ReputationPoint

In this age of the social media Wild West where a company can spend significant resources responding to the endless chatter, it’s a healthy exercise to weigh what voices truly matter to your company’s reputation, and for that matter, to rank what issues directly affect your company’s reputation.  This preparation of identifying “sources of excellence” will help fight through the clutter when bad news strikes.

A good example of measuring the importance of one’s critics occurred during the recent launch of Apple’s iPhone 4.  Released on June 24th, the iPhone 4 received praise for the entire product experience, but faced criticism by some of its antenna.  On July 2nd, in an open letter to iPhone 4 users, Apple addressed the issue by focusing on a faulty signal strength display — “Upon investigation, we were stunned to find that the formula we use to calculate how many bars of signal strength to display is totally wrong” – and, in effect, the Company downplayed the antenna design as an industry-wide fact of life – “To start with, gripping almost any mobile phone in certain ways will reduce its reception by 1 or more bars.”

Ten days later, on July 12th, Consumer Reports came down hard against the iPhone 4:

“It’s official.  Consumer Reports’ engineers have just completed testing the iPhone 4, and have confirmed that there is a problem with its reception.  When your finger or hand touches a spot on the phone’s lower left side—an easy thing, especially for lefties—the signal can significantly degrade enough to cause you to lose your connection altogether if you’re in an area with a weak signal.  Due to this problem, we can’t recommend the iPhone 4.”

Cutting his vacation short in Hawaii, Steve Jobs returned to Apple’s headquarters in Cupertino to host a 30-minute talk followed by 45 minutes of Q&A with the press on July 16th.  While the conference had some of the signature elements of a wonderfully produced Apple product launch, and took the proper step to offer consumers a solution to the problem, it was certainly held under outside pressure to respond (particularly from the Consumer Reports recommendation to avoid the phone).

New York Times’ reporter, David Carr, writes in an article entitled Post-Mortem: No Hair Shirt for Steve Jobs:

“How did Consumer Reports make Apple blink?  In large measure, the article in Consumer Reports was devastating precisely because the magazine (and its Web site) are not part of the hot-headed digital press.  Although Gizmodo and other techie blogs had reached the same conclusions earlier, Consumer Reports made a noise that was heard beyond the Valley because it has a widely respected protocol of testing and old-world credibility.  Mr. Jobs acknowledged as much, saying: ‘We were stunned and upset and embarrassed by the Consumer Reports stuff, and the reason we didn’t say more is because we didn’t know enough.’”

David Carr continues:

“It was a big week for Consumer Reports and a reminder that media that is unsupported by advertising can often have an impact that more traditional publishing, or even the most tech-savvy, enterprises don’t.”

Whether ad-supported or not, there is still a premium on quality sources, and in the case of Consumer Reports, there’s an irony that a publication that began in the 1930s — before the onset of the Internet and even television — can prompt a corporate titan of the digital age like Apple to swiftly react.

By responding directly to a specific media outlet’s criticism, a company is validating that source.  Apple may have caught a break in focusing its response on the Consumer Reports criticism, as future product reviews will now carry more weight and be read more closely by Apple’s many followers.  And if Apple’s reputation for product innovation and quality weathers this slight bump in the road caused by the faulty antenna, the future noise coming from Consumer Reports will likely be positive and amplified.

July 28th, 2010 | Comment on this.
Tags: Apple · Consumer Reports · corporate reputation · crisis response

Typically, the reclassification of a country from emerging to developed market status by equity index providers (such as MSCI Barra) is a mixed blessing for the companies that are based there.

On the one hand, the recognition that the economy in which the company operates is “up there” with the United States, Western Europe, and Japan is a recognizable badge of honor and will create immediate demand from index funds.

On the other hand, if a country is judged sufficiently industrialized to join the major leagues, it means that it has been on top of the emerging market pile for a long time. As a result, almost overnight, a company based in the upgraded country will go from being a big fish in a small pond to being a small fish in a big pond. The transition can be painful, as I have recently witnessed in the case of the incumbent telephone operator in a nation receiving this honor. Instead of being benchmarked against companies that were lagging it in terms of performance and practices, the company suddenly found itself compared to companies with far better established operating and reporting procedures.

Company managements and Investor Relations teams need to prepare for this transition well ahead of time, by familiarizing themselves with the demands this new status will create, and by starting to establish contacts with their new followers. For example, on the sell-side, with the exception of a handful of truly global sectors (for example, the oil and pharmaceutical industries), it is not the same financial analyst who follows an emerging market company and its developed market competitor.

Recently, fellow ReputationPoint contributor, Peter Verrengia, and I were interviewed by Korea’s leading business newspaper – Maeil Business – in which we discussed this and other Investor Relations issues and trends facing this dynamic and successful economy. While MSCI Barra still categorizes South Korea as part of the MSCI Emerging Markets Index, it is likely on the path to be upgraded in the not-so-distant future, so that many Korean companies will need to prepare for an eventual transition to “developed” market status accordingly.

Here is a link to a more complete discussion of international investor relations for Korean companies, by us, on which the interview was based.

June 7th, 2010 | Comment on this.
Tags: investor relations · Korea

NOTE:  The following article, written in March 2010, was excerpted and published in the May 2010 issue of the Japanese magazine — Kohokaigi.

It will be many months before we can objectively assess the long-term impact of Toyota’s recall situation on the company’s reputation and its future success as a business.  For now, perceptions of the company’s communications approach undoubtedly are somewhat different in the US and in Japan.  Unfortunately, from any perspective, what began as a drama has turned into a crisis, which we define as an event or series of events that threaten the company’s ability to carry out its business strategy and achieve its goals.

From a reputation management perspective, Toyota’s main problem is that its understanding of the company’s obligations to the public were not aligned with the public’s perceptions of Toyota’s obligations.  This happened as a result of the company’s success, and the apparent ease with which the company became the icon of quality.  This is partially the fault of an approach to branding that oversimplified the hugely complex task of generating such exceptional results.

At some point in the past decade, among consumers, investors, policy makers, and influential business and academic leaders there was a fundamental shift.  Everyone began to think of Toyota not as a car company that makes a quality product, but as quality company that happens to make cars.  When quality became the product, and reputation became two-dimensional (quality and size), reputation risk began to increase.  Because reputation is an often unappreciated component of corporate value, this increase in reputation risk invisibly increased the overall risk profile of the company—just the opposite of the expected result of the company success. [Read more →]

May 18th, 2010 | Comment on this.
Tags: crisis management · reputation · Toyota

ReputationPoint contributor, Franz Paasche, participated in a recent discussion entitled “Financial Services Reform: What’s the Endgame?” offering his insights into the rebuilding of the industry’s tarnished reputation.

We invite you to listen to a recording of the 5/13/10 event accessible at this link: http://events.fleishmanhillard.com/financialservicesreform

Here is the full list of participants:

• Lionel Johnson, Senior Vice President, Fleishman-Hillard, former Deputy Assistant Secretary for the Treasury

• Jack Bartling, Consultant, former Deputy Assistant Secretary of the Treasury for Legislative Affairs, and former Legislative Counsel to Sen. Christopher Bond (R-MO)

• Emily Altman, Consultant, former Managing Director, Head of International Government Affairs, JPMorgan Chase and Morgan Stanley

• Franz Paasche, Partner, Communications Consulting Worldwide (CCW)

May 18th, 2010 | Comment on this.
Tags: financial services · reform · reputation · webinar

Frank Koller’s recently-released business book entitled Spark. How Old-Fashioned Values Drive a Twenty-First-Century Corporation: Lessons from Lincoln Electric’s Unique Guaranteed Employment Program explores a topic we seldom read about in today’s headlines – a public company that has been productive while staying true to the value of retaining its workforce through good times and bad.

For over 110 years, Lincoln Electric has been a successful manufacturing company of welding devices.  Based in Cleveland, the company has consistently retained its position as the leading global manufacturer of welding equipment without resorting to layoffs at its main facility in the U.S. [Read more →]

April 3rd, 2010 | Comment on this.
Tags: Frank Koller · labor relations · layoffs · Lincoln Electric

If you want to follow an emerging issue in reputation management, the growing conflict at the intersection of business interests and privacy rights is ripe for some drama.  Those who manage the reputation of an organization, or who care about how reputations of individuals are formed, online and offline, should take note.

The implications of paying for digital information and social media services by sharing details about online habits, interests, and relationships is neatly summed up in the March 1 edition of the US version of Newsweek, by columnist Daniel Lyons.  His excellent one-page summary of privacy as currency ( “Google’s Orwell Moment”) describes the intergenerational and cross-cultural concerns presented by online business models that openly gather information from participants and turn that information into revenue.

Many people are just becoming aware of this issue.  So far, the internal debate many people are having about the value of their privacy resembles the signature comedy bit from 50 years ago by Jack Benny.  Benny, in his cheapskate persona, is held up at gunpoint by a criminal who says, “Your money, or your life.”  After a long pause, Benny says, “I’m thinking, I’m thinking.”

When it comes to the value of privacy as currency, many of us are saying, “I’m thinking, I’m thinking.” [Read more →]

March 9th, 2010 | 1 Comment
Tags: Facebook · Google · privacy · reputation

Yelp.com, the popular user-written reviews and ratings site of local businesses, has been hit with a class action suit filed on February 23, 2010 claiming extortion.  The suit reads:  “One method Yelp uses to control content (and thereby raise or lower a business’s rating), is to promise to remove a business’s negative review or relocate them to the bottom of a listing page where fewer searchers will read them if the business agrees to purchase a costly monthly advertising subscription from Yelp.”  One could say that Yelp is now faced with the difficult challenge of moving its own negative review “to the bottom of the page.”

Yelp.com is no stranger to butting heads with the small businesses that are subject to its consumer reviews.  You don’t have to search far for www.yelplawsuit.com as well as www.yelp-sucks.com  (yelpsucks.com is already taken by Yelp.com).  Even the Common Questions section of the Yelp company web site includes the following:  “I’m considering legal action against a review and/or Yelp.  What are the precedents here?”   [Read more →]

March 2nd, 2010 | Comment on this.
Tags: litigation · transparency · trust

It has been widely reported that Tiger Woods will not play in his own tournament, or appear at other events before the end of the year.  His stated reason for withdrawing from public view is that he was injured in his unexplained car accident.  However, his injuries were reported to be minor.  More likely, it is the concern about damage to his reputation that has sent him into seclusion.  His situation underlines the lasting result of the first choices an individual or organization makes after a negative event, and the impact of public scrutiny on even the most well-liked public figures. 

The effect of the accident itself on his reputation, and on his career as an endorser, should have been minimal.  But Tiger may be making the situation much worse by his subsequent choices.  Now he has stimulated the imaginations of millions of people by compounding the mystery of what actually happened with behavior that appears evasive, if not suspicious. 

Fans of irony will also appreciate the unintended consequence of one of his most visible campaigns.  Plastered over the walls of airports everywhere is the image of Tiger Woods considering his next shot in Accenture’s long-running ad series.  The headline reads: “It’s what you do next that counts.” [Read more →]

November 30th, 2009 | Comment on this.
Tags: crisis response · sponsorship and celebrity endorsers · Tiger Woods

ReputationPoint contributor, Franz Paasche, is quoted in The New York Times article “Wall Street’s Spin Game” (November 21, 2009).  Here’s a link to the article:

http://www.nytimes.com/2009/11/22/weekinreview/22bowley.html?ref=weekinreview

November 22nd, 2009 | Comment on this.

The past year has provided sharp lessons about the consequences of taking an overly optimistic view of financial risks.  Reputation is a key element in understanding risks of several types, so it is worth considering how too much optimism affects the reputations of corporations and their leaders.

A new book, Bright Sided: How the Relentless Promotion of Optimism Has Undermined America, by Barbara Ehrenreich, chronicles some of the perils of optimism and the power of positive thinking.  She links those now stereotypical American traits with the housing bubble, among other ills.  But she isn’t describing a one way street with too much optimism at a dead end. In her essay last month in Time magazine (October 10 cover date), Ehrenreich is quick to point out that the opposite of optimism need not be pessimism, but a realistic view of how things are and how they could be. [Read more →]

November 13th, 2009 | Comment on this.
Tags: Arthur Schopenhauer · Barbara Ehrenreich · optimism · pessimism · reputation