The “Brangelina” Story as a Business Model

The story of Angelina Jolie and Brad Pitt can be compared a lot to that of Daimler-Benz and Chrysler merger although the first one lasted 3 years longer than the later. At the time it happened, it was considered a merger made in heaven between 2 big superpowers and at the time it was over it was deemed worthless. For the sake of our story we will consider Brad Pitt to be Daimler Benz and Angelina to be Chrysler.

When Brad “merged” with Jolie he had a small foothold in America (Jennifer Aniston) which was somewhat not fully satisfying him. Brad (Daimler) wanted to expand his reach in America and he came across Jolie (Chrysler) a luxurious, flashy and highly in demand brand at the time and they both clicked. During the years that ensued, Brad went on to strengthen his foothold in America (Daimler building factories in the USA) while Angelina drifted away from her core business (less movie appearances) and did not increase her territory (Chrysler failed to expand into Europe at the same pace that Daimler expanded in the USA). During that tenure Brad was rumored to have had some flings (Daimler’s stake in Mitsubishi and Hyundai motors) but both were ended or denied. Trouble kept coming with Angelina (Chrysler) suffering the most – nervous break downs, double mastectomy and eating problems (Daimler Chrysler merger came to an end in 2007 just one year before the financial crisis when Chrysler took bailout money from the US federal government)

So now what?

For Brad: He will probably keep moving along and searching for bigger and smaller stakes here and there to try to polish his image (Daimler has a small share in the Nissan Renault alliance to help the German manufacturer in building small cars and EVs) Ironically he is rumored to have cheated on Angelina with a French actress (anyone else sees the humor here?) or to increase his reach in unexplored territory (50% stake in the Chinese automaker BYD and 12% in Chinese BAIC as well). He is unlikely to find another “Chrysler” or to settle back to a “small foothold” but he will be “everywhere” (Daimler has operations in 16 countries!)

For Angelina: the “old” lady will have to wait for a Sergio (CEO of FIAT) to come along; someone who wants her for her great past and who hopelessly believes that this past will push him forward to grandiosity; he will be happy enough to carry her big debt (6 children) but unfortunately he won’t get anything. Sure enough every now and then she can give him a “jeep” but that won’t cover the investment. She will drag him in to what she has always done and he will fumble along still thinking that he can get a bigger foothold in America (Sergio Marchionni still hopes he can revive FIAT in USA through Chrysler.)

In the world of business, mergers in the “same line of business” either face spectacular success or fail spectacularly. Unfortunately the 2nd option prevailed for our 2 actors in this case just like the Daimler Chrysler case; and as in most failure cases one gets out damaged more than the other and so far it seems that Angelina has had the shorter end of the stick. As the wise man once said “if it is too good to be true, then it probably is!”


Microsoft’s “Strategic” Mistake

Nokia’s life and death in the mobile devices industry is that of a fairy tale gone bad. After dominating the global market in the 90’s and mid 2000’s, a series of bad business decisions led to its dramatic downfall and demise. And although the climb was slow and painful, going downhill was as fast as a free fall. Nokia’s failure to remain competitive can mostly be attributed to failing in predicting the market trends, its slow reaction to technology and customer preference changes and the lack of an effective leadership to steer company ahead.

By 2013 it was obvious that Nokia needed  a savior; its global market share in the smart phone market had slipped to 1% or less, to add to that the company was facing fierce competition from local phone makers in both China and India which were once the company’s stronghold in the low end cell phone market. At this point, the company had only two options either to shut down the mobile device department or find a possible partner/buyer.

When Stephen Elop joined Nokia as CEO in 2010, the company was not in its best shape and form but also at the same time it was no secret that Microsoft was expressing interest in entering the smart phone market and it was no secret also that they wanted to do so through an acquisition. During that time, Nokia was struggling between two in-house operating systems instead of focusing on exclusively one so when Elop joined his first decision was to kill both systems in favor of windows OS. At the time, he justified his choice by claiming that he was seeking “differentiation” but soon after the first windows phone were rolled out Nokia announced that they will also produce android phones (how does that really differ from having two in-house OS?)

Turns out, all this was made in the purpose of setting the stage to ripen an acquisition by Microsoft. Elop did his job, Microsoft bought Nokia and all lived happily ever after….. Well not really because the story has just begun. No matter how great an idea is, if the execution does not rise to the occasion then the whole idea is just a big failure and this is where Microsoft seems to be headed to. Microsoft made two strategic mistakes in a very short period 1- They announced that they will remove Nokia’s from all their mobile devices. 2- when signing the deal with Nokia, there was a penal clause that forbid Nokia from independently producing cell phone devices before the end of 2016. Really now? Only 2016? You do not forbid such a strategic player from re-entering the market for such a short period only! Because despite all of Nokia’s failures in the recent years, the name alone was a leverage and Microsoft underestimated the power of the brand name and here are two big examples for why is that.

Example 1:  Back in the 90’s IBM was leading the market of personal PC’s with its legendary Think Pad laptops which dominated the business world but towards the end of the decade, IBM had decided to divest this department in order to focus on its core business. Lenovo, an up and coming Chinese manufacturer and seller saw the opportunity and jumped to it and they were able to acquire the division. Inside the corridors of Lenovo there was a debate on whether to keep the name “Think Pad” or kill it, eventually the proponents of keeping the name won and it turned to be a winning strategy since people related to the name and the confidence in the laptops was not lost despite being bought by a Chinese company which at that time still meant that Chinese products were substandard and not of a good quality.

Example 2: Nissan Motor Company is a remarkable car maker and one of the market leaders these days but they were not always that successful… nor were they always called Nissan…. The company that will soon celebrate its 100th anniversary changed hands of ownership many times in its early periods and just like any Japanese industry they focused on efficiency and reliability, two features that earned them the hearts of many car enthusiasts around the globe but under the name Datsun and not Nissan. So when the top management decided to kill the name in 1986, it proved to be an almost lethal mistake. The company went in a downward spiral because the confidence and familiarity that came with the Datsun name were lost by Nissan and people were not so welcoming of the new name so in addition to the rebranding costs and the marketing campaign to change the names, the slipping sales of Nissan nearly brought the company to its knees and led to drastic measures including hiring the first ever non-Japanese CEO to a Japanese company – The Lebanese Mr. Carlos Ghosn, and also hundreds of lay-offs, a decision that until that date was unheard of in the Japanese culture. 12 years after that, Nissan revived the name Datsun and is reaping the benefits of such a decision.

A third indirect example can be derived from the stories of BMW and Mercedes Benz, both car makers own or “owned” luxury brand cars and compact cars. BMW owns Rolls Royce and Mini Cooper while Mercedes owns the struggling Smart and until recently they produced the now defunct Maybach luxury cars. The reason why the first is successful with both brands and the second is failing is very simple: “differentiation”. BMW differentiated both brands and gave them a separate identity while Mercedes tried to associate them with its brand as much as possible just like Microsoft is doing so with the smart phones unit. Sometimes imposing a successful brand name on a different product can have a reverse effect and instead of acting as a leverage it would drown it….

A short while ago, Nokia announced that they were planning a comeback to the smart phone which poses a real and direct threat to Microsoft. When Microsoft purchased the cell phone division, they neglected the Nokia maps software which turned out to be one of the most valuable assets which is currently the target of many companies from cell phone companies to car makers. This alone can help in marketing and selling the new Nokia phones. The re-entry can be cheap for them and they can opt on choosing android OS just like the tens of cell phone makers in the industry. Along  with their maps and other solutions that Nokia is famous for it can prove to be a winning combo. Moreover, they might come back to their senses and work on redeveloping  their in-house software because the world might be ready for a new breakthrough.

Both companies are treading a fine line here because a comeback in the tech world is almost impossible and none has been able to do it so far. But in Nokia’s favor there is a remarkable brand name………..

Dacia, the Smart Car That Did What “Smart” Couldn’t Do

“ Any customer can have a car painted any color that he wants so long as it is black” the famous quote from the legendary Henry Ford when he was referring to his T-model – the car that made history. The importance of this quote lies in the fact that although the Germans might be the ones who invented the car, it was Henry Ford who laid the basics and essential reasons behind making                 a car. And today and more than ever, the basics he laid are serving their best purpose and proving what a visionary this man was.

In the 80’s of the last century, the Lebanese Nicolas Hayek devised a plan to produce a small economic car that would sell for less than $10,000 and serve basically the European Countries. Having saved the entire Swiss watches industry singlehandedly by creating “Swatch” the low end but high quality Swiss watch that was sold to the mass market and made enough sales and profits to save the ailing luxury watch makers, he was convinced that he could do the same to the European Car industry. The idea he came up was brilliant but the realization – well not every fairy tale has a happy ending. Having designed the car, his idea was to offset the high production costs that might kill the car’s purpose so he reached out to existing car makers in the European Market and it was Daimler Benz that adopted the idea and agreed to bring “Smart” to life. Unfortunately, how they decided to do so was not so bright. The idea behind the car was to keep it as simple as possible and as basic as possible. Daimler’s first mistake was the location: “France” a country known for its high production costs while they should have opted to countries of the Eastern Block if not India or China unless they had in mind to compete with French carmakers: Renault, Peugeot, Citroen although the idea seems to be farfetched given the concept of the “smart” car. To make things worse they were obsessed with safety measures and wanted to earn all the safety stars that were possible which added additional cost to the car. Needless to say, when the car was launched it was not below $10,000 at all and thus the car did not serve its purpose. Sales were not as strong as the hopes that were built on it and the company started piling up losses. Along the years that followed, they further scaled down their operations by discontinuing 2 of their cars the Smart Roadster and the ForFour and many concepts that were in the pipeline were ditched, while at the same time Dacia was increasing its car range and foraying into new markets. Then all of a sudden, Daimler went all American on Smart by merging its management with that of Daimler and closing its independent design centers in an attempt to cut costs; this was the exact mentality with which Americans managed their car companies and which almost led to their demise.

The mistake that Daimler made was in trying to give Smart its identity instead of keeping it independent; they must have thought that their name would give leverage to the young brand and help push sales but the effect was negative because no one is used to an economical car from Mercedes and the car was not even economical in the first place. They should have alienated it from them and given it its unique character just like BMW has done with the Rolls Royce and the Mini brands. Daimler did that to Maybach and killed it and so far Smart seems to be facing the same fate unless Mr. Ghosn manages to save what is left of the brand.

It took another Lebanese to realize Mr. Hayek’s dream and it was Carlos Ghosn who found in the Romanian brand Dacia the perfect car for this purpose (Yes it’s all about my fellow countrymen this time!). Dacia has been closely affiliated with Renault since its inception and many Renault brands were simply branded as Dacia with very small modification. This flirting and foreplay between the 2 brands came to an end in 1999 just at the same time when Renault purchased a stake in Nissan. Ironically at the same time Daimler merged with Chrysler in a deal that was about $40 Billion worth and at the same time the very first Smart cars were sold. I do not know who came with the idea of merging 2 luxury carmakers together; what were they thinking? That is if they were thinking at all. That deal did not live to be 10 years old, while Nissan Renault continues to thrive and grow until today. It is interesting how the fates of those 2 car makers groups are intertwined.

Mr. Ghosn, who had just managed a legendary turn around for the once almost bankrupt Nissan, turned his attention to Dacia and in 2004 the Dacia Logan was the first car to roll out of the Romanian factories as a totally independent car. Although some parts are furnished by Renault, the whole car now has an independent identity in contrary to previous models that were basically Renaults with different make-up. So while Daimler was merging, Carlos was diversifying. He made sure that every brand was separate in order to avoid any brand being hurt by another and to avoid overlapping. “Go back to the basics” was the theme for Dacia, a simple stripped down car that would take you comfortably from point A to point B without the toys, gismos and distractions of the other more luxurious cars. They were not even interested in the safety stars. A car big enough to fit a family and small enough to keep it personal as the great Henry Ford used to say. It comes as no surprise then that during and after the crisis when most car sales were slumping, Dacia was the fastest growing car in Europe and still reins the European markets while slowly making headway in the Middle East and other markets.

Mr. Ghosn seems to understand the US market much more than the folks at Daimler. He knows that the US consumer is not interested in small basic economical cars and this is why you don’t even see the small Nissan cars like the Tiida and the Micra in the company’s showrooms in USA and this is why he did not bother to try to introduce the Dacia to the US market at least not yet. For the Indian market, he has decided to revive the once iconic Datsun brand (for my American friends who are younger than 30 ask your dads about Datsun because chances are they owned one back in the 70’s and early 80’s). Datsun will probably sell in India for even a much cheaper price so Mr. Ghosn did not even want to risk the Dacia name, another proof of his understanding of the market and its segmentation.

Strange how those 2 companies are intertwined together; in 2010 a strategic alliance was announced between Daimler and Renault Nissan Alliance and the very first fruit of this alliance was that the Smart for two will benefit from the French automaker’s small car technology. Mr. Hayek’s vision for the smart car was to be a hybrid car, a vision that Daimler shied away at the time but which is the corner stone in Carlos Ghosn’s strategy. Now more than ever, the late Mr. Hayek’s dream seems so close to be realized. I guess it takes a Lebanese guy to realize a fellow Lebanese’s dream. Unfortunately Mr. Hayek is not around anymore to see his vision materializing.

Korean carmakers were once known to have cars with just the basics and the best purse but nowadays they are obsessed with being the new Audis in terms of luxury and designs. It seems that only Mr. Ghosn is the one who wants to scale back and go back to the basics of car making in order to offer the car that can fit every purse, purpose and preference (excuse me GM for stealing your moto but it seems to fit Renault-Nissan more).  I would like to end with another quote from Mr. Ford autobiography My life and Work “I would like to build a car for the great multitudes” and he did so with Ford T-model and then VW did the same with its beetle and they both managed to do so by sticking to just the basics and Dacia seems to be well positioned to fulfill the same purpose. Something tells me that Mr. Ghosn has copies of this autobiography on his desk and nightstand.