Sunday, January 31, 2010

CEOs Should Study President Obama

President Obama went into the proverbial "lions den", attending the gathering of the Republican Congressional Caucus in Baltimore last week.

The Democrats have a majority in the House and now 59 votes in the Senate. Obama is having problems with the Republicans, who have decided that it is good policy to simply attempt to block everything the Democrats propose--dividing the country along political and philosophical lines. Many on the left have been urging the President to forget about reaching out to the Republicans and use his mandate to push things through (remember when President Bush won his second term by a fairly slim margin and talked about all the "political capital" he had acquired and would use?). Vice President Cheney had noted that elections have consequences and that Bush had a mandate to move things forward. Funny how a larger margin of victory last year somehow did not give Obama a mandate, according to these same Republicans.

Anyway, what CEOs can learn is what Obama did by visiting the Republicans. Obama knew that he had to reset his own reputation and that of his party. He reached out to the GOP, talked to them, debated them, scolded them, and listened to them. He played the role of leader listening to his opponents. We have not seen this much previously, nor do we see it much in the corporate world. When confronted with ribald critics, companies tend to push back hard, to attempt to marginalize the opponent or vilify them.

Obama could have done the same thing, but it wasn't working, just as that tactic does not work in the corporate world. Instead, he met with his critics and showed them what dialogue looks like. By taping the proceedings, he also showed the country what leadership and true bipartisanship can look like.

There will be many who will attempt to spin this to their advantage. I'm sure that Limbaugh and Hannity will talk about the PR spin Obama is attempting or that he is trying to make us like England and its "question period" (a clear attempt to make us a European socialist society, they likely will argue). The left is likely spinning it their way demonstrating that Obama is in the right and the Republicans are always in the wrong. Some on the left will likely criticize Obama for not moving to the left rather than to the middle. However, most people know that the truth usually lies somewhere in between. The Republicans (at least the non-ideologues) have some good ideas, just as the non-ideologue Democrats do. The country is better off when we govern from the middle. At least that's my opinion.

CEOs and corporations can learn from this as well. They are not always right and their critics wrong. Meeting critics, talking with them (not at them, but with them), and listening to them can work wonders. One will learn quickly who can and cannot be talked with in a civil way and who is so ideologically driven that they have no room for compromise. But, by meeting with critics, you in effect nullify one of their primary strengths, which is their ability to characterize you.

Watch the tapes of the meeting between Obama and the Republicans. It could be used as a training manual for CEOs. The Republicans are now saying that they are sorry they allowed the meeting to be taped. They wished now they could continue to characterize the President, but now he has shown himself as a man of compromise, not the radical they have tried to show him as. He has made it more difficult for them to resist dialogue. Some on the far right and far left will not bend, but lets hope that there are enough clear-thinkers in the GOP and on the Democratic side to begin to talk. The country needs such dialog dearly, and it will show the way for others who are dealing with critics.

Friday, January 29, 2010

Leno's Interview with Oprah Opens Up Ways NBC Could Have Avoided the Fiasco

I watched an interview by Jay Leno with Oprah. It was very enlightening and put the whole NBC fiasco into greater clarity.

Some key issues that came out during the interview:
1) Leno was canceled because of poor ratings at 10PM
2) NBC wanted to cancel Conan because his ratings were down 49% since Leno had run the show
3) Leno was told that Conan would go along with the changes proposed

Granted, there is a lot of "he said, she said" in this. However, it is becoming more clear that the executives at NBC are the real jerks here. Leno is being blamed for coming back to the Tonight Show. He did not ask to come back; NBC suggested making the changes.

As I have noted in a previous blog, I am not a big fan of Jay Leno. That, however, is inconsequential here. Leno might have said no to NBC and quit. It was the second time they had fired him (he was removed from the Tonight Show--he did not volunteer). He could have gone someplace else. However, he wanted to go back to the Tonight Show--the show he never wanted to leave in the first place,

What NBC did was to allow two of its stars to battle it out in the public eye, thereby damaging everything around. It was like a drive-by shooting--innocent by-standers were killed.

NBC could have come out and explained that Conan's ratings were below expectations and that the networks and affiliates were not happy with either the Leno Show or the Tonight Show ratings. They could have said that it was their decision and that it was a business decision, not one based upon personal preferences. They could have done many things that would be expected by a good management team. However, the NBC executives are not good executives; that seems clear. Instead of stepping in after the shooting between Leno and Conan started to assume the responsibility, they started calling Conan names. They thought he made them look bad. There is no way Conan could make the NBC execs looks any worse than they made themselves appear.

Brian Roberts, the CEO of Comcast, said in the Philadelphia Inquirer this week that he is frustrated by his inability to do anything about this. All he can do is watch a future asset being hollowed out by lousy management. I hope that he can extract a better price during the acquisition and that he has the good sense to fire the NBC executives in charge of this situation immediately.

Will the Recall Damage Toyota's Brand?

I just did several interviews with news channels in the US and Canada on the Toyota recall. One reporter said that he had talked to several "experts" who suggested that the Toyota problems would "inexorably damage their reputation". I could not disagree more. He also said that this same "expert" thought that Lexus would be damaged by this.

First, I am questioning the use of the term "expert" with this person the reporter referenced. Does this person know anything about brand and reputation? Sounds to me like a PR "expert" working for a competitive brand.

If Toyota were a new product, fairly unknown to the public, then damage of this type might do in the brand. However, Toyota has been on the market for a long time and has built expectations amongst consumers that it makes cars with the highest quality and reliability. Certainly, the recall puts a dent in those claims, but it does not damage the brand completely.

When a company continues to exceed expectations, as Toyota has done over the years, it builds up inertia in its brand--what some people call a "halo effect". Problems are judged against this experience level. Usually, in such cases consumers are more forgiving because things like this are extraordinary, not the usual.

What would have inexorably damaged the brand would have been had Toyota refused to withdraw the cars, arguing that the problem was not a problem for most people. Think about what happened with the Bridgestone/Firestone tire problems. The company continued to argue that the problem was not real, despite evidence to the contrary. There was even a lot of finger pointing between Ford and the tire company, since many of the problems occurred on Ford cars, the heaviest user of the tires.

Toyota could have pulled a "Jacques Nasser" (the former CEO of Ford at the time of the Bridgestone/Firestone crisis) and blamed the supplier. It is taking the hit, both reputationally and financially. One must give them kudos for this.

They are taking the first major step toward protecting their brand longer-term. They are demonstrating their commitment to consumer confidence and trust. They also are doing what crisis experts always suggest--get out in front of the issue. I would suspect that they will rebuild their brand upon return to market. Will their entire market share return? Time will tell. Things like this damage the perceived value of claims of quality and reliability and allow competitors to close the gap in those attributes. But, Toyota is a smart company and I would hope that they will come back with something special for their installed base as well as incentives for new potential buyers.

Wednesday, January 27, 2010

Toyota Recall a Correct Decision

Toyota's decision to stop the sale of all cars affected or potentially affected by the acceleration problem should be applauded. It is an unprecedented move by an automobile manufacturer. In making this decision, Toyota took a short-term financial hit to save its reputation long-term. The decision reminds me of the decision by J&J in 1982 to recall all Tylenol from the market after 7 people died from cyanide-laced Tylenol in the Chicago area.

Toyota has built its reputation on quality and reliability of its cars. Those attributes have been put into question. Toyota's perceived leadership on quality and reliability will be tainted for many and the troubles will be a competitive lift to other car manufacturers. However, what Toyota told the public by its action is that they put safety and reliability over revenues and profits. Their recall may open them to even more litigation since it likely will be interpreted by the courts as being an admission of guilt. However, trust is built by trustworthy behaviors, not by words, and they have demonstrated by their action that they can be trusted.

All of these downsides were obviously weighed by the management team in Tokyo before making this decision. A recall of all affected cars was the first step and that is what most other car companies would have done, but most would have stopped there. Toyota, however, went further, pulling all affected cars from the market and also stopping the rentals of these cars from rental car agencies. By taking this action, Toyota also preempted regulatory withdraw of its cars. Within days they would likely have been forced to pull their cars, which would have been much worse of the company. They chose to get in-front of the crisis.

In the competitive world of auto sales and especially in our tough economic times, Toyota is pulling themselves out of consideration for many car buyers, loosing sales for a long period of time since auto buyers typically do not return for years. That is why anyone who believes in brand management or reputation management should applaud Toyota's action. They took the tough but right decision.

I have been asked whether I believe that they will regain market share after this is behind them. I believe that they have the potential to do that. It will take time because of the car buying cycle--it's years, not days or months like Tylenol. But, consumers now know for sure that Toyota is concerned with the quality of its cars and the safety of its consumers. We know that when those cars come back on the market, they will be engineered to the highest standards. Remember that Southwest Airlines was found to have cracks in its planes that were overlooked by negligent maintenance. It pulled its planes and when it began flying again, the public lined up again. Loyalty rebounded.

I suspect that loyal Toyota customers, those who have been their customers for years, will return. Those who bought a Toyota for the first time might find themselves looking elsewhere. They are what are called "passive loyalists", easily swayed by other offers.

I wish Toyota well. I do not own one of their cars, but I admire them for recognizing the importance of reputation in their long-term corporate health.

Monday, January 25, 2010

NBC is Destroying Their Valuable Brand

Imagine if you were at Comcast and were planning to buy NBC-Universal. Then, the fiasco between Conan O'Brien and Jay Leno begins. You have to sit on the sideline, unable to do anything about it, but knowing that the value of the brand you are about to buy is being hollowed out.

NBC demonstrated brain-dead management style in recent weeks. It made a deal in 2004 with Conan to assume the Tonight Show five years later. Leno was fine with it. Then, in 2009 Leno decided that things were going well and he wished he had never agreed to give up the Tonight Show. But, the deal was done so Leno was set up with a 10PM Show. The deal was a good one for NBC because doing a talk show at 10PM is a lot less expensive than developing a sit-com or drama for the time slot.

Well, we all know what happened. Leno bombed at 10PM. NBC was faced with a decision. What to do, what to do? Conan never really fit his comedy to middle America--he is a darling of a younger, urban set. The brains decide that they will give Leno a one-half hour show and push the Tonight Show to 12:05am, thereby also pushing the Late Show back and likely killing it. Never mind that the Tonight Show is the most valuable brand in late night TV. The execs at NBC sit back and thing: Leno's happy, NBC is happy. They might have expected that Conan would not be happy, but they likely also never imagined that he would turn his anger into a public vendetta against NBC. How dare Conan...he acted just like a spoiled Hollywood type--just like the NBC execs would act, but not what they expected form someone they thought they could push around. The entire thing becomes a "cause celeb" in the public forum.

This did not have to happen this way. A deal was a deal. It should never have been allowed to be acted out publicly. The new deal costs NBC $32.5 million to buy Conan out of his contract and an untold hit to its reputation and overall perceived value. Conan will likely launch a new program on Fox and NBC will be in even worse shape. Leno comes off as a self-absorbed Hollywood-type, which he likely is but didn't appear until now. He likely has damaged his standing with a good part of his audience and may not be able to get the advertising support needed in his new show. The kicker was when Tom Hanks, one the reportedly nicest people in Hollywood, came on the last Conan show and announced that "in my household you will always be the host of the Tonight Show". Word has it that NBC and Leno were heard whimpering over the slight. Leno will likely work with NBC to line up a blockbuster first week of guests that attempt to regain viewers. He will get a bump in the rating when he returns--people love to slow down to see car wrecks.

All the while, Comcast must sit by and watch this disaster unfold. I hope that Comcast is able to extract a discounted final price on its NBC-Universal deal since the brand has been diminished.

Friday, January 15, 2010

What on Earth Are They Thinking?

There have been so many corporate decisions recently that mystify me. I just shake my head and wonder "what on earth are they thinking"?

First, Independence Blue Cross in Philadelphia announced that it was either dropping or hiking the premiums by as much as 60% for its best health insurance plans for those who buy their insurance for themselves and their small businesses. This during one of the most hotly contested healthcare debates ever, with growing distrust of insurance companies. Instead of waiting for the legislation to determine their future, the brains at Independence Blue Cross decided to jump into the fray and get into a fight with independent business people. This will only raise the anger level higher and get the government more involved in the insurance business.

Next we have the Wall Street bankers who have decided that they are still due for mammoth bonuses, despite the fact that they led the economy to tank and put our society on the brink of a second depression. Some of the bankers even had the audacity to complain about the bonuses as being too heavily laden with stock rather than cash, leaving them in a cash flow crunch. Stock cannot be converted for a set period of time. Several of the bank chiefs sat before Congress and admitted that they did a lot of wrong things--like hedging or going short on stocks that they were pushing to the public--kind of like a Catch 22 scenario--sell the planes and the anti-aircraft guns. Yet none volunteered to cut the record bonuses. Somehow we are supposed to be concerned about retention of talent. Wasn't this the same talent that helped ruin our economy? And they throw a hissy-fit when the President feels compelled to push through new taxes on the banks because of public anger!

Then there's Mark McGuire, the guy who increased his hat size several fold and likely shrunk his genitals all for the sake of hitting 73 home runs. He finally admitted this week that he had been taking steroids for over 10-years. I am not sure who I am more upset with--McGuire, the St. Louis Cardinals who just hired him as a hitting coach, Major League Baseball that all but encouraged McGuire, Sammy Sosa, Barry Bonds, and others to put on a home run derby to make fans forget about the strike a few years earlier. Tony LaRusso, McGuire's coach while he was "roiding", brings him back as a hitting coach? Am a missing something? Isn't this a reward for bad behavior? Pete Rose gambles and can't get into the Hall of Fame despite being one of the greatest hitters of all time. McGuire cheats the entire game and gets a coaching job. And we wonder why people are angry and jaded!

And, lastly there is the NBC fiasco concerning Jay Leno and Conan O'Brien. NBC moves Leno to 10PM and brings O'Brien into the Tonight Show chair. This wasn't just to give Leno a new venue, but more to save money for NBC who hoped that it would not have to create a new show for that time-slot since talk shows run for a fraction of the price of a series. Leno bombed in that slot, not because there weren't viewers, but rather because his show was terrible. In the meantime, O'Brien brought younger viewers to the Tonight Show and got them ready for Jimmy Fallon, another favorite of younger viewers. So, rather than admit their mistake and buy Leno out or find him another show, NBC decides to make a complete joke out of their decision-making and announces that they will move Leno to 11:30 for a half-hour and then move the Tonight Show--the oldest running brand in late night that has always been at 11:30--to 12:05am. This would further push Fallon back to starting at 1:30am, primarily killing it. They probably thought that Conan would go know his place and go along with it, but he balked and has decided to quit the show rather than being a lacky for the network and Leno. So, NBC looks like Nincompoop Broadcating Company--the bozos of TV. Not a peep has been heard from the NBC brass. Hopefully, Comcast will get rid of this NBC-Universal "brain trust" once they complete their deal.

Tough business decisions must often be made, but these were not tough decisions. They were really bad decisions done with no foresight and seemingly no understanding of stakeholder relations. They were done for short-term gains that please the bottom line and those decisions usually turn out to be disasters.

Sunday, January 10, 2010

Chase Building a Brand Community for its Sapphire Card

I recently got a Chase Sapphire card. It had all of the benefits I was looking for in terms of mileage, no black-out dates, rental car coverage, insurance, etc. In other words, it seemed to have value to me. I got it to replace another card from another company that offered the same benefits, but did not offer much in the way of customer service to go with it.

What has surprised and impressed me is the brand community orientation of Chase. It has recognized that a credit card can be more than a credit card. When you think about the credit card category, it is fairly easy for the cards to differentiate value according to the segment. In other words, those with certain income can get better benefits than others because the risk to the card company is lowered. So, it is difficult for card companies to maintain a differentiation that is sustainable.

I have always believed and keep telling my students that customer service and community can be sustainable differentiators, if done well. Chase is doing this well. It was a surprise to me. I did not know or expect what I would get, but I am really pleased.

The first Chase benefit was before Christmas. Chase worked with a group of Philadelphia downtown retailers along a major shopping street to offer a discount to those using the Sapphire card. To go with it, if you spent $100 or more in total for the day, free parking at several downtown indoor garages was thrown in.

The next benefit came yesterday. I was invited to a dinner and film at a local restaurant with a discussion afterward with the actress Isabella Rosselini. The cost was only $50 per person, less than the price per person at this restaurant.

Chase is now advertising that it is the one card that has real people answering the phone rather than going through "call sequencing hell" (press 1 for new business, 2 for current billing, 3 if you are getting totally frustrated, 4 if you want to strangle someone by now....). Another brand benefit.

What Chase is doing reminds me of what American Express did when it introduced its card as a card with "special benefits". It was the card for the "upper class", a distinguishing mark for those who carried it. It was the card of business. It was serious. It said that you had arrived. It was differentiated on what we might call social image or ego from Mastercard or Visa. Over time, American Express lost that distinctiveness, so it started offering Platinum and Black cards to further differentiate the carrier. But, these came with a cost to those who carried them. You paid to become a member of the "club".

Chase has found an interesting brand positioning. It is a Visa card, which means that it can come with limited or no fee to the user. But, instead of just being another card, it has become a true brand--one that brings its carriers together and offers them a sense of community and special invitation.

Can others do this and cut the differentiation now held by Chase? Of course they can, but with the current credit crisis, most will likely see this as an expensive way to grow their customer base. What they miss is the fact that Chase is doing to the credit card what Apple did to the computer. The selection is not so much between Apple and a PC as it is between a cool, relevant brand and "your father's computer".

My compliments to Chase. They are building a great brand, a community, and growing customer loyalty.

Wednesday, January 6, 2010

Bad News on the Employee Satisfaction Front

A new study by the Conference Board found that employee job satisfaction in the U.S. has hit a new low, down to about 45%. While this is not totally surprising since the poor job market means that more people are stuck in jobs they might otherwise have left, but the trend started way before the current economic turmoil and its does not bode well for brands and corporate reputation.

The most important stakeholder for any company is its employees. Employees carry the reputation of the company with them every day. Research has found that a growing percentage of people judge a company's reputation by how they view the company's workplace culture. Most of this is interpreted through hear-say, either from employees or others, or on-line. Also, research has found that the connection between employee and customer satisfaction is extremely strong (about an r=.80). Customer service is a critical part of brand and reputation.

How can we get customers and other stakeholders to see our brands and companies positively if they are dealing with employees who hate where they work? This is a major problem for all companies. Peter Drucker said that the only two areas that add value to a company are innovation and marketing. How do we generate value when those responsible for innovation and marketing are disgruntled?

The real tragedy is that most companies do not understand the connection between their employees and their brands. Somehow they still think that brand is about marketing communications and do not see the connection between brand preference and customer satisfaction. Too many companies still see employees as an after thought in their planning. Employee engagement often gets even worse when the economy gets bad. Think about how much good customer service means in your assessment of brands and reputation. Think about how important it is that the employee you are dealing with seems to want to solve your problem or make your life easier or reduce your concerns, etc. This takes two things from employees--willingness and ability. Many employees are willing to focus on enhancing customer satisfaction but are not trained or given the support or technology to do so properly. That is a problem for the company. Other employees are not able to provide the type of service we expect. That is a different problem that requires change management or changing employees. We need to have employees both willing and able to support the company if we are to be successful.

How do we engage employees? Do we have a culture that threatens them to make them understand that customer service is important. "Smile more and be more friendly", we bark at employees. Do we have a culture that allows people to be loyal to certain managers or divisions but not to the overall company? Or, do we have a culture in which we inspire employees to see the outcomes of the company as their outcomes and make them want to be part of everything we do because they have been included in our discussions and decisions?

Bruce Pillard, a French marketing manager, who I have had the pleasure of communicating with in recent weeks, has a concept of making customers feel like employees, bringing them into co-creation as if they worked with the company. That is a great concept. But, before we make customers partners, perhaps we should make our own employees feel like partners rather than conduits.