Does Sebastian Mallaby have a sixth sense? Certainly the timing of his Washington Post article last week was perfect, given the turn of events for BP in Prudhoe Bay.
As Michael Jarvis summarized in his post last week, Mallaby's proposition is that firms are driven by the need to protect their brands, given that such intangibles can dominate over tangible book value. Faced with multiple leaks and extensive corrosion to its pipelines, BP shut down operations in the Bay. So is BP's choice a good example of brand protection?
Come at this from a corporate social responsibility (CSR) angle and you're likely to end up talking about competition - for resources and management attention. This type of either-or duality is the Achilles heel of CSR, as Jon Entine comments in an article from earlier this summer. The frequently used Band-Aid for this dilemma is talk of 'win-win' - but the duality remains. Entine quotes Elaine Stemberg, who instead urges discussion on 'how you conduct your business every day, every time'. Amen to that.
Looking back over the Developing Value report (PDF), there is no duality - but a single focus on what actions create value. A great CSR program or ISO 14001 certification doesn't tell me much - unless I know how it integrates into and affects core business processes. How companies achieve this in practice will be addressed in a sequel that we are planning to Developing Value - more on that in future posts.
Back to the question on BP and brand protection. Think of brand as a 'future promise' to buyers of the company (shareholders, customers), and its value becomes a product of the next step as much as those already taken. Past decisions about preventative maintenance did not bring value for sure - but the dent to the brand can be hammered back out if BP can compellingly demonstrate that the incident brought value to the company through learning, adaptation and improvement.
See also an Op-Ed in Monday's New York Times and a long commentary by Mallen Baker (no paragraph self-policing there) for further opinion on BP and brand.
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There are many possible takes on this. Here's one. If intangible assets dominate even for a business such as BP then expect to see more pipeline failures, sinking tankers and exploding refineries as management attention is focused on maintaining brands rather than maintaining infrastructure. Here's another. Oil was always about exploiting intellect, not natural resources. Oil came to be... used as a fuel because it was there and had no other use. Through finding ways of using such a unpromising material, and learning how to search for and extract it humans have learnt an awful lot of new things in a short time. In a few decades we might not use much oil, but we'll use a great deal of what we learnt while using it (as with steam power before). The oil compaines may well be important long after the oil has gone, and that's why the brands have value. The thing that would damage the BP brand most would be doing something stupid.
Read more Read lessWith respect to Mallaby’s article, when set in the perspective of “At a time when Washington seems incapable of tackling serious policy challenges” it seems that the discussion is really not about how good the companies might defending their brands, yet, but more in terms of how governments and countries are defending theirs so lousily… remember Soft Power? Seeing the recent efforts of multinationalization... of multinationals we have to ask ourselves if it is not more of a de-linking from countries. I mentioned “yet” in the previous comment because in these deep issues we are only starting to scratch the surface. For instance, when I try to get through to corporate leaders about the importance of getting more out of them in terms of social and environmental behavior than pure opportunistic flag waiving and which would be counterproductive for them since consumers would see through that in time, I find it useful to describe their relation with their consumers in terms of them being contracted on the basis of a retainer and not as short term marginal suppliers. Of course you expect much more of anyone on a retainer, in terms of who they are and of them being capable of being there for you the right way and at all times, than what you would expect from someone hired as a temp. Somehow when corporate leaders think in terms of brands this elicits some feelings of arrogance, “I have an asset, I am on the top” but the retainer concept helps to understand better the significance of a brand and to create a much more useful sense of humility. The retainer instead of brand-owner concept also helps to separate what must be those real corporate responsible behaviors from those that could be some purely marketing driven efforts to increase the value of the brands, since, of course, even socially responsible corporation should also be allowed to act socially responsible for purely opportunistic profit motives and since, of course, even socially responsible corporations are not supposed to satisfy any social-responsibility whim basing themselves thereon on the so socially responsible profit conservation need.
Read more Read lessBuilding on Richard's post, it is interesting to note today's article by Nirmalya Kumar and Nader Tavassoli in the Financial Times: "Dell can turn product failure into an opportunity." Noting another company facing a crisis - in this case, exploding laptop batteries - they rightly suggest that effective crisis management by a firm, doing all it can to reassure the consumer, generates goodwill that... can convert to sales and protection of the brand in the long run. This supports Per's comment on the need for corporate leaders to see themselves on a retainer basis with the consumer - responsible business helps long term brand management. FT article: http://www.ft.com/cms/s/4ae6e1cc-2d4d-11db-851d-0000779e2340.html
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