John dalton
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John Dalton, Director of LSPR Worldwide
REPUTATION MANAGEMENT:The business context
May 20th, 2005
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
Financial performance and capital
Customer benefits
Tangible assets
Intangibleassets
Human/Structuralcapital
Stakeholderengagement
Culturevalues
Businessprocesses
Adapted from: Intangible Assets:
J. Daum; Wiley, 1999
REPUTATION: “If we picture a company as a living organism, say a
tree, then half of the mass or more of that tree is
underground in the root system. And whereas the
flavour of the fruit and the colour of the leaves provides
evidence of how healthy that tree is right now,
understanding what is going on in the roots is a far
more effective way to learn how healthy that tree will be
in years to come”
Leif Edvinsson and Michael S. Malone; Intellectual Capital
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
REPUTATION: An Overview• Hill and Knowlton’s Corporate Reputation Watch 2004 Survey: Some
key findings
www.hillandknowlton.com
• 93% of senior executives believe that customers consider corporate
reputation important or extremely important
• 79% of senior executives believe that investors and lenders consider
CR either important or very important
• The impact of corporate governance has increased dramatically
since 5 years ago: now 40% of senior executives believe that strong
corporate governance is a critical factor that potential investors
consider before committing, whereas 5 years only 19% thought the
same.REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
REPUTATION
• A firm is defined by its relationships and contracts: sustainability is the law
• Need to reaffirm the purpose of a firm – serve the customers’ needs and not just maximize shareholder returns
• Key ingredient is reputation – asset in its own right
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
The Blind Light of Success
• Most data available on reputation are about success – very little on failure
• Failure is endemic and pervasive• Yet we can learn more from failure than
success• Assumption of continuity – when we
should appreciate the notion of discontinuity “know your market”
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
Problem with Selection Bias
• Selection bias is inherent in most marketing and corporate strategic data
• The issue of reverse causality
• WWII Planes !
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
Reputation and the Market
• Of 500 companies originally making up the S & P 500 in 1957, only 74 remained on the list in 1997, and of these only 12 outperformed the S&P index
• Companies are too busy focussing on operations, not innovation
• Most corporations are absorbed, bought out or die
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
Gales of Creative Destruction
• Behaviour in markets is not fixed; control and prediction of the system is simply not possible
• Companies suffer both internal and external shocks
• Need to destroy and create:
Monsanto - chemical to biotech
Duracell - private venture capital
IBM - Mainframes to business solutions
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
The Market Place
Firms Capital Markets
Emotion No
Vision and leadership No
Assumption of continuity Discontinuity
Corporate culture No
Lock-in strategies No
“Visible hand” “Invisible hand”
Need to understand the market place
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
What is Needed?• Develop an adaptive brand
• Constant renewal: creative destruction
• Less reliance on lock-in, military-like strategies
• Innovation: incremental and transformative
• Adoption of enterprise risk management (ERM)
• Key people
• Understand and exploit the values of intangibles
• Control the Internet and technologies
• A real understanding of stakeholders’ needs
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
Who are the Survivors?• J & J*
• GE*
• L ‘Oreal
• Hewlett Packard
• Pfizer*
• UPS*
• Exxon Mobile*
* Triple AAA rating on Moody’s and S&P 10th May
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
INTANGIBLESMarket Capitalisation Brand
Reputation
IP
Customers
Employees
Innovation
Organisation structure
Book value ___________ $
* The above would also be affected by other variables including
macroeconomic factors, shareholder sentiment and market speculationREPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
INTELLECTUAL CAPITAL
Market Value
Financial Capital
Intellectual Capital
Human Capital
StructuralCapital
CustomerCapital
OrganisationalCapital
MARKET VALUE
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
INTANGIBLESMarket to book ratio:
Dell – 17.5
Pfizer – 18.2
• Capital is now not just financial – it is anything that adds wealth and value
• Back in 1999, only 6.6% of Coca-Cola’s market capitalization was reported as book value
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
PR AND REPUTATION
PR REPUTATION
Desired image Vehicle of promise
Delivery of promise
BRAND
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
Traditional PR
• Less strategic
• Non-integrated
• Focus - short-term
• Key people involved
• Aims to give the best possible image
• Media relations focused
• Focus on transactional stakeholders
• Strategic in nature
• More integrated
• Holistic - long-term
• Involves all employees
• Aims to deliver an image and brand promise
• Uses all forms and opportunities to communicate policy and values
• Greater emphasis on multiple stakeholder relationships
1980s, 1990s, 2000 2010
Reputational Management
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
The Business Case for Reputation
• Links between reputation and financial performance are not easy to generalize about – evidence to date unclear and inconsistent
• Question – how do you measure and what?• Mathematical co-relations do not necessarily
demonstrate causality • The question is complicated and
multidimensional
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
Ocean Strategies
• Use of disruptive technologies and ocean strategies
• Leverage something you know: develop and invest in the core
• Embrace the notion of “creative destruction”
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
How to Develop a Reputation
• Quality of products and services• Passion for brand• Customer relationship marketing• Strong corporate governance and compliance• Integrated risk and issue management• Crisis planning• Corporate responsibility (CR)• Strong brand values and communications• Organisational culture and structure• Contract fulfilment• Business presentation and conferences• Customer facing staff
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
How to Develop a Reputation
• Innovation: incremental, substantive and transformative• Vision and leadership by CEO• Investor relations and public affairs• Intelligence gathering • Developing media profile • Adaptive and ability to reinvent• Community relations• CEO’s reputation• Core competencies• Establishing networks and alliances• Understand the market• Develop brand experience: “moments of truth”
REPUTATION MANAGEMENT: The business context JOHN DALTON LSPR Worldwide
John Dalton,
Director of LSPR Worldwide
lsp@easynet.co.uk
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