Wednesday, June 30, 2010

Netflix is Ruining its Great Reputation

I have always admired Netflix. Who wouldn't? Here is a company that was created by Reed Hastings because he had a $40 late fee at Blockbuster. He created a company with a unique customer algorithm, similar to that used by Amazon, that matches customer preferences, and with the ability to source materials for the most niche of movie interests. At the same time, Blockbuster was focused on major hits and keeping an inventory in its many stores.

Netflix was able to see the future and adapt to video-on-demand and downloadable movies, even doing deals with video game makers and DVD player makers.

All of this was admirable. I use Netflix as a case study in my MBA and Executive MBA classes. Now, Netflix has decided that it makes sense to move into pop-up ads on websites. Instead of keeping awareness high, they are becoming a nuisance. Instead of remaining an admired brand, they are ruining their reputation. They are becoming the equivalent of being stuck in a room with a life insurance salesman who just won't stop talking.

I don't know who is advising Netflix, but I wish they would step back and remind themselves of what made them such a valuable brand and return to their roots. Stop the interruption, pop-up ads. Those are for lesser companies.

Tuesday, June 29, 2010

BP's Independent Gas Stations are Hurt by the Spill

Business is reported to be down about 20% at some BP stations. This is even more severe than after the Exxon Valdez accident when Exxon lost about 5% of its business, some of which it has never regained. As a result, reputation experts began to estimate that reputation was worth about 5% of revenues on an annualized basis. It actually could be worth more, depending on the severity of the reputation damage that is done.

Among the victims of the BP disaster are the owners of BP gas stations. In the US,virtually all of the dealers are independent owners and operators--they have no relationship to BP other than selling gas under the BP brand. They are suffering and taking flack from consumers. Gas stations are being picketed.

A consumer has only three ways to show their disgust with BP: 1) they can urge their member of Congress or Senator to punish the company, 2) they can boycott BP gas, or 3) they can divest themselves of BP stock, if they hold it or urge their company to divest the stock from its portfolio.

This is a situation in which there is no upside for the dealers. They have a business relationship with a bad actor. As a result, the diminished brand equity and reputation of BP will continue to hurt them. They can scream and explain themselves all they want, and we can all feel sorry for them, but they are collateral damage. If consumers continued to buy BP gas they would not only be supporting the gas station owner, but also directly benefiting BP. I feel sorry for the station owners, but there is no way I am going into a BP station.

We've seen this situation in other markets. Toyota dealers are independent of the company, yet they were suffered great damage during the Toyota recalls for acceleration and brake problems. Most car dealers are independent. What can they argue? "Buy a car from me because I have nothing to do with making this lousy car"? Sorry, but brand associations are what lead you to make your purchase of the dealership in the first place. You linked yourself to the brand, for good and for bad. You are now suffering the impact of that brand association. We need to remember that there is truth in what our Mother's always told us: "we will be judged by the company we keep".

So, we can feel sorry for the independent BP dealers, but they benefited from the great reputation that BP had for so long--I'm sure that is why many of them wanted to own BP stations. They chose wrong brand association. Life is not fair.

Endorsed Brands Take a New Twist

Endorsed brands have always been an important brand strategy. Endorsements take on different variations. We continue to see people with lab coats acting as doctors to endorse the efficacy of a product or demonstrate what a "talk with a doctor" might look like. There are Ralph Lauren and Eddie Bauer interior in cars. Reebok sponsors work-out rooms in hotels. Martha Stewart is an endorser of towels, pillow cases, dishes, and other home products. Her name provides a risk reduction for those who are not certain they know how to properly decorate their homes. Oprah's endorsements can drive book sales, generate traffic at stores, and create new celebrities (Dr. Phil, Dr. Oz, etc. were all created by Oprah and have now become their own celebrities and are now endorsers).

Endorsements are designed to lower fear, uncertainty and doubt in the purchase. Endorsements are not designed to attract everyone. They are designed to attract the target. They connect the target with people who are admired or looked up to. They are a reference group--someone we aspire to be like or be associated with. A Nike shoe is a brand, but an Air Jordan takes on a whole new dimension because Michael Jordan is behind it. His endorsement was so strong that LeBron James actually said one time that he thought he could jump higher when he was young because he was wearing Air Jordans.

As a result of social media, consumers have become even more skeptical or celebrity endorsements, so a new twist has occurred. Celebrities like Ashton Kutcher and Lady Gaga are now taking a piece of the company and taking on management roles within the company so that their endorsements are not only more believable, but so that they share in the success or failure of the company (actually, there is little downside for the celebrity from a monetary standpoint since they get paid as well as a getting equity). Kutcher, for example, is going to be the head of social media for Popchips, a line of potato chips that are baked rather than fried. He is considered a social media expert because he has more Twitter followers than almost anyone on earth. He may not really know social media, but his Tweats about Popchips will likely lead to increased sales--at least amongst people who like Kutcher.

We saw how intimately tied companies and products are to their endorsers during the Tiger Woods problems. Accenture dropped Tiger immediately because his endorsement was no longer appropriate for a consulting firm. At the same time, Nike continued to support Tiger since he was responsible for the rise of Nike Golf. His personal issues could be separated from his athletic prowess. Tiger may not have had a piece of the equity at Nike, but he has a lot to say about design, similar to the input and responsibilities that Michael Jordan had at Nike.

Nike better watch closely what is happening. If Tiger or Jordan wanted an equity stake in the company, they would command a lot a hefty amount of stock--more than shareholders might be willing to tolerate, but the negotiations and calculations would be very interesting.

Monday, June 28, 2010

Developing a Good Positioning is Critical

I have seen and read so many positioning statements that sound like wonderful features or wish lists from the organization. They are often written by people inside who want those on the outside to believe the fantasy--that they are what they claim in the positioning. Words like "best", "exclusive", etc., find their way into the positioning without any sense of internal challenge as to whether or not they can be defended or supported. Too often, outside firms that are brought in to help with the positioning only hurt the process further when they think of positioning as trying to influence the market rather than explaining choices form the market perspective.

Positioning solves a number of issues for an organization: it identifies the target, it establishes the point of differentiation, it frames a promise, and its offers a reason to buy, invest, join, etc. In other words, solving the positioning puzzle is one of the the most important steps in the strategic process.

There are a number of must haves in a positioning:

--First, it must have a target. The target can be stated in demographic terms, or psychological terms, or behavioral terms, or any other way that we normally segment a market and identify a target. It doesn't have to say that the product or service is intended for men or women or craftsmen or some other group, but it should say who the product or service is intended for.

--Second, the positioning must create a frame of reference. All brands create a promise of performance and positioning helps, as a major part of the branding process, to state the promise that the target will receive

--Third, the positioning needs to offer a point of differentiation

--Finally, the positioning should give a reason to buy. In other words, what does the target get out of this experience, investment, etc.?

Companies need to recognize that positioning is a competitive endeavor. In other words, one is not just positioning ones own company, but one is juxtaposing the company against competition. Everyone in an industry group has similar offerings. The question is why you are different? Why should I give you my time, money, etc. versus someone else? This is a zero-sum game. We need to assume that when one buys us they do not buy someone else, or the corollary, that when they buy our competition, they are excluding us. It is called positioning because we are trying to establish our position in the market. Our customers and other key stakeholders will determine where they position us. Hopefully, our desired position will resonate with stakeholders.

So, positioning is critical in marketing strategy and branding. Good positioning should create a bit of angst internally. It is a mirror to the company from the client or customer perspective. If it is universally liked it is, like works of art, probably not that good. Great brands are not universally liked, but they are absolutely loved by some-- enough people to make them valuable. We want to differentiate, not be universally loved in our positioning. If we are for everyone, we likely don't have much to offer. We need to figure out who really needs us and why and make that clear in our positioning.

Friday, June 25, 2010

There is a Huge Need to Integrate Strategy and Execution

The July-August issue of Harvard Business Review has another excellent article by Roger Martin, Dean of the Rotman School of Management at the University of Toronto. In the piece, he argues that strategy and execution must be linked, but that they are not in most strategy courses in business schools, nor by consulting firms. It should be noted that Martin used to be a partner in a consulting firm prior to becoming Dean at Rotman.

It is clear that most people separate strategy and execution. How many times have we heard about a company engaging a strategy firm and then finding it difficult to implement the strategy once the firm is finished. I used to have a CEO who was fond of saying: "strategy is fine, but 90% of success is in execution". As Martin notes, one cannot be successful in execution independent of a good strategy, and one cannot have a good strategy independent of good execution.

It is interesting that in the brand and reputation world, most of the firms operating are execution-type firms. The brand firms do brand audits and then develop a new logo and set of identity guidelines. The advertising firms do advertising; the PR firms do PR. On the strategy side, McKinsey, Boston Consulting Group, and others are doing some brand strategy, but this is a very small part of their overall offering. There is a gap where Martin sees one. And, it is a wide gap that needs to be bridged.

Execution is becoming more and more commoditized in the brand world. Strategy is where the money is. So, implementation firms are typically staffed with junior people who do not really understand strategy; and the strategy firms are staffed with senior people who do not want to be bothered with implementation. When the strategy is done, it is "handed off" to the company which typically hands it off to a PR or advertising firm. The latter are typically not involved in the strategy discussions so they often implement against a strategy that they do not fully understand, unless they are briefed directly by the strategy firm or unusually well by the client. Advertising and PR firms say they do strategy, but they don't. They do advertising or communications strategy, not the type of strategy taught in an MBA program.

The difficulty is often with billing. Strategy firms bill thousands of dollars per day for even middle-ranked people; execution firms bill a fraction of this. So, when strategy and execution firms have tried to talk about mergers or working together, they often get stymied with billing. Clients who hire advertising or PR firms are usually not willing to pay $5,000-$10,000 per day for strategy; an strategy firms do not see the need to have an implementation group on the pay-roll.

In my own consulting practice at Brand and Reputation Management, I focus on linking strategy, brand management with employee engagement. I try to lay out implementation plans for the client, but I do not do the execution. I usually ask the client if I can help them brief the implementation firm so that there is a smooth transition to execution. But, this request is not always accepted. So, I have not connected all the dots, as Martin has pointed out, and could be serving my clients better if I were to connect with an implementation firm.

I have said to many people that there is a huge need for a brand and reputation management firm that has business and marketing strategy people, brand experts, researchers and implementation staff. There is nothing like that right now. Perhaps a first step would be to connect a few good firms together in common practice.

Wednesday, June 23, 2010

The McChrystal Flap Shows a Problem with His Team's Value Set

President Obama is being forced to decide what to do with renegade General McChrystal. The General and his advisors gave an interview to Rolling Stone in which they ridiculed many of the officials in the "chain of command". Now, Obama is forced to decide whether to accept the resignation that McChrystal is certain to offer (military culture demands that he tender his resignation). This is a President with so many problems confronting him that one has to wonder whether the fates have aligned against him.

When I read about McChrystal and his band of merry, arrogant, men, I see a poisonous culture that is highly problematic. We have seen the same culture at Enron. I saw it first-hand at Nortel. It is a culture of personality in which the boss is so revered or feared (I'll leave it to psychologists to figure that one out) that they become an arrogant, totally self-confident group that feeds off of one another. Everyone who "gets it", in the language Enron executives used to use, is part of the team. Anyone who doesn't agree and live the same life "doesn't get it" and needs to be ridiculed and purged. It is a test of purity. This may build a strong team, but the team is more akin to what the Communists referred to as the "cult of personality" than to a culture of ideas and thought leadership that characterizes most great leaders.

Great leaders surround themselves with people who think and are encouraged to share their ideas, even if they conflict with the prevailing ideas. When thoughts are closed off, there is only one way of thinking. The team gets, what a former professor at West Point I knew called "the spirit of the opposition". That is, a single-minded passion; almost mindless. But, McChrystal is a person who sleeps only a few hours a night; eats only one meal a day; refuses to take water and food while walking around in the harsh climate and heat; and will not nap on the plane. He sees his wife of 33-years only 30-days a year and celebrated their anniversary at a pub in Paris, along with his inner circle. Think about that personality. He is a military guy and we want him to win the war, but he clearly has psychological problems and he has selected a team of advisors that share his problems.

The McChrystal group calls itself "Team America" and believes that they are the only ones who know how to fight the war. Others who disagree are ridiculed, as was on wide display in the Rolling Stone interview. Many of the worst comments were not made by General McChrystal, but rather by unnamed staff. He may not have been in the room when they made those comments, but he clearly gave his team the feeling that they had the right to ridicule the Vice President and others in the Administration.

The military has prided itself on becoming more entrepreneurial and more akin to a corporation than to the hierarchical structure of the past. The success of the military can be found in people like General Petraeus, who appears to be not only bright a brilliant military mind, but also a great leader. Great leaders gain their ideas by having others challenge them. This is what leadership is all about. Not about giving orders, but rather about inspiring a team to internalize the outcome and help the organization succeed.

I recall Jack Welch, former CEO of GE, noting that the most problematic leaders are those who are successful in making their financial numbers, but at the same time destroy the lives of those around them. They are poison to an organization and need to be coached for change or fired if they cannot change. They can too quickly become the "exemplars" of the organization--those others aspire to become. It seems that McChrystal is that kind of leader. He is successful on the one hand, but he also seems to be poison.

Tuesday, June 22, 2010

BP's Internal Communications Becomes Theatre of the Absurd

The following was reported by NBC News and the Wall Street Journal. Just when we thought that Tony Hayward's yachting trip was the height of absurdity, BP's internal PR people go off on a tangent that can only be dubbed "what the hell were they thinking...or smoking?"

In-house corporate magazines are supposed to make the company look good, but The Wall Street Journal is asking whether Planet BP, the oil company's organ, is smoking something:

[I]n Planet BP — a BP online, in-house magazine — a "BP reporter" dispatched to Louisiana managed to paint an even rosier picture of the disaster. "There is no reason to hate BP," one local seafood entrepreneur is quoted as saying, as the region relies on the oil industry for work.

Indeed, the April 20 spill on the Deepwater Horizon is being reinvented in Planet BP as a strike of luck.

"Much of the region's [nonfishing boat] businesses — particularly the hotels — have been prospering because so many people have come here from BP and other oil emergency response teams," another report says. Indeed, one tourist official in a local town makes it clear that "BP has always been a very great partner of ours here…We have always valued the business that BP sent us."


We know that BP has to try to maintain the internal morale of the company's employees, but this is beyond absurdity. One has to wonder whether BP has manufactured its own reality and cannot quite live in the real world that they have thrust us all into with their destructiveness.

Because it was BP, the Reputation Damage to the Rest of the Oil Industry is Even Worse

I have said before that reputation is the expectations that stakeholders have of a company vis-a-vis its peers and competitors. There is no better example of that than BP and the rest of the oil industry. BP spent a decade or more trying to convince us that they were "Beyond Petroleum". They redid their logo to make it look like a green flower--a symbol of its environmental commitment--and they invested in alternative energy sources. We all thought that they were the best of an otherwise bad industry. In fact, in an industry in reputation last year stood at about a -57%, according to Ipsos, (more people disliked the industry than liked the industry), BP had a positive reputation (about 11%). In other words, people thought that BP was vastly different from the rest of the industry. BP differentiated itself with a brand promise that enhanced expectations. Over the years, they seemed like the good actor. All along, they actually were like the nice neighbor who turns out to be a serial killer in waiting. BP lived one way publicly while having a very different culture internally.

So, is it any wonder that members of Congress were not impressed when the executives of the other oil companies came before them arguing that they would never have drilled the area the way BP had done. "You can trust us", they said. We would have done it better. The problem is that no one believed them. Why would they? As I noted before, they collectively are the -57% reputation of the oil industry. If the perceived best of the group did what BP did, then what would one expect of the others?

I know that there are many in the Gulf who make their living in the oil industry and that the moratorium on drilling that the President put into effect is of concern to them. There are those who claim that it is illogical to penalize an entire industry because one company made a mistake; or that others are following the rules and regulations in drilling. I can understand the angst of these folks who are connected with the oil industry. But, there is no trust. There was no trust before for anyone other than BP. That trust has been totally eroded and with that it has put the rest of the industry in even worse shape. If this had been another oil company other than BP with this accident, the impact on the others would not have been so severe. But, expectations were set by one major player. For better or worse, the rest of the industry is now living with that situation.

Monday, June 21, 2010

What's Wrong with BP's CEO Attending a Yacht Race? Nothing and Everything

Tony Hayward, the CEO of BP, was supposedly removed from his daily job overseeing the oil spill in the Gulf. I say supposedly, because after the announcement, BPs press office offered contradictory explanations for what was happening. An American executives was said to be taking over the front line control, but the timing of this was unsure. One suspects that BP did not really think this out. They had to remove Hayward, who gave an awful performance before Congress. They replaced him with an American CEO with a southern accent. The real removal was not to change things, but once again to make us think that things had changed. It seems that BP is very good at manufacturing an image, but not very good at living up to its desired image. They undoubtedly thought that having a fellow with a southern drawl in front of TV cameras was preferable to having one with a British accent. Probably right, but for all the wrong reasons.

Within a day after leaving Washington, Hayward was in England at a yacht race with his son. This was the same man who had declared a few weeks ago the "I will not leave the Gulf until the oil leak is stopped". I guess the leak just went on too long and he felt he needed a break.

Fury grew among both members of Congress, the general public and fisherman in the Gulf who likely will never see their livelihood return. BPs response was that Hayward was having a family day. "He deserves that. We would think everyone would agree", said the PR spokesperson. Problem is, that statement showed the same tone deafness that BP seems to have been suffering from all along. Most would agree he deserves time with his family. But, few would agree that a public outing at a yacht race is good for his or BPs image.

Hayward had said weeks ago that "I want my life back". Poor guy! He has to suffer, likely for several months, every night taken away by private jet or limo, returning to a luxury hotel or suite rented for him. He has truly suffered!! His multi-million pension will cushion his blow. Those who are damaged, including the so-called "little people" that BP said they are worried about (still sounds like a company run by British aristocrats worrying aloud about the poor little people who might go hungry--tsk, tsk. Where is that butler with my tea and biscuits?").

What is wrong with Hayward going off to the yacht race (his 50-foot yacht, I might add) with his son? Nothing and everything. It is nothing, because this is a good father-son bonding moment. Hayward is a hard working CEO who deserves time off to see his family. At the same time, however, there is everything wrong with this. This is a guy whose company has ruined the environment for generations to come. He has wiped out the livelihood of an entire group of people in the Gulf. He has further ruined the city of New Orleans and the rest of the Gulf Coast. He may not have designed the rig that exploded, but it was his company and he bears the burden. That's the responsibility of CEOs. As they used to say in my corporate days, "that's why you're paid the big bucks".

To go off and visit a yacht race is optically wrong. It shows a total lack of character and morale fiber on his part. He just doesn't get it. He has not fully internalized the real damage done. It further demonstrates that he is as out-of-the-loop on the way the real world lives as we feared. He looked and sounded like a member of the British House of Lords when he sat before Congress. His poor performance continued.

I know that there will be some who will argue that there is nothing more that he could do to clean up the Gulf, and that his day away at his yachting adventure did not detract from the clean-up. That is all true, but it also is mute. Until the leak is stopped, he does not deserve a life. He has to show that he cares, that he is damaged mentally by what his company has done. I really don't care if he doesn't feel that way, but his victims in the Gulf deserve to see him suffering a bit.

His lack of good sense has not only hurt his image, but it has further damaged the reputation of BP.

Thursday, June 17, 2010

French Laundry--Talk About Perceived Value!!

The French Laundry is a Yountville, CA restaurant that is widely regarded as the best restaurant in the United States. It is one of only a few restaurants in the U.S. that has received the prestigious Michelin 3-stars, the highest rating for a restaurant.

The French Laundry serves only a prix fixe menu with a price of $250 per person, exclusive of wines. When all is said and done, a meal for two people is about $900. The restaurant has 60 tables.

Reservations can be made 60-days in advance, to the date. It takes about 2-hours for the entire restaurant to be reserved on the day the reservations are open. In other words, this is a tough table to get. I have heard of people trying for over a year to get a reservation.

Now, let's consider that the world is in one of the worst economic downturns since the Great Depression. Still, there are enough people willing and able to spend $400+ on a meal to fill the restaurant. This, despite the fact that fine restaurants around the world have been failing at a record pace due the poor economy.

What is the secret to the French Laundry? It is all about perceived value of the brand. In this case there are two--the restaurant name and the chef's name, Thomas Keller. He is the endorsed brand. His name adds value. Witness his bakery, Bouchon, that has lines at all hours wanting to sample a bit of his magic.

What makes a Keller/French Laundry meal worth this much money? Well, it is damn good. But, at some point, most of us if we are not food critics or chefs (let's be honest here) cannot distinguish the quality of food. So, it is all about the perceived value, the prestige, the ego boost, etc. We are swept up in the brand. We fight to get the ability to give over a lot of money to eat a meal that few people can afford--it makes us feel special. What makes a Picasso painting worth so much? What makes an Apple computer worth so much more than a PC?

This is the thing about prestige brands. We spend because we believe it is worth it--we must have the experience. The brand becomes our mark of distinction. I have now eaten at the French Laundry. I now join a rare breed of people who can make the same claim. I have paid for one meal what it would take me to spend for 3-4 meals at what would be considered outstanding restaurants.

I mentioned to someone the other day that I had eaten at the French Laundry. They looked at me in amazement and asked how I was lucky enough to get a reservation. My perceived value seemed to grow as a result of having gotten a reservation--who ddid I know? Who was I anyway? Talk about the perceived value of a brand and what it does for those who are associated with it!!

USAirways Continue to Shock with Poor Service

Just returned from a trip to San Francisco on USAir. I continue to be shocked by how much this airline has just given up on the concept of service. I wrote a blog recently about one flight in which the attendants seemed to be mimicking Southwest. I thought that perhaps USAir was trying to be friendlier and more customer friendly. Sorry to say, I was mistaken. This was a one-time experience due to the individual attendant, not the airline.

On this most recent trip, my wife and I flew 1st class. We did it because we were celebrating our 40th wedding anniversary and wanted a great experience. What a waste of money!! First, the airplane on the flight out was in very bad need of refurbishing internally--seats were torn, the seat in front of us wouldn't stay up, and there was precious little leg room for a 1st class cabin. The flight attendant worked hard to make our experience as pleasurable as possible. On the way back from San Francisco, we were informed that we had two bags too many (one is allowed to check two bags per person free in 1st class). The price quoted was $200 to pay to check two bags. $200 dollars for bags--after paying more than $1500 per ticket for 1st class. Unbelievable!!

Anyone who understands airline pricing models recognizes that the airlines only make money when they fill seats. When an airplane takes off with an empty seat, it is no different than a super market that has broken eggs or spoiled milk. It is wasted inventory. As a result, the airline is willing to price seats at differentiated prices. So, there is tremendous variance amongst the passengers in terms of what each person paid. Most of the 1st class cabin is comprised of people with upgrade coupons, or they have paid about $100 at the last minute to upgrade because there was an empty 1st class seat. Few, if any in the 1st class cabin have paid full fare, as we did. Few corporations are allowing their executives to fly 1st class anymore, so the full fee passengers are few and far between.

Given this background, it was absolutely shocking that USAir wanted to charge us $200 for two extra bags after we paid full 1st class fare. It was not shocking, given how poorly this airline is run, that they would not bend their bag fee policy for full fare passengers. Our fee more than made up the cost of extra bags--the airline got its money.

In addition, this was a 5+-hour flight and there was no entertainment. We weren't even offered headsets to listen to music. Our kids just flew Air Canada across country--an airline that has gotten a lot of flack of late for poor service--and economy class had individual entertainment systems in the seat backs. Yet, USAir offers no entertainment, even in 1st class. The only other airline like that is Southwest, but that is expected and promised--one doesn't pay for bags and the airline has no first class. They make a promise and stick to it. Is USAir trying to be a no-frills airline and high priced fares? That would be an interesting play. Not wise, but interesting.

USAir is a damaged brand with little redeeming value other than a fairly decent safety record. Its planes are old, its attendants do not seem to care, its fees are high, particularly at airports where it has a commanding market share (e.g., Charlotte, Philadelphia, Pittsburgh).

Recently, USAir wanted to merge with United. Continental moved in a did the merger, knocking USAir out. The fact that United went quickly for a different suitor is good demonstration of the poor brand equity of USAir. Now, the question is who wants to merge with USAir, since the airline needs a partner. One analyst suggested JetBlue. I cannot even imagine that JetBlue would want to be tainted with the USAir brand. The only way they would consider a deal is if--a big if--they wanted the routes USAir has, and if JetBlue wanted to become a major airline.

The only way USAir is surviving is because it provides a needed service that right now cannot be duplicated--flying to cities from certain cities that no other airline serves. As other airlines, like Southwest, move in to challenge USAir, they take market share and further damage USAir. Instead of beefing itself up and improving its brand, USAir acts like a company run by accountants or hedge fund managers--cutting costs and with it further eroding perceived value.

Stick a fork in USAir already. The airline is cooked. Please someone put it out of its misery.

Tuesday, June 15, 2010

BP Nees Less PR and More Operational Correction

A recent USA Today article provided insight into the advise that a number of PR executives would give BP on ways to build back its reputation. Among the suggestions are: 1) to become a "green company"; 2) to highlight and celebrate the contributions of those who are cleaning the Gulf; 3) to be more transparent and honest in its communications; 4) to admit its mistakes; etc.

As one can see, all of the suggestions are superficial to the problem that BP created and the reasons for it. They are what one might consider the worst PR spin on a very bad and complex problem. The suggestions sound more like those from a group of undergrads rather than from those who profess to be corporate counselors.

BP got into this mess because it spun its reputation rather than really living it. It got into this mess because its former CEO, Lord Browne, wanted to establish BP as a leader in environmental activism, yet he cut costs to an extent that BP could not live up to its hype. BP did not put into practice what it preached. It lived one way and talked another.

What these PR executives are advocating is to talk more and not to really change. What BP does not need is more PR. It needs operational change. It needs to get back to basics and discover if its values are really environmental leadership, safety and sustainability, or are they to articulate these values because it helps them look different in the perspective of key stakeholders.

But, while we're talking about PR, let's try to get BP to at least get its PR activities in line with what it claims it is trying to do. BP claims it is being transparent, yet at the same time it blocks reporters from covering the spill. It is taking out advertisements touting its actions to correct the problem while at the same time short-changing the payments to Gulf residents.

Enough is enough. This is a disaster of unprecedented proportions. I understand that British investors are concerned with the future of BP and, as a result, the future of their pensions. Screw their pensions. An entire region has been destroyed for at least another generation. Why should we worry about pensions when a company does such damage? It would be akin to being asked to not send to jail a known killer because he/she gives such large amounts to charity and the good of society.

Thursday, June 10, 2010

David Gergen Shares His Views on Crisis Management

David Gergen, who has served several presidents, both Democrats and Republicans, has offered his advise to crisis managing the BP disaster in the Gulf. Gergen is now a Harvard professor and television commentator--one of the best in the business because his views are so balanced and intelligent.

The following comes from Gergen's own blog post.

1. Set up a daily command center in Washington where a presidentially appointed leader runs the show, calls the shots, coordinates the overall effort, briefs the president and briefs the country.
2. Have two deputies, one to direct the leak-stoppage and the other to direct the clean-up. Ex-CEOs and generals would be excellent candidates.
3. Summon all the major oil and drilling companies to the White House for emergency efforts to get the hole plugged.
4. Get BP out of the picture for clean-up; just send it the bill. If it is still needed for hole-plugging, okay, but ensure that it answers every day to directions from the government. If BP needs new internal leadership, figure out how to get that done.
5. Employ the U.S. military for organizational coordination and where needed, for anything else such as clean-up.
6. Make more aggressive efforts to tap the best minds in the world for help.
7. Provide the country with the kind of daily briefings that the military has mastered for wartime — bring in people who are smart, straight and tough.
8. Ensure that economic assistance is provided to families, small businesses and communities that need it with dispatch and generosity.
9. Call off the finger pointing until we get out of this mess.
10. And finally, very importantly, exercise the powers of leadership every day from the Oval Office.

Thursday, June 3, 2010

Is Reputation About Delivering on Expectations, or Just the Expectations?

I recently heard a presentation by Charles Fombrun, perhaps the most widely published academic in reputation management. He defined brand as the promise that sets expectations and reputation as the delivery on expectations.

I have the utmost respect for Fombrun, but I disagree with him. I believe that reputation is related to expectations, not to the delivery on expectations. Brands do indeed create expectations. Reputation, then, is related to the branding effort--does the promise meet the desired expectations of stakeholders? If it does, our reputation will rise; if not, it will lag. Expectations can come from the company's efforts, from touch points at which the stakeholder meets the company, from one's peers, or from 3rd party influentials, such as the media or others.

Expectations run on a continuum. One can have negative expectations of a company. What would it mean if we delivered on those expectations, as Fombrun argues? Would we build reputation? Of course not, we would simply reinforce the negative perceptions of value. For example, it could be argued that for many stakeholders the BP oil leak in the Gulf reinforced their negative expectations of the oil industry. BP, then, delivered on those expectations.

On the other hand, let's take the current situation of J&J's crises related to Tylenol for children in which there were quality problems in the plant. J&J had one of the best reputations in the world. Most people had high expectations of the company. Their actions were below expectations. In this case, J&J would suffer some reputation damage, although the high expectations prior to the crises would likely buffer it compared to a company with lower reputation (lower expectations of its value).

If a company with a bad reputation attempts to invest in social responsibility efforts to improve its reputation in order to meet stakeholder expectations, according to Fombrun, we would expect that the company's reputation would improve. However, research has found that the opposite can in fact occur. Companies with poor reputations that attempt to build their reputations too quickly run into stakeholder disbelief. The expectations of stakeholders is that the company is a bad actor. If it tries to do something that it thinks would deliver on the value stakeholders would like to see, it risks further alienating stakeholders. Its actions are questioned--stakeholders assume that the company must be trying to buy a good reputation.

Companies with poor reputations need to build an organizational culture that allows them to act reputably and do so for some time before trying to engage in a program to convince stakeholders that it is reputable. In other words, reset expectations.

So, reputation is the expectations of value perceived by stakeholders. We manage reputation against those expectations, we do not deliver on them.