Jun 11 2014, 4:56am CDT | by Forbes
Apple’s recent acquisition of Beats has gotten many people wondering if the Apple brand is as strong as it once was. Some see the surprising move as a significant departure from the strategy that has built Apple into the one of the greatest brands of all time and they consider it a proof point of the decline of the Apple brand cachet.
On the surface, the development does seem like a radical change. For the first time ever, Apple will operate under another brand name. No other Apple offering carries a name other than Apple and the decision to use of Beats name suggests to some that the company views it as the stronger, or at least, cooler brand name today.
And in the past Apple’s corporate strategy has favored a build vs. buy growth strategy, which has given the Apple brand name strong associations with invention and originality. At $3BB, the Beats acquisition is so large (the company’s next biggest buy was NeXT Computer back in 1997 for just over $400 million) and so publicly promoted (media has been saturated with the news, in part as a result of Apple’s own PR machine) that it seems to be repositioning Apple as a more typical technology brand – one that is less based on unique creations and more based simply on new capabilities.
The Beat deal is also surprising because it installs Jimmy Iovine and Dr. Dre as key players in the newly combined organization. Apple’s brand equity used to bank heavily on one person, Steve Jobs – and all other key players, even current CEO Tim Cook, were considered insiders, Steve’s disciples. With the addition of such high profile outsiders, the brand seems to have lost the tie to Jobs and the purity and commitment to “Steve’s way.”
On the other hand, though, the acquisition may not be all that much of a change for the Apple brand. Apple achieved brand supremacy when integration became a core business driver. ITunes first revolutionized music by integrating content with hardware and software. Then the iPhone revolutionized communications by integrating hardware and software (apps). Now this Beats development is likely to create an equally disruptive change by integrating content with wearable hardware and personalized service. Last year Tim Cook accurately explained in an interview at Duke’s Fuqua School of Business, “The reason Apple is special is we focus on hardware, software, and services. And the magic happens where those three come together.”
Also, the use of the Beats name may actually have less to do with promoting the Beats brand and more to do with preserving the exclusiveness of the Apple brand. In February, Cook stated in a Wall Street Journal interview, “We’re not going to put Apple’s brand on something someone else designed.” While his comment was made in reference to the development of low-cost smartphones, it does reflect the company’s vigilant protection of the Apple brand. Putting the Apple name on Beats products might actually detract from the integrity of the Apple brand more than would the company using the Beats name on the products and services it offers. The company could have been accused of co-opting another brand or operating as a brand poser.
And the tie “Steve’s way” might actually be advanced by the Beats deal. Jobs himself once said that he admired Bill Gates for his skill in striking smart partnerships. “I think if Apple could have had a little more of that in its DNA, it would have served it extremely well,” Jobs remarked. Might a deal like the one with Beats is just the thing Jobs aspired to?!
So perhaps there isn’t as much cause for concern over the Apple brand – at least not in the near term. The biggest question mark the Beats deal raises is really about corporate culture. No longer is the leader of the company like a rock star – the company actually has two rock stars on its payroll. And no longer are the designers and engineers the cool kids on the block. Content may actually become king. It’s unclear if Apple employees will be as inspired by Iovine and Dre, and it they will play by their visions and along with their teams.
Internal culture shapes external brand perceptions more strongly than might be obvious. The ties between the cultures and brands at Zappos, Facebook, and Google among others attest to this. So the extent to which the Beats acquisition changes Apple’s corporate culture is really the key factor in determining the long term fate of the Apple brand. And for that, only time will tell.
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