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I really enjoyed this article "The Cost of Competence" by David Freedman from the September issue of Inc. and wanted to pass it along to a wider audience. It contains great examples of how events and trends provided the catalyst for business success -- and provides a valuable warning about the dangers of complacency.
http://www.inc.com/magazine/20070901/whats-next-the-cost-of-competence.html
The pressure is increasing for corporations to step up and take over where government will not -- or cannot. Two recent situations highlight this point. In the first, toy maker Mattel has responded well to a massive product crisis and has sought to communicate openly and widely. Only today -- many days after the situation become public -- did the Consumer Product Safety Commission announce that it would support Mattel in its efforts to manage the recall.
By contrast, BP's reputation has been seriously damaged as a result of a plan to increase the amount of pollutants (ammonia and sludge) it dumps into Lake Michigan. BP had insisted its actions would fall within EPA guidelines; opponents said that government guidelines don't go far enough and BP should recognize this and "do the right thing." BP tried to confront its critics through paid advertising and even by paying bloggers, according to the Chicago Tribune. Ultimately, BP had to bow to public and legislative pressure and cancel its plans, agreeing to either deploy newer technology or abandon its expansion efforts. The lesson for corporations is clear: expect to find less protection within the limits of the law. Management instead needs to look at the broader range of societal impacts of its actions and be willing to engage on the issues that affect its constituents. Compliance is no longer viewed as wholly sufficient.
Even legislators joined the chorus of critics and turned to social media for their outreach. Click here to view a YouTube video from Illinois' Senator Durbin on the issue.
I've had a long hiatus from posting, due to personal and professional travels, but the notebook is overflowing with ideas, observations and lessons from the road! Special thanks to those of you who have left comments, particularly those on my last post on IBM's Sam Palmisano. I'll try to incorporate your suggestions into the evolution of the blog and appreciate the comments.
At the top of the summer reading pile is my already-dog-eared copy of the June 25 BusinessWeek. If you haven't read it yet, skip past the cover story on the telecom industry (perhaps pausing momentarily to consider the American adult broadband access statistic of nearly 50 percent) and go straight to Tom Lowry's amazing profile of New York mayor Michael Bloomberg, "The CEO Mayor." 
It's far from the usual CEO profile; it's a guidebook for leadership and management success. He examines Bloomberg's business approach to public service: the city as a brand, voters as customers and transparency in reporting.
In particular, I've returned several times to this great quote that Lowry drew from Bloomberg:
"In business, you reward people for taking risks. When it doesn't work out, you promote them because they were willing to try new things. If people tell me they skied all day and never fell down, I tell them to try a different mountain."
Equally compelling is the publication's current issue (July 9 & 16) with its article on "What Price Reputation?" that attempts to quantify the impact of a positive image on stock price. It's an article that is sure to be quoted ad nauseum by managers in our field.
Look for a point of view and an alternative to this "new science of reputation management" later this week.
IBM CEO Samuel Palmisano addressed the Executives' Club of Chicago last week and delivered the most thoughtful and insightful presentation of the Club's season. He spoke to "the globally integrated enterprise," a credible theme for a CEO who manages operations in 171 countries, but he also offered useful perspectives on related issues like trust, control, and business' changing social contract. All of these are serious issues confronting the clients of our firm, as well as our own firm itself.
Successful global integration, he said, is driven by three principles: economics, expertise and openness.
On economics, he cited several interesting statistics to illustrate the dramatic shift underway. By 2011, two billion people will be connected by the Internet, prompting a new era of inter-relationships. In the last year alone, the world produced more transistors than grains of rice -- and at lower cost. Economics of production and information are changing rapidly; businesses -- small and large -- need to adapt to this new reality. For IBM, software is increasingly a service, and people are no longer concerned about where the application --or the data-- actually resides.
On expertise, he challenged the audience to think about how a region should attract business in the future. He asserted it would not be as a low cost provider of resources or labor, but instead as a source or center of expertise. Chicago -- or any city -- needs to embrace the idea that it is "not educating the future citizens of Chicago, but instead citizens of the world." Continuing on his theme, he pointed to an important change in perspective, "It's not about 'what globalization will do to me,' but instead 'what can I do to take advantage of the trend and make business flow to me'?" Regions, and their companies, should adopt this view as a strategic direction.
He cited a new era for business in society, which "requires a new level of humility and responsibility." "Companies used to handle the social burden, then pushed it down to employees, but you can only push so far," he said of issues like healthcare. "We need to come up with alternatives to corporate paternalism." "Business serves at the pleasure of society," Palmisano remarked.
On trust. He talked of the increasing regulation on business and executives and tied it back to trust. "We [big business] earned that regulation if we can't be trusted." In the global society, he said, "it all gets down to an issue of trust. How do you sustain trust in a global operation? Can you delegate trust or do you manage it?" Within the organization, "it starts by trusting people to do the right thing."
Employees are key. IBM asked its employees about "five trends that will reshape your work" in the new era of globalization and received 46,000 suggestions. There is too much in play to attempt to exert control over it all. According to Palmisano: "Management needs to learn to let go, but still be willing to be accountable." This involves what IBM calls "lowering the center of gravity."
Great comments on the current state of business!
Spring is definitely here: the robins have reappeared in my suburban Chicago yard, the forsythia are beginning to bloom ... and the annual issues of Fortune's Most Admired Companies and BusinessWeek's "50 Best Performers" have hit my mailbox. Not a moment too soon to break winter's gloom!
Forget about spring training or the Final Four. There's so much to analyze, so much to debate, and so much to ponder in the depths of these lists. And the drama! Think of the boardroom discussion! You can hear it now: Why GE, not me? What's so cool about Google? What ever happened to IBM? Are the rankings rigged? How could we advertise so much and not make the list again?
And for corporate communicators, the annointed stewards of reputation, it's time to pull out the playbook for responding to the big Q from the carpet: How do WE get on the list?
It's a data analysts buffet. On one side, we have the "Most Admired Companies" list (FMAC), where global corporate titans battle it out to make the cut of the coveted "Top 20." Directors, financial analysts and industry peers make the calls. On the other side, BusinessWeek's 50 Best Performers (BW50) scrutinizes key financial performance measures of the S&P 500 -- return on capital and growth -- to arrive at its own elite list (adding a modest dose of editorial judgment, the magazine notes). Good lists? Rigorous research? Those are perennial questions open to debate.
The fact is, the overall composition of these lists says more about what the marketplace values in 2007 than do the individual players. Would GE have made the FMAC if they had not launched the Ecomagination campaign? Would Google have topped the BW50 without the explosion of user-generated content from YouTube? Hard to tell, but the takeaway is that the businesses that top the charts are the best at listening to needs and wants, and using their resources to reflect and even effect social changes.
There is plenty to learn from both lists -- and that's what executives should be focusing on. What we admire is far more instructional than who we admire. Look to companies that are no longer on the list and ask why! Consider the rookies and make a note about their strategies. Reflect on the companies who have excelled in difficult markets and examine their management teams, use of capital and innovation. Think about meaingful corporate social responsibility. Acknowledge that every company is a media and political entity now -- and enter the dialogue.
A client once told me that his CEO used the Fortune list as a principal metric, saying "When we make the list, then I'll know that you (the corporate communications department) are doing your job." It seems to me that the communications executive could have said the same for his boss!
Another big merger grabbed headlines today -- Sirius and XM Satellite -- prompting renewed speculation about the antitrust actions that might block the deal. Late in 2006, the Wall Street Journal's Dennis Berman noted how little the government has done to block these transactions, having set a precedent with Oracle-Peoplesoft. This situation may be the same, but what can the deal companies do? Clearly the two companies will want to stay clear of anything that might ruin the deal, but there's one thing they certainly can do: Listen. Consider this: Both companies have strong subscriber bases that reflect a coveted demographic, engage in heavy Internet usage and are highly media attentive. There is no better opportunity to shape the future of the combined firms -- and their industry -- than to engage in ACTIVE listening. Seek out the market, give them a voice, let them own the future. Management should ask these subscribers what they want from their supplier and what the future looks like. When you consider historic mergers, it's easy to see there may be no better time to do this -- for strategic reasons. The information gathered from dialogue with subscribers will be good for marketing purposes, surely, but it could be even more useful for governmental affairs and reputation building, as the two companies essentially would be engaging the marketplace to co-create the future of radio -- the same marketplace that the DOJ is charged to protect! This is Merger Communications 2.0, in which deal companies think beyond getting the deal done and integrating the pieces, and move into creation of a long-term vision. This is a story management can tell, that Wall Street will value, that employees can embrace and that customers will buy. And it starts early in the merger plan, with LISTENING.
A strange week indeed, in which we saw the new face of the Wall Street Journal, the public smackdown of a Fortune 500 CEO, the celebration of the first female Speaker of the US House and a pay package for a college football coach that defies logic.
The Wall Street Journal exhibited edge and verve in its first week post-makeover week. Allan Murray's assessment of Bob Nardelli's departure from Home Depot was first-rate business journalism and was supported by provocative pieces and an editorial on Nardelli's "many failures." On the political front, its coverage of Nancy Pelosi's historic ascendance was equally insightful with truly balanced coverage. The coup de grace, however, was Janet Adamy's interview of McDonald's CEO James Skinner that was published just the morning after MSNBC aired "Super-Size Me." No accident, I'm sure, but was it McDonald's trying to blunt the effect of the show by offering up Skinner for the interview -- or did the Journal that see the opportunity to run an interview already in the can? What a contrast!
Finally, I'm finding it difficult to believe that in the same week that CEOs are chastised for their perks and pay, Nick Saban gets a $32 million coaching contract from the University of Alabama -- only slightly more than my alma mater's entire endowment!
In the wake of Henry Manne's thought-provoking Wall Street Journal essay "Milton Friedman Was Right," several readers have continued the debate over Friedman's positions on the social responsibility of the corporation.
Lost in the exchange of these viewpoints is the reality that a company can, in fact, serve its profit mission and satisfy its social obligations simultaneously.
Operating as a responsible company actually optimizes the profits of the firm: it removes management distractions (rather than create them as some have opined). Look to this week's announcement of Limited Brands' Victoria's Secret finally clearing itself from the scrutiny of NGO ForestEthics -- an issue that has hung about the company for more than two years.
Properly management corporate social responsibility programs connect the firm directly to the needs and desires of its customers and stakeholders, creating a positive reputation and goodwill (a financial measure that is captured on the corporate balance sheet). At its most fundamental level, operating as a responsible company and being viewed as such perpetuates the firm's license to operate. The argument that corporate social responsibility programs are merely altruistic distractions and serve a "collectivist agenda" is both fallacious and short-sighted. Companies that recognize the power of a positive reputation -- particularly those with an acute awareness of their perceived role in society -- are the ones that do the greatest service to their shareholders.
Finally, the campaigning is over, and most importantly, the endless stream of commercials has ceased. We've made our decisions and now we can do our best to live with the choices we've made -- especially in those cases in which none of the choices were very appealing!
Certainly we can learn something from this, right?
The election cycle is instructive, particularly for the sheer purity of the positioning process. Consider this: If the "vote" is the pollitical equivalent of the "purchase," there could be valuable lessons outside politics, particularly for corporate brand stewards. Whether you're running a brand or managing a campaign, you have three choices -- prop up your brand, take down the competitor's brand, or try to balance the two approaches.
With the first option, you accentuate the positive and refuse to sling the mud. But do you risk being seen as weak? Not if your proposition is strong, your track record is good and you enjoy support from your community. You can shake all the hands you want and confidently pose for the cameras. If done really well, your audiences will even presume innocence during attacks of your competitors. A crisis shield.
The second option is the sucker's gambit, of course. It's the "race for the bottom" strategy that relies upon the voter's (customer's) ability to discern the better of two evils and pick the right one. This approach kills both brands and leaves the customer feeling bad about the choices, the decision, the process and the industry.
The third option is the hybrid: assert the values of the candidate (your brand), but also educate the field about the issues and be seen as a force for change. This is highly effective -- as we saw in many cases this November -- but it demands discipline, strategy and a long-term view.
Maybe we communications professionals can learn from these campaigns. Do you have the "votes" of your stakeholders? Is it a vote for your company, or merely a vote against your competitors? Does your posture and language make stakeholders feel good about the process and your industry -- or are you racing for the bottom? Are you a force for positive change? How is your record? Are you making empty promises? Who endorses your candidacy?
I attended a breakfast event this week featuring Greg Case, CEO of Aon Corporation. Case assumed the CEO position from Chicago corporate icon Patrick Ryan, joining just over a year ago from McKinsey & Company.
His remarks were far from the usual CEO patter and chest thumping that most executives deliver at these events. He provided the requisite background on Aon and acknowledged his role as a new CEO, but then quickly moved into a discussion of risk. Case asked the audience to consider risk in a different way, not just as protection against the downside, but also as a driver of opportunity, expansion and innovation.
Case reportedly talks with an average of 100 clients per month and he used those conversations as background for "six things these constituents want you to know about risk." They included:
For communicators, even without hard assets to protest, these risk comments are profound and instructive. For our communications programs, we need to look at risks to reputation as an opportunity to attack the problem or issue head on. We should not wait for trouble, but should instead see the risks we face as opportunities for growth or expansion. On an individual level, there is an appeal to take more risks; on an organizational level, we need to create cultures that consider risk, embrace it and shape our responses into opportunities.
