Leveraging Innovation to enhance Corporate Reputation

By Jeremie Guillerme, Consultant, ReputationInc.

Being perceived as an innovator enhances corporate reputation and business performance. However, besides technology companies that consistently top reputation league tables, how can firms in more traditional sectors, such as food and beverage, leverage radical innovations to enhance their reputation?

Looking at the latest Fortune’s Most Admired list, it is clear that companies perceived as most innovative enjoy a significant reputation advantage over their competitors. The corporate reputation of innovators such as Google or Apple is clearly triggering admiration and envy across all industry sectors.

Academic research provides evidence that a reputation for innovation leads to various business and reputational benefits such as:

- customer loyalty

- improved favourability

- propensity to pay premium prices

- and perhaps most importantly: customer excitement (Henard & Dacin, 2010)

Ultracompetitive marketplaces require companies to think beyond customer satisfaction and market needs to become providers of excitement. Remember Steve Jobs’ mantra: “people don't know what they want until you show it to them.”

However, all industry sectors are not born equal when it comes to creating excitement. In the present context, the task is certainly easier for a technology company than it is for a large food and drinks company. While the high-tech industry has generated many disruptive innovations lately (tablets, apps, streaming technologies and so many others), the consumer goods industry has mostly focused on incremental product changes (improved taste, different portion sizes, more convenient packaging, etc.).

It would however be unfair to say that the food and beverage industry has not provided any disruptive innovation. Innocent is one notable example of a company that succeeded in creating excitement about a new product category, and reaped the associated reputational benefits. But what can be said about larger, sometimes century-old global players with well-established brand portfolios?

Acting under the constraint of increasingly stringent health-related regulations, these companies are also trying to create the new product category that will enhance their reputation for innovation as well as generate consumer excitement. However, large incumbents face a challenge that new players like Innocent did not. How to enhance an innovation profile with radically new products while avoiding blurring the reputation of a well-established company? Being a disruptive innovator can indeed be highly regarded, but doing so shouldn’t confuse stakeholders on your vision and purpose.

A classic example of a large food and drinks company successfully launching a disruptive innovation without losing focus is Nestlé’s Nespresso venture, which radically changed the way coffee is sold to consumers through a clever product associated with a profitable business model:

- A new, premiumized coffee giving consumers a ‘connoisseur’ feeling

- A business model where an appealing appliance (see the design of the coffee machines) is the starting point of virtually unlimited repeat purchases of high-margin coffee capsules

- A closed distribution circuit eliminating any competition

The resulting consumer excitement has led the new brand to the success we all know. However, it is interesting to note that, in order to achieve this level of innovation, Nestlé has had to create an entirely separate organisation, with its own staff and office buildings. In a well-known Harvard Case, a senior VP from the company mentions how difficult it was to break away from the company’s culture: “internally, there was a lot of scepticism about the possibility to commercialise Nespresso. The business was physically moved out of Nestlé so that it could establish credibility and so that it didn’t have to fight against all the company’s rules”.

However, the new venture remained bound to Nestlé by a set of unconditional values and principles formulated by its CEO Peter Brabeck: “very simple, not a lot of words, no mission statement—just a list of the things we didn’t want to change at all, even as we evolved.”

What learning can we draw from the Nespresso case, looking at it through the lens of corporate reputation management?

1- Even large companies in more ‘traditional’ sectors can create disruptive innovations and enhance their reputation as an innovator.

2- Fostering cultural change internally is not always sufficient to drive radical innovation. Sometimes innovation has to happen outside of the company culture.

3- Maintaining the overall coherence with the company’s vision and purpose is critical to avoid stakeholder confusion about your activities.

The new normal for Corporate Communications functions

By Mark Hutcheon, Associate Partner at ReputationInc

The past decade has witnessed transformational change in areas ranging from geopolitics to teenage leisure pursuits. But one of the most dramatic shifts has been in communication as digital technology, social networking and 24 hour news have become dominant forces in the transfer of information from business to business, from business to consumer and from consumer to consumer. The new dynamic has forced every business function to adapt, perhaps none more so than corporate communications.

Once, corporate communications was relatively simple. Its main role was to liaise with the press: sending out releases when necessary, arranging half-yearly meetings between members of the media and the chief executive and making sure a coterie of senior journalists were on your side.

For some corporate affairs directors, the role was even more prescriptive: asked to act as guardians of information, they saw their job as ensuring the press knew as little as possible about the businesses for which they worked.

Today, such control is almost impossible. Thanks to the internet, virtually anyone can find out virtually anything about virtually everything. That alone imposes fundamental change on the corporate communications department. But the situation has been intensified by the economic downturn and its impact on the reputation not just of banks but almost every aspect of the corporate world.

Consumers are demoralised, disillusioned and disappointed by a wide variety of sectors and industries – which means companies have to work harder than ever to gain their customers’ trust. And who takes responsibility for this task? Invariably, it falls to the corporate communications team.

So the corporate communications function is broader and deeper than it has ever been. The nuts and bolts of traditional media management - writing press releases, developing relationships with key journalists and ensuring they have access to senior executives when interim and full-year figures are released – remains. But, as every corporate affairs director knows, the role has become far more sophisticated.

Today’s corporate communicators have to cope with 24 hour news flow so journalists expect to be able to talk to people in the know from morning to night, seven days a week. But news flow is not just about journalists responding to a corporate announcement. Today, news can emerge from bloggers, social network sites, activist websites and the like. As events ranging from the Arab spring to the UK August riots make clear, spreading information is breathtakingly easy these days – and corporate communications teams need to be able to monitor what the electronic world is saying about their company and – equally importantly – influence those messages.

At the same time, companies are under pressure to cut costs, so corporate affairs directors are being asked to justify their budget and do more with less. Chief executives expect their corporate communications team to bring the outside world in, explaining the way the company is perceived and shaping those perceptions. They expect the press office to deliver genuine thought leadership, offer meaningful advice about how to enhance their company’s reputation and act as an antenna to risk. These are high value functions that will test the competencies of the best communicators.

To many corporate communications directors, this plethora of demands can seem excessively challenging. But what if they view the ‘new normal’ as an opportunity to take the corporate communications function to the next level?

Smart operators are already changing their teams to reflect the new reality – ensuring staff have the requisite skills to cope with the demands being placed upon them. Sometimes, this involves recruiting new talent. But existing team members can become superb advocates for their organisation, if they receive appropriate training and gain an understanding of what they need to do and how best to do it.

Despite the recession, raising the skills and competency bar through capability building is vital. Shrunken, newly assembled or over-worked teams will enjoy both a performance and morale boost from an investment in their in the competencies.

As we see it, the classic development approach is still relevant. Discover the competencies (and therefore gaps) most needed to advance the business and reputation goals; design a learning methodology and deliver it across multiple points and channels. It should reflect the learning philosophy of the company, mix foundational level training with master-classes customised to different levels and exploit the latest experiential learning tools.

Wherever your function is on its journey , competencies in reputation management, corporate campaigning, reputation foresight and reputation content are becoming indispensible.

There is no going back to the old ways. Corporate affairs directors have to adapt. Those who face up to the challenge, relish it and ensure their staff are equipped with the requisite skills can prove their own worth and elevate the status of their entire team.

The alternative is a slow erosion of the corporate affairs function. And, for savvy, sophisticated communicators, that is simply unacceptable.

Building Reputation from the Inside Out: The Power of Employees

By Nuno da Camara

As I listened to Stephen Dorrell’s comments on the failure of the Care Quality Commission to uphold health standards this week, I was reminded once again of the fact that every organisational reputation issue is fundamentally about behaviours inside the organisation.

The Care Quality Commission, said the former Health Secretary, allowed a culture of ‘tick-box’ bureaucracy to develop rather than physically carrying out site visits on a regular basis. The root of the problem is cultural and, therefore, relates to the behaviour of leaders, managers and employees inside the organisation. Similarly, the Deepwater Horizon crisis this year was caused by BP’s inability to establish a proper safety culture on its offshore drilling sites. Culture was also at the root of Toyota’s recall of several of its US models in 2010 due to the ‘sudden unintended acceleration’ problem. As the company Chairman Akio Toyoda explained to the US Congress, the company got its priorities wrong and developed a culture of volume, rather than one of quality and safety. Examples of how culture is at the root of reputation abound. Admittedly, this may seem like a fairly obvious point but the fact still remains that when a reputation crisis hits the headlines much of the focus is on repairing relationships with external stakeholders. Even more worryingly, reputation is rarely considered from an internal organisational point of view. Yet, given the instrumental role of internal culture it is critical to explore how reputation works with employees and how it can be built from the inside out.

Firstly, we should look at why reputation is not always automatically associated with employees. The issue is largely semantic. By definition, reputation is what other people think of your organisation. In this context, we tend to think of employees as part of the ‘organisation’ and not part of the ‘other people’. The reality, of course, is that employees are actually stakeholders of the organisation (i.e. the management team who employs them) and are therefore ‘other people’ too.

Moreover, employees do form reputational judgments about the organisation that they work for and this impacts on their behaviour and commitment at work. Today, there are numerous surveys and rankings of employer reputation which attest to this fact (e.g. http://www.greatplacetowork.com/). Employer reputation or the reputation of an organisation as a "good place to work" is strongly associated with employee engagement; and, employee engagement has been reliably linked to organisational performance . The time has therefore come to properly acknowledge employees as a reputational stakeholder in their own right.

Furthermore, employees are unique in the stakeholder map of any organisation because they come into daily contact with the other stakeholders. As Andrew Moss, the CEO of Aviva, one of the world's largest insurers, noted in a round table discussion on corporate reputation: ‘our reputation is shaped on a daily basis by the many thousands of people who are serving our customers in our call centres’. Beyond the realm of customers, reputation is also being formed by constant employee interactions with suppliers, investors, regulators, NGOs, media and other stakeholders. So, if an organisation has a good reputation with its staff this will have a powerful multiplier effect on its reputation with all stakeholders. Happy staff are keen brand advocates and are worth their weight in gold.

In addition, a highly dynamic feature of employees is that, as well as being the main actors in organisations, they are also an audience and consume the same media as other stakeholders. As such, employees read and hear about their organisation all the time and are highly aware of its reputation externally. Naturally, employees are motivated to work for organisations with a good external image. In many cases, this is exactly what attracts employees to organisations in the first place and, once they join an organisation, it is what makes them proud to be a part of it. This is often referred to as Perceived External Reputation and research shows that it has a positive impact on employee identification, commitment and performance .

There are therefore two types of reputation with employees:

• Reputation as a “Good Place to Work” - Employee belief in organisational leadership, goals and strategy and perception of how the organisation manages reward and recognition, career development and work/life balance, which impacts on employee engagement and commitment.

• Perceived External Reputation – Employee perception of how the external stakeholders view the organisation, which impacts on employee pride and advocacy.

These two types of reputation are strongly related to each other. Employees of an organisation with a high "good place to work" reputation are more engaged and committed and perform better at work. This has a positive impact on external reputation, which is perceived by employees and adds to their motivation even further. Hence, a positive feedback loop is set off in which a good reputation is sustained for the long term. Conversely, if internal reputation as a “good place to work” is poor, this will demotivate employees and eventually feed into a poor external reputation, which will only serve to demotivate employees further.

Since culture is at the heart of reputation organisations must focus on the development of internal reputation and its impact on employee behaviour. Without doing so, and without being aware of the gaps in internal and external reputation, organisations will not be able to sustain a good reputation over a long period of time. But the prize for those organisations that do understand the critical links between internal and external stakeholders is a reputation that looks after itself and keeps on getting better for years to come.

10 years on from 9/11: the communications challenges of the campaign against terrorism remain as important and pressing as ever

By Andrew Hammond, Associate Partner at ReputationInc

The US and wider Western response to the attacks of 11 September 2001 has been dominated by counter-terrorism and military might. While major successes have been achieved, including the unseating of the Taliban regime in Afghanistan, an overwhelming emphasis on ‘hard power' has fuelled controversy across much of the world.

Even former US Defence Secretary Donald Rumsfeld acknowledged the problem when, in 2006, he asserted that the United States “probably deserves [only] a ‘D’ or a D-plus’ as a country as to how well we’re doing in the battle of ideas” [in the anti-terrorism campaign], and that “we have to find a formula as a country” for countering the jihadist message.

A decade on from 9/11, the death of Osama bin Laden, especially when taken in combination with the ongoing ‘Arab Spring', offers a remarkable window of opportunity for policymakers to re-emphasise the importance of diplomacy and communications in the campaign against terrorism. As US President Barack Obama has emphasised, this must include an “alternative narrative” for a disaffected generation in the Islamic world.

According to the just-released annual findings of the Pew Global Attitudes Project, in 9 of 13 key countries for which relevant time series data is available, significantly fewer people think more favourably of the United States in 2011 than before 9/11. Nowhere is this phenomenon more evident than in the Islamic world. In Turkey, for instance, US favourability ratings have declined precipitously from 52% in 2000 to 10% in 2011. In Egypt, the fall-off is from 23% in 2000 to 12% in 2011.

Even in Britain, Washington’s staunchest ally in the campaign against terrorism, there has been a significant fall in favourability towards the United States from 83% in 2000 to 61% in 2011 (with a low point of 51% in 2007). The partial improvement since 2007, a trend also in evidence in several other countries, is due in significant part to the greater international appeal of Obama than George Bush.

The overall fall-off in popularity of the United States in the last decade is so serious because of the erosion of US soft power -- the ability to influence the preferences of others derived from the attractiveness of a state’s values, ideals and government policies. History underlines the key role that soft-power instruments (which include diplomacy, economic assistance and communications) have played in obtaining desirable outcomes in world politics.

For example, the United States used soft resources skilfully after the Second World War to encourage other countries into a system of alliances and institutions, such as NATO, the IMF, the World Bank, and the UN. The Cold War was subsequently won by a strategy of containment and cultural vigour that combined soft and hard power.

Like the Cold War, the challenges that are posed by the campaign against terrorism cannot be met by hard assets alone. This is especially so as the anti-terrorism contest is one whose outcome is related, in significant part, to a battle between moderates and extremists within Islamic civilisation. The US will secure greater success in meeting its goals if it demonstrates an enhanced capacity to win more moderate Muslim support.

It is in this context of winning Muslim ‘hearts and minds’ that, ten years after 9/11, Obama now has such a precious political window of opportunity to re-launch the campaign against terrorism. Seizing the moment would require the United States giving higher priority (as it did during the Cold War) to activities such as public diplomacy, broadcasting, development assistance and exchange programmes.

US public diplomacy is in particular need of revitalisation. Here, Obama should fully resource and implement the ‘Strengthening US engagement with the world’ strategic initiative launched last year. This identifies many priorities, including better combating the messages of violent extremists, and ensuring that US policy is better informed by an understanding of attitudes of foreign publics.

Such a re-launched anti-terrorism campaign would continue, of course, to include a significant military and counter-terrorism component. However, barring a major new attack on the US homeland, or that of a key ally, hard power could be de-emphasised in relative importance, including through the planned withdrawal of troops in Afghanistan from 2011-13.

Original article in PR Week:

http://www.prweek.com/uk/news/1090075/Tenth-anniversary-9-11-comms-challenges-campaign-against-terrorism

How good customer service enhances reputation, both offline and online

By Marit Sillavee, consultant at ReputationInc

According to the European Parliament’s recent study, 40% of EU consumers purchased goods or services online in 2010, up from 20% in 2005. Why such a dramatic rise?

Quite simply, more and more people have Internet access and the skills to surf the web, and it doesn’t hurt that e-commerce outlets have invested heavily in ensuring that the entire ‘click-and-buy experience’ is now so generally straightforward and stress-free.

It comes as no surprise that a large majority of online shoppers find consumer reviews highly relevant. To remain credible and trustworthy, it is therefore a must for an online outlet to allow commenting and, furthermore, also even encourage all customers to rate and comment products and the entire shopping experience.

Ocado, the UK online retailer for instance sends their users an e-mail after the goods have been delivered so that they can let the firm know if the driver was helpful and happy and remembered to ask back the plastic bags for recycling. No wonder they have won plaudits for their service.

Customer service remains crucial – even in an increasingly on-line world. Social media guru David Spark’s latest newsletter presented the following useful statistics on the importance of good customers’ service:

• The average "wronged customer" will tell 8-16 people about their experience.

• A typical business hears from only about 4% of its dissatisfied customers, 96% just go away and 91% will never come back.

• 95% of complaining customers will come back if the complaint is instantly resolved and customers who get their issue resolved tell 4-6 people about their good experience.

So, if you don’t want your customers to trash your reputation, firms would be wise to eliminate bad customer service in the first place. Is there a simple, foolproof recipe, which ensures high profit margins and good reputation for all consumer-facing outlets, be they online or offline?

One increasingly utilised area of best practice is to develop an easy-to-use feedback system whereby unhappy customers can express dissatisfaction. Here, it is crucial to always, always, respond immediately to each and every complaint. It is also key to be transparent about your products – if you don’t, consumers will ‘fill in’ the gap by reviewing the products you sell and describing honestly its quality, colour, smell and functionality.

Firms are also increasingly utilising other cutting edge technologies, e.g. the Transparency Toolbar, an application that tells you if the products that you’ve chosen are safe, healthy, green and socially responsible. As a downloadable application, this has the potential to work with all online shopping sites. I love the comment of Josh Dorfman from the Huffington Post on this particular application:

“Any free-market loving capitalist will tell you that transparency is crucial to an efficient, functional economy. Without complete information, consumers cannot send accurate demand signals to suppliers about what they truly want and, therefore, what suppliers should produce.”

It is interesting that even today, regardless of how open or closed a website is, brand name is of major importance. According to the European Parliament’s survey, if a brand has a credible reputation and a relationship already established offline, it is more likely to be trusted by consumers in the online environment. Therefore – to gain a bigger market share online, it is essential to cement or establish offline relationships with consumers, in one form or another.

And last but not least, the study finds that men (yes, men) are more likely to buy online than women. How have online shops managed to attract an audience who are commonly perceived to resent shopping?

I guess the explanation is simple – men don’t mind buying goods, they just mind having to take the trip to the high street and fight for their right for a pair of pants. Shopping online is perfect: they can buy a whole new wardrobe within 15 minutes and get it delivered to their door next morning. Researching male audience perceptions of online shopping experience (which sites they prefer, how do they choose the online outlet, is the online outlet’s reputation important to them, etc) would thus help online outlets to target their commercial activities and draw even more male shoppers to discover the wonders of online shopping.

After all, men are a growing audience shopping segment. Women will also continue shopping online, but let’s face it - they will never give up spending time in boutiques and department stores!