business. It can sometimes be a precursor of changes to come, as was the hope at International Harvester, when it sold off its agricultural division to Tenneco, renamed itself Navistar in 1986, and worked to make a name for itself in the diesel engine and truck chassis markets. Finally, there is an escapist component to the some name change, where the firm is trying to get away from troubles and hopes that changing its name will help it in the endeavor. When Research in Motion changed its name to Blackberry in 2013, it was in an attempt to divert attention from declining sales and a business in trouble.
- To market: To make money, you have to sell your products and services, and not surprisingly, companies are drawn to names that they perceive will make it easier for them to market. In some cases, this may require simplifying your name to make it easier for customers to relate to; Tokyo Tsushin Kogyo did the right thing in 1958, when it renamed itself Sony. In still others, it may be designed to have a name that better fits your product or service; we should all be thankful that Larry Page and Sergey Brin changed their search engine's name from Backrub to Google a year into development. Finally, the name change may be to something more exotic, in the hope that this will give you pricing power; the only