Separate but Equal

The Situation

Today, Thermo Fisher Scientific is a leading supplier of products and services for pharmaceutical, biotech, and diagnostic labs for hospital and clinical research.  But it was not long ago that things were very different for this company.

Like most major corporations, Thermo Fisher Scientific once existed as two separate and distinct entities: Thermo Electron Corporation and Fisher Scientific.

Thermo Electron’s brand really skyrocketed for the first time in 1983.  The corporate brand strategy implemented at the time by brothers George and John Hatsopoulos (former CEO and CFO respectively) was quite the dynamic approach for its time.  Recognizing their business’s reliance on banks for R+D funding, the duo saw more growth potential for Thermo Electron as a group of companies as opposed to a single entity.  Therefore, the company proceeded to create several spinouts from the parent company, each geared toward its own specialty sector.  As part of this strategy, Thermo Electron even established a naming architecture that would be incorporated for the vast majority of its future spinouts.  Each would use some form of the prefix “Thermo” followed by the market sector for which it was responsible.  Examples include Thermo Bioanalysis, Thermo Instruments, and Thermedics.  The strategy proved so successful that it not only led Thermo Electron produce several spinouts, but its spinouts also developed spinouts.  There were even periods in the company’s history where the sum of its parts were worth more than Thermo Electron as a whole.  As it turns out, Fisher Scientific followed a similar brand strategy to that of its future partner.

Since the company’s founding in 1902, Fisher Scientific has had quite the storied history. Over its century-long existence, Fisher has been privatized, acquired, renamed, spunout, restructured and more.  During these transition periods, Fisher made plenty acquisitions of its own, all while employing a similar strategy to Thermo Electron’s.  Typically, once the company had enough acquisitions under its belt, it would envelop those subsidiaries into the appropriate division.  Sometimes this meant creating an entirely new division.  A prime example was when Fisher integrated Curtis Matheson Scientific (CMS) into its fold roughly 15 years ago.  Due to the lack of overlap between Fisher and Curtis’s business segments, CMS was transformed into Fisher Healthcare, a division that had not existed prior to the acquisition.  Despite this strategy, which proved to work well for the company, Fisher’s constant corporate reshuffling brought its fair share of setbacks.  To recoup some of its losses, in 1998, Fisher was recapitalized (the company’s equity and debts were restructured) in order to get the company back on solid ground.  Over the next decade, Fisher would resume its industry growth, further solidifying its reputation in scientific research and clinical laboratory markets.

Both Thermo Electron and Fisher’s growth aspirations centered on new market entry through acquisitions.  Prior to the merger, this often led to instances where the interests of one company overlapped with the other, consequently pitting both companies in competition with one another when this was not usually the case.  Recognizing their similar philosophies, both companies came up with an idea they felt would prove mutually beneficial.

The Move

Over the course of their evolutions, both brands saw an opportunity for their next stage in growth.  With the exception of the occasional attempt at market expansion, neither company’s business was truly challenging the other for dominance.  Thermo Electron had their segment of the scientific community, and Fisher had theirs, yet they were essentially vying the same global markets.  There was potential here.  In order maximize the benefits and exposure for both brands, not to mention the added perk of helping to consolidate the industry itself, Thermo Electron and Fisher decided to merge.  In May 2006, it was announced that Thermo Electron would acquire and merge with Fisher Scientific.  The new company would be called Thermo Fisher Scientific.

The Result

In the years following their merger, numerous accolades have followed Thermo Fisher Scientific.  Most recently, the company has won awards in product innovation, design, and market leadership.  In 2011, it was ranked by Fortune as one of the World’s Most Admired Companies in the “medical and other precision equipment” category.  Prior to making this year’s list, Thermo Fisher Scientific had only been able to place as a “contender” in this category.  2011 was the first year that Thermo Fisher Scientific successfully crossed that threshold between “contender” and “key player” by achieving a top 5 ranking on the list.  In addition to ranking as one of the World’s Most Admired Companies, in 2008, Fortune listed the company as one of the Top 500 Fastest Growing Companies in the world.  But out of all these achievements, perhaps the most impressive is the company’s growth on the main Fortune 500 list.  In 2010, they successfully climbed to the #234 spot, a significant step up from #258 the previous year.

Our Perspective

Thermo Fisher Scientific’s brand architecture reveals a strategy that few others would be gutsy enough to try.  Based on the way Thermo Fisher Scientific describes itself on their corporate website, the company is essentially a tiered brand with three distinct levels.  At the highest level is Thermo Fisher Scientific, the company’s corporate brand.  At the next level, the company splits into three divisions, each with its own brand identity.  Its two main divisions are Thermo Scientific (formerly Thermo Electron) and Fisher Scientific.  The third division – though on the same level as Thermo Scientific and Fisher Scientific – differs from its brethren in that it acts as a more general category for the multiple specialty brands housed under Thermo Fisher Scientific’s portfolio, as opposed to just one.  The final level is made up of various subsidiaries unique to each of the company’s two chief divisions, Thermo Scientific and Fisher Scientific.

On the surface, the above architecture may appear to illustrate the company as a “house of brands”, but this assessment is not entirely accurate.  A true example of a “house of brands” company would be Procter & Gamble.  P&G has multiple brands under its belt – 23 to be exact – but their corporate name is less synonymous with those 23 brands than one might think.  For example, most individuals may be familiar with the Bounty brand of paper towels, but those same people are not necessarily aware that it is part of the P&G portfolio.  The product brand and corporate brand are kept at a distance from each other.  Each one is generally recognized only by the group(s) interested in it (i.e. shareholders care about P&G, not the brands, and consumers care about the product brands, not the corporate brand).

Thermo Fisher Scientific allows the brands under its belt to function somewhat independently like P&G; however, there are still two key differences that prevent it from truly being called a “house of brands.”  First of all, the way Thermo Fisher came to exist is nothing like the way Procter & Gamble was formed.  In the case of the latter, the corporate brand was developed first, and its product brands came later down the road.  Thermo Fisher, on the other hand, did things backwards.  Its two main brands came first, and a corporate brand spawned from the merger.

This timeline of development directly leads into the second argument against why Thermo Fisher is not a true  “house of brands.”  Recall that the P&G brand is not closely associated with its portfolio of brands by its consumers.  The same case can be made for most “house of brands” companies: Reckitt Benckiser, Johnson & Johnson, and others.  Thermo Fisher cannot make this claim.  In their case, the company’s two main brands may have their own websites and brand identities (i.e. colors, attributes, personality, etc.), but one cannot truly say that there is no callback to the corporate brand in the mind of its target consumers like we see in P&G’s case.  This is because both Thermo Scientific and Fisher Scientific are always directly tied to the corporate brand simply because they all share names.  Those two brands are depicted together at the corporate level and individually at the divisional level.  As a result, whenever a person conducts business with one of those three brands (corporate brand or one of the two divisional brands), there is no way to perpetually disassociate a single brand from the remaining two.  Interaction with Thermo Scientific creates awareness about Thermo Fisher Scientific.  Interaction with Fisher Scientific creates awareness about Thermo Fisher Scientific.  Interaction with Thermo Fisher Scientific creates awareness about both Thermo and Fisher Scientific.  This cycle is nearly impossible to ignore for any consumer that engages with the company at any level. There will always be some aspect of the Thermo or Fisher brands that a consumer will associate to the corporate level simply based on their names alone.

After debunking the possibility of being a pure “house of brands”, one might venture to guess that Thermo Fisher Scientific was a monolithic brand, or pure “branded house”.  This, too, is not absolutely correct.  For it to be a monolithic brand, all of the company’s products would have to carry the Thermo Fisher Scientific brand name.  Instead, all company products are branded at the divisional level, i.e. Thermo Scientific OR Fisher Scientific.

So what kind of brand strategy is Thermo Fisher Scientific using if they are not a monolithic brand or a “house of brands?”  And more importantly, is the company’s corporate brand equity suffering because of this chosen architecture?

The short answer is that Thermo Fisher Scientific is a hybrid brand.  Their current brand strategy makes them neither a true “house of brands” nor a true monolithic brand, yet it borrows aspects from both strategies at the same time.  Like a “house of brands” Thermo Fisher Scientific has multiple brands under its belt.  Like a monolithic brand, they keep the corporate brand in the public’s mind at each level of the company.  This is what makes it a hybridization of both.

Of course, the corporate brand could receive an equity boost by rebranding both divisions completely under the Thermo Fisher Scientific name.  The problem is that the company would, then, lose some of the legacy equity it has built and maintained over the last 5 years by allowing both the Thermo and Fisher brands to continue functioning somewhat independently from the corporate brand.  This current structure enables the corporate brand to syphon associations and legacy equity from the very two brands that give the company its name.  This is because Thermo Fisher Scientific had no legacy of its own upon which to build its corporate brand, save for its association with Thermo and Fisher.  Remember that the corporate brand is only five years old.  Thermo Scientific and Fisher Scientific on the other hand, have years of equity under their belts.  For now, this makes Thermo Fisher’s equity dependent on the legacy equity of its two main brands.  This is not such a bad thing.  This organizational structure means that the corporate brand did not have to start from scratch in order to begin building brand awareness at the corporate level.  Now should the company ever want to rebrand, it is in a better position to do so than it once was five years ago.

Over time, as consumers engage with either the Thermo or Fisher Scientific brands, those experiences, emotions, and loyalties cannot help but be translated to the corporate level because a name association has already been established through the Thermo Fisher Scientific brand.  If one trusts the Thermo Scientific brand, logic dictates that they would carry some of that trust to the corporate brand and back to Fisher Scientific as well.  Overall, it seems like Thermo Fisher Scientific has found an ingenious solution to their branding concerns.  The company’s two main brands can still give the impression to their respective consumers that neither brand has changed from the one they knew years ago before the merger, and at the same time, keeping them alive in this way helps to build equity for the corporate brand.  Everybody wins.

Timeline

• 1902 – The Scientific Materials Company is founded by C.G. Fisher
• 1925 – The Scientific Materials Company changes its name to Fisher Scientific in order to set itself apart from other competing businesses that recently sprung up with generic sounding names
• 1956 – Thermo Electron is founded by George Hatsopolous
• 1981 – Fisher Scientific is acquired by Allied Corporation
• 1983 – Thermo Electron initiates its spinout strategy
• 1985 – Allied Corporation merges with The Signal Companies to become AlliedSignal Inc., later known as Honeywell International
• 1986 – The Henly Group, of which Fisher Scientific was the largest of the group’s 35 business, is spun off by AlliedSignal
• 1991 – Fisher Scientific once again becomes an independent business when Fisher Scientific International, Inc. is established
• 1995 – Fisher Scientific acquires Curtin Matheson Scientific, which would go on to become Fisher Healthcare
• 2006 – Thermo Electron and Fisher Scientific merge to become Thermo Fisher Scientific; as part of the merger, Thermo Electron became Thermo Scientific and Fisher was required by the Federal Trade Commission to sell its Genevac business unit; the merger was announced in May and completed by November