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16 March 2017

Leadership is the Only Option

Written by: Nick Barron, Managing Director at Edelman

Corporate Reputation

We underestimate the upside of outspokenness – and overstate the risks.

“We’re an empire now, and when we act, we create our own reality. We’re history’s actors . . . and you, all of you, will be left to just study what we do.” – Karl Rove

In 1965, Intel’s co-founder Charles Moore predicted that the number of transistors humans could squeeze onto a square inch of circuit board would continue to double each year for at least a decade. It was more than a prediction based on an observable trend, it was an idea that changed the world.

Moore’s Law shaped the way we thought about the potential of computing power and acted as a stretch goal for the tech community. As Patrick Moorhead, principal analyst at Moor Insights & Strategy said:

“Fifty years after Moore’s Law was penned, why does it still matter? It matters because it is still the rallying cry in the industry to double transistors densities every two years. This then leads to higher performance and lower power technology.”

In an industry notorious for howlers like the President of IBM’s forecast in 1943 that the world would need “maybe five computers” or the founder of 3Com’s prediction that the internet would “catastrophically collapse in 1996”, Moore’s Law stands out for its precision and prescience. Ironically, however, Moore himself wasn’t especially confident about his prediction, but made it anyway, as a way to attract more interest and investment in the semiconductor industry. In doing so, he left a major commercial and reputational legacy to the company he founded.

It’s a lesson everyone dealing in corporate affairs should remember: If you really want to build a reputation, you have to put your ideas out there. Everything else is just reputation management.

The majority of corporate communications work is about mitigating risk, dampening shocks, asserting well-worn positions and navigating a complex set of interests. This is noble and valuable work, which allows organisations to focus on their goals without serious interruption or distraction, but it has produced a powerful Status Quo Bias. Venturing a strong opinion invariably means cutting across competing and stakeholder agendas and thought leadership is frequently snared by sign-off processes.

For these reasons, the companies that punch above their weight in the public arena are often those with few insulating layers between the leader and the wider world – privately held companies like the Jamie Oliver Group (client), JCB and Dyson or those where the founder still looms large over the organisation, like Tesla, Starbucks (client), or Wetherspoons.

The risks of offering an opinion are legion, but the objections typically boil down to three concerns: We will give away competitive advantage; we will invite criticism and upset stakeholders; and worst of all, we will be held to account for what we say.

These risks are overstated.

Firstly, good thought leadership doesn’t mean surrendering an advantage, it means changing the terms of trade by advancing ideas that make peers and rivals ready to deal. And new thinking has never found a more receptive audience. Klaus Schwab, Founder and Executive Director of the World Economic Forum, recently observed:

“An underlying theme in my conversations with global CEOs and senior business executives is that the acceleration of innovation and the velocity of disruption are hard to comprehend or anticipate and that these drivers constitute a source of constant surprise, even for the best connected and most well informed.”

In a time of accelerating change, WEF’s prescription for business leaders is intellectual agility, openness to new ideas and long-term thinking. Business craves new ideas and narratives.

Amazon and Netflix are two examples of businesses whose suppliers are often their competitors, leaving them vulnerable to disintermediation. They have become powerful, in-part, through the force of their arguments about the future of retail and linear television, which have persuaded rivals to work with them, rather than against them.

Secondly, business shouldn’t fear criticism or challenge. The public wants to understand more about the people who run the companies that shape our lives and business relationships and they admire leaders who put themselves out there. When 63% of the general public thinks CEOs “cannot relate to people like me,” and 71% think they are “too focused on the short term,” there is a premium attached to those leaders who share their ideas about big issues.

Customers also want to support brands that share their values. Speaking out may alienate a few who vehemently disagree, but how can you identify with a company that says nothing? On the issue of gay rights, for instance, brands like Oreo and Skittles have shown that the commercial upside of taking a stand far-outweighs the downside.

There’s even evidence to suggest that criticism is much less wounding than businesses imagine.

During the 2016 US Presidential Election campaign, John Sides, associate professor of political science at George Washington University, analysed media coverage of Trump and his performance in the polls and found that:

“Tone of coverage appears to matter much less than the volume. Statistical models that try to account for potential inter-relationships between media coverage and polls show that the volume of Trump’s coverage is helping to drive his poll numbers, and vice versa. But the tone of coverage has no apparent relationship to poll numbers, once you account for volume.”

As The Economist’s Matt Steinglass, explained:

“The character that Trump has made of himself has been 25 years in the making. We know that character – the groundwork has already been laid.”

This does not amount to a plea for clients to be more like Trump, but it suggests that controversy-minimising communications strategies are the wrong approach. Fame beats opprobrium. Or as Trump himself put it in The Art of the Deal: “Controversy sells”.

Finally, while it is true that businesses’ ideas and predictions will be scrutinised, we are prepared to cut businesses that lead some slack.

We don’t expect IBM to understand precisely how AI will transform business, or Ericsson to know exactly what the appropriate limits of state surveillance across their mobile networks should be. But we appreciate their work to lead these kinds of debate and we worry about companies that don’t acknowledge doubt or uncertainty.

This is a post-authority age, in which the public trusts “people like me”. The consequence of this is that “listening” to customers, stakeholders and employees has become one of the defining behaviours of trusted companies. Leadership in this context means beta-testing, crowd-sourcing and synthesising ideas, rather than presenting a fully-formed solution.

When Paul Polman’s Unilever unveiled the progress they’d made against their Sustainable Living Plan goals in their first year, they admitted that there were key areas where progress had been frustratingly slow. Instead of criticism, this level of transparency drew praise (if all targets are being met, you probably haven’t set them high enough) and brought forth NGOs and entrepreneurs with ideas to help them in their mission.

Leaders don’t allow perfect to be the enemy of the good.

Except for a handful of household names, most people do not spend much time thinking about businesses or brands and they can’t name more than a handful of celebrity CEOs. Trust and attention is hard-earned.

If communication is to drive change – in perception, attitudes and outcomes – then the only option is to think big and create moments and ideas that others will want to talk about. This means accepting that if people are talking about you, some disagreement and criticism is the price of success. Leadership of thought and action forces critics to fight on your turf:

The BRIC(S) narrative may have been flawed but it established Goldman Sachs as a company that understood the dynamics of globalisation. Every other financier had to use the term, knowing that it was a competitor’s IP.

The government’s Northern Powerhouse strategy is criticised for its lack of substance, but it has nonetheless captured the public imagination in a way that policy rarely does. Every debate about rebalancing the UK is now focused through George Osborne’s lens.

Mars’ 2016 “Health and Wellbeing Ambition” was a comprehensive sugar strategy, which instantly propelled them into a clear leadership position, in which they are part of the solution to the global obesity epidemic. Every move they now make – from cutting portion sizes to discouraging their customers from eating their products too often – is a big media moment and competitors’ initiatives will be benchmarked against them.

What each of these leaders has done is to use communications to shape the operating environment for themselves and everyone else around them. The leadership dividend earned by companies like Unilever and IBM can last for decades, while the barb of a critic is quickly forgotten.

Ultimately, businesses have a choice: lead or play on someone else’s terms.

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